Urban Food Chains

the links between diet and power

Brexit's legacy customs clearance UK UK economy
A work in progress?
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As the world’s most recent third country, UK food exports are at the receiving end of thorough checks on entry to the EU. All animal products are allocated risk levels and inspected accordingly; plant material undergo a parallel set of phytosanitary (plant health) checks. For UK exporters, the administrative overheads of complying with food safety standards were a known quantity long before the January 2021 transfer to third country status when UK shipments were routinely checked in Border Control Posts (BCPs).

The UK has yet to carry out its longstanding commitment to implement a mirror image system with the same inspection protocols for food shipments coming into the UK. Until that happens, Brexit is no more than a work in progress, not a done deal.

At the time of writing, the UK government is poised to kick border checks on into the long grass for the fifth time, delaying the full complement of checks until autumn 2024. This should come as no surprise, given the gaps in government resources.

Westminster is wrestling with a structural shortage of vets who are authorised to issue valid health declarations. This was a known issue in 2017 when a House of Lords select committee warned of a vet shortage, among other things, in its report Brexit: plant and animal biosecurity Over the past few years there have been a number infrastructure modifications at UK ports to house BCP facilities. The situation is complicated by the fact that around the UK not all ports are in public ownership and many have hybrid management frameworks. For some, the fabric of the port is its capital, meaning that a parliamentary bill may be required to underwrite loan capital for major infrastructure investments. This is only one factor among many that has cooled the government’s will and ability to act, however.

The UK food industry is caught up by its own reluctance to make the transition to full food safety checking at internal borders. This is not a public health issue so much as a tangle of red tape and knowledge gaps. At any given time of the day or night, there will be dozens of lorry movements up and down the country, heading for Northern Ireland. Leaving aside the unionist arguments against having a border check where none should be required, there is potentially a grittier problem to resolve.

There is a lack of old-fashioned stock control clerks with previous experience of customs documentation. The real problem is that the documentation travelling with a load is closer to a customs valuation than a handlist for whoever has to unpack the roll cage when it arrives instore. The stock in trade of an RDC (Regional Distribution Centre) is a loaded roll cage with dozens of SKUs, more or less stacked in the order they were picked. This is adequate for England and Wales, but is not a promising start for goods which may need to be inspected on a line by line basis in a customs shed.

The rules for calculating a customs valuation are clear and there are a number of ways in which a customs valuation may be arrived at, each with its own methodology. Think of the process as HMRC making a window into a retailer’s accounting system and then discovering anomalies with earlier figures. These could arise from the ways in which shelf money is managed or have an innocent explanation, but making a case to HMRC for a wide gap between a low customs valuation and a full retail price is not what people want to spend time on just now, if at all.

The additional cost of physical checks just adds to the awkwardness of the situation. The UK government is preparing to run documentation checks on inbound animal products for just over GBP 30, but is fighting shy of publishing a price list that would put physical checks into the six or seven hundred pound bracket. These inspection costs would feed directly into the import VAT calculations, pushing up the final figure.

The uncompromising attention to detail and the time these checks will add to operating costs — meaning that they should be blamed on a new incoming government in the wake of a general election. This morning’s BBC news carried an item to the effect that MPs standing down at the next election, or defeated at the ballot box should continue to be paid for four weeks instead of the current fortnight. Someone in Westminster is reading the writing on the wall.

Brexit's legacy food manufacture UK UK economy
Of Brexit and dogs’ dinners
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For years the Common European Tariff has ensured that imports of third country pet food have been taxed heavily at the border. Duty of up to EUR 948/tonne is added to the invoice price of any dog food that might cross the EU border. The exact rate depends on the product’s composition. During the UK’s years as an EU member state, UK customs officials were ready and waiting to do their bit to ensure that third country pet food did not arrive unchallenged by officialdom. Needless to say, a duty regime as strong as this has successfully excluded products which faced duty out of all proportion to their price.

Click the image to download Schedule XIX, then go to file page 93, which is folio 87. (A folio is a printer’s name for the number on a page, the numbering of which may be dislocated by front matter, such as prefaces and other preliminary matter.)

That was then and this is now. We have been through Brexit, which remains a work in progress. As the world’s most recent third country, has the UK risen to the challenge and opened the gates to imports of third country pet foods? Have the punitive levels of duty been dismantled in the UK’s Schedule XIX? Guess.

