Summary
There are mounting industry concerns the UK authorities are not ready for implementing controls on goods crossing over from the EU scheduled to be introduced in October 2021. The de facto extension of the ‘Operation Brock’ emergency powers to regulate traffic flows along the main cross channel routes is seen as an implicit recognition of the dangers of road traffic disruptions. The serious air and sea freight disruptions and freight rate increases over the last year is complicating ACP efforts to restructure triangular supply chains, so as to deliver directly to the UK. This makes getting to grips with the sources of cost increases for ACP re-exports shipped to the UK via the EU a matter of considerable urgency. There is considerable scope for unilateral UK government action to reduce costs increases along triangular supply chains, without this impacting on broader UK/EU negotiations on trade related issues. Equally, on the EU side there is also scope for unilateral actions to reduce cost increases and delays along triangular supply chains. Read more “Concerns Expressed Over Lack of Preparedness for October 2021 UK Controls on Goods Crossing from the EU”
Category: Horticulture
Fundamental Restructuring of Supply Chains Increasingly Needed in Absence of Progress in EU/UK Discussions on the Implementation of Necessary Border Controls
Summary
UK retailers with operations in the EU are counting the costs of the UK’s exit from the EU single market, with a fundamental restructuring of supply chains looking necessary if the affected UK companies are not to lose market share in EU27 countries. This is particularly the case since there continues to be little progress towards the obvious short-term solution, a formal agreement on the ‘temporary’ alignment on UK regulatory requirements with existing EU standards. Rather than pursuing this option the UK government has announced a major regulatory review which will include a review of the use of the EU’s ‘precautionary principle’ approach and its replacement with a ‘proportionality principle’. Such a move can only complicate efforts to find agreements which will restore the smooth flow of goods across EU/UK borders. Against the background of the need for restructuring of supply chains ACP agri-food exporters need to identify how they will adjust their export operations in order to fit into these new restructured supply chains. Early adjustments could help individual ACP exporters sustain and even gain market share, while a failure to adjust could see a reduction of overall exports to the UK as the onward trade from the UK to EU markets grinds to a halt. Read more “Fundamental Restructuring of Supply Chains Increasingly Needed in Absence of Progress in EU/UK Discussions on the Implementation of Necessary Border Controls”
UK Government Seeking Fundamental Renegotiation of the Northern Ireland Protocol
Summary
Following a lack of progress in EU/UK discussion on the implementation of the Northern Ireland Protocol, the UK government has tabled a position paper proposing what amounts to a fundamental re-writing of the mutually agreed Protocol. This would bring into question the continued participation of Northern Ireland in the EU customs union and single market as agreed in the Protocol. The EU continues to insist solution must be found within the framework of the agreed Protocol. Prime Minister Johnson’s willingness to suspend the Protocol, so the UK can act unilaterally subject to joint decision making under the Protocol, if acted upon, could result in a serious deterioration in EU/UK trade relations as early as October 2021. This could then be the final nail in the coffin of ACP triangular supply chains. Even if such action is temporarily averted in October, the UK proposals leave unaddressed issues related to the future regulatory regime applicable to ACP products onward traded from GB to Northern Ireland. This in turn will make it more difficult to set in place solutions to the issues disrupting the functioning of wider ACP triangular supply chains (both ACP-to-UK-to EU and ACP-to-EU-to-UK) Read more “UK Government Seeking Fundamental Renegotiation of the Northern Ireland Protocol”
Kenya Looking to Market Diversifications in Face of Growing Complications on EU Markets and Covid-19 Related Increases in Air Freight Costs
Summary
The Kenyan authorities are once again looking to promote a diversification of exports towards non-EU markets, in the face of stricter EU SPS import controls and ongoing impact of Covid-19 related freight disruptions, which have increased the costs of serving EU market. These increased costs are likely to remain for some time, leaving little scope for investments in developing high value alternative non-EU markets for horticultural exports. If such investments are not made any shift to non-traditional markets is likely to reverse once Covid-19 disruptions are overcome. With UK and EU phytosanitary requirements beginning to diverge, new opportunities could open up in a traditional non-EU market, the UK. The ability of Kenyan exporters to exploit these opportunities will be critically determined by the evolution of freight rates to the UK. Read more “Kenya Looking to Market Diversifications in Face of Growing Complications on EU Markets and Covid-19 Related Increases in Air Freight Costs”
Growth Continues in EU27 Imports in Organic Products Where ACP Producers Have an Export Interest
Summary
ACP organic exporters have sustained strong growth in volumes to the EU market in 2020 despite a slight reduction in overall EU organic imports. In some organic product areas (rice and sugar) opportunities appear to exist which ACP producers have yet to exploit. Given the growing EU policy focus on the environmental sustainability of patterns of agri-food imports to the EU, exploring expansion into organic production in these areas could prove worthwhile. However, three headwinds are faced in continuing the expansion of ACP organic exports to the EU: the scheduled reforms to the EU’s organic product regime; the new trade administration complications for ACP organic exports to the UK, resulting from the UK’s departure from EU electronic systems for the management of imports of organic products; and the likely divergence of EU and UK organic certification requirements. Close attention will need to be paid to this issue by ACP organic exporters if existing growth in the volume of ACP organic exports to the Europe are to be sustained. Read more “Growth Continues in EU27 Imports in Organic Products Where ACP Producers Have an Export Interest”
