Summary
ACP exporters of short shelf life products serving the UK market via initial ports of landing in an EU27 member state will face significant challenges under a no-deal Brexit, despite the reconsolidation of duty free-quota free access to the UK market having been secured by all LDC and EPA signatory ACP countries. These ACP exporters will not only need to address the inevitable administrative challenges arising from the UK becoming a separate customs jurisdiction, but will also need to get to grips with the severe transportation disruptions a no-deal Brexit will give rise to along existing EU27/UK transportation corridors. ACP exporters using triangular trade routes will need to:
- ensure they are ready for inevitable administrative changes a no-deal Brexit will bring about (with new EORIs BOIs and BTIs being obtained where necessary);
- ensure valid certification and authorisations are in place and their exports remain compliant with labelling and marking requirement ;
- clarify the location and basis of SPS inspections of products traded along triangular supply chains (ACP/EU/UK) into the UK market;
- review and revise contractual arrangements for delivery of products to clients in the UK;
- take unilateral action to review and revise their current shipping arrangements for serving the UK market ;
- intensify dialogue with trade partners on how best to address specific Brexit related trade disruptions;
- explore the use of the new ferry services being set in place to address Brexit related transportation disruption focussed on the RORO cross channel routes centred on Kent;
- in some case seek out new direct routes to UK markets abandoning their existing triangular trade partnerships.
There is an extensive trade in short shelf life horticulture and floriculture products from ACP countries to the UK via initial ports of landing in the EU27, mainly the Netherlands and Belgium, but also France and Germany (see for example epamonitoring.net article ‘No-Deal Brexit Challenges in Cut Flower Sector Highlight Problems for ACP Triangular Supply Chains’, 1 March 2019). While this mainly takes place from East Africa, some Southern African, West African and even Caribbean countries make use of this triangular trade route in serving the UK market.
This trade is vulnerable not only to the general trade administration challenges which will arise once the UK is no longer part of the EU customs union and single market, but also transportation disruptions arising from:
- the reintroduction of new controls on imports into the EU from the UK;
- shortcomings in UK border control services in the face of increased demands along short sailing roll on-roll off (RORO) cross channel routes (where some 215 million new customs declarations a year will need to be handled);
- severe traffic congestion along roads leading to UK short crossing channel ports;
- consequent shortages of trucks, and licenced HGV drivers as turnaround times increase dramatically and even potentially fuel shortages in the South East of England (1).
New trade administration requirement could considerably increase the costs of using these cross channel routes in serving the UK markets. Estimates from HM Revenue and Customs (HMRC) suggest the administrative costs per customs declaration of ‘around £28 if carried out by the companies concerned and £56 per declaration if outsourced to a specialist company’ (1).
In addition delivery delays as a result of border related transportation disruptions at the main cross channel ports could see the value of delivered consignments reduced considerably, with it being estimated a one day delay in delivering cut flowers to customers’ results in a 30% loss of an exporters profits.
If the new administrative costs are to be reduced then special arrangements will need to be set in place with the assistance of both EU27 and UK border control administrations to facilitate the onward trade in ACP goods landed in EU27 countries prior to onward shipment to the UK.
Additional costs and losses arising from potential delays could also in part be mitigated by exploring the use of the new cross channel ferry services now being established in preparations for a no-deal Brexit.
In September 2019 P&O Ferries announced a new service between Calais and the Port of Tilbury. This will involve ‘two sailings every weekday and one each on Saturday and Sunday’ (2). The aim is to provide a direct route for unaccompanied freight to a port of unloading just 25 miles from central London and with good connections to the Midlands and north-west of England; being just 41 minutes from the intersection of the M25 and the M1 route to the north of England.
The Chief Executive of the Port of Tilbury argues that by ‘prioritising the fast discharge of the ship, the freight can be on the M25 from 5.30am, thereby enabling time-sensitive loads to continue their journey before the rush hour starts’ (2). According to press reports ‘it is expected that time sensitive supermarket goods, including fresh fruit and vegetables will be transported on the route’ (3).
However this port clearance time needs to be seen in relation to the 8 hour sailing time which will precedes unloading, which compares unfavourably with the 90 minute cross channel sailing time from Calais to Dover.
However significantly the Port of Tilbury has installed and fully functioning Border Inspection Post since it also handles trade with non-EU countries. This is in distinct contrast to the Port of Dover where no such Border Inspection Post infrastructure is in place.
The Port of Tilbury also has onward rail connections for containerised cargoes and is in the process of expanding its RO-RO terminal, which currently handles 18 services per week (4). This expansion which is scheduled to come on stream in April 2020 will treble volumes which P&O can ship through its existing sailings from Zeebrugge to Tilbury to 600,000 loads of freight a year (2).
