Brexit: asleep on the job

Sunday 24 January 2021  



We touched on this briefly yesterday when the Cheshire Cheese Co ventured briefly onto Twitter to lament the loss of its European online business. Now, the Guardian has picked up the story and developed it, telling us that the business owner, Simon Spurrell, has lost 20 percent of his sales, leaving him with a £250,000 "Brexit hole".

The proximate cause of his grief is his discovery that he needs to provide a £180 export health certificate on retail orders to consumers in the EU, including those buying personal gift packs of his award-winning wax-wrapped cheese worth £25 or £30.

Spurrell says he had hoped to take part in the "sunny uplands" promised by the government post-Brexit but has instead seen the viability of his online retail come to a "dead stop", despite the avoidance of the no-deal and the announcement of a free trade deal.

"What has only become clear in the last week is that our successful B2C [business to consumer] online sales to EU consumers is now impossible to operate", he now says, giving us the makings of a classic Brexit "horror story".

However, the narrative then begins to get interesting. As small businesses up and down the country come to terms with the new and complex export red tape, says the Guardian, Spurrell explains that he thought he was fully prepared for Brexit, and had consulted with the Department for Environment, Food and Rural Affairs (Defra) and the National Farmers Union along the way.

He says knew he would need customs declarations and health certificates signed off by vets to get his cheese into the EU after 1 January, and has successfully been getting pallets of the product across the Channel to wholesale customers. But what he had not anticipated was the requirement for health certificates to accompany online orders from private customers. He thus complains:
It's as if someone forgot to negotiate this part of the deal, they forgot that there needed to be an exemption or allowance for the direct consumer sales. We ship to the USA, Canada, Norway, etc, all non-EU countries; we have never had a problem with at all. It is an oversight in the agreement that does not affect EU producers at all, but is a dead stop for all UK producers selling into the EU via online sales.
It is interesting that Spurrell claims he has no problems with the USA, Canada or Norway, but from the look at the situation with Canada and the US, he should have problems. The US law is quite stringent and similar provisions apply to Canada. As for Norway, that is part of the EEA and what applies to the EU also applies EEA-wide.

This notwithstanding, what happens in other third countries is something of a red herring. The EU has its own rules and, if you wish to export to EU Member States, you have to conform with them.

Helpfully, the EU sets out the rules for "small consignments of goods sent to natural persons which are not intended to be placed on the market" in Commission Delegated Regulation (EU) 2019/2122, which supplements Regulation (EU) 2017/625 on "official controls.

All Mr Spurrell had to do was find and read these regulations or, when he consulted with the Department for Environment, Food and Rural Affairs (Defra) and the National Farmers’ Union, either of them should have told him. Direct sales of products made with milk (including cheese) is not permitted.

As to Spurrell's view that, "It's as if someone forgot to negotiate this part of the deal", that "they forgot that there needed to be an exemption or allowance for the direct consumer sales", this is pure fantasy. Regulation (EU) 2019/2122 only came into force on 14 December 2019, less than two months before the UK left the EU.

The Regulation is applicable to produce from all third countries, and there was no way that there would be a special exemption for the UK, especially in a regulation so recently introduced.

Bizarrely, in response to this report, Defra says it was continuing to "engage with the European Commission and the EU member states to ensure that we share a common understanding of the EU’s export rules and how they should apply", as if that was going to make any difference.

Nevertheless, we get the leaden mantra that Defra had "worked hard" to ensure UK businesses were not disadvantaged by the deal. As more and more government systems mess up, we are constantly and frequently assured that everybody has "worked hard", as if that somehow made it better.

We also learn that the farming and food minister Victoria Prentis would now be in contact with Spurrell and Defra officials to discuss further the issues – something which will achieve precisely nothing. Defra can no longer mark its own homework.

Already, though, Spurrell has got the message. To save his business he is now planning to switch a £1 million investment he was planning to make in a new distribution centre in Macclesfield to the EU, with the loss of 20 jobs and tax revenue to the UK.

"It is a real shame", he says, "because that means I'm now going to invest in France, provide French employment, and then contribute to the EU tax system, which was pretty much going against the whole reason that we were meant to be leaving [the EU]".

This, though, according to the Observer is precisely what other UK exporters are being advised to do by Department for International Trade officials.

This, the paper "reveals" in the usual pompous, self-important way of the legacy media, calling this an "extraordinary twist to the Brexit saga". Even then, it has no real understanding of the issues, stating that registering new firms within the EU single market, from where they can distribute their goods far more freely, is the way UK small businesses can "circumvent border issues and VAT problems that have been piling up since 1 January".

This, of course, misses the point, the problem being – as I wrote in August2017 - that once we'd left the EU and the EEA, our products would no longer be permitted free access. Instead, they would have to be routed via an importer, "a natural or legal person established in the Union who places a product from a third country on the EU market".

Now that has come to pass, UK exporters are finding that they either have to appoint an agent in the EU to perform this function, or set up their own company to act as the importer. And given that UK citizens no longer have right of establishment, even that is not going to be easy.

But the take-away issue from all this is just how badly businesses have been advised by both trade associations and government agencies. Yet even now a government spokesperson has the nerve to say: "there is extensive advice available to support businesses as they adjust to the new arrangements", adding that it was "vital" that traders ensured they had the correct paperwork for exports.

One senses, though, from Spurrell's comments about "exemptions" and from other similar views, that there were unrealistic expectations of Johnson's deal. Come what may, with or without a deal, the system was going to require EU-based importers, while customs formalities and "official controls" were always going to apply.

It is all very well the media lovingly recording the tales of woe, joined by choruses of back-covering trade associations, politicians and government officials, but it would have been much more helpful if they had been warning of the [very obvious] things to come. Too many people, it seems to me, have been asleep on the job.

Also published on Turbulent Times.



Richard North 24/01/2021 link

Brexit: Nissan's regulatory triumph

Saturday 23 January 2021  



"Good news from Nissan", writes wunderkind Tom Harwood, he of Students for Britain. Now writing for the Daily Telegraph, he is living proof that profound ignorance is no bar to a career in modern journalism.

He is not, of course, the only one to remark on the intervention of the car-maker's chief operating officer Ashwani Gupta, who says that Brexit will give the company a competitive advantage over its car industry rivals.

But, to Harwood, this provides "more proof that Brexiteers were right". It turns out, he writes, "that regulatory autonomy, combined with a free trade deal with nearby markets is a good thing after all".

If nothing else, this demonstrates that the man-child either hasn't read the TCA or simply hasn't understood it. And, quite obviously, no one in his circle has pointed out to the poor lad that, in respect of the automotive industry, Johnson's administration has not secured regulatory autonomy.

Rather, the government has committed to the maintenance of UNECE (WP.29) standards, thereby keeping British automotive regulations in lockstep with EU regulations, ensuring that the UK and EU regulations remain fully harmonised.

This drives a horse and cart through Johnson's claim in his Christmas Eve speech that: "We have taken back control of every jot and tittle of our regulation, in a way that is complete and unfettered".

The irony here is that, as far back as 1958, when the EEC was still polishing its desks in its new offices in Brussels, UNECE concluded an Agreement on "harmonised technical UN Regulations for the approval and certification of new wheeled vehicles, their equipment and parts".

Administering a global body known as the World Forum for Harmonisation of Vehicle Regulations (WP.29), UNECE thus launched what was the first – and largely successful - attempt to create a single market in automobile manufacture, and on a global scale, pre-dating any harmonising activity by the then EEC, its systems now adopted by the EU as the basis for its vehicle construction and approval regulations.

