Date: Monday, January 25, 2021
Source: Wall Street Journal
One of Peter White’s trucks carrying $136,267 worth of fresh lamb waited at a French port for 44 hours as its paperwork was cleared. Yet Ford Motor Co. F -0.75% has shipped engines from its British factory into the European Union with few problems.
Britain’s first weeks of doing business outside of the EU have been mixed, as goods from large companies mainly sail through ports but many small businesses struggle with the new post-Brexit rules.
Still, the true test of the U.K.’s new relationship with the EU will come in the next few weeks, say trade experts and companies, as shipment volumes increase and the difference between teething problems and permanent obstacles becomes more apparent at one of the world’s biggest trade borders.
or the first time in almost half a century, goods moving between the EU and U.K. starting Jan. 1 have faced customs checks and the need to meet separate sets of standards and regulations. In an extra complication, goods moving to Northern Ireland—part of the U.K.—from the rest of Britain face checks, following a compromise to avoid a land border with the Republic of Ireland, which is in the EU.
Britain’s big grocers have flagged only minor disruptions to food imports, while the country’s ports report few problems with the container traffic that makes up 60% of U.K. trade or issues with their other major businesses.
But many smaller U.K. companies that move goods to the EU via trucks that cross the channel on ships or through the Channel Tunnel say they are experiencing extra costs and big delays—and worry this represents a permanent obstacle for their exports to continental Europe.
“At the ports themselves the level of trucks being turned back is so far lower than was predicted by the government, and the flow of unaccompanied freight, big cargoes, is largely uninterrupted,” said Tim Morris, chief executive of UK Major Ports Group, a trade body.
“But it is too early to be encouraged, because you need to see that system tested at normal levels of trade,” he said.
Covid-19 lockdowns, a post-Christmas lull and stockpiling ahead of the Jan. 1 change mean shipments at ports in Kent—the busiest part of the U.K. border—is running at 40% of typical volumes, according to government numbers from last week. Mr. Morris also believes that some smaller businesses aren’t going to the ports because they don’t have the correct paperwork, further understating potential problems.
Under the new trade arrangements, the British government estimates there will be 215 million extra customs declarations a year—nearly 600,000 a day—which businesses say will take time and cost money to organize. Some companies will need to pay inspection fees, seek import licenses and figure out how to account for value-added tax. British food and animal exports to the EU will be checked on arrival.
For companies based in the EU, potential problems aren’t yet fully apparent because the U.K. isn’t starting full customs checks until July.
For some British companies, they already are a reality.
Mr. White, the transport manager at Whites Transport Services Ltd., said the truck carrying lamb had to wait 44 hours because of what he described as a minor discrepancy in the cargo’s paperwork. Ten of the company’s trucks have spent a total of 135 extra hours in French ports awaiting clearance to move on.
“Extra time means extra costs…we are a family firm,” he said.
The U.K. seafood sector, meantime, complains that extra paperwork has made it difficult to deliver fresh products to mainland Europe before it goes bad, threatening the viability of those exports. To highlight its plight the industry staged a protest Monday by driving trucks through central London emblazoned with slogans criticizing the government.
Two of Europe’s largest logistics firms, DB Schenker and DFDS A/S, suspended deliveries to and from the U.K. because incorrect paperwork was creating huge backlogs. DB Schenker said last week that the recipients of only 10% of goods coming into the U.K. had the correct paperwork.
By Monday, DFDS had restarted its services to Britain. The problems were with so-called groupages, where smaller consignments are placed into one shipment and missing paperwork from one holds up the entire truck, a spokeswoman said.
“The big shipments were fine, and the systems were in place,” she added.
Supermarket chains, for instance, say they have been preparing for Brexit-related changes for some time and that food is largely moving as usual, although there have been some shortages on shelves in Northern Ireland.
Tesco PLC Chief Executive Ken Murphy said Britain’s largest grocer has seen some disruption but extensive supply-chain and inventory planning meant it had “weathered the storm.” The company expects Brexit-related cost increases to be minimal, he added.
Business associations say smaller companies didn’t have their IT systems ready to deal with the new regime or the legal and logistics experts to interpret the 1,500-page document of new rules that landed on Christmas Eve, when London and Brussels agreed to the new trade arrangements.
Lynsey Harley, chief executive of Modern Standard Coffee Ltd., uses a haulage company to ensure the specialty coffee maker’s paperwork is in order, allowing it to export from Scotland to the EU with few problems.
“Before Christmas, we assumed there would be massive delays but it has been fine so far,” she said.
The British government describes any disruption as teething problems. It says leaving the EU will allow it to benefit from striking its own trade deals and give it more control over policies like immigration.
Still, some businesses say the trading changes are likely to present permanent challenges.
While Ford hasn’t seen disruption at ports, new rules of origin, which establish where a product comes from, mean that two car models made in the EU are now subject to U.K. tariffs because they have engines from Mexico. While those models make up a small slice of the company’s U.K. sales, the tariffs have added £1,500, the equivalent of about $2,050, to the price of those cars for British consumers.
Before Jan. 1, Dartmouth Crab Co. would land its shellfish on England’s south coast on a Friday, load the catch onto trucks and have it on sale in Portugal by Sunday morning. Today, it says the nine different documents it needs in hard copy for each cargo—around 40 pieces of paper—and the checks at the French border mean the fish could take until the following Wednesday to reach Portuguese customers.
“It is easier to export to the Far East than to France, and that is crazy,” said Mark Moore, the company’s manager.