Summary
On 11 March 2021, the UK government announced the deferment until 2022 of its planned phase 2 and phase 3 controls on goods crossing an EU/UK border. This has reduced concerns over potential disruptions of UK imports of fresh produce in the coming months and provides a 9-month breathing space for the UK authorities to set in place border control infrastructure and services which are ‘fit for purpose’. This deferment benefits EU producers, but largely leaves ACP exporters serving UK markets along triangular supply chains unaffected. ACP exporters will still face the dilemma of choosing between entering the EU customs union so as to benefit from the light UK import controls applied to EU products and losing ‘originating status and facing MFN tariffs, which is the consequence of leaving customs supervised transit arrangements. Clearly there is an urgent need to address specific ACP triangular supply chain issues if the functioning of many of these ACP triangular supply chains are not to be fundamentally undermined.
On Thursday 11 March 2021, the UK government announced it would be postponing until 2022 the introduction of the April and July scheduled phases of UK border controls on goods crossing from the EU. This followed on from representations from a wide range of stakeholders, ranging from the HORECA and retail sectors, through road hauliers and port authorities to fresh produce importers and UK farmers organisations.
According to a statement issued by Cabinet Office Minister Michael Gove, the decision was taken in light of ‘the scale and significance of the challenges businesses have been facing in adjusting to the new requirements, at the same time as dealing with the impacts of COVID’ (1). However, press analysis suggests shortcomings in the establishment of ‘a network of 30 border posts being built to process incoming goods’, which would simply ‘not have been ready on time’ (2), has been the critical factor in the UK government’s decision.
According to the director of food and sustainability at the British Retail Consortium, the governments’ decision has come ‘in the nick of time’. According to Andrew Opie ‘until the infrastructure is in place, with IT systems ready and established processes for checks and paperwork, it would be foolhardy to introduce full requirements for export health certificate documentation, pre-notification of imports, physical checks and more’ (2).
This needs to be seen against the background of UK government claims it ‘has put in place the staffing, infrastructure, and IT to deal with the situation’, and that as a consequence ‘thanks to the hard work of traders and hauliers, we have not seen anything like the generalised disruption at our ports which many predicted’ (1).
The specific changes announced by the UK government to the phasing in of UK border controls are as follows:
Pre-notifications
- ‘Pre-notification requirements for Products of Animal Origin (POAO), certain animal by-products (ABP), and High-Risk Food Not of Animal Origin (HRFNAO) will not be required until 1 October 2021. Export Health Certificate requirements for POAO and certain ABP will come into force on the same date’ (1). This will effectively ease pressure on public authorities in both the EU and UK in regard to the issuing and administration of export health certificates.
- ‘Pre-notification requirements and documentary checks, including phytosanitary certificates will be required for low-risk plants and plant products, and will be introduced from 1 January 2022’ (1). This means once cleared through EU import control processes ACP exports will continue to be treated the same as imports from the EU throughout 2021 and hence will not require the re-issuing of export health certificates prior to onward shipment, as is currently the case for ACP products imported to the UK and then re-exported to the EU.
Physical Checks
- ‘Physical SPS checks for POAO, certain ABP, and HRFNAO will not be required until 1 January 2022. At that point they will take place at Border Control Posts’ (1). This will side-step the immediate physical infrastructure challenges faced at ports of entry and designated sites for inland border control posts.
- ‘Physical SPS checks on high-risk plants will take place at Border Control Posts, rather than at the place of destination as now, from 1 January 2022’ (1).
Location of Physical checks
- Similarly, ‘from March 2022, checks at Border Control Posts will take place on live animals and low risk plants and plant products’, rather than at the final destination as is currently the case (1).
Customs Import Declarations
- ‘Customs import declarations will still be required, but the option to use the deferred declaration scheme, including submitting supplementary declarations up to six months after the goods have been imported, has been extended to 1 January 2022.’
Safety and Security Declarations
- Safety and Security Declarations for imports will not be required until 1 January 2022.
However, ‘traders moving controlled goods into Great Britain will continue to be ineligible for the deferred customs declaration approach. They will therefore be required to complete a full customs declaration when the goods enter Great Britain’ (1).