Crucially, in 2018, the EU then adopted what is regarded as the Holy Grail of regulatory harmonisation, UNECE's so-called Regulation 0 on the International Whole Vehicle Type Approval (IWVTA). This completed the suite of regulations covering vehicle construction from components to finished vehicles.

With the rest of the UNECE standards, the IWVTA has been included in the TCA, requiring each Party to "accept on its market products which are covered by a valid UN type-approval certificate as compliant with its domestic technical regulations, markings and conformity assessment procedures, without requiring any further testing or marking to verify or attest compliance".

While the UK failed to secure a mutual recognition agreement on conformity assessment – thus exposing any number of UK manufactured products to the expense and potential delay of border checks on entry to the EU – this provision effectively serves as such an agreement in respect of motor vehicle exports.

Checks are done in-factory and the worst-case scenario is that Nissan has to hire regulators from an EU Member State, instead of from the UK, in order to verify compliance. The cost implications for a company the size of Nissan are minimal.

This, as far as Brexit goes, very much makes the automotive industry a special case - with the media completely unaware of what is going on. To all intents and purposes, the Single Market survives in respect of the automotive industry and, with the no-tariff agreement, Nissan's position has changed very little from pre-Brexit days.

Unsurprisingly, therefore, Gupta is claiming that the "new" customs procedures amount to "peanuts". And he is right. Unlike most other businesses, the company can continue trading on very similar lines to those it enjoyed before the UK left the EU.

The one possible fly in the ointment was the rules of origin, and in particular, the "insufficient" production" rule which might have had a significant impact had the company imported batteries from other third countries for its electric vehicles, and then sought to export the vehicles to EU Member States.

But now the company is planning to build its own electric batteries in Sunderland, it will have the edge on many of its rivals which will still be reliant on batteries imported from Asia.

Those of Nissan's EU-based rivals which then seek to export to the UK may well be caught by the self-same rules of origin provisions, thereby giving Nissan the competitive advantage on what will be, effectively, a protected home market.

Given that Johnson is planning to ban new cars and vans powered solely by petrol and diesel by 2030, and hybrids by 2035, the prime minister is creating an ideal market base for Nissan – a strong domestic demand on which to build a competitive export performance.

Separately, of course, Nissan has been offered £80 million in subsidies, but there have also been scarcely concealed indirect subsides, such as infrastructure improvements to induce Nissan to keep producing in the UK.

In its own terms, this makes absolute sense and is little different from what other countries are doing to keep car producers on their territories. But no one should be under any illusion that this is the "free market" at work, or that Johnson has secured "regulatory autonomy" in respect of the car industry.

The treatment of this car firm is also in sharp contrast to the way the food industry is being treated. Only yesterday, we saw the plaintive lament from the Cheshire Cheese Company which announced, "with great sadness" that it had been forced to stop sending its cheese to the EU.

"Due to an oversight in the Free Trade deal", it said, "it is impossible for us to send cheese to our EU online consumers", adding that "DEFRA has told us not to expect an exemption or change anytime soon". The company concluded: "Investment and hope is lost today".

Yet, there was a way in which small, mail-order firms could have been accommodated - by the UK agreeing to adopt in its entirety the EU's food safety acquis - as per the Isle of Man, outlined here in respect of the infamous Isle of Man "kippergate" incident, into which Johnson blundered.

IoM is within the EU's customs union but is not part of the Single Market. Therefore, ostensibly, Regulation (EC) No 854/2004 on "official controls" applies, which would require fisheries products sent to the UK (pre Brexit) to be routed via a Border Control Post, putting IoM traders in the same impossible position as the Cheshire Cheese Co.

However, as a special concession, its traders are permitted to conduct direct mail order trade with the UK, selling small quantities of goods. This has been permitted because the Isle of Man government has committed to adopt in its entirety the EU's food safety acquis.

However, since Johnson insisted on regulatory autonomy in respect of food legislation, and the freedom to diverge from EU rules, there were no circumstances where UK firms were going to be permitted to carry out direct selling to EU retail customers. This is not a bug, as they say. It is a feature.

Perhaps the difference was that Johnson had hopes of doing a deal with the US on trade in food and agricultural products whereas it is unlikely that there could be any regulatory convergence between the US and the UK on automobile manufacture.

Thus, while food businesses and other enterprises have been thrown to the wolves, the position of Nissan (and other UK car manufacturers) has been protected by an agreement to keep regulatory harmonisation with the EU. And dozy little Tory boys like Tom Harwood haven't even noticed.

Also published on Turbulent Times.



Richard North 23/01/2021 link

Brexit: assessing the problems

Friday 22 January 2021  



The post-referendum "debate", such that it was, discussion was hampered by the binary nature of the discourse. You were either "leaver" or "remainer" in a rigidly binary confrontation, where the "moderate" middle way got squeezed out, shunned by the main protagonists.

Now it seems, in the post-transition era – where the full force of Brexit is beginning to be felt – we're back in the same territory. As tales of woe are garnered by the media, responses have largely stratified into two camps.

On the one hand, there are those, former "remainers" for whom the events supporting their view that Brexit is "a bad thing". On the other hand, there is the "leaver" tendency which sees the problems as evidence of the rule-bound "pettiness" of a "vindictive" EU, thus confirming their decision to leave as the correct one.

As before, nuance has been drowned out by the shouting match between the warring parties, aided and abetted by a venal, superficial media. This is intent on shoehorning reports into a simplistic "red tape" narrative which saves idle hacks the trouble of thinking – assuming they are even capable of such an arduous activity.

Nevertheless, if one dispenses with the filters of partisanship and tries to cut through the media "red tape" dirge, it is possible to discern in the maelstrom of reports (many of them repeated, with or without embellishment) a number of themes.

It may be early days yet, and the fog of confusion lies heavy, but it might be possible to develop a rough categorisation of the post-transition events being experienced, in order to gain some insight into the nature of the problems with which we are dealing.

The first and most obvious category is the one which the Johnson administration would have you believe encompasses the entirety of the post-transition experience: that we are undergoing a series of "teething troubles" which will be resolved with time as the actors get used to their new roles and systems settle down.

At the other extreme are problems of such magnitude and complexity that they are probably incapable of being solved, or are beyond economic redemption. These are likely to become permanent features of the post-transition landscape.

Between the "easily solved with time", and the "insolvable", however, there are multiple layers, all adding up to a picture of immense complexity which defy easy description and which may change with time and better understanding of the issues.

We have, for instance, the shock discovery by exporters of fishery products, and then those who sought to move products of animal origin, that the EU's "official controls" apply to their products, applying requirements which they were not equipped to meet.

Some of the problems here arise because individuals and their trade groups had not realised in time that these controls would be applied (or wrongly believed that they would be exempt from them), and had failed to make the necessary preparations.

But, in a complex picture, where the participation of UK authorities is required (such as in the timely provision of Export Health Certificates), it may be that the authorities themselves have not installed the capabilities necessary to support commercial requirements.

However, there are further variations which may change the categorisation of the problem. We have seen in this respect, shellfish producers working to extremely short timeframes, where it is extremely unlikely that the authorities will ever be able to respond with sufficient speed (or acceptable cost).

In this case, the traders affected may find that that parts of their businesses are no longer viable, the lack of which may threaten the viability of their businesses as a whole.

Allied to this – but also having wider effect – is the problem of groupage. Where "official controls" apply, each separate consignment within the load will have to have its own EHC, and all consignments (whether SPS-related or not) will require unique documentation.

