Summary
The scale of the road transportation disruptions along EU/UK supply routes as a result of the UK’s departure from the EU customs union and single market and the consequent creation of border controls are increasingly becoming apparent. The main impact will be unaffected by the outcome of the ongoing EU/UK negotiations. Against this background ACP exporters currently using triangular supply chains may have little choice but to move over to direct exports to final destination markets or the abandonment of markets in the UK, mainland EU or the Republic of Ireland currently served along triangular supply chains.
The haulage challenges which will face all goods crossing and EU-UK border from 1st January 2021 have been thrown into sharp relief by the recent heated exchanges between the UK freight industry and the Cabinet Office Minister responsible for overseeing Brexit preparations, Michael Gove.
On 14th September the Guardian reported on a ‘sensitive’ UK government Border and Protocol Delivery Group report which described ‘a reasonable worst-case scenario’ which foresees ques of up to ‘7,000 lorries in Kent, and two day delays to cross to the EU’ (1).
Under this ‘reasonable worst-case scenario’ ‘only 30-60% of lorries carrying freight’ will be ready for the new border procedures. While plans are in place to deal with the consequent road congestion, this is dependent on IT systems working effectively. However, the contention of the 46 page document is that ‘a core IT system for hauliers is not expected to be tested publicly until the end of November’ (1) and is unlikely to be fully operational until April 2021 (2). In addition, so far less than 1/3 of freight forwarders are familiar with the planned system and how it will work (2).
This is a matter of considerable concern, since the Smart Freight System (SFS) was intended to provide an interim solution, given delays in the design and operational rolling out of the Goods Vehicle Management System’ (GVMS). According to the UK freight industry, while the SFS is ‘all great in theory’ (1), there are major concerns over how it will work in practice. There are concerns the envisaged ‘Kent Access Permit’ system is unenforceable in practice (1).
| The Kent Access Permit System
On 23rd September Michael Gove confirmed a Kent Access Permit would ‘be introduced for lorry drivers entering Kent to travel on to the EU’, from 1st January 2021. All HGV drivers intending to travel on to the EU will need to be in possession of a KAP in order to enter Kent. Failure to obtain a KAP will result in drivers facing fines of £300. The KAP system will be enforced by mobile police patrols and automated number plate recognition software along the main access routes. The issuing of the permit will be contingent upon the drive being in possession of all documentation required to cross an UK/EU border. Guardian, ‘Lorry drivers will face de facto Brexit border in Kent, Gove confirms’,
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Some of the delays with the IT systems are structural, since ‘preparations for new post-Brexit border operations are all-consuming, affecting 26 government departments using 100 IT systems’, with, in some instances, a need for new legislation before inter-departmental information sharing is legally permissible (1).
Significantly the UK Border and Protocol Delivery Group report notes how while ‘the modelling is focussed on outbound traffic, due to the closed loop system at the short channel crossings, with a finite number of HGVs running return trips, we assume that inbound flow would be constrained to a similar degree as outbound, as lorries get stuck in Kent and cannot return to the EU to collect another load’. The report’s analysis goes on ‘it is understood that this will be a more significant constraint than any checks on in-bound flow immediately post-transition’ (1).
These haulage issues are thus likely to have a far greater impact on ACP exporters using triangular supply chains in serving the UK market than actual UK border controls, which are to be phased in over a six month period.
On 15th September the situation highlighted by the Border and Protocol Delivery Group report saw the British International Freight Association (BIFA) call on the UK government to provide ‘clearer and more accurate information on border processes following the Brexit transition on 1 January.’ BIFA is concerned ‘most UK freight forwarders do not have a clear understanding of the processes required and have significant reservations over whether they have the capacity to handle the major changes required’ (3).
BIFA Director General Robert Keen urged the UK government to ‘listen to the significant reservations that have been expressed by the companies on the front line in the management of the UK’s visible imports and exports’ (3).
On 18th September, a meeting between UK freight industry representatives and Michael Gove to try and secure details and greater clarity on the border procedures to be applied was described by Richard Burnett of the Road Haulage Association as ‘a complete waste of time’ (4). He maintained while ‘Government officials are political experts, we are experts in road freight, logistics and keeping the supply chain moving’, and it had been hoped the meeting ‘would result in a mutually effective co-operation’, this ‘hasn’t happened and there is still no clarity’ (4).
It should be noted the projected ‘reasonable worst-case scenario’ is likely to occur regardless of the outcome of the ongoing EU-UK negotiations.
Following these revelations, relations between the UK freight industry and government have not been helped by a letter from Michael Gove warning the freight industry of the dangers posed by a ‘reasonable worst case scenario’ and urging the industry to ‘act now to get ready for new border formalities that could help mitigate the disruption.’
This letter caused outrage in the freight industry, which fears it is now being set up as the ‘fall guy for delays and disruptions likely in January’ (5). This is despite the freight industry having issued repeated warnings over the past 18 months of precisely dangers the UK government’s Border and Protocol Delivery Group report highlighted (6). The situation is however now even worse than initially feared, with the Covid-19 pandemic having absorbed all the energies freight companies would otherwise have been devoting to Brexit preparations. Indeed, in many respects the sector is even less well placed than in 2019 to deal with a no deal UK departure from the EU customs union and single market.
Given the ineffective dialogue to date, there is now little time for the necessary arrangements to be set in place on an operationally effective basis by 1st January 2021 or even the 1st April.
