Will ACP Exports to the UK Be Impacted by the New UK-EU Border Control Requirements?

Summary
While the UK government asserts the introduction of UK border controls on goods entering from the EU will leave trade with ACP countries and the rest of the world unaffected, this is not entirely the case. ACP goods entering the UK market via EU27 member states along so-called triangular supply chains, will be most severely affected, though be it in a wide variety of ways. This will depend on:

The nature of product and whether any significant alteration to the product takes place in the territory of the EU on route to the UK, specifically whether the consignment is simply broken down or undergoes repackaging or some simple level of processing prior to onward trade to the UK.
Whether the product remains formally ‘in transit’ under the provisions of the CTC.
Whether the good enters the customs territory of the EU prior to onward movement to the UK.
The basis on which the UK finally leaves the EU customs union and single market.
The efficiency of UK border control services and border clearance infrastructure in the face of the basis on which the UK leaves the EU customs union and single market.

All these factors will influence the impact the UK’s departure from the EU customs union has on ACP exports to the UK. In addition even direct ACP exports to the UK will be affected by the new UK/EU border requirements, in terms of the trade documentation required to enter the UK customs area and the overall efficiency of UK border control services, in the face of the new demands a UK/EU border will generate. ACP exporters will need to be alert to and prepare for all these potential impacts, with the level of adjustment required varying considerably across products.

Disaggregating ACP Agri-Food Exports to the UK Market
In July 2020 the UK governments Border and Protocol Delivery Group issued a document entitled “The Border with the European Union: Importing and Exporting Goods” setting out the new controls which will be applied on goods crossing EU27/UK borders once the UK leaves the EU customs union and single market. While the UK government asserts the new border controls to be applied to imports from the EU will not affect UK border controls applied to imports from the rest of the world, including ACP countries (1), this is not entirely the case.

The impact of new UK-EU border controls on ACP exports will depend on the routes to the UK market used and what activities take place along the route to the final market in the UK.

In terms of the impact of the new UK/EU border controls three basic distinctions can be made between:

ACP goods which transit through the EU on route to the UK (and hence use international transit arrangements).
ACP goods which enter the custom territory of the EU prior to onward shipment to the UK.
ACP goods exported directly to the UK market.

Within the category of ACP goods which enter the custom territory of the EU prior to onward shipment to the UK, further distinctions are required between:

Goods from consignments which following entry to the EU customs territory are simply broken down before onward shipment to the UK and other destinations.
Goods which upon entry to the EU customs territory are subject to repackaging in one form or another.
Goods which upon entry to the EU customs territory are subject to processing activities in the EU27 prior to onward export to the UK.

For each of these sub-categories different levels of complexity will arise.

ACP Goods Transiting the EU on Route to the UK
The UK government sees no change in the arrangements for the handling of goods in transit through the EU to the UK, with 3^rd country exporters needing to continue to use the Common Transit Convention (CTC). To make use of the CTC a variety of documentary requirements need to be followed. For example, all goods must be accompanied by a ‘Transit Accompanying Document (TAD)’, which ‘must be presented at an office of transit.’ The aim of the UK Government is for ‘the Office of Transit process to be completed digitally, using the new Goods Vehicle Movement Service (GVMS)’ (1). However, problems are currently being faced in the effective design and operationalisation of this new IT system (2).

While the UK government asserts 3^rd country suppliers would be able to continue to use the CTC, the reality is that many ACP exporters trading along triangular supply chains will never have made use of the CTC. Since 1993 most ACP exporters will have been clearing their products at the first port of landing in the EU, so as to avail themselves of the possibility of the free movement of goods which the EU single internal market provided.

An additional critical point to note is that use of the CTC requires goods not to be subject to significant alteration by the staged introduction of imports to the territory of the UK through the territory of the EU. It is unclear to which ACP products this no significant alteration requirement applies.

Finally goods in transit through the EU to the UK could still face delays as a result of the introduction of UK border controls on goods entering from the EU depending on the general state of freight movements along EU27/UK transportation routes.

The extent to which delays occur along these routes will depend on:

Whether there is a new UK/EU trade agreement in place and if so, what form this agreement takes.
The state of development and application of new electronic trade management systems at the time the new border controls are introduced.
The level of business (importers and exporters) preparedness for the new trade administration arrangements at the tile they are introduced.
The level of preparedness of traders and hauliers to effectively implement the new electronic trade systems once they are introduced.
The availability of trained customs agents to support businesses in implementing the new trade administration requirements.
The extent to which necessary investments in Border Control Posts along EU/UK trade routes have been completed by the time the new border is set in place. This is vital to avoiding delays in truck movements and extended delivery times, which would carry both cost and final revenue implications.
The extent to which properly trained staff are available to carry out necessary border controls, within Covid-19 social distancing requirements at the multiplicity of levels which will be required (document checks, observational checks, physical inspections, lab based testing).