The table shows the current duty rates for goods covered by customs code 2309 10 – Dog or cat food, put up for retail sale (highlighted in yellow). Click the image to download the complete document. Betweentimes, the tariffs have been redenominated in GBP at an exchange rate of around 85 pence to the Euro. Depending on the formulations, these products face duty up to GBP 805/tonne and are essentially unchanged. Given the stated aim of Brexit to boost trade with the rest of the world, it would have been simple to edit the twenty or so tariff lines, setting them to zero, job done.

The irony of the Brexit debacle is that it neither achieved any of its wild dreams, nor were any logical adjustments carried out to meet Brexit’s stated aim of trade liberalisation. The Common European Tariff (CET) was drafted as a blunt instrument to suggest that the cost of subsidised products under the Common Agricultural Policy (CAP) could be calculated with a degree of accuracy. The CAP has evolved since these agri-tariffs first saw the light of day, losing much of their relevance in the process.

But let us start at the beginning. At the risk of stating the obvious, the UK chose to become a third country, in the EU sense of the term, used to refer to non-members of the EU. The Common European Tariff is built on this “us and them” view of the world. This detailed document was structured for this purpose and no other. The UK has adopted it with a surprisingly low number of often symbolic modifications, leaving the original EU intent intact.

It comes as a bit of surprise to learn that such humble products as dogs’ dinners command such high levels of duty. Animal foods are a downstream activity that typically draw in by-products from the manufacture of more lucrative goods. Industrialised food production brings with it a higher degree of homogenisation in both ingredients and by-products. There is a business case for ensuring that all available downstream ingredients are incorporated in some sort of secondary product, even if it only serves to dodge the cost of waste disposal. Indeed, the tipping point between a positively-priced ingredient and the operational cost of managing indeterminate mush is a crude measure of technological sophistication. That said, it will be searched for more closely in company accounts than production lines.

Working with documents generally supposedly means keeping one’s hands clean. This is a moot point, which can be illustrated with a straightforward example: tariff item 0208 40 10 is whale meat, once a common ingredient in pet foods many years ago. Third country whale meat is taxed at 6.4% ad valorem. There is a case to be made for taxing it mercilessly, on environmental grounds. There is a procedural problem with this, however, since the World Trade Organization will only cut tariffs, but not raise them. Since the WTO decisions are based on consensus, any attempt to obstruct international trade in whale meat will be systematically be blocked by Japan, Iceland and the Faroes. There are similar problems, on a smaller scale, with a 6.4% ad valorem duty on tariff item 0208 90 70: frogs’ legs.

Brexit's legacy UK
Equivalence is not the same
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The familiar CE quality mark is far more important than it might appear at first sight. It is the first line of defence in meeting product liability requirements. The presence of the CE graphic assures consumers that the product concerned meets all the EU safety regulations and can be sold legally within the EU. CE stands for conformite europenne (conforms to European regulations).

At some point in the Brexit planning stages, someone had the bright idea of devising a British equivalent to reassure consumers that post-Brexit British goods complied with British legal requirements. It would have been better if someone had spotted the looming problem and canned the UKCA lookalike quality mark before releasing it on an unsuspecting public. No such luck, it just gets worse.

The UK parliament’s control of the quality mark and its use is limited to, well, the UK. It has no status or relevance in continental Europe, for which it was intended. Brussels does not recognise the mark, nor is there any reason why it should. UK plans to drop accreditation for the original CE mark have suddenly been put on hold, as businesses complained that they genuinely need the CE mark for their export goods. As part of the CE accreditation, a substantial chunk of EU law, previously earmarked for dumping, will now have to be kept on the statute book for the UK’s claim to continue issuing CE marks to be valid.

It is the kind of own-goal for which Brexit is becoming infamous. There is the mild embarrassment of having to retain EU laws that some in government wanted to clear out so as to make room for other things. The requirement to organise and fund two separate product certification applications, not to mention the additional testing fees, has unsettled many businesses, faced with having to pay twice. More to the point, UKCA cannot replace the CE mark outside UK borders, nor will Brussels ever recognise it.

Follow this link for a guide to UKCA and CE requirements.

Brexit's legacy
More like a CET piece than a new start
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When the UK government started to work on its replacement for the Common European Tariff, it quickly became clear that nobody, least all the ministers in charge of the process had much idea of what needed to be done. They not only lacked a plan, they didn’t have a clue…

There is one tariff tweak in the UK schedule that makes sense: 0803 90 10 fresh bananas. In the CET this is set at EUR 114/100kg, to protect French banana growers in the Caribbean. For the UK Schedule, this duty has been revised downwards to GBP 95 / tonne in the UK schedule, reflecting the sort of opportunities that are available to a new third country. But it is an isolated example

 
A lot of commonplace ingredients remain barely touched, however. Take garlic, 0703 20 00: it faces an 8% ad valorem plus GBP 100/100 kg in the UK Schedule. Quite why the UK, which has no high profile garlic growers north of the Solent, should seek to make consumers pay through the nose for it, is a valid question. It may just turn out that Westminster needs the money and minimising the changes in the CET will generate a steady income stream. But that’s not what British voters were told to expect. For those who embraced the message “…sit back and enjoy the ride…” it is time to wake up and ask awkward questions. Like: “What’s going on with the economy?”

