Reasonable Preparations for a ‘No Deal’ Brexit are Needed Says UK Institute of Directors

In light of the growing prospect of a no deal Brexit the IoD’s recommendation that companies should ‘carefully consider their exposure and draw up mitigation plans’ would appear to apply equally to ACP exporters with a heavy exposure to the UK market.

It also applies to ACP exporters who while having a, low exposure to direct exports to the UK market in their trade with the EU are extensively exposed to any disruption of EU27/UK trade flows as a result of the triangular nature of their trade relationship with the UK (e.g. East Africa least develop cut flower exporters who supply the UK market via the Dutch flower auctions).

ACP exporters using triangular supply routes to serve the UK market should consider initiating dialogues with their existing partners to determine what plans are being set in place to deal with potential trade disruptions along cross-channel routes and what complementary accompanying steps individual ACP exporters should be taking.

This should include reviewing the vulnerability of individual ports of transhipment to Brexit related disruptions in light of the Brexit preparedness strategies being put in place by port authorities.

ACP exporters should encourage their governments to launch an initiative to determine to what extent ACP exports routed to UK market via EU27 member states will be eligible to use the UK’s newly introduced Transitional Simplified Procedures (TSP) for imports entering through the Dover transport corridor bottleneck. This is particularly important in the case for agro-food products where in addition to new UK customs controls, the UK will also have to apply standard SPS and food safety import controls.

Clearly additional triangular forms of administrative cooperation will be required for ACP agro-food products requiring SPS and food safety inspections before leaving EU27 countries for their final destination in the UK.  These arrangements urgently need to be set in place and the initiation of a trilateral dialogue on this issue should be accorded a high priority by ACP governments whose exporters are most exposed to the disruption of triangular supply chains.

ACP exporters involved in serving UK markets through triangular supply chains should also consider joining forces with EU27 and UK food industry bodies in calling for concerted regulatory action to keep the food trade flowing, regardless of the outcome of the UK/EU27 negotiations (2). ACP exporters should place a particular focus on the regulatory action required to ensure the continued smooth functioning of triangular supply chains serving the UK market via initial ports of landing in EU27 member states.

ACP exporters using triangular supply chains should also consider initiating a review of their options for directly exporting to the UK.

However it needs to be recognised that given the challenges arising under a ‘no-deal’ Brexit, ACP exporters directly exporting to the UK market will also need to take up contact with their logistics partners to ascertain the state of their ‘no-deal’ Brexit preparations and the relevance of such solutions to the ACP exports involved. This should include determining the extent to which partners in the UK are hiring their own border inspectors to fast-track their imports.

ACP exporters of agro-food products requiring warehousing or cold storage prior to delivery to the contracted recipient will be exposed to the acute shortages of storage space which a November ‘no-deal’ Brexit will give rise to. Shortages are likely to be particularly acute as Brexit related stockpiling will coincide with seasonal stockpiling. This could pose particular problems for ACP exporters who have not previously locked in the requisite storage space. It could see increases in storage costs and the emergence of an absolute shortage of storage space. In this context ACP exporters should move quickly to lock-in the requisite storage capacity and where necessary make use of the free to use web portal established by the UK Warehousing Association (UKWA MarketSpace), in addressing their warehousing needs in an increasingly tight market.

Brexit preparations at the retail level could see a process of ‘delisting’ of some suppliers, as supermarkets seek to adjust their supply chains to the difficult sourcing and storage realities which a ‘no-deal’ Brexit will give rise to. While this is likely to primarily affect EU27-UK supply chains, some ACP exporters could also be vulnerable. Individual ACP exporters will need to determine their vulnerability to such ‘delisting’ processes and where necessary take practical steps to ‘Brexit-proof’ their supply chains to ensure ‘delisting’ does not occur.

A final area in which ACP exporters could usefully initiate a review relates to the contractual arrangements for sharing the costs of potential Brexit related trade disruptions. The issue of the distribution of the costs of transport disruptions has recently come to the fore in France, where the ‘yellow vest’ protests disrupted the delivery of Cameroonian pineapples to French supermarkets. Given the contractual arrangements in place, this left the Cameroonian exporter exclusively carrying the losses these transportation disruptions gave rise to. (see companion epamonitoring.net article ‘Impact of Yellow Vest Protests on Cameroonian Pineapple Exports Highlights Importance of Tackling UTPs along ACP-EU Supply Chains in Context of Potential ‘No-Deal Brexit’, 13 May 2019). Initiatives in this area could build on the British Retail Consortium (BRC) coordinated discussions on ‘how costs and risks would be shared if stock is delayed’ (3).

This also highlights the need for ACP government initiatives to ensure the provisions of the EU’s new regulation on Unfair Trading Practices related to the removal of unfair trading practices in supply chains involving 3^rd country suppliers are speedily operationalised and applied.