Summary
Road traffic disruptions along EU/UK ‘RoRo’ routes have been less than feared. This is largely due to a sharp drop in traffic flow along these routes. However, the changes to EU/UK border arrangements have seen an increase in road haulage costs along these routes. Some of these causes of cost increases are transitional and will decline by 2022. Other causes of cost increases are structural and could undermine the commercial viability of the use of triangular supply chains currently used to get ACP products to market. This will be a particular problem for lower value fresh produce and smaller scale ACP exporters. Individual supply chains will need to assess the long-term commercial implications of rising road haulage costs along EU-UK ‘RoRo’ routes. Policy initiatives to remove the rules of origin complications along triangular supply chains for ACP exporters whose products enjoy duty-free/quota-free access to both the UK and EU market are possible. Equally it should be possible on risk assessment ground to waive any need for phytosanitary import controls on ACP products which have recently been subject to such controls on entry to the EU when onward shipped to the UK. However, under current circumstances this will need to be negotiated bilaterally with the UK. Such initiatives would ease pressures on road haulage operators and incentivise the resumption of more normal haulage arrangements for ACP products shipped to the UK via the EU
While projections of road traffic chaos along the short sailing EU-UK transport routes have not materialised, this is largely attributable to the dramatic reduction in traffic flows along these routes According to the Road Haulage Association in the first week of the new year ‘there were about 2,000 lorries a day in each direction making the Dover-Calais ferry crossing and going through the channel tunnel compared to a normal daily figure of between 5,000-6,000’ (1).
Three weeks into the new year daily road freight traffic was reported to be down by almost a third compared to 61% in the first few days of 2021 (2).
In terms of the rejection rate of trucks arriving at the short sailing cross channel ports as a result of incorrect paperwork, estimates vary. On Thursday 7th January, the RHA estimated 1 in 5 trucks were being turned away, while the ferry company DFDS tweeted on the 8th of January ‘we are experiencing a high volume of vehicles being refused and delayed at the Ports of Calais, Dunkerque and Dover, due to incorrect paperwork being presented at check-in.’ However, the UK Department of Transport took a different view maintaining less than 10% of lorries had incorrect paperwork and hence faced delays in the first two weeks of 2021 (1).
By the end of the third week government officials told MPs this had fallen to an average of 5% (with around 200 lorries a day being turned back) (2). It was maintained traffic has been ‘completely free flowing’, with there being ‘no significant knock-on disruption on Kent roads’ (3). What delays were occurring, were attributed to the new Covid test requirements for truck drivers introduced by the French authorities. This needs to be seen in a context where many exporters have ‘paused’ their EU/UK trade operations to see how the new border processes will operate in practice.
In terms of delays in the first week of January it was reported Dutch traders were requesting orders to be placed an additional 24 hours in advance in order to allow timely delivery to the UK (4).
However, there is common agreement that costs of road freight from the EU to the UK are increasing. Press reports suggest a year on year rise of 47% in haulage fees charged in the first weeks of 2021 (2). Indeed, The Telegraph reported ‘how some European hauliers have raised their rates from €1.50 per kilometre to €10 to reflect being unable to organise return loads or cover the costs of being held up for days at the border’ (5) Other Press reports indicate that at the beginning of January Dutch traders had been charging a £150-per consignment levy for cargoes destined for the UK (4).
These cost increases of course are only faced if hauliers can be found to take cargoes across from the EU to the UK. The rejection rate of hauliers willing to take cargoes from the EU to the UK has reportedly increased 168% in the first weeks of 2021 (2). This needs to be seen in a context where EU hauliers are ‘rejecting UK deliveries because of new requirements for financial guarantees for lorry-loads of goods’ (6).
What is increasingly clear is that the raft of new customs procedures on trade related paperwork is giving rise to complexities and delays which are substantially increasing the costs of doing business along EU to UK supply routes.
This was confirmed by Ian Wright the Chief Executive of the Food and Drink Federation in a presentation to MPs on the ‘Future Relationship with the European Union’ Committee in the second week of 2021. He highlighted how the industry operated on tight profit margins and how ‘unless the deal changes in some material way’, there will be a need for a substantial ‘re-engineering of almost all the EU-UK and GB-NI supply chains over the next six to nine months.’ Andrew Opie of the British Retail Consortium confirmed the new ‘system for trade between the UK and the EU is not set up for just-in-time supermarket supply chains’ (7).