Here, the problems lie in collecting all the required documentation in time and then in ensuring the absence of errors. One fault in one document set relating to one consignment may hold up a whole load, rendering groupage far too problematic for most (or any) carriers to handle.

Businesses which hitherto have relied on groupage services to distribute their goods throughout the EEA may find that they can no longer service their customers by this means. Their problems may drop into the "unsolvable" category.

Others may be more fortunate in that they may be able to find an EU (or EEA) based agent or distributor who is able to take on the import role and handle the import formalities, and thus enable customer needs to be satisfied.

Those less fortunate, or with deeper pockets, may set up their own EU-based subsidiaries to handle their products, although the cost implications may rule this out as an option. Whether their problems are solvable, or not, therefore, requires a case-by-case assessment.

Then there is the service sector to consider. Those businesses which are wholly or mainly service providers may struggle to survive. A UK-based architectural practice – which shares staff and manages commissions jointly between UK and European offices, with frequent exchanges of staff – may find it impossible to operate. Others may be able to compartmentalise their work.

Hybrid businesses, which rely in part on the sale of goods, and then on service elements such as installation and servicing, may find it extremely difficult to survive without an EU-based subsidiary and locally employed staff. Once again, therefore, the "solvability" category will require a case-by-case assessment.

Other issues lie outside the capabilities of any business to resolve. We see an account in RTE News where the Irish Road Haulage Association is complaining about the "serious and far-reaching challenges" hauliers are facing "due to Brexit".

In fact, though, while Brexit is the proximate cause of their woes, the heart of the problem is the approach being adopted by the authorities at the Irish Ports, which is creating an "unmitigated mess" in the post-Brexit environment.

Eugene Drennan, the President of the IRHA, says: "Our members and their customers are experiencing appalling examples of lack of co-ordination by the Revenue, the Department of Agriculture, Food and the Marine and the HSE concerning checks on goods arriving in Dublin".

Instead of adopting an approach aimed at facilitating trade, the Irish authorities seem intent on operating disjointed, duplicating, uncoordinated and excessive checks on goods arriving into Ireland, Drennan writes. "They are employing complex and excessive requirements in a way that will bring trade to a complete standstill if not addressed".

He adds that the problems are not a consequence of new rules being introduced but instead largely a consequence with the manner in which the trading and customs rules have been applied by the Irish authorities.

We are seeing similar problems in the UK, with the usual incompetence and lack of coordination displayed by the authorities, and multiple failures of IT systems, some of which will not be quickly resolved. And the authorities on the mainland continent are not immune to such problems either.

But one thing which is not going to change is the nature of the settlement between the UK and the EU. Barnier himself has recently stressed this, speaking to an Irish audience after receiving the "European of the Year" award from the Dublin-based pro-EU group, European Movement Ireland.

Businesses, north and south, must deal with the consequences of Brexit and accept that it cannot be "business as usual" for trade with Britain, Barnier says. The two treaties [the WA and the TCA] must be implemented "carefully, precisely, objectively", he adds, then telling his audience: "Let me be frank and repeat what I said more or less every day during the last four-and-a-half years: Brexit means Brexit".

To be fair to the man, he has indeed being saying this, emphasising that the UK cannot expect the same degree of unimpeded access to the Single Market that it has previously enjoyed, having stepped outside the EU's regulatory "ecosystem".

With time, we will come to learn in detail exactly what Brexit means but while the media (and businesses, for that matter) are keen to prattle on about red tape, the "paperwork" is not the cause of the problems experienced – only one of the effects.

Whether the root cause is Brexit, however, is arguable. It would be more precise to say that many of the problems arise as a result of Johnson's version of Brexit. But there were always other, better ways of doing things. Whether that is still an option remains to be seen.



Richard North 22/01/2021 link

Brexit: no going back

Thursday 21 January 2021  



One of the easiest ways of winning an argument is to have a one-sided conversation with yourself on matters about which you know very little, at the conclusion of which you can happily declare the points you have made to be so convincing that you are clearly the victor.

This very much seems to be the technique adopted by the Guardian, a paper which – like so much of the legacy media – has never let its own ignorance prevent it airing its opinions on a subject.

The issue in question, expressed in a stern editorial, is Brexit and bureaucracy, where the paper accuses the Conservatives – not entirely without justice – of continuing "to obsess about the burden to business of red tape, except where it is real – at the EU border".

In making its case, however, the paper makes exactly the same mistake that so many commentators are making, asserting in respect of fish and other animal products that Brexit "imposes cumbersome new procedures". Anyone with a scintilla of knowledge will know that these are not new procedures, but simply newly applied at the borders, as a result of the UK leaving the Single Market.

But there is a more profound point here which completely evades the newspaper, yet it is one which goes to the heart of what the Single Market is all about – but actually requiring a degree of knowledge and understanding of the system to which most journalists can never aspire.

If one takes the meat industry, pre-Brexit, the slaughtering of animals and the onwards processing of meat products, was already subject to a horrendously complex and expensive EU-mandated control regime, the nature of which, post Brexit, is exactly the same in most details.

What differs is that the UK's "competent authority" – required to be established by EU law - is no longer answerable directly to the Commission for the implementation of meat controls, under the supervision of the Dublin-based Food and Veterinary Office.

Nor is the UK subject to the jurisdiction of the ECJ and the imposition of sanctions (financial and other), if the law is not enforced to the satisfaction of the Commission.

It was (and is) this system which enables the EU to remove border controls for intra-Union trade, on the basis that, if substandard product is picked up anywhere in the Union by local authorities, it can be traced back to the point of production and the Member State in question can be held responsible for any enforcement failures.

However, since the end of the transition period, the Commission no longer has the power to monitor, supervise and control the implementation of EU laws within the territory of the UK (or Great Britain, as the case may be), it is not able to verify in real time the conformity of meat and meat products to its mandatory standards, and is not able to sanction the UK government in the event of default.

Thus, in the absence of these capabilities, the Commission adds an additional layer of controls at the EU's external borders, requiring pre-notification of the arrival of consignments, and the formal verification of origin, and conformity with safety and quality standards.

This system, however, did not come from nowhere, and has been evolving over a considerable period. Its genesis lies in Directive 64/433/EEC of 26 June 1964, on "health problems affecting intra-Community trade in fresh meat".

At the time of its implementation and for many years afterwards, this Directive applied only to slaughterhouses and cutting premises which engaged in intra-Community trade, thus creating a two-tier system of hygiene enforcement in the meat industry (which applied even before we joined the EEC in 1973).

There were the so-called "export" slaughterhouses, which worked to the (theoretically) higher EEC standard, and the rest – the greater bulk of the industry, largely comprising the medium and small slaughterhouses. These had to conform to the more relaxed domestic standards, but could only sell their products withing the Member State of production. But even the produce from the "export" slaughterhouses was subject to cross-border checks.

Then, in 1992, along came the "completion" of the Single Market. And, to permit meat and meat products to be sold freely throughout the Community, we saw the implementation of a new law, Directive 91/497/EEC.

In terms of the physical standards, this turned out to be a re-enactment of 64/433/EEC, but the big difference was that they were be applied to all but the very smallest slaughterhouses – whether they exported or not. But additionally, the EU's system of regulatory supervision and meat inspection was to be applied to all slaughterhouses, even the very smallest.

At the time, I recall that the Guardian was particularly active in campaigning for the adoption of European laws to all slaughterhouse, arguing that slaughterhouses subject to domestic law were somehow substandard (as indeed some were – especially many of those which were owned and operated by local authorities).

The burden of meeting the physical standards – especially as they were over-zealously applied by the UK's (then) Ministry of Agriculture, Fisheries and Food (MAFF) – was difficult enough, and put many slaughterhouses out of business.