The commercial significance of any delays which shortcomings in the above areas will generate, will be most acutely felt in short shelf life product supply chains

This needs to be seen in a context where goods ‘in transit’ will still need to clear UK customs, phytosanitary, safety and security and other border controls to which all imports entering the UK from the EU will be subject in the course of 2021.

In this regard there is not necessarily any significant difference between the delays which will be faced by ACP goods ‘in transit’ and delayes which will be faced by ACP goods which have first entered the EU27 customs territory prior to onward shipment to the UK.

ACP Goods Entering the EU27 Customs Territory Prior to Onward Shipment to the UK
ACP goods entering the EU customs territory prior to onward shipment to the UK will face all the potential delays ACP goods in transit through the EU will face in travelling on to the UK market. However, the challenges facing this category of ACP exports are likely to be more pronounced given these products are generally traded along the ‘roll-on/roll-off’ (Ro-Ro) routes, which carry the bulk of EU-UK trade and hence are likely to be most vulnerable to border clearance and associated road transport disruptions which the UK’s departure from the EU customs union is likely to generate.

What is more ACP goods entering the EU customs territory prior to onward shipment to the UK will be required to provide proof of origin to back up claims for duty free access under UK trade arrangements in favour of a large number of ACP countries. This issue will take on significance in the event of a no-deal UK departure from the EU customs union. However, the nature of the challenges faced will vary depending on the nature of the product and the existing logistical arrangements for onward shipment to the UK

When considering triangular supply chains where goods have entered the EU customs territory the ‘groupage’ issue is of importance for short shelf life products, given the way many of these supply chains currently function.

What is ‘Groupage’?

‘Groupage’ arises where products of different origins and/or different importers are grouped together in a single consignment. In the July 2020 UK document, it was highlighted how the clearance of the entire ‘Groupage’ load is dependent on each individual component being ‘cleared’ in line with ‘the relevant requirements for those goods to be imported’. (1)

This means ‘traders, intermediaries, and hauliers will need to ensure that the relevant declarations, permissions, and where necessary, paperwork, is in place to ensure groupage loads are not subject to delays or compliance action due to customs or other requirements not being met’ (1). This basically creates a situation where the level of inspection (delay) of ‘Groupage’ loads will be determined by the product subject to the most rigorous controls.

This may require a careful rethinking of which ACP products traded along triangular supply chains are subject to “Groupage”. This is an issue of special concern to the onward trade in ACP exports of air freighted cut flowers and short shelf life horticultural products.

Decisions related to the ‘Groupage’ of cargoes for onward shipment to the UK will largely lie with the agent or trade partner in the EU27 member state. In this context, ACP exporters will need to urgently ascertain whether their existing trade partners are considering ‘Groupage’ issues in their logistical planning for trading with the UK in 2021 and what concrete steps they are taking to deal with the ‘Groupage’ issue.

Specific problems will also arise for goods traded along triangular supply chains which undergo repackaging or some level of simple processing in the EU prior to onward trade to the UK. For these products, the critical question becomes respectively:

what specific repackaging activities can be prior to onward shipments to the UK without losing ‘originating status’?
what specific processing activities can be undertaken in the EU27 prior to onward shipments to the UK without losing ‘originating status’ ?

Linked to this in both cases, is the associated issue of what level of documentary proof will be required to ensure the ACP originating goods can continue to enjoy the duty free access guaranteed under UK-only trade arrangements, despite some level of repackaging or simple processing taking place in the territory of the EU27?

Goods Exported Directly to the UK
For ACP agri-food products directly exported to the UK the impact of the reintroduction of UK/EU border controls will be felt at two main levels. Firstly, at the level of changes to trade administration documentation and trade management systems, which the creation of the UK as a separate customs territory, distinct from that of the EU will give rise to.

ACP companies exporting directly to the UK will need to stay on top of these changes. ACP companies will need to make sure they are fully prepared for the implementation of UK only trade documentation requirements (e.g. being in possession of a valid UK issued Economic Operator Registration Identification (EORI) number since they will no longer be able to make use of an EU27 issued EORI numbers for imports to the UK). Equally ACP exporters will need to make sure they stay on top of the introduction of new UK on trade management systems such as the UK’s new IPAFFS system (Import of Products, Animals, Food and Feed System), for the pre-notification of consignments requiring the submission of Phytosanitary certificates. This new system replaces the existing EU TRACES (Trade Control and Expert System) IT based trade management system.

