Category: Topics

Kenya Looking to Market Diversifications in Face of Growing Complications on EU Markets and Covid-19 Related Increases in Air Freight Costs

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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

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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

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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”

Brexit set to extend marginalisation of traditional ACP suppliers on the UK sugar market

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Summary
The proposed sugar quota under the UK-Australia FTA is initially equivalent to 17% of total UK import from outside the EU in 2019, rising to 47% after 8 years. Its impact on total ACP sugar exports to the UK will be determined by the future volume of EU27 sugar exports to the UK; the future evolution of UK sugar demand; and the future of the temporary UK ATQ of 260,000 tonnes which was introduced for one year from 1 January 2021. If the ATQ is retained, EU sales remain at ½ 2020 volumes and UK sugar consumption shrinks in line with projections, the situation of most ACP exporters on the UK market will be precarious. However, the vulnerability of individual ACP exporters to the evolving UK sugar sector trade policy varies greatly, with in depth, country specific analysis being required to determine which ACP sugar exporters are most vulnerable to the UK’s evolving sugar sector trade policy. Read more “Brexit set to extend marginalisation of traditional ACP suppliers on the UK sugar market”

HGV Driver Crisis Raises Contractual Issues for ACP Fresh Produce Exporters

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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

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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”

Wider Trade Dimensions of EU Due Diligence Regulations: Where Does the Interest of the ACP Lie?

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Summary
President Macron is throwing his weight behind efforts to establish regulatory ‘mirror clauses’ in EU trade agreements to combat ‘environmental and social dumping’. However, despite strong European Parliament support, there is no consensus among EU member states governments on the scope and practicality of such a ‘mirror clause’ approach. ACP exporters and governments need to define where their interests lie within these EU regulatory discussions, so as to be able to protect and promote ACP producer interests within these policy debates. Read more “Wider Trade Dimensions of EU Due Diligence Regulations: Where Does the Interest of the ACP Lie?”

Circumvention of the LID Highlights the Need for an Ambitious and Effective EU Human Rights and Environmental Due Diligence Regulation

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Summary
The EC’s much heralded human rights and environmental due diligence regulation looks set to be limited to establishing a common minimum standard, which businesses will be required to adhere to, with an enabling environment being created aimed at incentivising companies to address the negative impacts of their activities. In the face of corporate lobbying Tony’s Chocolonely has broken ranks demanding the EC establish an ambitious minimum standard. This would appear essential, given current corporate efforts to side-step the overall cocoa procurement cost implications of the Living Income Differential initiative, by reducing other components of cocoa bean payments made in Ghana and Cote d’Ivoire. A clear Organisation of African, Caribbean and Pacific (OACP) States and African Union position in support of an ambitious and rigorously enforced corporate minimum standard for living wage, human rights and environmental protection commitments would appear to be required. Read more “Circumvention of the LID Highlights the Need for an Ambitious and Effective EU Human Rights and Environmental Due Diligence Regulation”

EU Phytosanitary Regulations at the Forefront of Challenge Facing Kenyan Cut Flower Industry

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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

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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”