The UK freight and logistics sector expressed mixed feelings on yesterday’s White Paper outlining the Government's proposed future relationship between the UK and European Union after Brexit.
Robert Keen, Director General of the British International Freight Association, said: “The White Paper addresses some of the issues that BIFA has highlighted over the past two years, including retaining something as close to the Single Market and Customs Union as is possible, with positive ideas on future Customs matters and international trading arrangements. But we have to remember that nothing in the White Paper is cast in stone.
"The proposals on Customs, where the UK is proposing to apply EU tariffs to EU goods passing through the UK, while having the freedom to set different tariffs on goods entering the UK, look complex and untested, something that has already seen negative comment from the EU.
“Other than a facilitated customs arrangement, I suspect that there will be other areas where there will be differences of opinion between the UK and EU. Notwithstanding the above, it is the most comprehensive and cogent proposal put forward by the UK Government to date and is a useful basis for negotiation with the EU.
“However, we need to be realistic. It still has to get through parliament, even before the negotiations in Brussels.”
This was echoed by the Freight Transport Association’s Deputy Chief Executive James Hookham who said the solutions outlined in the document offer encouragement for those tasked with keeping the nation's complex supply chain moving freely, but will require a similar level of imagination and optimism from the UK's European trading partner.
"[The] White Paper includes positive proposals for many areas which have caused concern for the logistics industry, and should give businesses, which have been worried about a lack of clarity over future trading arrangements, some level of reassurance. It is now Europe's turn to step up and deliver a similarly supportive, encouraging plan which will minimise the barriers to continued frictionless trading arrangements as the UK leaves the EU."
However, there are still areas of concern, Hookham continued, which will need urgent attention if trading between the UK and the EU is to continue to operate with minimal disruption.
“[The] White Paper gives encouragement to those of us charged with keeping the UK's shops, schools, businesses and manufacturers stocked with the products and raw materials they need on a day by day basis. However, the devil is always in the detail, and while FTA recognises the efforts made by the government to address the needs of the logistics industry in today's document, there is still much we need to understand on the practicalities for future trade.
"Of most concern is a lack of clarity over how road transport will be able to operate in the future - a permits system is mentioned in passing, but is really not an option if the thousands of vehicle movements which currently happen to and from the Continent and Ireland are to continue with minimal delays. There is no point in having the most facilitated customs agreement in the world if a permits quota means that trucks cannot move goods freely across borders.
"The paper needs to provide more clarity on the status of skilled EU workers after Brexit - with more than 45,000 HGV drivers from Europe currently working in the UK, loss of their working status would leave the industry severely exposed. The framework for the mobility of workers between the UK and EU needs more detailed explanation, to provide reassurance to employers and those relying on continuity of deliveries for the resilience of their own businesses."
The FTA has been pressing the government for clarity on eight key points of concern over trading arrangements, and Hookham was encouraged by the response to this pressure in the White Paper: "Finally, the UK government has recognised the needs of the logistics sector in its plans to keep Britain trading after Brexit. There is still much to achieve, but what now needs to happen is for the EU to step up to the plate and match the UK government's boldness with similar imagination. If that can happen, trading relationships between the UK and the EU can continue to the benefit of businesses on both sides of the border."
The British Ports Association’s Chief Executive, Richard Ballantyne, said: “It is clear that the Government has listened to businesses and ports as the revised Facilitated Customs Arrangement proposal will preserve the present free flowing of trade between the UK and the EU. If agreed, this concept would avoid the need for customs and other frontier checks and would ensure that borders remain fluid. It would therefore address the concerns about queues and congestion at ports. We understand there will be challenges for other parts of the logistics industry to overcome but we welcome the Prime Minister’s aspirations to find a trade friendly Brexit deal.”
The main relevance for ports is that the facilitated customs arrangement proposes a free trade agreement that involves the UK becoming a ‘Combined Customs Territory’ with the EU. This will enable trade between the UK and the EU to be free from customs controls and checks.