This forms only part of the new ferry freight services being offered to address port and related transportation stresses which will arise in the event of a no deal Brexit.
In early October 2019 the UK government signed contracts worth £87 million with Brittany Ferries, DFDS, P&O and Stena Line to ‘provide additional capacity for up to 3,000 heavy goods vehicles (HGVs) a week using eight ports away from the Dover-Calais short straits across the English Channel’ (5). These new expanded services will ‘travel to Teesport, Hull, Killingholme, Felixstowe, Harwich, Tilbury, Portsmouth and Poole from Cherbourg, Caen, Le Havre, Zeebrugge, Hook of Holland, Rotterdam, Europort, Vlaardingen’ (5). These services will prioritise the delivery of what are known as Category 1 goods, such as essential medicines (6)
This needs to be seen in a context where the UK governments’ own forecasts suggest ‘traffic across the Channel could be disrupted for six months, with a reduction in freight capacity of up to 60%’ (5). According to representatives of ferry operators ‘disruption and delays would be inevitable, despite mitigation measures, in a no-deal exit’ (5).
However the Director of Operations for DFDS at Dover is concerned that exporters and importers are not ready for Brexit and will not have their paperwork in order to pass French customs which will have knock on effects on ferry services on cross channel routes.
It is against this background that at the beginning of October P&O announced a partnership with a logistics company SGS Maco to offer a customs declaration service so as to provide a comprehensive door to door transport service to clients, thereby minimising disruptions to the operation of ferry services arising from shortcomings in trade administration resulting from the reintroduction of border controls on EU/UK trade (6).
Significantly it should be noted that while the UK government has committed to implementing along the main EU27/UK trade routes a border control policy involving ‘no new checks with limited exceptions’, the governments Yellowhammer report suggested this approach is likely to prove ‘unsustainable’ given the ‘significant economic, legal and biosecurity risks’ such a policy will give rise to (1).
| Comment and Analysis
A no-deal Brexit will give rise to intense pressures on UK import control systems as a result of human, physical infrastructure and IT system constraints faced in the context of the new demands which will be placed on UK border control services. From an ACP perspective these pressures will be most severely felt by exporters serving the UK market via initial ports of landing in channel coast and North Sea EU27 member states. It is against this background that ACP exporters may need to explore with their European logistics partners the opportunities available for making use of the new cross channel ferry services being set up to reduce the pressure on the existing primary EU27/UK transport corridor through Kent. More immediately ACP exporters will need to make sure they themselves are ready for dealing with the trade administration and logistical challenges which a no-deal Brexit will give rise to. Key questions which ACP exporters will need to consider and address include: · ensuring the current Economic Operator Registration Identification (EORI) number used to land cargoes in the EU will still be valid for onward shipment to the UK; · if the EORI number currently in use to land cargoes in a EU27 member state was issued by the UK customs authority then a new EORI number will need to be obtained from a EU27 customs administration for the initial landing of cargoes in a EU27 member state; · if a new EORI number needs to be obtained which is valid in the UK or for landing cargoes first in a EU27 member state before onward shipment to the UK, then new Binding Tariff Information (BTI) and new Binding Origin Information (BOI) decisions will also need to be obtained linked to the new EORI number if tariff preferences for which ACP exports are eligible are to be claimed. All these issues will need to be discussed with trade partners and logistics service providers to ensure these administrative issues are addressed and ACP goods shipped to the UK via a EU27 member states continue to flow freely with the benefit of the tariff preferences for which they are nominally eligible. Similarly, where products currently exported to the UK or EU27 require product safety authorisations or certificates in order to be placed on the UK market then steps will need to be taken to ensure these safety authorisations or certificates are issued by the relevant authority with jurisdiction over the territory to which exports are destined (i.e. either the EU27 or the UK). Effectively under a no-deal Brexit two separate authorisation and certification processes will need to be undertaken in the absence of any agreement between the EU27 and UK on mutual recognition of safety authorisations or certificates. In the agro-food sector a particularly important sub-set of safety authorisation and certification requirements relates to SPS import controls. For products requiring SPS import controls exported along triangular supply chains (ACP/EU27/UK) a critical question will be where these SPS controls will take place. ACP exporters using triangular supply chains will need to discuss with their trade partners in the first country of landing just how the concerned public authorities envisage SPS controls being conducted on goods destined for onward shipment to the UK. If there is a lack of clarify on this issue then ACP exporters and particularly