But what was really crippling was the savage and unthinking imposition of the EU's veterinary inspection system the costs of which were beyond the capability of the industry to sustain. In the decade after the implementation of 91/497, we lost over 1,000 slaughterhouses – a staggering impact on the industry from which it has never really recovered.

So crass (and outdated) was the system that even the EC (as it was then) could not justify its continuation and, just over ten years later, we saw Regulation (EC) No 853/2004 of 29 April 2004, which implemented a more rational (although far from perfect) regime.

To bring the situation up-to-date, now that we are out of the EU, it would be (theoretically) possible for the current Conservative government to "deregulate" the meat industry, reinstating the pre-Single Market "two-tier" system of export and domestic standards.

However, it is not that easy to turn back the clock. The damage has largely been done and the survivors operate in an industry which has restructured itself to take advantage of the Single Market freedoms.

Reversion to the UK's system of inspection might marginally help some small and medium-sized slaughterhouse, except that the system no longer exists. It would have to be rebuilt from scratch, if that is even possible.

Thus, we see the Guardian write about "the tragedy – and the absurdity – of the situation", where Johnson "will feel compelled to indulge the rhetoric of releasing business from a burden of imagined bureaucracy to avoid taking responsibility for the real burden, imposed by him".

And yet, strictly in terms of the meat industry, the newspaper in its time was as responsible for the additional burdens imposed on the industry – with its prolonged campaign for the adoption of "European" standards. Now, the bureaucracy imposed – although heavily modified – is probably here to stay for domestic slaughterhouses.

As for the operations which wish to continue exporting, they will have to deal with the existing "official controls". These apply to all third country produce and other countries seem to be able to cope with them, including New Zealand, Brazil, Botswana and even Canada. In time, our people will get used to them.

But the sad fact is that the past is the past. Although the launch of the Single Market in 1992 needlessly damaged the industry (and the UK public health system), there is no going back.

Also published on Turbulent Times.



Richard North 21/01/2021 link

Brexit: muddying the waters

Wednesday 20 January 2021  



There can be no dispute that EU-UK trade in the post-Brexit environment is an evolving situation of exceptional complexity. It also involves many specialities, disciplines and organisations, so there is no one, overarching guide or single narrative which can be used to explain events.

Nevertheless, where there are many different things happening within a common framework such as Brexit, albeit with different causes and variable effects on the ground, the temptation for the media to over-simplify must be extremely powerful.

With that, one can see several distinct themes emerging. One focuses on the incompetence of government in preparing for the end of the transition period – an obvious and extremely rich vein to mine, of which there are several recent examples.

But one of the most prominent being entertained by the media is the "victim narrative" – much favoured by the BBC - where traders and their representatives are being given free rein to vent their complaints about border controls to which they are being exposed, and related issues, raging against "paperwork" and "red tape" and "bureaucracy".

While no one could begin to dispute that there have not been significant government failures, however, not all traders cannot absolve themselves from all responsibilities, particularly those involved in the shipping of highly perishable goods, particularly in the fisheries sector, and in products of animal origin.

The point here is that, however unjust and miserable the outcome of the EU-UK trade agreement (TCA) might be, there is no excuse for allowing vehicles with valuable and vulnerable cargoes to turn up at EU borders, with inadequate preparation, and expect a free pass from the EU.

Where this has occurred, it really is about time that industry and the media stopped whingeing, and started confronting the reality - that these UK exports to the EU are now subject to pre-existing third country controls, specifically the "official controls" which apply to fisheries and meat products.

As we know, and I have detailed many times on this blog, these are not "new" controls. They are part of the EU's Single Market acquis, reinforced by the Union Customs Code (UCC). They have applied to all third countries and thus are only newly applied to the UK since it acquired third country status.

It is crucially important in this respect to understand that the EU hasn't changed. The UK has. It has purposefully stepped outside the Single Market and thereby willingly and deliberately made its exports to the EU subject to third country controls.

The "official controls" mostly apply irrespective of any free trade agreements, so there was no excuse whatsoever for not being prepared for their implementation. Since January 2017, when Mrs May committed the UK to leaving the Single Market, it was a matter of certainty that they would apply – irrespective of what British politicians might have said.

One can understand and have a small amount of sympathy with the view that business was misled by Johnson's claim of the TCA that there would be no non-tariff barriers, but anyone who believed that – in the face of the evidence – must surely be more than a little naïve.

The Johnson administration, after all, has turned lying into a routine instrument of government, while most statements from Johnson himself on the subject of regulation have served only to illustrate his profound ignorance of the subject. No sane person would believe anything that Johnson said, without extremely strong supporting evidence.

Nor is it sensible or realistic for traders of their representatives (much less government) to ask the EU to be "pragmatic" (i.e., lax) in the implementation of its border controls. The EU is obliged under WTO rules to treat all third countries equally, without discrimination. The UK cannot be given a free pass without breaking the rules.

There are no circumstances, therefore, under which the regime will get easier. The only way UK businesses can continue to export is if they take the existing rules seriously as a permanent feature of our trading relationship with the EU, and learn how to comply with them.

That said, the scope for compliance is restricted to the areas where the controls are well-defined and there is no reliance on failed (or failing) government systems.

Bloomberg, for instance, points up an issue with the application of the Union transit system, which allows carriers to bypass customs formalities at the point of entry to the EU, deferring them to the country of destination.

However, the system (as with the ATA Carnet), requires financial guarantees to be lodged, covering any liability for tariffs and other fees in the event of default. Yet, as a result of the massive increase in what are now "non-Union" goods from the UK, many of the carriers have "maxed out" on their guarantees.

Yet, those firms wanting increase the size of their guarantees, or to apply for a new one, have been unable to do so, as they have been unable to register the details with HMRC, which is experiencing problems with its New Computerised Transit System, as a result of a recent software "upgrade".

At Ashford, southeast England, we are told, drivers have had to wait at a truck park for hours to obtain their transit documents and are regularly being turned back, according to Steve Cock of The Custom House, which has a base at the site.

The firm, which has a 200-million pound ($273 million) transit guarantee, has been turning clients away because it is at capacity, Cock said. He expects chaos as soon as freight traffic rebounds from its current subdued level because as much as 90 percent of goods being moved will need transit documents.

In completely different territory, we have the Irish Times shed some light on the problems supermarkets in Northern Ireland are having stocking their shelves with supplies from Great Britain, bought in bulk and repacked for distribution.

As it stands, under the rules of origin provisions of the TCA, goods purchased from outside GB and caught under the "insufficient production" rule are subject to tariffs when re-exported to Northern Ireland. And while goods imported directly from EU Member States to NI would be tariff-free, if they are repackaged in GB, in a bizarre twist to the rules, they then attract tariffs when sent to NI.

The rules have led to severe disruption in supply chains and food shortages and empty shelves in Irish retail outlets of UK supermarket chains, in the Republic and Northern Ireland, and delayed the shipment of other goods.

Government officials have made "technical inquiries" with officials within the Commission "to see what the possibilities are", says one Government source, though they warned that finding a fix for the issue was unlikely. "This", says the source, "is an issue which was unforeseen or not foreseen to the extent to which it should have been".

These two examples, contrasted with the problems experienced recently by the meat industry, illustrate the nuances affecting border issues, and the diversity of causation.

Meat exporters, for instance, are complaining about a load of pig's heads exported from the UK to European buyers to make products like sausages and pâté. They have been stuck at Rotterdam port for weeks due to Dutch authorities demanding that that they be tested for disease.

