Summary
The UK governments rejection of binding commitments on regulatory alignment with the EU and insistence on preparing for full border controls if a comprehensive FTA with the EU cannot be agreed and in place by 1st January 2021 is causing concern in business circles. The British Ports Authorities has described this new policy approach as likely to create a situation which looks ‘a bit like a no-deal’. This could seriously disrupt the functioning of ACP supply chains which serve UK markets for short shelf life horticulture and floriculture products via initial ports of landing in EU27 member states. Special arrangements for the handling of this onward trade are required if a range of ACP exporters of short shelf life horticulture and floriculture products are not to be driven out of the UK market. These special arrangements need to be agreed in a matter of weeks if private sector operators are to make the necessary investments in ensuring the continued smooth flow of ACP goods to the UK market along these triangular supply chains from 1st January 2021.
Only the day after the UK’s formal departure from the EU a press briefing to set the stage for Prime Minister Johnson’s presentation on the UK’s ambitious global trade policy, suggested the UK government is ‘planning full checks on all EU imports – export declarations, security declarations, animal health checks’ and will require ‘all supermarket goods to pass through border inspection posts’ (1).
According to press analysis ‘if confirmed, the new policy would mean physical checks on food such as tomatoes, cheese and meat coming in from the EU, including beef and dairy from Ireland, as well as paperwork on imports’ (1). This would represent a reversal of the earlier policy of Theresa May, whereby, in the event of a no-deal Brexit, the UK planned to ‘waive customs checks and tariffs on 87% of the goods coming into the country and only impose limited checks on goods.’ It was confirmed the UK was no longer considering ‘no deal unilateral flow prioritisation.’ It was recognised by the government spokesperson this would have ‘big practical impacts.’ (1)
However, it is unclear whether this represents a fundamental shift in UK policy or is simply a hardening of the rhetoric in an effort to influence the impending discussions in the EU Council of Ministers on the European Commission’s draft negotiating mandate.
The press briefing needs to be seen alongside earlier remarks from UK Chancellor Sajid Javid to the effect the UK would no longer remain in regulatory alignment with the EU (see companion epamonitoring.net article ‘The UKs Commitment to Regulatory Divergence Could Complicate Functioning of ACP Triangular Supply Chain Exports to the UK Market’, 23 January 2020). This has led the EC to seek to explain once again the close link between the extent of regulatory alignment and the extent of frictionless free trade. EC President Ursula von der Leyen stated clearly Europe would ‘defend its interests in a determined manner’, with ‘only those who acknowledge the rules of the internal market’, being able to ‘benefit from the common market’ (2).
Meanwhile an exasperated EU chief negotiator Michel Barnier, expressed the hope the UK government would reflect closely on this matter since the EU could not ‘agree to a close neighbour trying to seek an unfair advantage through subsidies to industry or a removal of stringent standards to cut costs’. For the European Commission this is an existential issue for the EU project, with full free trade and regulatory alignment being two sides of the same coin.
The prospect of full custom checks is causing alarm in the business community, which had been urging ‘the government to ensure as little friction on cross-border trade as possible’ (1).
The head of European policy at the Freight Transport Association (FTA) Pauline Bastidon maintained full customs checks would have ‘serious consequences for supply chains and would be an unwelcome departure from the previous pragmatic approach’ (1).
Against this background the FTA is calling for the UK government to provide time to implement whatever may be agreed before the changes are actually introduced. Effective business level preparations, it was argued, require ‘clarity on operational requirements and new processes as soon as possible’. Simply being told new customs formalities will be introduced without knowing ‘precisely what it will look like operationally’ is not seen as providing an adequate basis for planning and investment by the companies affected (estimated at tens of thousands of companies) (3).
