Waiting for salvation

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All around the Mediterranean and across southern Europe, thousands of communities are waiting for this year’s olive crop to be milled. Until this year’s production is ready for packing, no new business can be written: there are no reserve stocks available. Every last litre has been sold and there will be no olive oil to sell before the first deliveries of the new crop year reach the market.

For months bulk olive oil prices have been sky high. As recently as August, some desperate buyers in Spain were paying almost 7,000 Euros a tonne for low-grade lampante that would normally have been a fraction of today’s prices. In August, the Spanish industry was forecasting a crop of 1.4 million tonnes of olive oil this year. This “business as normal” bravado is misplaced, since hot weather in the final weeks before the crop is gathered will affect the moisture content and can reduce the yield. In previous years, yields of 20% were average: but until this year’s crop reaches the mills, there is no reliable way of predicting finished tonnages. However, apart from wildfires, there is probably not a lot of additional damage that the environment could inflict on the nation’s olive groves.

The Spanish government is responding to the crisis by cutting VAT on olive oil from 5% to 4%, with effect from 2025. Consumers have seen retail olive oil prices rise from around EUR 3 / litre two or three years ago to hover around EUR 10 / litre now. The unthinkable is happening and Spanish consumers are buying sunflower oil instead of olive oil for home use. Since many households buy cooking oil in small quantities very often, Spaniards have suffered more from the rising prices than elsewhere in Europe. This is because most European retailers place huge orders immediately after the harvest is in, to cover the coming 12 months sales. This fixed price for the year means that retail bottle sizes can have stable prices for the duration, although there is a temptation for retailers to raise olive oil prices anyway, pushing up their margins.

Spain has imported 20,000 tonnes of olive oil this crop year, bringing Spanish consumer consumption and industry intake to a total of 100,590 tonnes. Bottler stocks in August were at an all-time low of 131,740 tonnes with a further 138,660 tonnes held by co-operatives and millers. Total production at the close of this crop year is expected top 820,000 tonnes, making it a poor year. An average season these days would be somewhere between one and two million tonnes of oil.

This year saw a closing of the gap between Extra Virgin Olive Oil (EVOO) and cheaper grades. Paradoxically, strong demand for better grades meant that the market was picked clean, leaving mainstream buyers to pay more for lower quality grades because that was all there was left. Formerly used to fuel oil lamps, as the name suggests, today lampante refers to oil that needs work to return it to an edible grade. This means that lampante has a limited number of takers, since the consignment will need to go to a refinery, adding to the cost and commercial risk.

BTOM: the story so far….

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In the beginning was a grand vision for international trade, but no-one was ready to commit it to paper. So the great and the good met and agreed that: “…we outlined how our proposals sought to balance the need for effective border controls with the need to support businesses with import processes that are as simple as possible.” (https://www.gov.uk/government/publications/the-border-target-operating-model-august-2023/the-border-target-operating-model-august-2023) It may not have been a properly constructed statement of the BTOM”s purpose, but the great and the good can get away with shit like that because it goes down well at party conferences. “We explained that with our new approach, we would harness our new freedom to set our own border policy and integrate the technological transformations set out in our 2025 UK Border Strategy.”

Stuff like this costs money, so the great and the good consulted vets and food safety experts. These wise folk gave detailed technical answers that the great and the good could not follow. So instead, they devised a Brexit border tax to bring some money in and hoped that no-one would notice. Now read on…

Delivering results?

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Turn the clock back to 2013 and the UK was divided over its membership of the European Union. Given the vehemence of the anti-EU campaigners, buoyed up with sympathetic media treatment,  the 4% majority in 2016 was hardly a ringing endorsement for such a major change. The most memorable slogan of the time was “Brexit means Brexit.” Not surprisingly, there were also opportunities to use Machiavellian creativity to plug gaps in the Leave campaign.

It was a time in British politics when the civil service was flexing its muscles and in a position to engineer bids for power with a free hand, actively encouraged by Tory grandees like Francis Maude. Running the Cabinet Office, Maude had a  new vision for the Civil Service, which was going to be set free from such tawdry constraints as public service: it was to be redefined and rewritten using People Impact Assessments (PIAs). The Cabinet Office led the way, setting up hybrid public/private joint ventures and mutuals in a bid to gain the best of both worlds, so to speak. These were not just government departments on steroids, these were new power structures of a sort that could be presented as a public service and a commercially savvy business at the same time.

The first employee-driven joint venture was the Behaviour Insights Team (often referred to as “the nudge unit”) which opened for business in March 2013. Here is what was said at the time (https://www.gov.uk/government/news/government-launches-competition-to-find-a-commercial-partner-for-the-behavioural-insights-team):

“The government’s Behavioural Insights Team will take its first step to becoming a profit-making joint venture today as the Cabinet Office launches a competition to find a commercial partner for the business. Less than three years after it was set up in the Cabinet Office the team is the first policy unit set to spin off from central government. This has been employee-led as the staff of the BIT have driven the process and will continue to run the organisation.