David Lindars from the British Meat Processors Association decries "clerical bureaucracy and the misunderstanding of the rules we [the UK] and they [the EU] are operating to", apparently surprised that "All paperwork is checked for 100 percent of products entering the EU" and that "the number of issues raised at the border control posts determine whether a truck is held for hours, days, or even weeks".

Lindars argues that "there are huge issues with a system that is fundamentally not designed for a short shelf-life food", apparently unaware that, until recently, the UK was implementing exactly that system for third country imports, including chilled New Zealand lamb, which has come from the other side of the world.

To an extent, the industry's complaints serve only to cover up its own complacency and lack of preparedness, but they provide easy copy for lazy journalists peddling the "victim" narrative.

There is a long way to go before we are through this mess, and many difficult decisions will have to be made by many traders about the future of their businesses. Many will not survive. But the media muddying the waters with its own superficial narratives helps no one. We need a better understanding of what is going on.

Also published on Turbulent Times.



Richard North 20/01/2021 link

Brexit: incompetence all round

Tuesday 19 January 2021  



Yesterday was the day when the Scottish fishermen (or some of them) brought their concerns to the streets of SW1, complaining of "Brexit carnage", the message of "government incompetence" emblazoned on the side of a large vehicle – which seems rather appropriate for the circumstances.

Incompetence, however, was by no means confined to the government though, as BBC News reporter John McManus was on the scene, calmly explaining that, "Having left the European Customs Union, UK exports [of fisheries products] are subject to new customs and veterinary checks which have caused problems at the border".

McManus has more than 19 years' experience of working for BBC News, as a reporter, producer and on-air presenter and, over several years, has variously worked as a reporter for BBC World Service Radio and BBC World TV, as well as working for BBC1 bulletins, the News Channel/WTV, and BBC Radio 4 news programmes.

Yet, despite his seniority and experience, the man – like many of his colleagues – is incapable of distinguishing between the effects of leaving the customs union and the Single Market. Furthermore, in common with almost the entire corps of legacy media journalists, he insists on describing the checks as "new" as opposed to already existing but newly applied to the UK, it having acquired "third country" status.

But even the infelicities of McManus pale by comparison to the sterling endeavours of Lisa O'Carroll, of the Guardian. O'Carroll is not any old journalist; she is the paper's specialist Brexit correspondent, tasked on this occasion to chronicle the woes of wine importer Daniel Lambert who recently committed himself to a length complaint on Twitter, graphically describing the difficulties he has encountered.

Helpful, our Lisa explains to us ignorant plebs that, "At the heart of the issue is a complex piece of paperwork, called Chief, that was used for imports from non-EU countries before Brexit", thus inviting the question as to how it is even possible to be a Brexit correspondent for a major national newspaper without knowing about this HMRC software.

I actually recall writing about Chief in March 2017, airing concerns that the system would not be up to the jo. This certainly seems to be the case with Daniel Lambert, with it not permitting him to make the necessary declarations and thereby preventing him importing his product.

The failure of a key piece of software – the subject of parliamentary select committee inquiries – one might have thought would have been of great interest to O'Carroll. But it passes her by. The media narrative is about "paperwork", "red tape", and "bureaucratic procedures", the constraints of which set the tone of this hack's coverage.

Sadly, though, we're not only getting dismal performances from the so-called "mainstream" media. Even the speciality press is lettering us down, witness a tediously superficial explainer from Autocar, which seeks to inform its readers: "What the Brexit deal means for car manufacturers".

To my mind, one of the crucial issues here is the adoption of UNECE (WP.29) standards in the TCA, thus ensuring that the UK industry will maintain a high level of regulatory convergence with EU-based plant. This, in removing important non-tariff barriers, will to an extent facilitate trade with the EU – and the rest of the world.

Typically, though, there is no mention at all of this development in the Autocar piece, which focuses entirely on tariffs and rules of origin, in the latter case not even bothering to explain the difference between the "value added" and "insufficient production" elements, which have some relevance to the automotive industries.

The one-dimensional approach of the title typifies the media coverage of Brexit where the coverage on offer is in the hands of intellectual pygmies whose grasp of the subject remains stubbornly at the equivalent of primary school level. In a nutshell, the British media is incapable of reporting on Brexit at an adult level.

Even the august but generally over-rated Financial Times fails to rise to the occasion, reporting that, since the UK left the EU single market and customs union on December 31, "British fishing businesses have suffered delays at the border when exporting fresh produce to the bloc as it applies new import controls".

To point out the error may be regarded by some as pedantry but, since the previous iteration of the EU's fishery control regulation stems from 2009, and a proposal for revision was adopted on 30 May 2018, the import controls can hardly be described as "new".

The distinction, of course, is both important and relevant in that, where the government's declared intention during the "future relationship" negotiations was to leave the Single Market and the customs union, it was entirely predictable that existing "third country" controls would apply, the nature of which were also known.

While individual UK operators might not be (and, in fact, were not) aware of the precise requirements which were to enter into force on 1 January 2021 – irrespective of the nature of the trade deal negotiated – trade associations and the government should have been fully aware of what was coming, and businesses should have been warned of what they might expect.

That they were not warned (in time) is indicated by the FT, which tells us (without comment) that several French government officials expressed surprise at the lack of preparation on the British side for the "new" regulations that the EU is applying to imports from the UK since the end of the Brexit transition period on 31 December.

Thereby, the paper is actually missing the main story that businesses were sent entirely unprepared by their trade associations and the government into a maelstrom of bureaucracy, with which they could not possibly comply.

And yet, trade bodies such as the British Ports Association seem to be in denial. On the one hand, they blame a shortage of UK environmental health officers – who actually certify fisheries products in the UK (under veterinary "supervision") and the "extremely strict application" of the "new" EU import rules for the delays.

The Association wants the government to hold urgent discussions with counterparts in the EU, particularly France, "about a pragmatic approach to enforcement". This is echoed by the trade body Scotland Food & Drink, which wants an "immediate dialogue" with the European Commission to secure a lighter-touch approach to border controls.

A UK government spokesperson, however, will only concede that the fishing industry faces "some temporary issues", and says that the government is "looking at what additional financial support we can provide to those businesses affected". This is expected to be worth £23 million.

The idiot Johnson, however, blames blames seafood exporters for "not filling in the right forms", thus demonstrating his usual ignorance of how the EU regulatory system works.

He also links the crisis to the Covid-19 pandemic shutting restaurants across the Channel. "Unfortunately, the demand in restaurants on the Continent for UK fish has not been what it was before the pandemic", the buffoon says.

A spokesman then adds: "We continue to extensively engage and work closely with representatives of the industry from across the UK, and the authorities in EU member states, to understand and address any issues with documentation", thus completing the circle of ignorance and indifference.

Not anywhere in the media does one get any sense of how badly the government has failed – or why – and the calls for "pragmatism" by trade associations verges on the absurd.

Not only will EU member states continue to implement well establish controls (which they must do without discrimination, under WTO rules), when the revised regulation comes into force, UK fisheries product traders will face a far tougher regime.

Interestingly, Rod McKenzie, managing director of policy at the Road Haulage Association, says that the "chaos" seen at UK ports due to Brexit – where the situation at Dover and other ports is "deteriorating" - would top the news agenda in any other year.

But, given the almost complete inability of the British media to report the issues in any depth, one wonders whether more intense coverage would make any difference, other than spread the veneer of ignorance somewhat thinner.

Also published on Turbulent Times.



Richard North 19/01/2021 link

Brexit: deregulation

Monday 18 January 2021  



A piece in the Guardian should, if it is read properly, put to bed the complaints about "paperwork" and "red tape" relating to Brexit.