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What the UK’s Initially Planned Phasing in of UK/EU Border Controls Meant for ACP Exporters Using Triangular Supply Chains 1 January to 31 March 2021 · EU (and EU-cleared) fruit and vegetables will not require pre-notification or a phytosanitary certificate (PC) from 1 January until 31st March. The exception in this regard are high-risk plants and plant products which will need to be pre-notified and accompanied by a phytosanitary certificate, with documentary checks being conducted remotely and physical checks taking place at the point of destination. · If ACP products are cleared in the EU and subject to EU SPS controls, then these ACP products would not require pre-notification or phytosanitary certificates. However, by entering the territory of the EU ACP products lose their ‘originating status’ and hence access to duty free tariff treatment as ACP products. If no substantive transformation takes place in the EU, then EU status is not gained so duty free access cannot be claimed under the EU/UK trade agreements. The product becomes a ‘stateless good’ subject to standard MFN tariffs when shipped across an EU/UK border. · ACP goods ‘transiting’ the EU under customs supervision will be subject to the standard third country checks but will retain their originating status and hence duty-free access to the UK market under the relevant trade arrangement in place with the UK. These arrangements will now remain in place until the end of 2021 From 1 April 2021 until 31st May · Almost all fresh fruit and vegetables would have needed a phytosanitary certificate and would have been subject to pre-notification requirements, except for products for which no phytosanitary certificate requirement exists (kiwi, cotton (bolls), citrus (fruits and leaves), curry leaves, kumquat, mango, bitter orange, passionfruit, persimmon, guava, pineapple, coconut, durian, banana & plantain, and dates), as well as processed and packed fruit and vegetables. · Phytosanitary inspections would have been conducted on all regulated pests, and physical inspections will continue for ‘high-priority’ plant and plant product, with the relevant inspection fees being applied. These arrangements will now be deferred until 2022. From 1 July 2021 · All regulated plants and plant products would have needed to be pre-notified and accompanied by a phytosanitary certificate unless exempt. Physical inspections would also have been carried at border controls posts rather than final destination. These arrangements will now be deferred until 2022. |
The UK government’s decision needs to be seen in the context of the fears expressed in the preceding 6 weeks, over the dangers of a replication of the problems faced by UK exporters in the face of the introduction of standard 3rd country border controls by the EU from 1 January 2021.
Analysis from the accountancy firm KPMG warned of the ‘headaches facing traders’ if the UK governments’ planned phasing-in of border controls was adhered to. In February 2021 it was suggested the proposed new controls could generate ‘logjams at points of entry’ which ‘could cause fruit and vegetable shortages in the spring.’ The British Meat Processors Association, meanwhile, had warned if, from April 2021, importers faced the same problems as exporters the situation would be ‘quite challenging’ (3).
Against this background, the UK governments’ decision has been widely applauded, although the Fresh Produce Consortium (FPC) has sounded a cautionary note. The FPC maintains while the UK government had now ‘recognised the enormity of the challenges facing the UK fresh produce industry and its European partners, as well as its own plant health inspection service’, the current measure was only a ‘temporary reprieve.’ It was stressed how the UK plant health authorities now needed ‘to put in place the much-needed electronic certification system which is essential to alleviate several issues …. identified before pre-notification is introduced’. While the UK Animal and Plant Health Agency (APHA) ‘must improve its current inspection service’.
It was pointed out how already ‘UK importers are experiencing significant problems with high-risk plant products due to poor availability of plant health inspectors, delays in inspections and clearance of consignments.’ This is carrying important commercial consequences for highly perishable products; with increased levels of food waste and potentially a ‘loss of contracts with customers (4).
The FPC highlighted how the UK government’s 11 March decision has simply bought time to carry out the essential enhancement of border control services and infrastructure to ensure ‘the UK plant health inspection regime is ‘fit for purpose’ and ready to take on an additional million plant health certificates each year for fresh fruit and vegetables, flowers and plants.’ Against this background the FPC called for more collaboration in identifying and implementing solutions which ‘reduce unnecessary bureaucracy and enable highly perishable products to be cleared efficiently and cost effectively’ (4).
In a little noted announcement also made on 11 March 2021 it was revealed ‘lorries bound for the Channel ports will no longer be directed to Manston for customs checks or Covid tests from March 21.’ Indeed, ‘all HGVs coast-bound will instead access the Operation Brock traffic management system between Junctions 8 and 9 on the M20 coastbound carriageway, with one lane being used for Eurotunnel and the other for the Port of Dover.’ The use of the emergency facilities at Manston has been terminated since there has been ‘no significant traffic issues on Kent’s roads since the end of the EU transition period.’ This is seen as a first step towards ‘an eventual return to business as usual’ (5).
However, this needs to be seen in a context where in January 2021 UK exports to the EU were down a massive 40.7%, below the comparable level in January 2020 (-£5.6 billion, compared to an increase in UK exports to non-EU markets of £200 million and increase of 1.7%, with exports to non-EU markets accounting for only 3.6% of the loss on UK exports to EU markets). Exports of food and live animals including fisheries products were particularly severely affected, with UK exports collapsing 63.6% in January 2021 (6).
In the face of these figures the UK government remains upbeat, maintaining it was a product of a ‘unique combination of factors’ which ‘made it inevitable that exports to the EU would fall in January’, with evidence suggesting ‘overall freight volumes between the UK and the EU have been back to their normal levels since the start of February’ (6). Meanwhile experts suggest the scale of the decline in January 2021 is ‘unlikely to be permanent’, with stockpiling and Covid related disruptions multiplying the fall in trade in January.