“The team was established to find ways of encouraging, supporting and enabling people to make better choices for themselves. Since then it has delivered rapid results – identifying tens of millions of pounds of savings, spreading understanding of behavioural approaches within government, and developing a reputation as a world leader in its field. Demand for its services from within government, the private sector and foreign governments has grown significantly.” 

The decade was to see a blurring of the distinction between public servant and executive power. If political  factions ever needed to inject reliable, hand-picked people to oversee critical functions in the political process, a joint venture with a government department takes a lot of beating.

Networking and data services have been at the heart of a number of government joint ventures, with the government’s 25% stake being sold off at the end of the first ten years. So it was that the French business Sopra Steria bought out the Cabinet Office’s stake in Shared Services Connected Ltd in October 2023. Here is what they said at the time:

“The transition from joint venture to wholly owned subsidiary will not affect the management, employees, clients, or services of the business, which has delivered significant savings and value for money for the taxpayer.

“Since Sopra Steria founded the company with the Cabinet Office in 2013, SSCL has become the largest provider of critical business support services for the UK Government, Ministry of Defence, Metropolitan Police Service, and the Construction Industry Training Board (CITB), delivering shared services at scale.”

It is not uncommon for IT suppliers to be over-confident about their system’s ability to cope and there are signs that all is not well at the points of delivery in the UK. Dover issued a note to port users in early June, seeking details of operational failures with BTOM. Invoicing for the Brexit border tax has been plagued with errors, including double-billing.

Ten years ago, there can be little doubt that Francis Maude knew and understood the Sopra Steria motto of the day: “The world is how we shape it.” Reality has since dawned on the management and it has been withdrawn.

What’s happening?

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Empires tend to look backwards, in a bid to see far enough into the past to identify the reasons for their success. Unfortunately, for reasons that I won’t unpack here, history involves believing that society’s direction of travel is backwards looking. Were this to be the case, we would still be convinced that the Earth was flat. Faced with new problems of a scale, violence and force not seen previously, this is no time to take refuge in the past. We need to reach out to other societies, learn from them and resolve the crises that threaten our shared futures. This is no time to hide from reality.

From bad to worse

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No procedural detail is too small for food and farming ministry DEFRA miss an opportunity to dismantle any vestiges of EU compliance it can get its hands on. 

For example, on January 1, 2025, the EU Deforestation-free Regulation (EUDR) will come into effect and require the European food industry to ensure that basic ingredients such as soya and palm oil have not been harvested from forest that has been recently cleared, or has been a source of forest degradation.

There is nothing unexpected in this: there have been a number of consumer-driven campaigns to harry the food industry into improving its environmental track record. Typically, companies have responded by setting up lookalike groups such as the Rainforest Alliance, which allow multinationals to feel good about their corporate foot dragging and  buys them time. The EU Deforestation-free Regulation (EUDR) has the task of ending years of lip service to good intentions and tackling increasingly obvious vulnerabilities in the modern economy. 

Soya and palm oil are two cornerstones of today’s food industry. From livestock to highly processed foods, the whole sector depends on reliable ingredient supplies. The burden of proof is on suppliers, who will have to provide evidence of their product’s provenance and full traceability. European food companies have been preparing this shift in manufacturing practice for months, if not years.

Dairy products are not covered by EUDR, but livestock farmers and meat processors who want to ship cow beef to Europe after January 1, 2025 will need to be ready for the far-reaching changes. Small to Medium Enterprises (SMEs) have an extra six months to comply.

The UK has a parallel scheme that will respond to a number of subtly different issues, the UK Forest Risk Commodity Regulation (UKFRC)  There is not a lot of detail on UKFRC, but DEFRA has confirmed that dairy cattle and their products will be within the regulation’s  scope if the livestock’s diet includes soya or palm oil by-products. 

The impact of having two similar but incompatible standards at the heart of the food sector should not be underestimated. The cost of managing more than one  standard in a business is potentially exponential. It is not something that businesses would consider, let alone adopt willingly. 

Undaunted by the potential costs or consequences of its systematic detuning of international standards, DEFRA is continuing to look for things to tweak. During the last week of August, the ministry released a series of changes to the management of food imports to the UK with immediate effect. The long term aim is to grow the user base for the Goods Vehicle Movement Service, which will eventually manage all lorry movements across Britain. This UK government IT system will control and co-ordinate the post-Brexit movement of vehicles. A Wikipedia contributor has estimated that it will need to be capable of handling 400 million movements a year. Whatever the real figure turns out to be, the system will have to work flawlessly.