For sure, traders and shippers are having to get used to handling new forms of paperwork, with which many are unfamiliar, and failure correctly to complete the necessary papers is giving rise to delays and additional costs.

To some (limited) extent, however, the problems can rightly be put down to "teething troubles" and once there is a degree of familiarity and practice, recruitment has been improved and IT problems have been sorted, the system should settle down into an uncomfortable routine to become the new normal.

Undoubtedly, there is going to be continued grief until these issues are sorted but, as the Guardian intimates with its headline: "Shock Brexit charges are hurting us, say small British businesses", they are only part of the problem.

Clearly, the charges are also problematic, although the paper spoils the effect of its own headline with its sub-heading: "Levies to cover the increase in red tape, VAT and customs declarations are hitting trade to the European Union".

The point that should emerge is that while completing paperwork incurs costs, some of the costs (such as VAT) would arise even if we were inhabiting a form-free world.

In other respects, the paperwork is the least of the problems. For traders dealing in products of animal origin, for instance, the requirement to submit consignments to a border control post for physical inspection, and the payment of the associated fees, cannot be classed as "paperwork", while "red tape" hardly conveys the nature of the processes involved.

It seems though that the legacy media is unable to break out of its own self-imposed narrative, and will continue to trot out their generic "red tape" stories, even though the subject matter is diverse and wide-ranging.

Descriptions notwithstanding, there is good evidence to suggest that the cumulative effects of newly-applied border controls, and related issues, are building towards a perfect storm which is set to precipitate a major crisis in our trade with European Union Member States.

It seems vastly inappropriate at this juncture, therefore, that the government should be devoting limited "bandwidth" to the subject of deregulation, with the Telegraph reporting that Chancellor of the Exchequer Rishi Sunak is to chair a Whitehall taskforce "to lead bonfire of EU red tape".

This is to be a new "Better Regulation Committee", based in Downing Street, focusing on "cutting EU red tape for businesses", with the prime ministers saying that he wants the changes to allow the government "to seize opportunities in the UK as an independent nation".

Whatever the merits of this approach – and there are very few – it also sends an unfortunate signal to the EU, effectively declaring that regulatory divergence is an important and immediate priority of the Johnson administration.

This can only feed the developing trade crisis, as the level and intensity of border checks on goods imported into the EU (and the rest of the EEA) will depend to a very great extent on the degree to which the UK's regulatory standards match those of the EU.

Where, as is the case, there is a declared intent to move away from EU regulation, the inevitable consequence will be that customs authorities in the EU Member States (possibly with the encouragement of Brussels) will veer towards a more rigorous control regime than might otherwise have been the case.

As if that was not bad enough, one draws from the Telegraph piece the view that, even if reducing regulation was to be fostered, the government is going about the process in entirely the wrong way.

The report has it that Number 10 wants the new committee to "refresh the strategy on making better regulation outside the EU, review existing rules and cut red tape for businesses".

One of those anonymous sources then develops the theme, saying that: "With newfound control of our laws, reviewing and reforming regulation will be at the forefront of the Government's agenda to take advantage of opportunities outside of the EU".

Officials (also anonymous) are saying that the Committee will, "coordinate and drive through an ambitious programme of regulatory reform to over the parliament. It will push the boundaries, boost creative thinking and inject pace at the centre of the government".

Sunak himself is quoted, telling as: "Now that we have left the European Union, we have an opportunity to do things differently and this government is committed to making the most of the freedoms that Brexit affords us". He adds: "This isn't about lowering standards, but about raising our eyes to look to the future - making the most of new sectors, new thinking and new ways of working".

We are then told that the Committee will be backed by a unit of civil servants who will be charged with carrying out "a series of systematic deep dives... into EU-derived regulation to identify and implement agreed changes". By way (presumably) of reassurance, we are also told that "any reforms would not come at the expense of the UK's high standards in areas like workers' rights and the environment".

The reason for my distinct lack of enthusiasm is partly to do with the fact that we've been there before. Booker and I took part on several deregulation initiatives in the 90s, including Major's "deregulation offensive" lunched at the party conference in October 1992, when he appointed his trade and industry minister Michael Heseltine to "take responsibility for cutting through this burgeoning maze of regulation".

Famously, Major asserted that there was no one better "for hacking back the jungle", telling Heseltine: "Come on, Michael, out with your club, on with your loin cloth, swing into action".

Over the next four years, inspired by the gold-plating of EC directives, this was to remain a flagship policy. Yet during that time, when Major's government put its lengthy "Deregulation Bill" through Parliament, not a single regulation implementing a directive was changed.

The annual number of regulations issued, which only topped 3,000 for the first time in 1992, never dropped below that figure. Only at the end of the Bill's passage through Parliament did a junior minister in the House of Lords finally admit that it was always intended to exclude regulation stemming from the (then) EC.

From that, we could adduce that the major failing of the initiative was the failure to deal with "European" regulation, but it would be wrong to draw that conclusion for the present day. Since the early 90s, and continuously right up to the present, EU standards have been progressively replaced or augmented by international standards, even if they have still been labelled as EU laws.

Any attempt to cut back regulation, therefore, will quickly impinge on the "double coffin lid" phenomenon, where we will find that we will be in breach of our international commitments – more so as many of them are built into the TCA.

Crucially, though, what we (Booker and I) learned from previous attempts is that deregulation, per se can never work. What must be appreciated is that regulation is an instrument of policy, and policy is a response to a need, real or perceived.

To tackle "excessive" regulation, you have to address the "need" in the first place, and then modify the response with a more appropriate policy – from which new measures will naturally emerge. If you simply play around with the written word, you create a political vacuum which will act as a driver for more or replacement regulation, or simply act as a barrier to change.

For instance, if you look at the current tranche of financial services regulation, this is driven by the financial crash of 2009 and the need to prevent it happening again, where states, at great cost, had to bail out the banks.

Thus, you can't play around with the regulation, without first understanding why it came into being in the first place, and the functions it was intended to perform, looking at the bigger picture and deciding how best to secure policy objectives.

This is a subject to which we must inevitably return, not least as the current ideas have the makings of another Johnsonian train wreck – as if we didn't have enough already.

Also published on Turbulent Times.



Richard North 18/01/2021 link

Brexit: courses for horses

Sunday 17 January 2021  



There is no doubt that businesses have been badly served by their governments over Brexit – some worse than others, with the UK in the "world beating" league.

But there are also strong indications that there has been significant "head-in-the-sand" behaviour exhibited by some business leaders and their trade bodies, with entirely unrealistic expectations of the post-Brexit/transition period.

One of the sectors which would seem to be indulging in this behaviour is the horse-racing industry, to which I've referred recently as I try to puzzle out the impact of Brexit, in all its ramifications.

That I should even be in this position is in itself odd. In the UK, the industry is far more important than commercial fishing – which has attracted so much attention. The first time I wrote about it, I noted that it was worth £3.45 billion to the UK economy, employing (directly and indirectly) 85,000 people and underpinning a £12.6 billion gambling market. The figures may have changed with time, but they are roughly in the same order.

Given the value of the industry – to say nothing of its totemic importance and the undisputed view that the end of the transition period will make cross-border movement of horses, on which the industry relies, more complex administratively, more time consuming and more expensive - one might have thought that there would be prominent complaints and significant media coverage.

Even though movement bans and other Covid restrictions have muddied the waters, I nevertheless have to admit to being perplexed by the extraordinarily limited coverage on this issue, most of which has centred around the impact on the Irish end of the business.