There is an oddity in Chapter 16, where three codes for luncheon meat get widely differing treatments for what are very similar industrial food products. Beef luncheon meat in cans (1602  90 69) attracts 16% ad valorem; porcine luncheon meat (1602 49 30) GBP 71/100kg, while 1602 31, turkey luncheon meat, faces duty at EUR 102.14/100kg or around GBP 1000/tonne. 
The UK online product description at the time of writing (June 2023) talked of an undercooked canned product that would fail every food safety check in the book. The whole point of the Appertisation process is that food undergoing the process is fully cooked to the core of the product. There is no such thing as a little bit unsafe in canning: it either is or is not fully cooked. Botulism is not a forgiving disease.

Brexit's legacy
Why Brexit is a real mess
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Boris Johnson promised the earth at the last election but what he delivered was a complete shambles. A key Brexit document is Schedule XIX, which lists all the tariffs for UK imports and the conditions that apply to them. Look a bit more closely and you will see that it is in fact still a lightly edited version of the Common European Tariff (CET). It has been retained from the UK’s days as an EU member state and transferred into British policymaking for Brexit without any real thought about what it should achieve. For a start, it is still designed for member states to keep control of third country imports. In one sense, this should come as no surprise, since the CET is in force for all member states of the European Union, including the UK until Brexit. It would have been reasonable to suppose that an historic change in UK economic policy should have been matched by a political and procedural vision to make it fit for purpose. No chance.


If the whole point of Brexit was to break free from the European trading bloc, a failure to adapt the CET to fresh trading perspectives is more than a basic oversight. It is a fatal flaw. The roots of the CET are in the mechanistic visions of the 1970s to make third country imports uncompetitive against subsidised EU products. It is not constructed to serve third country interests without a lot of serious modifications. Since Brexit was regarded as the grandstanding opportunity of the century, none of the politicians who invaded the nation’s TV screens ever thought about such unimportant procedures as tariffs.

The CET contains tariffs that combine ad valorem percentages and flat rate payments in Euros, reassigned to GBP. These were best guess estimates of the day as to how much money the EU had lavished on an agricultural commodity before it reached the end user. This economic anachronism has been more firmly embedded into the UK economy without a second thought for what the UK might need from a tariff in years to come.

A cursory look for changes to the CET in its transition to Schedule XIX yields a few surprises: the schedule document I downloaded from gov.uk has no Chapter 03 (fish) and goes directly from the end of Chapter 02 (meat and offal) with the line CN 0210 90 90 “Edible flours and meals of meat or meat offal” straight to Chapter 04, listing dairy products. The missing fish chapter is complemented by a gap in Chapter 16, (PREPARATIONS OF MEAT, OF FISH OR OF CRUSTACEANS, MOLLUSCS OR OTHER
AQUATIC INVERTEBRATES) which only lists terrestrial species. Chapter 03 (fish) was restored in the version issued by Hansard: It was still denominated in Euros, but a redenomination into GBP had been scheduled.

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In a report to the European Parliament, Irina Popescu and Frederik Scholaer observe that the UK has always believed its fishing fleet was being short changed by European fisheries policies. Repeated claims that European proposals would threaten “vital national interests” were made throughout the six years of negotiations that finally led to the Total Allowable Catches system (TAC). The UK fishing industry persists in blaming the rest of the world for reduced catches, but one has only to look at archive photographs of postwar trawlers with nets full to bursting to wonder why anyone should imagine fish stocks are inexhaustable. Popescu and Scholaer allude to a sense of grievance that found resonance with numerous Brexit campaigners and their talk of “taking back control”.

British attitudes to fishery access is at best ambivalent. Since the early days of accession to the EU, UK boat owners have cheerfully sold fishing quota and whole fishing boats to foreign operators. Referred to as “flag ships*”, these vessels are captained and crewed by foreign nationals and sail to catch fish on UK quota allocations, also sold on for the purpose. Contrast this with the vitriol and bad blood reserved for foreign fishing crews and it quickly becomes clear that there will be no quick fixes for the UK fishing sector.