Red tape tangle

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Being a third country has not boosted the British economy in any of the ways the electorate was told it would. The last week of August saw a tidal wave of amendments to Britain’s food export regulations. Over 30 official guidelines setting out modified requirements for cross border food trading were re-issued on Wednesday and Thursday alone. Some of the products involved are high value occasional transactions, such as retired race horses for breeders in the Middle East, but the meat products covered by certificate 3858 are in daily use by the UK food industry. (https://assets.publishing.service.gov.uk/media/66d18b210e4387ef0d1aeab1/8385_EN_rs_-_SPECIMEN_V4.pdf) The link to the real document gives readers an indication of the detailed work that goes into an eight-page A4 document. A qualified vet would charge a few hundred pounds for each certificate issued.

This is the level of detailed work that has been going into on high volume processed foods for years. Becoming a third country supplier has placed another layer of cost on UK exporters. Some of the pain is self-inflicted: the Common User Charge (CUC), for instance, is tax on a collection of lines extracted from a consignment note. There is no way it can be linked in any significant way to the operating costs of port inspection facilities. For good measure, Dover is a private port, over which the government supposedly has no say in the charging of anything, let alone CUC.

As for the setting of schedules for the inspection of loads,, the standard procedure is for port authorities to inspect 100% of shipments from unproven facilities, lowering the inspection rates as the newcomers prove their reliability.

Meanwhile, food importers to the UK are being badgered to include all the data fields on their health declaration, without using any of the template material from the official model statements made available online. Inadvertently copying and pasting fragments of watermarked documents, for instance, is a no-no. Here is DEFRA, verbatim:

You must not directly copy the model health certificates provided on GOV.UK. Competent authorities should create their own official documents for use by exporters. These should include all the information from the model certificates.

Any consignments into Great Britain will be considered non-compliant and will be rejected if they have a model certificate that has been directly downloaded from GOV.UK, shows the ‘model certificate only’ watermark and is dated 1 April 2023 or later.

(https://www.gov.uk/government/collections/health-certificates-for-animal-and-animal-product-imports-to-great-britain#full-publication-update-history)

Double standards are just one item on a growing list of abusive post-Brexit practices that are emerging from the parliamentary woodwork. Most can be traced back to the previous administration, which set the tone for a spectacularly vindictive modus operandi that soured relations with many lifelong anglophiles across Europe.

Taxing times

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Time is running out for importers of food to the UK. On September 4 HMRC will demand its pound of flesh and the UK food industry will find itself between a rock and a hard place. This is not the first time that the deliberate destruction of the British economy by the departing government has been discussed on this site: it is still a live topic. Called the Common User Charge by civil servants, the UK’s stealth tax on food imports is also known as the Brexit border tax and doubtless has cruder titles.

Since August 4, many importers have been receiving their first invoices for Common User Charge (CUC. Importers of animal and plant products that would usually be considered for food safety checks can expect to pay over the odds for driving a lorry off a ferry at Dover to join the UK road network. Hauliers booking a DFDS one-way ticket online to Dover pay three pounds for this indispensable service, while lorries carrying grouped consignments of SPS foods face open-ended bills in the hundreds or low thousands for the same access. The simple explanation is that Britain is playing catch-up: the European Union had everything in place to trade with the UK as a third country the minute it ceased to be a member state. Britain was so totally convinced that it would somehow negotiate a favoured nation package Brexit that there was not even a sketchy idea of what a post-Brexit customs system might look like. The years passed, conveniently putting off the awkward moment when Brexit would be complete. As recently as November 2023,  DEFRA describes the organisational basis for European food imports to the UK thus: 

“Currently, imports from the EU and certain imports from Greenland, Faroe Islands and EFTA countries do not need to enter Great Britain via a BCP and are not subject to veterinary checks at the border.” 

(Source: http://apha.defra.gov.uk/documents/bip/iin/vcap.pdf)

Just two months later, Britain was rolling out its three-phase Border Target Operating Model (BTOM). (The label ‘world-beating’ is optional.) Lorry drivers arriving in Britain have not been impressed by the service standards they have encountered on  the ground (https://urbanfoodchains.uk/sevington-gives-cause-for-concern/), which is more of a hostile environment than a workplace.  

Brexit’s hostile environment

DEFRA has gone from absentee administrator to nitpicking zealot overnight and is chafing over the accuracy of form-filling, notably for consignment detail on Export  Health Certificates (EHC). Hang on to your hats, here is a sample:

“Continuous and/or deliberate non-compliance  

It has come to our attention, that some traders and logistics companies are making continuous and/or deliberate errors including:

mis-declaring goods as low risk when they are medium;

or as medium when they are high;

 not including a relevant Export Health Certificate (EHC) or Phytosanitary certificate.”