However, as Suren Thiru, the head of economics at the British Chambers of Commerce, argued ‘the practical difficulties faced by businesses on the ground go well beyond just teething problems’ with disruption to UK-EU trade flows being likely to persist. The general view is that ‘Brexit is best seen as a slow puncture, rather than a sudden blowout, with the costs gradually accumulating’ (6).
| Comment and Analysis The deferment of the implementation of phase 2 and phase 3 controls on EU/UK cross border goods movements until 2022 is primarily of benefit to EU producers, largely leaving ACP exporters using triangular supply chains unaffected.To date in order to benefit from the light border control regime being applied on goods crossing EU to UK borders, ACP exporters have to clear customs and phytosanitary import controls on landing in the EU. However, by doing so, such products lose their initial ‘originating status’, without gaining EU originating status. As a consequence, duty free access cannot be claimed under either ACP member states trade arrangements with the UK or under the EU/UK trade agreement. These products then become ‘stateless goods’, which face standard MFN import tariffs on entry to the UK from the territory of the EU, regardless of the tariff treatment they would receive if exported directly to the UK. Clearly this is not an issue for products which face zero MFN tariffs, such as mangoes and curry leaves, but it is an issue for products which face high MFN tariffs. Thus, East African least developed country exports of cut flowers shipped to the UK via the Netherlands or Belgium, would face MFN tariffs of 10%, while Kenyan cut flowers flown directly to the UK would enjoy duty free access. This is despite the fact that when shipped directly all least developed countries enjoy full duty free-quota free access to the UK market under the rolled over UK EBA style arrangement announced in June 2017. This situation severely undermines the commercial position of East African LDC cut flower exporters serving the UK market via the Dutch flower auctions and could serve to drive them off the UK market. Main Eastern African Cut Flower Exporters to the EU28, UK Netherlands, Belgium (tonnes and % share) – 2019
Source: EC, Market Access Data Base, https://madb.europa.eu/madb/statistical_form.htm Thus, while this UK arrangement in favour of LDCs was announced as early as June 2017, it neglected a critical dimension of the commercial conduct of this trade; namely the export of these LDC products via the Dutch flower auctions (see epamonitoring.net ‘UK government commits to extending EBA access for LDCs post Brexit’, 30 June 2017). The ability of LDCs to adjust their shipping routes in response to the impact of the culmination of the Brexit process, by moving away from shipping via the Netherlands to directly supplying the UK, has been seriously compromised by the air freight consequences of the Covid-19 pandemic. In assessing the relative costs and benefits of entering the EU customs territory prior to onward trade to the UK, the loss of ‘originating status’ and consequent imposition of MFN tariffs needs to be balanced against the cost savings arising from avoiding UK phytosanitary import controls for the remainder of 2021. This latter dimension needs to be seen in the light of the serious infrastructure and staffing constraints currently faced in the conduct of these UK border controls along traditional ‘roll-on/roll-off’ cross channel ferry routes. In this context it should be noted smaller ACP exporters have far less options in adjusting their routes to serving the UK market than larger exporters and therefore have most to lose as a result of the unaddressed issues which plague ACP exporters who have traditionally used triangular supply chains in serving the UK market. |
Sources:
UK Government, ‘Border Controls Statement made on 11 March 2021’, Statement UIN HCWS841, Statement made by, Michael Gove, Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office,
https://questions-statements.parliament.uk/written-statements/detail/2021-03-11/hcws841
(2) The Guardian, ‘UK forced to delay checks on imports from EU by six months’, 11 March 2021
https://www.theguardian.com/politics/2021/mar/11/uk-forced-to-delay-import-checks-on-eu-goods-by-six-months-2022-border-post-not-ready
(3) The Guardian, ‘UK importers brace for ‘disaster’ as new Brexit customs checks loom’, 7 February 2021
https://www.theguardian.com/politics/2021/feb/07/british-importers-brace-for-disaster-as-new-brexit-checks-loom
(4) PFC, ‘’RESULT!’ FPC lobbying succeeds in securing revised timetable for import controls’, 12 March 2021
https://www.fpcfreshtalkdaily.co.uk/single-post/result-fpc-lobbying-succeeds-in-securing-revised-timetable-for-import-controls
(5) kentonline.co.uk, ‘EU bound lorries no longer directed to Manston for customs checks or Covid tests’, 11 March 2021
https://www.freshplaza.com/article/9301904/eu-bound-lorries-no-longer-directed-to-manston-for-customs-checks-or-covid-tests/?edition=3
(6) The Guardian, ‘Exports to EU plunge by £5.6bn in first month since Brexit’, 12 March 2021
https://www.theguardian.com/business/2021/mar/12/exports-to-eu-plunge-in-first-month-since-brexit-uk-economy