Brexit has raised demands for additional border checks. There are a number of longstanding verbal commitments to implement Sanitary and PhytoSanitary checks (SPS), which are to be carried out in standardised Border Control Posts (BCPs), previously known as Border Inspection Points or BIPs. A July rollout has since been pushed over into October. There are pivotal crossings passing through privately-owned ports, such as Craigryan. This leaves the UK government imposing a future requirement for border checks for fish and animal products at internal borders. Port operators are not alone in their insistence that this is unfair, even though it’s a legal requirement. EU parliamentarians Irina Popescu and Frederik Scholaer cited the objections made by Scottish salmon producers to procedures that could add up to GBP8.7 million a year to their operating costs.

The last-minute signing of the Trade and Co-operation Agreement (TCA) on December 30, 2020, was a keystone in the Brexit edifice. It marks an uneasy peace for the fishing sector. The small print gives both parties six and a half years to redefine the terms of the TCA, so even though it is a done deal it is not set in stone.

Brexit's legacy UK economy
Pounds, pence and Euros
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If current headlines (week 24, 2023) about the turmoil in the Conservative party appear serious, wait until the parlous state of the UK’s unfinished Brexit arrangements come home to roost. History will judge those responsible, but the UK population will pay the price. Having copied and pasted the Common European Tariff into the UK economy, ministerial hands have been fiddling with some of the detail, but not with any visible signs of understanding what they were about.

As one might expect, the Common European Tariff is haunted by a number of ghosts in the machine. These are mainly mechanisms that protected former cornerstones of the Common Agricultural Policy from third country imports. With some dating back to the 1970s, these tariffs were supposed to make subsidised EU agricultural products competitive on the internal market against third country goods. Many of the tariffs are ad valorem percentages, but most of the politically sensitive sectors supported by the CAP are made up of an ad valorem percentage and a flat rate payment per 100kg in Euros, redenominated in GBP.

Third country olive oil arriving in the EU still faces a flat rate duty of EUR 124.50 per 100 kg. For some years now, there have been trade deals with third countries such as Tunisia, which establish a duty-free quota for EU packers. This olive oil can then be traded freely within the EU.

Under Rules Of Origin (ROO), however, any third country olive oil arriving in the UK is liable for duty at GBP 104 pro rata in blends, converted into sterling at around 85p to the Euro. Now the UK has no indigenous producers of olive oil to protect from competitive pricing of third country oils and ministers could have cheerfully set the duty to zero.

All the schedule XIX money values appeared in Euros before Brexit, as they did when the document first appeared in the summer of 2018. For its UK enquiries, HMRC works in pounds and pence. The transfer of Schedule XIX to Sterling was carried out by the WTO (World Trade Organisation) but there remain a lot of unresolved issues that will take a lot longer to resolve than Brexit. With more than 160 members, the WTO’s insistence on consensus makes bluster and confrontation counter productive. Brexit negotiations were shot through with contempt for consensus on the British side. In Geneva it doesn’t wash.

Brexit's legacy key concept olives
Rules Of Origin (ROO)
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Goods that combine components from more than one trading bloc are subject to the Rules Of Origin procedure. Goods made in the EU are zero-rated on arrival in the UK, while the status of duty payable on third country components or ingredients used in EU goods is determined by applying Rules Of Origin. These establish whether or not the third country component has been transformed sufficiently for it to be considered an integral part of a new product. If it is a fellow traveller in a blended product, for instance, it is liable for duty.

The first target is to ascertain whether or not the component concerned has been absorbed into the finished EU product. If so, it can usually be covered by the duty payable on the finished product. If, on the other hand, it can be recovered from or identified within the EU product, the third country component may be liable for third country duty pro rata. The key marker is whether or not the third country component qualifies for a change of customs code. This will be decided by the UK customs staff on a case by case basis.

In the case of third country extra virgin olive oil (1509 2000), it is considered a fellow traveller in a blended product. This currently stands at 104 gbp per 100kg, according to the UK government online tariff service, https://www.trade-tariff.service.gov.uk/subheadings/1509200000-80 (as of check made on May 29).

Brexit's legacy customs clearance haulage lorry raw
Westminster faces customs stalemate
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The Scottish parliament is accusing Westminster of intransigence over the halted building work at the Scottish car ferryport of Cairnryan. Work to build a Border Controls Post (BCP) started after getting a government green light last year. Since then, construction has ground to a halt, as Westminster has refused to give a binding commitment to fund the BCP in full.