Lack of Clarity on the Whether Brexit Disruptions of EU/UK Trade in Plants in Impacting ACP Exports
Summary
The early introduction of ‘complex and lengthy pre-notifications, certificates and inspections’ for living plants and cutting crossing from the EU to the UK is impacting on the EU/UK trade in such products. Currently it is unclear what knock-on effects this is having on ACP exports to the EU, given the large proportion of imports which originate in AC countries and the central role the Netherlands plays in the import and re-export trade. Given the impasse in EU/UK trade relations around the Northern Ireland Protocol, the early conclusion of a substantive EU/UK ^phytosanitary agreement is unlikely. The scope for shifting over to ACP direct exports to the UK meanwhile is complicated by the commercial consequences of the UK’s Covid-19 linked ‘red-list’ travel restrictions which are raising air freight costs from East Africa to the UK. Read more “Lack of Clarity on the Whether Brexit Disruptions of EU/UK Trade in Plants in Impacting ACP Exports”
HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters
Summary
While a post-Brexit-road haulage crisis was foreseen, this initially focussed on cross border road haulage operations. However, a combination of Covid-19 linked economic downturn and movement restrictions, a ‘hostile’ post-Brexit UK immigration policy and UK tax reforms linked to the employment of independent HGV drivers, has served to create an acute shortage of drivers for both HGV vehicles and lighter vans. This is posing serious challenges to the continued smooth functioning of food supply chains. This raises important issues related to the distribution of the losses and additional costs arising from the current road haulage crisis. These issues need to be addressed within ACP supply contracts, with the inclusion of provisions which insulate ACP suppliers from the worst of the emerging losses and additional costs. On the basis of past commercial experience of burden sharing this may require policy interventions if ACP suppliers are not to bear the brunt of the new costs and losses. However, the policy framework for such interventions is weak. Read more “HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters”
Effects of Rules of Origin Complications for ACP Exports Shipped to UK Via EU Being Increasingly Felt
Summary
For products shipped across an EU/UK border since January 2021, the end of the 6-month grace period for the submission of documentation required to validate self-certified originating status claims (on which duty-free access is based) has started. Failure to validate initial claims will potentially see UK MFN tariffs imposed. This poses problems for ACP products shipped to the UK via the EU, where invalid originating status claims were initially made. For these products extending the grace period for document submission will not help. What is required is the introduction of simplified procedures for the verification of initial ‘originating status’ of ACP products re-exported (e.g., through HMRC recognising country specific phytosanitary certificates as valid documentary proof of origin for duty free access claims). Such reforms need to be urgently introduced if the commercial viability of a wide range of ACP triangular supply chains are not to be fundamentally undermined. Read more “Effects of Rules of Origin Complications for ACP Exports Shipped to UK Via EU Being Increasingly Felt”
EU Phytosanitary Regulations at the Forefront of Challenge Facing Kenyan Cut Flower Industry
Summary
The Kenyan cut flower sector has identified three major challenges currently faced: EU plant health regulations, freight costs and domestic Kenyan taxation. Of these, EU plant health regulations is seen as the most serious challenge since this relates to the accessibility of the all-important EU market. While there is no alternative to meeting EU requirements for access to the EU market, there is now scope for divergence in UK plant health regulations from inherited EU requirements. This could offer market alternatives for ACP cut flower exporters unable to verifiably meet EU requirements. This would appear to add urgency to expanding direct exports to the UK market, particularly since this would side-step the increased costs faced along triangular supply chains. However, Covid-19 linked airfreight disruptions greatly complicate such routing adjustments, with these new trading realities needing to be built into post-Covid air freight recovery plans. Read more “EU Phytosanitary Regulations at the Forefront of Challenge Facing Kenyan Cut Flower Industry”
Brexit Begins to Seriously Impact of Re-Exports of ACP Products to Ireland via the UK
Summary
The border controls arising from the basis of the UK’s departure from the EU customs union and single market is profoundly disrupting the re-export of ACP fresh products to Ireland. While larger ACP exporters are able to adjust their routes to Irish markets to side-step the new border complications, smaller ACP exporters are simply losing orders. There are simple policy solutions which could be adopted to address the rules of origin/MFN tariff and phytosanitary complications now faced. Adopting such solutions is not only important in its own right but would offer a model for addressing the far more extensive disruptions to re-exports of ACP products to the UK which are likely to arise as full UK full border controls on good crossing from the EU are rolled out in 2022. Read more “Brexit Begins to Seriously Impact of Re-Exports of ACP Products to Ireland via the UK”