When I last left the subject, concerns were being expressed by an Irish trainer that VAT would be payable on racehorses imported temporarily into the UK which, even though recoverable, would impose a serious financial burden on the industry.

Since then, however, fears on that score have eased, although we are seeing acknowledgements in RTE News that "transporting horses abroad has become more expensive due to Brexit and could impact on animal comfort and welfare".

This comes from Wicklow-based Ronan Rothwell, who breeds about 20 top show jumping horses a year, with around 70 percent being sold to the UK and the rest to Europe.

Rothwell has encountered problems recently with two young horses that are ready to be transported to Britain. "There is", he says, "now a time lag because a veterinary report needs to be lodged with the Department of Agriculture for permission for export. That takes around three days".

"There is also the expense of paper work, which we never had before. Using the land bridge with the UK [to get to Europe] is extortionately more expensive than it was before." The other option is to transport the horses directly to Europe from Rosslare to Cherbourg but the "sad reality" of an 18-hour journey at sea was that "the losers in all of this are the horses".

Nothing in this report, though, gets close to identifying the problems facing the racing fraternity, although we do get some more idea from a report in the Irish Independent.

However, like so many media reports, the focus is on "paperwork", with the headline declaring: "'Don't get caught out' - Irish trainers warned to have documents ready ahead of post-Brexit Cheltenham".

We do, though, get confirmation (not that it was needed, because it is in the TCA) that the race horses and other temporary imports will require ATA Carnets. Ciara Dillon, from BDO Ireland, one of Ireland's largest business advisory firms, is brought in to explain.

Her advice though, as recorded in the paper, is confused, as she talks about the options of the ATA Carnet or a "temporary admission procedure", despite that fact that the Carnet is a temporary admission procedure, and is the one identified in the TCA. Incidentally, the Carnet can also be used as a transit document, as is explained in the 674-page explanatory guide.

The whole situation is rather downplayed, as Dillon does not mention the cost of the carnets, nor the 40 percent financial guarantee which must be deposited, or the insurance in lieu of a bond.

Nothing is said of the fact that the Tripartite Agreement falls, that veterinary certificates must now be furnished, and that entry into Europe must be routed via Border Control Posts, where the horses must be subject to veterinary inspection. Commentators seem to have no idea of what is about to hit the industry.

However, RTE does give some intimation of troubles to come, pointing out that the BCP at Calais will only process three horses an hour for arrivals from the UK. On this, the broadcaster cites Deirdre Seale and her husband Roy, who run Seale Transport and ship around 60 horses a month to Europe and Scandinavia.

Recently, they embarked on a dry run to see if they could continue using the UK land bridge only to find they could not get through Calais. Mrs Seale said they then tried to use the Rosslare to Cherbourg route direct to Europe.

"We were all loaded up and ready to go on Thursday night, our veterinary certs were stamped. Then we got a call from Stena to say the ship was not certified to take horses", Mrs Seale said, calling it an "exhausting and draining" time for the equine sector.

"The Government does not know what it's like on the ground, we are front and centre on the world's stage when it comes to the equestrian industry", she adds. "But they don't seem to have perceived the difficulties. The government and the governing bodies of the industry should be making sure that we can still export.

Mrs Seale fears that: "We are going to be left marooned while everything happens on mainland Europe without us", reminding us that: "You are dealing with people's livelihoods".

There is a sort of phony war feel about this. The problems are there and they are being confirmed in practice, but no-one as yet is sounding the alarm bells in a way that we have seen with some other sectors.

Once the season gets under way, and the small-scale eventers are also affected, my guess is that the media will finally wake up to another aspect of "train-crash" Brexit, with no end of gifted hacks breathlessly "revealing" the problems which they are largely ignoring at the moment.

But, as with the meat industry, fishing and other sectors, these are no mere "teething troubles". Through the Tripartite Agreement, the racing industry and other eventers have effectively enjoyed free movement for thoroughbred horses, with minimal formalities. The new procedures will be slow, cumbersome and expensive, and are bound to impact heavily on the sector, particularly the small players.

Eventually, we will start to see horror stories for other sectors, as the media craving for novelty reasserts itself, as the Covid news starts to abate. As Pete wrote yesterday, there are choppy waters ahead.

Also published on Turbulent Times.



Richard North 17/01/2021 link

Brexit: going elsewhere

Saturday 16 January 2021  



Embodied in a headline from the BBC's Simon Jack – the businesses editor – is what looks like an example of fundamental intellectual laziness. It is one seen in many journalists reporting on post-Brexit events.

The headline itself reads: "Post-Brexit customs systems not fit for purpose, say meat exporters", a charge that is actually repeated in the body of Jack's story, where he says: "UK meat exporters have claimed post-Brexit customs systems are "not fit for purpose".

This might sound anodyne enough but the claim is attributed to Nick Allen, chief executive of the "British Meat Processor Association" (sic). But he of the processors (plural) association does not say that. He does not talk about the customs system but the "export health certification process" – an important distinction.

"Fundamentally", he says, in a direct quote cited by Jack, " this is not a system that was designed for a 24/7, just-in-time supply chain". It is, adds Allen, a "process was designed for moving containers of frozen meat around the world where you have a bit of leeway on time".

Where the laziness comes in is with Jack's reference to the "customs system", the automatic assumption that because the health certification is part of the border control system, it is part of the customs formalities. In his mind, "border controls" and "customs" are one and the same.

As it stands, though, the regime applied by the EU to imports of products of animal origin is not the responsibility of customs. As Jack would find if he looked it up on the Commission website, he would see that it is part of the vetrerinary border control system, entirely separate from the customs system with its own body of legislation.

However, people such as Allen rarely look up things. They waft through their privileged and over-paid lives assuming their own superior knowledge of such things is essentially correct, and are never reluctant to foist their ignorance on the nation at large.

In practical terms, of course, the distinction is of considerable importance. The system precedes customs controls, with the importer having to give advance notification of the arrival of a consignment, then following a procedure that even the Commission's best friends would agree is arcane and complex.

Indicative of the complexity of the system, when one follows the links on the Commission website, one is eventually lead to an official guidance document which, published in 2013, is actually out of date. The rules – known as "official controls" were substantially revised in 2017 and 2019.

Anyhow, the thrust of Nick Allen's complaints – further elaborated on and partially repeated – comes in additional quotes cited by Jack. Says Allen:
Fundamentally, this is not a system that was designed for a 24/7, just-in-time supply chain. The export health certification process was designed for moving containers of frozen meat around the world where you have a bit of leeway on time. No matter how much better we get at filling in the forms, it's really not fit for purpose. This is going back to the dark ages in terms of a process really, in this digital age.
Allen then adds: "It's going to be a problem for quite a time until we move forward and hopefully get a better digital system in place and can make it work a bit better, but until then, we've got to put up with all this paperwork and lorries arriving in Ireland with box files full of paper".

In actuality, though, Allen could not be more wrong. The original system goes back to Directive 64/433/EEC, one of the Commission's very first forays into food safety, and one which I remember well. It remained in force until 31 December 2005, when the food safety procedures were replaced by Directive 2004/41/EC.

As to the export procedures, though, the system has been augmented with TRACES, the Union's TRAde Control and Export System, and fully compatible with the EU's electronic customs systems, as part of the development of the "Single Window Project".

Allen's people, therefore, may have familiarity issues and a steep learning curve, but the system is as good as it gets, linking in with the Union Customs Code, which itself has only recently been updated and is still in the process of further updates.