Sailings from Stranraer were transferred to the nearby Dumfries and Galloway port of Craigryan back in 2012, for operational reasons. Wholly-owned by Larne Harbour Ltd, Craigryan is a part of the P&O landside portfolio. It can operate up to 16 sailings a day, serving destinations in Northern Ireland.

While Brexit negotiations were in progress, Westminster was committed to funding border infrastructure in full. The Scottish parliament is concerned that it may end up footing part of the bill for port infrastructure on a privately-owned facility. There are also political sensitivities about a requirement for customs facilities on what is currently an internal border.

The implementation of Sanitary and PhytoSanitary (SPS) checks that are the reason for building a BCP in the first place has not happened. Successive start dates in 2021 and 2022 were announced and cancelled: Westminster is currently planning to start SPS checks on livestock and animal products in July, although the BCP site at Cairnryan might not be operational by then.

From a commercial point of view, ferry traffic patterns have changed since Brexit, making the business case and the requirement for a BCP a moot point. The introduction of inbound SPS checks for the UK cannot be evaded forever.

Brexit's legacy customs clearance Europe
Unfinished business
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Years after leaving the European Union, the United Kingdom is finally preparing to standardise sanitary and phytosanitary border controls for imports of animal products and plant material at the UK border. This long-running shortfall in customs procedures has been a recurring bone of contention.

Those of us with long memories will recall Boris Johnson assuring EU leaders that he had a workable solution for the Irish border. This ground-breaking declaration rapidly degenerated into despair and disillusion as it became increasingly clear that Boris had no intention of delivering any such thing.

Just in case this sounds overstated, listen to Boris Johnson’s biographer Anthony Seldon talking to Sky News about Johnson’s real Brexit agenda. https://www.facebook.com/watch/?v=1009898093714184

This failure has been the elephant in the room haunting European relations ever since. When the UK first announced its intention of becoming a third country, France moved swiftly and decisively to implement a range of Border Inspection Post (BIP) facilities at Calais to complement those available at Dunquerque and Boulogne sur Mer. The substantial investment and recruitment drive was a prerequisite for handling third country imports of animal products and plant material from the world’s newest third country, the UK. The French government was in a position to act in a timely manner, since the state owns all the country’s port facilities, the daily management of which is delegated to local chambers of commerce.

The English situation, on the other hand, is an arbitrary mix of publicly and privately owned ports, in which the larger ones are public assets while many smaller ports are privately-owned and/or run by trusts. These routinely require government legislation to authorise investment capital, often secured against the assets and fabric of the ports concerned. This less-than-satisfactory muddle means that the government could not require some ports to release land for goods inspection facilities without first checking the local management structure(s). The UK government intends to expand its existing provision of inspection facilities along the lines of EU system, seemingly more cheaply than what the EU would charge for inspecting goods travelling in the opposite direction.

The EU has round 400 Border Inspection Posts (BIPs), later renamed Border Control Posts (BCPs). These are equipped and authorised to inspect consignments of specific livestock species and/or products derived from them. Importers need to book an appointment and plan their journey accordingly. Likewise, shipments of fish and plant material will be directed to BCPs that are equipped to inspect them. EU checks on paperwork are capped at around 45 Euros per consignment. Randomised physical inspections cost around 450 Euros for a container and are charged to the owner of the goods concerned. Regardless of any duty payable on the goods, VAT is payable on the inspection fee, as a component of import VAT. The UK government is quite clear in presenting its plans for border checks that it will retain the principle of charging for inspecting paperwork, but charge a single one-size-fits-all fee for all traffic, regardless of whether or not goods are physically checked. (link)

“It is the UK Government’s intention that there will be charging at Inland Sites to recover operating costs which are necessary to undertake physical inspections at BCPs. The UK Government will consult on its proposed methodology and rates in the coming weeks to inform charging levels. The proposal is to administer a Common User Charge on each consignment which enters through Port of Dover and Eurotunnel that is eligible for SPS checks. The charge would apply to all eligible consignments, whether or not they are selected for a BCP inspection. The indicative Common User Charge rate is estimated to be in the region of £20-£43, however final rates will be determined following consultation.”

The document does not specify a price range for physical inspections and it is not clear whether there are enough qualified vets to cover such a requirement. This light touch, combined with the government’s enthusiasm for trusted trader schemes suggests that physical inspections will be the exception rather than the rule.

The extra cost of shipping animal products into Europe as a third country has hit UK exporters, who were not warned in advance. There’s a footnote about import VAT here, by the way.