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.
The Fresh Produce Consortium in the UK has warned fresh fruit and vegetable sector operators the UK authorities are ‘not ready for the new import controls on EU goods’ scheduled to come into force at the beginning of October. The new controls which are scheduled to come into effect relate to products ‘subject to sanitary and phytosanitary controls’, with this including not only fruit and vegetables but also all livestock products. These requirements include:
- The provision of export health certificates by the concerned EU authorities (in the case of ACP re-exports ‘phytosanitary re-export certificates’).
- Pre-notification to UK customs authorities of ‘goods movements via the new Import of Products, Animals, Food and Feed System (IPAFFS)’
- From 1 January 2022, the application of customs controls, including the completion of frontier declarations (1).
According to FPC Chief Executive, Nigel Jenney this is adding to the internal trade administration burden of the affected businesses. According to the FPC ‘there is a lack of adequate preparation in the industry for the new rule,’ with this ‘being compounded by going staff shortages’ (1). CEO Jenney called for an ‘efficient solution for a highly efficient industry’ and expressed concerned such solutions were not being offered.
The current UK government approach of ‘so called support and advice’ and attendance at ‘countless online events,’ simply wasn’t delivering the necessary solutions. He maintained ‘the implementation delays are driven solely by the Governments failure to develop and implement their new border infrastructure and IT model on time’ (1).
The prospect of disruption to trade flows along cross channel short sailing routes was implicitly acknowledged when the UK government quietly extended the emergency powers to handle traffic flows in Kent under ‘Operation Brock’. This traffic management system is ‘designed to cope with queues of up to 13,000 lorries heading for mainland Europe across Kent’. The emergency powers to implement ‘Operation Brock’ were scheduled to end by October 2021, having been previously extended. The removal of the ‘sunset clause’ from the legislation, ‘means the emergency protocol can be activated at any time to govern the flow of lorries around the Port of Dover and Channel tunnel at Folkestone with contraflow systems’ (2).
UK government representatives however have sought to downplay the Brexit related dimension of the contra-flow traffic management system. It was argued ‘while Operation Brock was originally created to deal with disruption caused by [the] EU exit [transition period] and in response to the Covid-19 pandemic, removing the sunset clauses from Operation Brock will mean the Kent Resilience Forum is better prepared to respond to any type of traffic disruption in the area, not solely related to EU exit, including strikes and severe weather’ (2).
Opposition politician however claimed the removal of the ‘sunset clause’ from the emergency legislation was further evidence of the long-term disruptions which would follow on from the UK governments ‘botched’ trade deal with the EU and constituted an implicit admission the government had failed to properly plan for the chosen outcome of the Brexit negotiations (2).
Looking beyond air freighted cargoes, in the absence of policy initiatives to address the cost increases consequences of the Brexit process, the phasing in of UK border controls along triangular supply chains, will compound the challenges faced by ACP sea freight cargoes, which are already facing a surge in freight rates to Europe. Lloyds of London reporting sea-freight rates to Europe increasing a massive 120% in the last year, with no end to these high sea-freight rates in sight (4). Indeed, according to Drewry’s Reefer Shipping Annual Review and Forecast 2021/22 report, in 2021 ‘average reefer freight rates jumped 32% in Q2 and are on track for a 50% increase by the end of Q3.’ While these freight rate increases have been most severe along east-west trade lanes, north-south trade lanes handling perishable products have also been affected, though be it less severely. What is more, reefer rates are projected to rise, as cost price inflation feeds into north-south routes, as long-term contract rates are renewed. Little relief from these pressures is foreseen before 2022 (5).
Along north-south routes the cute shortage of reefer equipment is also a problem given ‘the imbalanced nature of perishable trade’ along north-south routes. For certain products this is likely to be come an increasingly pressing issue during seasonal peaks. This high transport cost inflation is seeing some ‘perishable commodities being priced out of the market.’ The impact of this however varies from product to product depending on the impact of the Covid-19 pandemic on the demand side. According to Rafael Llerena, CEO of 3PL EasyFresh while ‘citrus is not the most valuable product… the pandemic has increased its demand and price have gone up, so it is still able to absorb higher sea freight and logistics costs’ (5). Other sea freight products with less favourable price trends will thus carry the fully commercial cost of higher sea freight rates.