While the private sector and government may disagreement on the level of road traffic disruption there is a common agreement that matters are likely to get worse before they get better. UK officials have warned businesses to be ‘braced for delays to lengthen over the coming weeks as traffic movements return to nearer normal levels, and again when a grace period for imports ends in July’ (3).
To date the UK authorities have prioritised maintaining the flow of goods over border controls and revenue collection. While this may continue on the UK side throughout the first six month of 2021 (and even beyond), the lapsing of transitional light and flexible import controls on the EU side and the application of standard 3rd country controls by EU officials on goods entering from the UK, will be likely to compound difficulties on what is essentially a closed circuit for road haulage.
Current and future difficulties are particularly challenging for the fresh produce sector, Nigel Jenney, Chief executive of the Fresh Produce Consortium has expressed concerns ‘about the substantial amount of additional administration and official inspections which the industry will have to complete’, and the costs this will generate along the supply chain. He maintained the fresh produce industry had been let down by the UK government which failed to prepare necessary IT systems properly, with an early transition to electronic phytosanitary certificates now being seen as essential (8).
In terms of overall cost increases along fresh product supply chains it was reported ‘new operational procedures, inspections and bureaucracy’ were costing ‘approximately 400 euros (about US$500) per truck’ (9). Meanwhile buyers at New Convent Garden Market were reporting prices of fresh fruit and vegetables increasing by up to 10%, with this being a matter of major concern in what ‘is a very tight margin business’ (10). It is expected that the situation in the fruit and vegetable sector will only get worse through to July 2020 as the second and third phase of UK controls on the EU border are introduced.
There are concerns that for the fruit and vegetable trade, of which ACP exporters using triangular supply chains form a part, the real effects of Brexit have not yet been felt.
Against this background there are growing calls across the European fresh fruit and vegetable trade for the ‘the creation of Green Lanes for fast-track access of perishables and swift establishment of electronic transmission channels for phytosanitary and other certification’ (9)
More broadly there are growing calls from within the fresh fruit and vegetable industry for the EU and the Member States to ‘step up efforts to streamline administrative processes for obtaining certificates and increase flexibility in export operations’ (9)
It is unclear to what extent this is likely in the short term. The EC’s new special advisor on relations with the UK, none other than Michel Barnier has made it clear ‘this agreement will not be renegotiated; it now needs to be implemented’ (11). Any rewriting of the ‘structural changes that have led to checks on agricultural exports’, will need to await the formal constitutions of the relevant Committees established under the EU/UK trade agreement (12), the elaboration of the working methods of each Committee and detailed discussion of the various points of contention. This is likely to take a considerable amount of time and is likely to stretch throughout 2021.
In addition, particular concerns have been expressed about ‘the UK’s capacity to conduct physical controls in July both at the UK border and at inland sites to avoid more delays and costs’ for fresh fruit and vegetable supply chains, including of course ACP-EU -UK triangular supply chains (7).
| Comment and Analysis In terms of the road haulage disruptions along EU-UK short sailing cross channel ‘RoRo’ ferry routes used for the onward shipment of ACP goods to the UK, the sources of delay and cost increases are an important consideration when assessing the longer-term implications of recent developments. Some of the source of delay and cost increases will be purely transitional and are likely to disappear once the situation stabilises, other areas of cost increases will be structural. Thus, measures such as the supplementary levies imposed by Dutch traders of £150 per consignment are likely to be transitional, while the dramatic increase in per tonne haulage charges linked to fears of serious road congestion are also likely to ease, as UK border control capacities are enhanced, and cross border flows stabilise.Equally current increases in road haulage rates linked to the absence of return loads (5) are likely to diminish as the situation stabilises towards the end of 2021, although problems are likely to remain in the medium term given the projected decline in the UK’s export trade to the EU. The problems of securing the services of hauliers willing to ship along EU to UK routes is also likely to be around until probably the final quarter of 2021 at least; with this posing particular problems for ACP-EU-UK supply chains where the EU partner does not own its own fleet of trucks for onward shipment. However, other cost increases will become a structural feature of the functioning of EU-UK haulage operations. These structural issues