Summary
The impact of new EU/UK border clearance requirements on the costs faced by East African fresh produce exporters serving the UK market via the EU is becoming apparent. In some cases, this is severely impacting on export volumes destined for the UK market shipped along triangular supply chains. The dilemma is faced of whether to ship under customs supervision and face inspection delays at the UK border, or clear customs and SPS inspections in the EU and risk losing ‘originating’ status and hence facing MFN tariffs when entering the UK. This dilemma is faced by a multiplicity of East African exporters who use triangular supply chains. LDC based exporters are particularly disadvantaged, given the absence of clear structure for dialogue with the UK on resolving customs and trade facilitation issues.
Less than a month on from the start of the implementation of the new EU/UK trade agreement, the impact of new EU/UK border clearance requirements on the costs faced by East African fresh produce exporters serving the UK market via the EU is becoming apparent. At the beginning of February 2021, the Ugandan newspaper the Daily Monitor carried reports of a 90% decline in exports to the UK from the Ugandan Fresh produce exporter KK Fresh Fruits and Vegetables, as a result of difficulties faced in accessing the UK market along triangular supply chains. The company has traditionally exported fruit and vegetables via Belgium to serve both UK and other EU markets. This includes products such as aubergines, sweet potatoes, okra, chili pepper, avocados and matooke. However, these exports now face cumbersome procedures for their onward movement to the UK.
CEO Mr James Kanjigye, explained how, despite Covid-19 related international freight challenges, ‘their goods have been reaching Europe’. Now however, onward trade into the UK, which is ‘one of Uganda’s biggest market destinations in the EU, has become difficult’. In clearing the UK border there were now new trade documentation requirements, with this seeing handling fees having ‘doubled from thirty cents of the dollar to 62 cents for every cleared kilogramme.’ What is more the absence of necessary phytosanitary import control testing facilities at the UK border further complicates the matter. Mr Kanjigye explained how this was leading to a lot of export produce being lost, with KK Fresh Fruits and Vegetables being ‘forced’ to ‘sharply reduce by more than 90%’ volumes exported to the UK along triangular supply chains.
Fresh produce exporters such as KK Fresh Fruits and Vegetables, find themselves on the horns of a dilemma. If they ship their goods to the UK under customs supervision (and they do not formally enter the EU customs territory), these products are subject to phytosanitary import controls on entry to the UK, where the absence of inspection facilities at the borer poses problems. However, if such goods are customs cleared in the EU and subject to phytosanitary import controls on entry to the EU, then these products ‘lose’ their Ugandan ‘originating’ status and are no longer eligible for duty-free access under the UK’s parallel EBA style regime established in favour of least developed countries (see Companion epamonitoring.net article ‘UK government commits to extending EBA access for LDCs post Brexit’, 30 June 2017). As a consequence of not having acquired EU ‘originating’ status, since no transformation of the product takes place in the EU, these goods then face standard MFN tariffs.
The full implications of these new rules of origin requirements along triangular supply chains are currently being disguised by the establishment of 12-month grace period for the submission of supporting documentation verifying the self-declarations of ‘originating’ status on which goods are currently being allowed to enter the UK market on a duty-free basis. However, should supporting documentation be inadequate, or self-declaration claims of ‘originating’ status prove false, then MFN tariffs will be claimed on these imports by the UK tax authorities at the end of the 12- month grace period.
It is unclear, whether companies trading along triangular supply chains fully understand these rules of origin requirements and the potential tariff bills which could be faced at the end of the 12-month grace period as a result of self-declarations proving to be false.
Sample of MFN Tariffs Faced on KK Fresh Fruits and Vegetables if Originating Status is Lost
| Product | Tariff Code | UK MFN Tariff |
| Sweet Potatoes | 07142010 | 2% |
| 07142090 | £5.30/100 kg | |
| Aubergines | 70330 | 12% |
| Okra | 07099920 | 10% |
| Chilli peppers | 07096020 | 6% |
| Avocadoes | 080446 | 4% |
| Matooke (bananas) | 08039012 | £95/1000 kg |
Source: UK Global Tariff: Search Engine, https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1
The Ugandan Export Promotion Board is now looking at how it can assist Ugandan exporters in dealing with the new challenges faced along these triangular supply chains.