The problems, therefore, are not the "paperwork" of the "red tape", terms to which idle hacks like Simon Jack are prone to resort. The real issues more complex and more far reaching.

In the first instance – as I've pointed out several times now – UK traders have to get used to a fundamental change in their status as a result of the UK leaving the Single Market. No longer can they export on their own accounts, loading goods in trucks and shipping them to their destinations for sale – the process known technically as placing in "free circulation".

Instead, an importer must be found, a "legal entity" (either a person or company) established in the EU, who must notify the veterinary authorities of impending consignments, and then (separately) make the necessary customs declarations. The UK trader, as the exporter, loses control of the process.

The agony starts long before the products are despatched from their points of origin, with each separate consignment having to be furnished with veterinary heath certificates, with all the products shipped bearing official "establishment numbers", which must be visible on labelling.

The loads must them be routed via the Border Control Posts, at the ports of entry, where there are three levels of checks. The first is of the documentation, the second is the "identity check", which means physically reconciling container or vehicle contents with the manifest. This can even require the opening of packaging and carrying out tests to confirm the products are as described.

The third level is the physical inspections of the meat, the standard levels being set at 20 percent of each load, although this may be increased at the discretion of the inspector. Supplementary checks may also be carried out, such as sampling for pesticide or veterinary medicine residues, or testing for the presence of microbial contaminants or parasites.

Only once these procedures are completed and the goods have been passed as satisfactory – and the inspection fees have been paid – can consignments be released to customs, for their clearance.

Paperwork apart, it is these procedures which are taking the time, with the formalities adding a day or more to delivery times, and injecting a huge level of uncertainty - and the extra costs which must be paid by the importers.

Understandably – as pointed out in Jack's report – buyers are losing patience and are looking for other solutions – sourcing from suppliers within the EU. These are not "teething troubles", and they will not "bed in" with time. The "official controls" process is inherent in the UK's change in status from EU member to a third country.

Traders will have to learn to live with "significant additional disruption", but also with the reality that their customers don't have to. They can go elsewhere and, from all the indications, that is precisely what they will do.

Also published on Turbulent Times.



Richard North 16/01/2021 link

Brexit: a bad deal is no better than no deal

Friday 15 January 2021  



Just a couple of weeks short of four years ago, I wrote this piece on the potential effects of Brexit on the horseracing industry, which Booker picked up in his column a few days later.

The industry itself seemed slow to react to the threat, but eventually set up the "Thoroughbred Industries Brexit Steering Group" (TIBSG) to liaise with government and to keep the industry informed about the cross-border movement of horses.

Like everyone else, it was stymied by the late conclusion of the TCA, and when the treaty was published, it more or less confirmed the worst fears – having made no specific concessions to allow the sport to proceed on the same basis as before.

There are some tax concessions in the treaty (Article CUSTMS.16 – p.85), but it would appear that temporary admission is to be made conditional on production of an ATA carnet (paragraph 3).

The situation has been confused by the application of Covid-19 restrictions, leading the British Horseracing Authority to issue a holding statement on Christmas Eve, which does not seem to have been updated.

This conveyed the advice of the TIBSG that no one should attempt to move horses for at least the first two weeks of January unless absolutely necessary. This was to allow time for agreements to be ratified and the new processes to be communicated to relevant officials here and in the EU.

Nonetheless, the group conceded that the process of moving horses would change significantly from the end of the transition period. It would be more complex administratively, more time consuming and was "likely to be more expensive".

The ease and informality of the Tripartite Agreement, easing movement between the UK, France and Ireland, has gone and, although "horse passports" are still recognised for thoroughbred horses, based on stub book details, much else has changed.

On top of residency and isolation requirements, horses have to be blood tested for certain diseases, an export health certificate will have to be obtained and signed by an official vet, formal notification of movement has to be given and entry must be via a Border Control Post, where veterinary inspection (for a fee) is compulsory. But it does not stop there.

Today's Racing Post (no link) suggests that horses sent from Ireland to the UK for racing will face potentially "colossal" VAT charges. Although these will be refundable, the payments are expected to take months to process, placing a huge financial burden on racing teams.

Already, there is some doubt as to whether some of the "big name" Irish horses will make it to the Cheltenham Festival. This could have a devastating effect on the Festival as horses trained in Ireland account for nearly 40 percent of the runners.

However, the problems are by no means confined to the "high end" of the horse world. As the BBC reports, a show jumping trainer has said that Brexit has stopped her taking horses to Europe to compete in events.

This is Rachael Williams, from East Yorkshire, who says there had been delays and confusion over the new requirements for taking live animals to the continent. She says she would usually travel to Europe around ten times a year, taking three riders and six horses to various competitions.

"We were told that if you were jumping internationally and if you had your horses registered with the Dutch federation, passport and things like that, you would get better travel and it would just simply be the same - and it is not", she says. "We haven't had a good Brexit deal at all, in fact we've had no deal".

Williams, though, isn't the only one making that discovery. A complacent livestock industry is finally being jolted into accepting reality, finding that "excessive" vet checks and paperwork are hitting meat exports to the EU.

And here we go again. About this, I wrote in January 2017, setting out in great detail precisely what was involved. Yet now the National Pig Association (NPA) is complaining that delays caused by what it claims are "excessive checks and paperwork" are making UK shipments unattractive to buyers in the EU, forcing processors to reject shipments and cancel future orders.

One load was held at Calais for 20 hours while inspectors carried out checks. The pigmeat was then rejected on finally reaching its destination in Germany because its quality had deteriorated. And still, the NPA warns that the full overall impact of the new rules is yet to be felt, as UK export volumes remain lower than normal for the time of year.

Processors have reported a number of issues. For instance, the administrative burden of health certificates means that vets are struggling to meet the demand. One processors took nine hours to prepare paperwork for a single shipment to the EU last week. paperwork for a 15 tonne shipment bound for the Netherlands required 12 stamps in three languages, in duplicate, or 72 stamps in all.

Furthermore, since inspectors are required to check labels on each box in consignments, pallets have to be offloaded and broken apart to be examined. And, as if this was not bad enough, Eurotunnel needs to process 500 lorries an hour but has the veterinary capacity for only 150 an hour, causing further delays.

NPA chief executive Zoe Davies complains of "bureaucracy overload" but she does not help herself by displaying her own profound ignorance. She concedes that the "we always knew it [Brexit] would mean more red tape, checks and delays", but she then complains that "there is a political element, too".

About 30 percent of all UK consignments to the EU were being checked, she says, but this is far more than for many other third country exporters to the EU. For New Zealand, she says, the figure is one percent.

What she clearly doesn't understand is that New Zealand negotiated a special deal with the EU, something which our "fantastic" negotiators didn't bother to do, despite Johnson claiming that there were no non-tariff barriers – having not read the treaty he signed.

Instead we have Davies prattling that: "It is clear that the EU Commission wishes to make Brexit as painful and as messy as possible to prevent any other country from following suit, so we have very little hope of improving things". She is calling on the government to act.

However, she is not likely to get much comfort from that sources, with the ineffably stupid George Eustice telling Scottish fishermen that their problems are down to "teething troubles".

With the Mail dismissing measures as "Europe's petty revenge", while trade sources are blundering around in a fog of their own ignorance, it looks to be some time before business gets to grips with Barnier's "new normal". With little help from the media or politicians, they are having to find out the hard way the real meaning of non-tariff barriers, as one in ten trucks are being turned back at the border.

While Mrs May famously told us that "no deal" was better that a "bad deal", as Rachael Williams is finding, a bad deal is no better than no deal.

Also published on Turbulent Times.



Richard North 15/01/2021 link
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