It is argued companies urgently need ‘precise details of the changes they will face, in order to recruit, train and deploy potentially thousands of staff to deal with expected extra red tape’. However in the current situation ‘uncertainty remains over issues ranging from whether physical sanitary checks will be required on food and animal products’, and whether ‘traders will have to declare each border crossing as it happens’ or ‘whether they will be able to rely on “trusted trader” status to simplify the process’. (3)
The Chief Executive of the Road Haulage Association, Richard Burnett, re-enforced this point by highlighting how ‘a large firm introducing a new transportation and logistics system would typically devote two years to preparations’, while the UK governments timetable provided only 11 months (3). This assumes the outline of a future agreement could be instantly agreed. In all probability however negotiations are only likely to be concluded by July, if not later leaving business operators less than 5 months to effectively prepare and implement appropriate operational arrangements.
It was acknowledged that ‘if details about future requirements are not provided soon enough, many companies will press ahead and try to make it work’. However, it was also acknowledged ‘others will simply decide it is too difficult’ (3) and will cease to operate across EU/UK cross border routes.
This needs to be seen in a context where ‘a stationary truck waiting in a queue at a port can cost a haulier £58 an hour’ this will reduce profitability while delays of up to 10 hours would mean companies would be going ‘out of business pretty quickly’.
According to the British Ports Association Chief Executive Richard Ballantyne ‘If there’s an FTA deal without alignment on standards, that’s going to look a bit like a no-deal to the ports industry, particularly roll-on/roll-off ports whose traffic works on the assumption you can move trucks swiftly through’.
It was pointed out how for hauliers having vehicles ‘sitting in traffic because the paperwork hasn’t been done’, will generate increased costs for vehicle operators (2) while for trader in short shelf life products delivery delays will strip value out of the supply chain. These delivery delays will not only affect traders and consumers but will feed back into contractual arrangements for the supply of goods to UK supermarkets and wholesalers, to the detriment of ACP exporters who use triangular supply chains to serve the UK market.
| Comment and Analysis
The introduction of full UK custom controls and other border checks along the principal roll-on/roll-off (Ro-Ro) EU27/UK shipping routes would carry particularly serious implications for ACP exporters of short shelf life horticulture and floriculture products serving the UK market via initial ports of landing EU27 member states. The application of full trade documentation checks would be particular disruptive of current logistical services for the delivery of fruit and vegetable to UK customers under arrangements whereby diverse products from a multiplicity of third countries are consolidated into containers for delivery to individual retail outlets. This model of delivery depends heavily on the free flow of goods across the EU27/UK border. Potentially if border controls along EU27/UK routes were reintroduced, each of these products from a different country will require separate paperwork to clear the EU/UK border. This could require each container to be accompanied by a veritable mountain of paperwork, with the application of even the most basic documentary checks along these supply chains undermining the viability of this logistical model. Developments in this area will be critically determined by the specifics of the new controls systems to be introduced. This situation would be compounded if phytosanitary checks were introduced on all agri-food products entering the UK along the short sailing Ro-Ro routes, which currently carry the bulk of EU/UK agri-food sector trade, including the on-ward trade from ACP countries. The Port of Dover lacks the physical space to set up the required phytosanitary control infrastructure on site, with the UK government planning to direct all consignments requiring phytosanitary inspections to dedicated inspection sites located beyond the ring-road round London (outside the M25). Only after phytosanitary checks have been conducted at these sites would these consignments be allowed to move on to the final customer. In addition, the general application of customs and border controls would be likely to lead to transportation disruptions and delays along transport routes in the South East of England, within which ACP exports of short shelf life horticulture and floriculture products using current triangular shipping routes would inevitable become embroiled. Against his background to describe the impact of full UK border controls along short sailing Ro-Ro routes between the EU27 and the UK as carrying serious consequences’ is a profound under-statement in the case of the existing triangular trade in short shelf life ACP products into the UK market. The reintroduction of