include: · Long lead times for deliveries which will reduce the shelf life of products delivered · The costs of road haulage linked to new trade administration requirements. · The extra costs arising from an abandonment or major restructuring of existing Beyond these structural and quasi structural issues, there remain are serious concerns about the UK governments capacity to have the necessary IT and physical infrastructure for inland border controls in place by 1 July 2021. These shortcomings are likely to be a further source of cost increases in the medium term, although by 2022 these are likely to ease. It now seems to be generally accepted, even by the UK government, that things will get markedly worse before they get any better, in terms of the ease of road haulage operations along the main EU-UK routes RoRo routes. The cost increases this gives rise to, coming on top of existing Covid-19 cost increases on the inter-continental leg of this triangular trade, could well fundamentally undermine the commercial viability of the continued use of ACP-EU-UK supply chains by fresh produce exporters. This is likely to pose particular challenges for smaller scaler ACP exporters with limited export volumes. While fresh produce supply chains are likely to be most severely affected, a range of other ACP-EU-UK supply chains are also likely to be affected by onward road haulage cost increases, even where rules of origin complications can be adequately addressed (e.g., exports of Caribbean bottled rum shipped via the EU to the UK). Against this background it is essential that the discussions on the creation of “Green Lanes” for fast-track access of perishables currently being launched the European fresh produce industry, fully accommodate the interests of ACP exporters. Specifically, this should extend to · the inclusion of full, automatic cumulation provisions in the EU/UK trade agreement for ACP products crossing an EU/UK border where these products would enjoy duty free-quota free access to both the EU27 and UK market, and · the waiving of UK phytosanitary and other border control requirements for products which have previously been subject to equivalent EU import controls on initial landing in the EU. This latter approach is already de facto being applied on a transitional basis until 1s April 2021 in regard to phytosanitary import controls on most ACP fresh products shipped via triangular supply chains. This would immediately remove one of the new major obstacles threatening the functioning of both ACP-EU-UK and ACP-UK-EU triangular supply chains and would greatly ease some of the road haulage challenges now being faced. |
Sources:
(1) BBC, ‘Were there hold-ups in first week after Brexit?’, 9 January 2021
https://www.bbc.com/news/55573772
(2) Sky News, ‘Freight traffic slumps and costs soar as Brexit friction bites’, 22 January 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/freight-traffic-slumps-and-costs-soar-as-brexit-friction-bites
(3) The Independent, ‘Taxes worth £800m go unpaid as border checks relaxed to keep traffic flowing after Brexit’, 22 January 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/taxes-worth-800m-go-unpaid-as-border-checks-relaxed-to-keep-traffic-flowing-after-brexit
(4) Evening Standard, ‘24-hour delays on day one of the Brexit deal but no major disruption yet, say market traders’, 5 January 2020
https://www.fpcfreshtalkdaily.co.uk/single-post/24-hour-delays-on-day-one-of-the-brexit-deal-but-no-major-disruption-yet-say-market-traders
(5) The Telegraph, ‘Half of trucks carrying only fresh air as Brexit and Covid hit exports’, 27 Jan 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/half-of-trucks-carrying-only-fresh-air-as-brexit-and-covid-hit-exports
(6) The Guardian, ‘Labour calls for more customs agents to cope with Brexit red tape’, 22 January 2021
https://www.theguardian.com/politics/2021/jan/22/labour-calls-for-more-customs-agents-to-cope-with-brexit-red-tape
(7) BBC, ‘Brexit will increase food supply chain costs, warn business groups’, 14 January 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/brexit-will-increase-food-supply-chain-costs-warn-business-groups
(8) FPC, ‘UK fresh produce industry let down by the government says FPC’s Nigel Jenney’, 11 January 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/uk-fresh-produce-industry-let-down-by-the-government-says-fpc-s-nigel-jenney
(9) Freshfel, ‘So far worst case scenario avoided but Brexit impact on fresh produce sector mounting with extra costs totalling €55 million Freshfel, January 20, 2021
https://freshfel.org/so-far-worst-case-scenario-avoided-but-brexit-impact-on-fresh-produce-mounting/
(10) The Evening Standard, ‘Brexit price hikes on fruit and veg ‘could affect menus from top chefs’’, 23 January 2021
https://www.standard.co.uk/business/fruit-veg-prices-up-brexit-chefs-change-menu-b900800.html
(11) Independent,’ Exports to EU to plunge by more than one-third because of Brexit trade deal, study warns’, 18 January 2021.
https://www.fpcfreshtalkdaily.co.uk/single-post/exports-to-eu-to-plunge-by-more-than-one-third-because-of-brexit-trade-deal-study-warns
(12) Politico.eu, ‘Brexit means bureaucracy at least when it comes to making the deal stick.’, 26 January 2021
https://www.politico.eu/article/brexit-deal-bureacracy-trade-policy/