Ballantyne continued: “Whilst the Association did not take a position on the referendum or any other political episodes, we have been clear from the day of the result that where possible, retaining the benefits that the Customs Union and the Single Market provide in terms of trade facilitation, should be a key priority.”
Free circulation for goods will be possible, the White Paper suggests, by the UK aligning its customs rules with the EU’s and by adopting a Common Rule Book for goods. This will mean the UK and the EU will have a system of mutual recognition of standards. Significantly this will cover agri-food standards exempting the need for a port health inspection regime at the border as well.
Ballantyne added: “We are pleased to see that the new proposals mean no new physical or IT infrastructure requirements for those ports with EU traffic. A lot will depend upon the EU’s reaction of course but it’s important to note that the proposal will also solve the post Brexit border challenges which would arise at European ports with links to the UK.”
The United Kingdom Warehousing Association also focused on plans for a facilitated customs arrangement. UKWA Chief Executive Peter Ward, said: “It is pleasing that, unlike some other members of her party, Prime Minister May appears to be living in the real world and has listened to the needs of the business community. Since the referendum result was announced more than two years ago, UKWA has stressed the need to retain ‘frictionless trade’ with the EU and it appears from today’s document that the Government is attempting to avert any major upheaval in the way goods are traded between the EU and the UK.
“It remains to be seen however, whether this White Paper is a fanciful wish list aimed primarily at uniting a divided government, that will gain firstly the wider support of parliament, the country, and ultimately Brussels, or whether indeed it is purely a starting point for negotiation.”
Malcolm Dowden, Legal Director at law firm Womble Bond Dickinson, said: "The Government's White Paper proposes the creation of a "free trade area for goods", coupled with a "facilitated customs arrangement" to allow cross-border trade to be as "frictionless" as possible.
"Central to those proposals is the concept of "trusted traders". For example, it suggests that: "where a good reaches the UK border, and the destination can be robustly demonstrated by a trusted trader, it will pay the UK tariff if it is destined for the UK and the EU tariff if it is destined for the EU".
"The "trusted trader" concept has its roots in the World Customs Organisation (WCO). In Europe, "trusted traders" are referred to as Authorised Economic Operators. To qualify, businesses must be able to demonstrate that they have both the policies and physical arrangements required to guarantee that goods have been transported securely and are properly accounted for. To qualify for the linked status of Authorised Economic Operators (customs) or "AEOC" businesses must currently be able to show at least three years' experience of meeting customs obligations. That test cannot be met by the estimated 131,000 businesses who, according to HMRC estimates, will be brought into customs procedures for the first time. It is possible to buy-in expertise or to use intermediaries such as freight forwarders or distribution companies. However, the UK currently has only 630 businesses with AEO status (compared with 6226 in Germany and 1563 in the Netherlands). Consequently, third party AEO status and expertise is likely to be in short supply, potentially increasing the cost of accessing those services.
"Attaining AEO status is not straightforward. The applications forms are relatively short, but they require a significant body of detailed evidence. Applying for (and then maintaining) AEO status therefore represents a significant investment of cash and management time. Further, the approval process leads to an assessment carried out by HMRC, which can be a significant bottleneck as HMRC resources are very limited. The AEO application process theoretically takes up to 120 days. However, experience in practice suggests that the process often takes much longer – in some cases extending from 18 months to two years. AEO status cannot be regarded as an easy route, or as a quick fix.
"The usefulness of any AEO scheme depends on mutual recognition. Any end-to-end process for the import or export of goods works only if it works at both ends. The Government's White Paper cannot guarantee that AEO status granted in the UK would be recognised by the EU27. Consequently, it merely expresses the hope that the UK will be able to "agree mutual recognition of Authorised Economic Operators (AEOs)". Without mutual recognition, AEO status would be of little value – and mutual recognition can only be achieved through a full political agreement with the EU. In the event of a "no deal" Brexit, or of a deal that did not include mutual recognition, the "trusted trader" concept that underpins the White Paper suggestions would not provide "frictionless" trade."
Posted on: July 13th 2018