The challenges faced by Ugandan exporters are symptomatic of the types of challenges facing smaller scale fresh produce exporters, who since 1992 have taken advantage of the EU single market, to use single distribution hubs to serve markets in both the UK and across the EU27. In East African this includes exporters in countries such as Rwanda, Tanzania, and Ethiopia, all of which are similarly placed to those in Uganda.
Press reports indicate imports of yellow roses from Ethiopia shipped to the UK via the Netherlands are already facing import tariffs of 8%, with this affecting all cut flower imports to the UK traded via the Netherlands, as a result of the loss of their initial ‘originating status. The cut flower sector is one of the first areas to be impacted, given the dependence of the UK florist sector on imports form the Netherlands. According to the Fresh Produce Consortium ‘the wholesale price of stems in the UK is set to rise by between 5% and 10%’ (2).
The introduction of UK phytosanitary certificate requirements from 1 April 2021 and the introdcution of physical inspection requirements at approved border control posts from 1 July 2021 will add further costs to the supply of cut flolwers to the UK along triangular supply chains. In addition, it will result in delivery delays of a full day, reducing the shelf life of the average cut flower by 10% (2).
Overall, the Fresh Produce Consortium estimates ‘the new customs rules and tariffs, post-Brexit, will add £100 million to the cost of importing cut flowers into the UK’ (2)
| Comment and Analysis For East African countries Belgium and the Netherlands are important transit and distribution hubs for the shipment of fruit and vegetables to European markets, including the UK. For fruit, almost 35% of Ugandan, 66% of Rwandan, 65% of Tanzanian and 35% on Ethiopian exports to the EU pass through the Netherlands and Belgium. For vegetables, the corresponding figure for Uganda is 36% but the shares are lower for Rwanda (21%) Tanzanian, 27% and Ethiopia (19%). For cut flowers however, the situation is quite different to that of vegetable exports, with 99.5% of Ugandan, 99.7% of Rwandan, 92% of Tanzanian and 94% of Ethiopian exports to the EU passing through the Netherlands and Belgium (see table in annex) (2).These exports to the Netherlands and Belgium provide the basis for the triangular trade between the EU and UK which is now facing new challenges.Taken as a whole the combined total value of exports of cut flowers, fruit and vegetables to the EU passing through the Netherlands and Belgium, account for 87% of the total value of exports of these products to the EU for Ethiopia, 66% for Tanzania, 54% for Uganda and 35% for Rwanda (3).The kind of problems facing KK Fresh Fruits and Vegetables thus have a far wider relevance. Indeed, for ACP cut flower exporters the situation is even more complicated, with changes to VAT administration, resulting from the UK becoming a sperate VAT territory, adding further border clearance administrative burdens. However, the scope for passing new costs on to consumers in the UK would appear to be greater in the cut flowers sector than in the general fruit and vegetable sector. For fruit and vegetable exporters, the trade in lower value produce along triangular supply chains is likely to be particularly vulnerable to the additional costs generated by the creation of a new EU/UK customs and regulatory border. In addition, it needs to be borne in mind that smaller scale exporters tend to have less options for the direct delivery of products to individual markets than larger exporters (e.g., Uganda, compared to Kenya). It is thus smaller least developed country exporters who are likely to bear the brunt of the costs associated with the creation of a new UK/EU customs and regulatory border. What is more LDCs would appear to be in a difficult position in making their concerns known and seeking redress. Most LDCs take advantage of the UK’s rolled over ‘EBA’ style preference system (announced by the UK government as early as June 2017), and as such, have limited institutional mechanisms for taking up the kinds of customs cooperation and trade