Or the consequences… :

“Continued non-compliance within either the EHC or the CHED is not acceptable and will not be tolerated by Port Health Authorities (PHAs). Deliberate misdeclaration is a criminal offence.  PHAs will be actively looking to identify such behaviour.

“Where there is repeated non-compliance or evidence of misdeclarations, the appropriate authority will take statutory action. This will result in goods being held at a Border Control Post (BCP) for a physical inspection, which may lead to the consignment being ultimately returned or destroyed at cost to the person responsible for the load.”

Entering a conversation with a tone like that is doomed to become a monologue. Enough said. Now it just remains for the law enforcers to round up a bunch of suspects.

Since the end of April, Dover has been receiving a steady trickle of complaints about the way the Brexit border tax has been implemented. Here is what Dover had to say on the subject, again verbatim:

“As you are aware, the Border Target Operating Model (BTOM) checks have been operational for a month. Aside from initial teething problems, we are receiving a growing number of queries and concerns about how the checks are being carried out versus the costs that are being charged, delays to consignments, poor responses to calls and/or appropriate live assistance with your imports, the impact on biosecurity and the possibility of using Dover BCP to complete checks.

“It is important to understand your experiences so far to enable us to help establish simple solutions moving forwards, so we would like to set up a short call to discuss this with yourselves.

“Please drop us a line outlining your concerns and suggested solutions so we can escalate these for you. In addition, a member of our team may also call you.” 

The simple fact is that the CUC started off on the wrong foot and is compounding ongoing problems on the way. It was cobbled together out of retained EU law. Its stated aim is to recover the operating costs of Border Control Posts in the UK, but this does not stand upto close inspection. Officially, CUC rates for privately-owned ports are set by their owners. At regular intervals, DEFRA kicks the distinction into touch by stating that the tax is being charged at Dover and the Eurotunnel terminal. 

The port of Dover  has belonged to the town since it was incorporated in 1608 by James 1. Some members of the port harbour authority board are appointed by the department of transport, but this is a working arrangement rather than a power grab.

At the beginning of June, Dover issued the following statement, which I cite verbatim:

“We are writing to you with reference to the ‘Operational Border Target Operating Model Information’ Defra circulated on the 03/06/2024 which contained a significant inaccuracy regarding the BCP for high risk food not of animal origin arriving via Dover within the section ‘Moving high-risk food and feed not of animal origin at the Short Straits’.

“To clarify, if you are importing high risk food not of animal origin (HRFNAO) through the Port of Dover, either via RORO ferry terminal and / or deep sea cargo, you must continue to pre-notify Dover Port Health Authority on IPAFFS using the Dover Terminal BCP code GBDOV2P and not, as outlined in the Defra information update, Sevington BCP.

“Official border controls on high risk food not of animal origin arriving via RORO freight have been undertaken at the BCPs in the Western Docks for over a decade and since 2019 at the Cargo Terminal GBDOV2P (in the Western Docks).  

“Dover Port Health Authority will continue to provide this statutory function and ensure that your goods are handled efficiently and without undue delay. Please note, the Common User Charge does not apply to the Dover Cargo Terminal BCP. The Common User Charge will be applied if your goods are notified to Sevington BCP by selecting their different BCP code on IPAFFS.”

Food import meltdown concerns ahead

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Hundreds of small to medium businesses are bracing themselves for a financial maelstrom in the wake of DEFRA’s implementation of the Common User Charge. Officially the ministry sent out thousands of invoices during the first week of August, many of which have yet to turn up. CUC has been charged on imported plant and animal-based products  since the end of April. As well as billing three months’ worth of tax in one fell swoop, there is a widespread concern that a significant proportion of the bills will end up with people who are part of the supply chain but not actually liable for settling the account. Preliminary estimates of impending invoices run to thousands of pounds a month.

Often referred to as the “Brexit border tax”, the Common User Charge was devised by the previous Conservative government. It was presented as a mechanism to recover the costs of border checks for inbound goods, but this notion should be taken with a pinch of salt. The most potent multiplier in a CUC bill is in fact the number of consignments in a load, making it a damping influence on grouped shipments. These account for around two thirds of UK food imports.

Datacrumbs for week 28

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After four years of test marketing, ASDA is taking down the refill stations that were installed at four UK stores. The proposition was simple: invite customers to bring in their own packaging (glass jars and the like) or use a new container from the refill station. They could then fill these from bulk containers, weigh the goods and take a till slip, to settle at the checkout. The fact that this project survived for four years suggests that ASDA did not lose any money with it: the retailer cites low consumer uptake as one of the main reasons for dropping the scheme. The story opens a whole raft of issues, far too broad to do it justice here, although there are some topics that we shall be revisiting in the coming weeks.