Concerns over the management of traffic flows are compounded by concerns over the shortage of customs agents required to assist businesses with the border documentation which will be required from 1st January 2021. Press reports citing a survey carried out by Descartes suggests ‘only 18% of British businesses seem prepared for a ‘no-deal’ Brexit’. It was noted how ‘those companies with experience of customs declarations were more worried than those without’, with this suggesting ‘the latter group does not yet understand how complex the processes are’ (7).
Further complications are also likely to arise as a result of any failure to reach agreement on the mutual licensing of HGV drivers. Currently, under the default arrangement which would apply in the absence of a new EU/UK specific agreement (the European Conference of Transport Ministers (ECTM) scheme), only ¼ of currently licensed UK HGV drivers would be allowed access to EU roads (2,088 licenses compared to 8,348 currently in use) (8).
These freight industry concerns are widely shared, with the Confederation of British Industry (CBI) warning UK government Ministers ‘only 4% of company bosses from a survey of 648 said they supported a no deal Brexit’, in a context where the Covid-19 pandemic has ‘negatively affected preparations for Brexit.’ CBI Director General Carolyn Fairbairn, highlighted how UK businesses ‘face a hat-trick of unprecedented challenges – rebuilding from the first wave of Covid-19, dealing with the resurgence of the virus, and preparing for significant changes to the UK’s trading relationship with the EU.’ She maintained ‘a good deal will provide the strongest possible foundation as countries build back from the pandemic’, keeping ‘UK firms competitive by minimising red tape and extra costs, freeing much needed time and resources to overcome the difficult times ahead’ (9).
| Comment and Analysis
While attention has been focussed on the formal changes the UK’s withdrawal from the EU customs union and single market will give rise to, a more critical issue in the short-term, is the logistical challenges which will be faced in the transportation of goods across an EU/UK border by accompanied trucks. The recent exchanges between the UK freight industry and the UK government highlight the fundamental practical challenges which will be faced in moving goods across an EU/UK border in the absence of a comprehensive EU/UK agreement. Taken together the current preparedness situation would appear to pose fundamental challenges to: · The onward shipment of ACP exports utilising triangular supply chains via the EU27 · The onward shipment of ACP exports utilising triangular supply chains via the UK for · The onward shipment of ACP exports to the Republic of Ireland using the UK ‘land These challenges are in many respects independent of the nature and severity of specific border checks to be conducted on ACP goods entering the UK via the EU or the EU via the UK. This suggest ACP exporters involved in serving UK or EU markets along triangular supply chains will need to explore options for: · The direct delivery of goods to the UK, rather than via the EU. · The onward shipment of goods to the UK in the form of unaccompanied · The direct shipment of cargoes landed in the mainland EU to ports in the Republic of · The direct shipment of goods to the EU rather than via the UK. · The negotiation of payment arrangements for the delivery of goods to the first port The main ACP products which will be affected will be air freighted short shelf life fresh fruits, vegetables and cut flowers. Smaller ACP exporters will be more severely affected than larger ACP exporters; given the formers more limited inter-continental shipment options. While it is still possible negotiate special boarder clearance arrangements for ACP exports using triangular supply chains, such arrangements will leave unaddressed the logistical challenges which are increasingly coming to the fore. Against this background ACP exporters currently using triangular supply chains may have little choice but to move over to direct exports to final destination markets or the abandonment of markets in the UK, mainland EU or the Republic of Ireland currently served along triangular supply chains. |
Sources:
(1) Guardian, ‘Official post-Brexit report warns of queues of 7,000 lorries in Kent’, 14 September 2020
https://www.theguardian.com/politics/2020/sep/14/official-post-brexit-report-warns-of-queues-of-7000-lorries-in-kent
(2) The Loadstar, ‘Another blow for UK logistics smart freight system wont be ready for Brexit’, 16 September 2020
https://theloadstar.com/another-blow-for-uk-logistics-smart-freight-system-wont-be-ready-for-brexit/
(3) The Loadstar, ‘UK government still not clear on post-Brexit border processes says-BIFA’, 15 September 2020
https://theloadstar.com/uk-government-still-not-clear-on-post-brexit-border-processes-says-bifa/
(4) The Loadstar, ‘Brexit clarity meeting was just to cover political arses than get meaningful results’, 18 Sept 200
https://theloadstar.com/brexit-clarity-meeting-was-just-to-cover-political-arses-than-get-meaningful-results/
(5) BBC, Brexit letter warns of 7,000-truck queues in Kent’, 23 September 2020
https://www.bbc.com/news/uk-54260470
(6) Guardian, ‘Truck queues could be 7000 long when Brexit transition ends ministers warn’, 23 September 2020
https://www.theguardian.com/politics/2020/sep/23/truck-queues-could-be-7000-long-when-brexit-transition-ends-ministers-warn
(7) The Loadstar, ‘Number one fear for UK post-Brexit trading is supply chain delays’, 8 September 2020
https://theloadstar.com/number-one-fear-for-uk-post-brexit-trading-is-supply-chain-delays/
(8) The Telegraph, ‘Three quarters of hauliers face loss of permits in no-deal Brexit’, 20 July 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/2020/07/20/Three-quarters-of-hauliers-face-loss-of-permits-in-no-deal-Brexit
(9) The Guardian, ‘Business leaders urge UK government to avoid no-deal Brexit’, 28 Sept 2020
https://www.theguardian.com/politics/2020/sep/28/business-leaders-urge-uk-government-to-avoid-no-deal-brexit