facilitation issues which will be essential to ensuring the continued functioning of triangular supply chains previously used for the delivery of fresh products to the UK market. In contrast ACP countries which have concluded a Continuity Agreement with the UK are better placed. At both the political and technical level institutional structure have been created to address trade issues. These issues could thus be taken up at the political level in the various Trade and Development Committees established under the different trade agreements concluded with the UK, while at the technical level these issues could be taken up in the Special Committee on Customs Cooperation and Trade facilitation. This offers scope for addressing these issues through, for example, the modification of the rules of origin provisions dealing with Direct Transport, which covers the procedures to be followed to retain duty-free access when goods are passing through another customs territory prior to delivery to customers in a separate customs area. |
Sources:
(1) Daily Monitor (Uganda), ‘Brexit has made UK market difficult to access – Exporters’ 1 February 2021
https://www.monitor.co.ug/uganda/business/finance/brexit-has-made-uk-market-difficult-to-access-exporters–3275818
(2) ITV News, ‘Brexit makes it more expensive to say it with flowers’, 9 February 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/brexit-makes-it-more-expensive-to-say-it-with-flowers
(3) EC Market Access Data Base
https://trade.ec.europa.eu/access-to-markets/en/statistics?includeUK=true
Annex:
East African LDC Fruit, Vegetable and Cut Flower Exports by Initial Country of Customs Clearance in the EU (2019)
| Edible Fruit (08) | Edible Veg. roots & tubers (07) | Cut Flowers (0603) | |||||||
| Uganda | Euro | Tonnes | Euro | Tonnes | Euro | Tonnes | |||
| EU28 | 5,810,966 | 2,888 | 11,700,174 | 5,916 | 20,637,603 | 9,102 | |||
| UK | 2,639,869 | 1,265 | 5,856,575 | 3,097 | 348,092 | 47 | |||
| Belgium | 1,079,938 | 710 | 1,788,227 | 977 | 430 | – | |||
| Netherlands | 439,006 | 290 | 1,550,194 | 611 | 20,289,081 | 9,055 | |||
| Germany | 994,873 | 375 | 1,331,794 | 528 | – | – | |||
| France | 468,449 | 244 | – | – | |||||
| Czech Repub. | 441,819 | 125 | 24,815 | 9 | – | – | |||
| Other EU | 215,461 | 123 | 680,120 | 450 | – | – | |||
| Rwanda | Euro | Tonnes | Euro | Tonnes | Euro | Tonnes | |||
| EU28 | 661,537 | 269 | 5,994,374 | 1,707 | 3,654,537 | 1,167 | |||
| Netherlands | 2,692 | 2 | 97,127 | 25 | 3,622,922 | 1,163 | |||
| Belgium | 222,418 | 177 | 1,161,307 | 340 | – | – | |||
| France | 204,433 | 16 | 1,692,253 | 421 | – | – | |||
| UK | 231,994 | 45 | 3,043,687 | 921 | 31,615 | 4 | |||
| Other EU | 29 | 0 | 0 | 0 | 0 | ||||
| Tanzania | Euro | Tonnes | Euro | Tonnes | Euro | Tonnes | |||
| EU28 | 18,786,959 | 7,247 | 6,890,170 | 3,072 | 17,082,013 | 3,731 | |||
| Netherlands | 8,712,530 | 3,176 | 2,315,760 | 483 | 14,668,697 | 3,365 | |||
| Belgium | 3,063,388 | 1,509 | 287,667 | 358 | 377,529 | 71 | |||
| France | 2,491,936 | 1,077 | 369,601 | 74 | – | – | |||
| UK | 2,395,993 | 803 | 1,536,055 | 513 | 1,931,950 | 278 | |||
| Spain | 800,486 | 392 | 31,638 | 26 | – | – | |||
| Germany | 590,421 | 195 | 38,333 | 11 | – | – | |||
| Italy | – | – | 2,259,728 | 1,553 | |||||
| Other EU | 95 | 51,388 | 54 | 103,837 | 17 | ||||
| Ethiopia | Euro | Tonnes | Euro | Tonnes | Euro | Tonnes | |||
| EU28 | 174,690 | 52 | 24,169,218 | 26,319 | 163,762,693 | 58,105 | |||
| Netherlands | 29,236 | 10 | 666,648 | 640 | 87,677,976 | 38,651 | |||
| Belgium | 24,497 | 8 | 7,035,246 | 4,364 | 60,167,192 | 15,715 | |||
| UK | 115,642 | 31 | 4,268,732 | 3,679 | 10,286,984 | 2,542 | |||
| Germany | 1,187 | 1 | 1,924,479 | 525 | 4,541,309 | 998 | |||
| Portugal | – | – | 4,915,387 | 9,493 | – | – | |||
| Bulgaria | – | – | 1,949,379 | 3,192 | – | – | |||
| France | 1,930 | 1 | 783,583 | 774 | 86,522 | 26 | |||
| Slovakia | – | – | 650,616 | 989 | – | – | |||
| Italy | – | – | 594,469 | 945 | 961,742 | 170 | |||
| Other EU | 2,198 | 1 | 3,330,058 | 1,718 | 40,968 | 3 | |||
Source: EC Market Access Data Base
https://trade.ec.europa.eu/access-to-markets/en/statistics?includeUK=true