| Comment and Analysis
Over the last 30 years a multiplicity of ACP exporters have taken advantages of the economies of scale to be gained from the distribution of fruit and vegetable product exports to Europe via single distribution hubs in the Netherlands and Belgium. For some West African exporters this extends to the use of distribution hubs in France. While the precise volume of this onward trade in ACP exports is unclear, the vital role the Netherlands in particular plays in the fresh fruit and vegetable trade of ACP exporters means what happens along these supply chains to the UK is of considerable importance. The recent experience of the introduction of UK border controls on the trade in plants and cuttings, which has seen Dutch traders seriously reconsidering whether to continue the re-export trade to the UK is causing particular concern (see epamonitoring.net article, ‘Lack of Clarity on the Whether Brexit Disruptions of EU/UK Trade in Plants in Impacting ACP Exports,’ 20 July 2021) From the perspective of East African, Caribbean and some Western Africa air freight short shelf-life fruit and vegetable exporters, who ship along triangular supply chains, the timing of the potential disruptions which the phasing in of UK border controls on goods crossing from the EU could give rise to, is a particular source of concern. This is a result of the UK ‘red list’ travel restrictions first announced at the beginning of April 2021. These Covid-19 control measures have served to cripple the nascent recovery in passenger-based air freight services which was beginning to get underway in March 2021 (3) (see also companion epamonitoiring.net article ‘East African Air Freighted Horticulture and Floriculture Exports to UK facing Devastation Given UK ‘Red List’ Travel Restrictions’, 13 April 2021). This has reduced the options open to ACP exporters who use triangular supply chains to re-orientate their supply chains towards directly serving the UK market. Indeed, since the announcement of the initial UK ‘red list,’ which covered 32 ACP member states 6 new countries have been added, including Uganda and the Dominican Republic (see table below for updated details as of 8 August 2021). What is more since April 2021, no ACP countries having been removed from the UK ‘red list’. Indeed, there seems little prospect of such ‘red list’ travel restriction being lifted until such time as vaccination rates in ACP countries reach levels comparable to those in the UK.
These air freight and sea freight disruptions and freight rate increases would appear to make 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. In this context the UK government could take a series of unilateral actions to address key areas of cost increases. These include: · Establishing simplified system of verification of country of origin of re-export · Waiving the need for phytosanitary inspections for re-exports of fresh · Waiving the need for the lodging of financial guarantees by hauliers for · Facilitating agreements on officially recognised pre-export documentation All of these measures could be taken unilaterally by the UK government in association with the concerned private sector traders and producers organisations and are not dependent on broader negotiations with the EU on trade related issues. Such action would be wholly consistent with the calls made in the March 2021 House of Lords European Union Committee report on the Brexit challenges faced in future trade relations with the UK, for the UK government to adopt unilateral policy measures to ease the challenges now faced (see companion epamonitoiring.net article ‘UK Parliamentary Report Reviews Operational Shortcomings of EU/UK TCA and Highlights Rules of Origin Problems Faced by ACP Re-Exports’, 8 April 2021). On the EU side unilateral actions are also needed. Specifically in regard to the re-export of ACP products, this includes a need to urgently clarify: · The basis on which imported consignments to be broken down for onward · The authority responsible in each EU member state for the issuing of |
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Sources
(1) Freshplaza.com, ‘UK not ready for October import controls’, 10 August 2021
https://www.freshplaza.com/article/9343242/uk-not-ready-for-october-import-controls/
(2) The Guardian, ‘Emergency Brexit powers for lorry queues to be made permanent’, 10 August 2021
https://www.theguardian.com/politics/2021/aug/10/emergency-brexit-powers-for-lorry-queues-to-be-made-permanent
(3) gov.uk, ‘Red, amber and green list rules for entering England’, 8 August 2021
https://www.gov.uk/guidance/red-amber-and-green-list-rules-for-entering-england
(4) Lloyd’s List, ‘Contract freight rates continue to surge’, 5 August 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/contract-freight-rates-continue-to-surge
(5) The Loadstar, ‘Reefer cargo the new battleground with rates rising and equipment scarce’, 16 August 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/reefer-cargo-the-new-battleground-with-rates-rising-and-equipment-scarce