their trade partners in the EU will need to initiate dialogues with national SPS import control authorities on how they envisage handling the SPS clearance of goods destined for onward shipment to the UK. Given a desire within concerned EU27 governments to avoid any administrative side deals which would give ammunition to ‘hard Brexiteers’ who seek to dismiss the economic damage a no deal Brexit will give rise to, there may be a need for ACP government initiatives to kick start this dialogue around the implementation of SPS controls for goods traded onward to the UK. Central to this dialogue should be the issue of how SPS controls on goods destined for the UK market can be conducted in ways which minimise the additional costs to ACP exporters. A parallel dialogue will clearly be needed with the UK authorities so that some kind of accommodation can be reached in this area. ACP exporters using triangular supply chains to serve the UK market will also need to look at the contractual arrangements in place to see who will bear the burden of additional costs and potential value losses along triangular supply chains. A critical first issue to be reviewed in this regard will be where the responsibility of the exporter ends and where payment is realised. If payment is received at the point of landing of the product in the EU27 member state then the EU27 trading company will carry all the no-deal Brexit related risks associated with onward trade to the UK. However if the partner in the EU27 member state is simply a logistics service provider and the ACP exporter remains responsible for the exported products until it reaches the final customer in the UK (e.g. UK supermarkets) then all of the Brexit related risks associated with onward trade to the UK will be borne by the ACP exporter. Against this background it would appear important not only to discuss with the partner logistics service provider the basis for SPS import inspection requirement for onward trade to the UK but also their plans for using new ferry services for onward trade to the UK which avoid the south east of England transport bottleneck which is likely to arise under a no deal Brexit. In this context it should be noted the UK governments own Yellowhammer report estimated the flow of HGV vehicles through Kent ports could be reduced to between 40-60% of current levels, with this reduced rate of flow persisting for three months, after which it might rise to a flow rate 50-70% of current levels (1). Given delays along the south east of England transport bottleneck could lead to shortage of trucks, HGV drivers and even fuel, ACP exporters should also initiate a dialogue with their trade partners in the UK on the plans they have in place to address truck, driver and fuel shortages for transportation onward within the UK. This is a particularly important issue where the ACP exporter remains contractually responsible for onward shipment of goods within the UK. This may need to involve restructuring existing shipping arrangements to reduce vulnerability to shortages of trucks, licenced HGV drivers and fuel. Given the restructuring of just-in-time supply chains which a no-deal Brexit will necessitate, ACP exporters may be confronted with the current warehousing and cold storage shortages which have emerged in the UK over the past year. This will require ACP exporters to explore ‘locking-in’ warehousing or cold storage facilities in the UK for their exports currently using triangular ‘just-in-time’ supply chains. This of course will be critically determined by how sensitive particular exports are to storage requirements and the commercial sustainability of sourcing warehousing and cold storage space at the escalating rates now being charged across the UK. Of course given the many problems which a no-deal Brexit will give rise to along triangular supply chains, ACP exporters may need to initiate discussions with freight providers on the scope for directly exporting to the UK (see companion epamonitoring.net articles ‘Hard Brexit Could Create Fruit and Vegetable Shortages in the UK’, 23 November 2017 and ‘New Tanzanian Air Link to UK Could Help Side Step No-Deal Brexit Threat to Horticulture Exports to UK Via the Netherlands’, 6 May 2019) However for smaller scale exporters this may not be commercially viable. In which case added urgency would be given to exploring the scope for lower cost delivery of products to the UK via the newly initiated ferry services designed to side step some of the worst trade disruptions arising forma no-deal Brexit. |
Sources
(1) gov.uk, ‘Operation Yellowhammer: HMG Reasonable Worst Case Planning Assumptions AS of 2 August 2019’
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/831199/20190802_Latest_Yellowhammer_Planning_assumptions_CDL.pdf
(2) P&O Ferrymasters, ‘P&O adds Tilbury-Calais services’, 13 September 2019
https://www.freshplaza.com/article/9143397/p-o-adds-tilbury-calais-services/
(3) freshplaza.com, ‘With Brexit approaching, P&O Ferries gears up new service’, 18 September 2019
https://www.freshplaza.com/article/9144741/with-brexit-approaching-p-o-ferries-gears-up-new-service/
(4) forthports.co.uk , ‘The Port of Tilbury’
https://www.forthports.co.uk/our-ports/tilbury-london/
(5) news.sky.com, ‘Govt signs £87m ferry contracts for no-deal medicine supply’, 11 October 2019
https://news.sky.com/story/government-signs-87m-ferry-contracts-for-no-deal-medicine-supply-11833031
(6) doverport.co.uk, ‘Port of Dover view on EU exit preparedness’, 7 August 2019
https://www.freshplaza.com/article/9131473/port-of-dover-view-on-eu-exit-preparedness/