The second area of impact will arise from the new demands placed on the UK Border Force service by the introduction of new border controls on imports from the EU. The extra demands this places on the operation of the UK Border Force, could potentially carry system wide implications for the efficiency of border clearance operations for products entering through all UK border control posts and not just those currently devoted to imports from the EU27.

ACP exporters will need to be alert to and prepare for potential consequences for the efficiency of all border clearance operations in the UK resulting from the new additional demands placed on UK Border Force capacities from the 1^st January 2021. This will require ACP exporters wherever possible to make use of whatever trade facilitation instruments are available, including full digitisation of cargo shipping arrangements, in ways compatible with new UK IT trade management systems.

Comment and Analysis
Currently the UK July 2020 UK Border and Protocol Delivery Group information document makes no reference to specific provisions for ACP trade which enters the customs territory of the EU and is subsequently shipped to the UK. Since 1993 this trade has grown substantially given the economies of scale which were to be gained by trading through specialist distribution hubs in serving the EU market (most notably for cut flowers and horticultural products).

An initial review highlights the range of the ACP products involved. In ascending order of complexity these include:

Goods Undergoing No Significant Alteration

Products delivered by Multiple port service sea freight lines, which traditionally allowed the customs clearance of all fruit and vegetables at the first port of call in the EU and more efficient unloading and port clearance at subsequent ports of call within the EU. While this will be a relatively easy adjustment to make it will not be entirely cost free.
Air freighted Cut flowers traded through the specialist Dutch auction floor, where imported consignments are broken down, and then reconsolidated in line with individual orders from customers across the EU28.
Sea freighted horticulture products making use of specialist trading services in the Netherlands and Belgium (e.g. for avocadoes), where imported consignments are broken down, and then reconsolidated in line with individual orders from customers across the EU28.
Short shelf life horticulture products which make use of low cost inter-continental air freight services linked to air passenger services and which are subsequently onward traded to the UK.
Frozen and chilled fish landed in an EU27 port and onward traded into the UK.

Goods Undergoing Repackaging

Exports of bulk-rum bottled in the EU27 and onward shipped to the UK.
Tuna exported to single canners in the EU27 for distribution across the EU (including to the UK)

Goods Undergoing Refining or Simple Processing Either in the UK or EU before Onward Trade

Trade in cocoa paste, cocoa butter and cocoa powder which is processed in the Netherlands and Belgium and onward traded to the UK.
Trade in coffee of ACP origin which has been roasted, ground and repacked prior to onward trade to the UK.

These are simply the most obvious areas of ‘trangular trade’ where the introduction of a new border between the EU and UK will carry cost implications for ACP exporters currently serving the UK market under these arrangements. These issues if addressed at all are only partially dealt with in the July document released by the UK Border and Protocol Delivery Group.

This should come as no surprise since these issues are not central to the concerns of the UK Border and Protocol Delivery Group. However, for some products these issues are of critical concern to the affected ACP exporting countries.

If disruptions to these ACP exports to the UK are to be avoided then detailed discussions on how these 3^rd country exports to the UK will be impacted by the process of establishing a UK/EU border will need addressed in discussions with the UK and EU authorities in the coming months.

In the absence of such discussions and the elaboration of concrete initiatives to address the cost increasing effects and trade uncertainties generated by the new UK/EU border arrangements, the impact of the UK’s withdrawal from the EU customs union and single market could be felt by ACP exporters using triangular supply chains as early as October 2020, as UK and EU buyers turn their back on what are seen as increasingly uncertain and hence unreliable supply chains.

The extent to which ACP exports using triangular supply chains are affected will be critically influenced by:

The core process arrangements for UK border controls set in place and the phasing in of these controls.
The adequacy of preparations for the introduction of UK border controls on imports from the EU in terms of the physical infrastructure available, the IT systems in place, the staffing levels deployed in different Border Force departments and the adequacy of their training, the effectiveness of UK government communications to affected businesses on the new requirements faced, the extent to which the concerned stakeholders have time to prepare for the efficient and effective implementation of border controls.

Sources:
(1) uk.gov, ‘The Border with the European Union: Importing and Exporting Goods’, 13 July 2020
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/899991/200713_BPDG_-_Border_Operating_Model_FINAL_1320_edit.pdf
(2) Computer Weekly, ‘HMRC yet to begin building UK border IT system’, 25 June 2020
https://www.computerweekly.com/news/252485180/HMRC-yet-to-begin-building-UK-border-IT-system