border controls may require the abandoning of these pre-existing routes to the UK market and the development of increased levels of direct exports to the UK market. While large scale exporters such as Kenya have already taken steps in this regard by establishing direct freight services from Nairobi to lesser used UK airports, namely Sheffield/Doncaster airport, smaller scale African exporters do not have the same scope for adjusting their current routes to market. This is particularly the case in the cut flowers sector where Dutch auction houses have established a global dominance. Smaller exporters in the Caribbean who use triangular supply chains in the face of limited alternative transportation options will face similar problems and could easily be driven out of the UK market. However, the full implementation of UK border controls on EU27/UK trade could well undermine the functioning of border controls along direct ACP exports routes to the UK market, given the new demands such controls will place on the limited cadre of Border Force and phytosanitary inspection staff. This could well see personnel redeployed from existing direct ports of entry for ACP short shelf life products to the emerging ‘choke points’ for trade in the South East of England. This could then serve to prolong border clearance times for ACP direct exports to the UK market, with this then reducing the commercial value of delivered products. Even if the UK’s new “hard-ball’ approach is purely a negotiating tactic, ACP exporters who use triangular supply chains could still be affected, well before 1st January 2021. The hard reality is if current uncertainties are allowed to persist into the second half of 2020 UK supermarkets and wholesalers may begin to quietly de-list ACP exporters who serve the UK market along triangular supply chains. This would be a logical response to ongoing uncertainties over how goods will be dealt with when entering the UK through the main South East of England Ro-Ro routes which play such a dominant role in UK agri-food imports from and through the EU27. Securing ‘clarity on operational requirements and new processes’ to be applied to ACP short shelf life horticulture and floriculture products entering the UK market along triangular supply chains, can thus be seen as a matter of considerable urgency for the affected ACP exporters. Given the current rhetoric coming out of London and the apparent willingness of the UK to take the negotiations with the EU down to the wire, there is an urgent need to delink agreement on the arrangements for the handling of the current trade in ACP products into the UK market via EU27 member states, from the general process of UK-EU trade negotiations. This would appear to be essential if serious commercial losses to ACP exporters of short shelf life products on a trade which approaches half a billion euro is to be avoided. This would appear to require the EU and UK authorities either jointly or in parallel to agree to special administrative arrangements for the handling of the onward trade in ACP short shelf life products to the UK market. This requires special administrative arrangements which de facto: · Waives any need for customs checks for goods transiting EU27 member states · Waives any need for UK phytosanitary checks on the basis of an EU commitment to These commitments would need to be communicated to a) the concerned supply chain stakeholders (traders, freight forwarders, port b) customs officials and SPS inspectors, so that appropriate administrative and The early and clear communication of commitments in this regard would appear to be essential if the smooth flow of goods along triangular supply chains is to be ensured. Such commitments should be seen as an integral part of the UK and EU’s respective commitments on using trade in the service of economic development with relations with trade partners in Africa, the Caribbean and the Pacific. What is clear is that if early policy commitments in these areas are not forthcoming private sector operators will be unable to make appropriate logistical and administrative arrangements to ensure the continued smooth flow of goods along triangular supply chains The need for such special arrangements to ensure the continued smooth flow of goods to the UK market along triangular supply chains needs to be taken up with the UK and EU authorities in the coming weeks before the rough and tumble of hard headed UK/EU trade negotiations get underway. |
Sources:
(1) Guardian, ‘Johnson to impose full customs checks on goods from EU – report’, 1st February 2020
https://www.theguardian.com/politics/2020/feb/01/johnson-to-impose-full-customs-checks-on-goods-from-eu-report
(2) Guardian, ‘Brexit weekly briefing: one chapter ends, and another begins’, 4 February 2020
https://www.theguardian.com/politics/2020/feb/04/brexit-weekly-briefing-one-chapter-ends-another-begins
(3) Independent, ‘Boris Johnson must clarify new Europe trade deal to avoid delays and possible job losses, business groups warn’, 2 February 2020
https://www.independent.co.uk/news/uk/politics/brexit-boris-johnson-eu-trade-deal-europe-business-a9312336.html