Urban Food Chains

the links between diet and power

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.

customs clearance haulage lorry ship UK
Food pricing 100 years ago
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The 1925 Royal Commission on Food Prices was tasked with investigating food industry prices. Urban Food Chains is running a series of analytical case studies for subscribing members, drawing on the detailed statistical evidence that was heard by the commission during its deliberations.

Board of Trade statistician Mr A W Flux* told the hearing that the UK food economy grew by about two billion pounds (thousand million) in 1907. This comprised goods consumed in the UK , which were valued at between 1,248 and 1,408 million pounds; services between 350 and 400 million pounds and additions to capital of between 320 and 350 million pounds.

2. Of the goods consumed, some passed directly from producer to consumer (e.g. bread), and in some cases the produce was consumed by the producer (e.g. farm and garden produce consumed by the families of the cultivators). A second class of goods, while passing through merchants’ hands, was not the subject of retail trade, while, of the goods that passed though merchants’ and retailers’ hands, it was estimated that the charges of distribution, including cost of transport, amounted to something between one half and two thirds of the value of the goods at the place of production or importation.

The First Report of the Royal Commission on Food Prices, Volume 3, Appendix 1, paragraph 2

*Mr Flux is not a made up name, it is for real.

Follow the links for subscription-only content about the core commodities of the day:

bacon
bread
butter
cheese
eggs
fish
flour
fruit
ham
milk
sugar
tea
vegetables
wheat
customs clearance haulage key concept
Import VAT
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In today’s economy there is a big difference between the place of production and the place of importation. The place of importation today is the customs post which is clearing goods for onward travel. At the turn of the twentieth century in the days of empire, it is arguable that the UK national frontier included or contained the colony concerned. One can be sure, however, that customs duty would not have been expected on goods leaving a colony and arriving in the UK.

In today’s post-Brexit economy, however, things are a bit different. The place of production determines the rate at which duty is payable (or zero percent, depending on the provenance of the goods). Regardless of duty, however, import VAT is due and can be considered a fiscal rite of passage. A consignment of goods arriving at a UK border post will have a customs value: this is the aggregate of the value of the goods, insurance, shipping and administrative costs (such as phytosanitary checks for plant material).

Zero duty goods will not be charged import VAT on the zero duty, but will be charged VAT on the rest of its customs value, at the applicable UK rate. Since import VAT is an aggregate, it will be levied on each component of the consignment at the applicable rate of VAT, for example haulage from point of origin to the customs post will be charged at 20%; food safety checks at, say, GBP 450 per container will be taxed at 20%, likewise freight insurance and office admin costs. In short, zero-duty goods will escape customs duty but not import VAT. The implementation of Sanitary and PhytoSanitary (SPS) checks in July 2023 will add another administrative layer to food imports as well as increased levels of import VAT when customs values rise.

The increased cost of importing food — or anything else for that matter — will not go unnoticed. The government’s additional tax revenue will take a bit of explaining. There is not a queue of UK politicians waiting to sell this delicate state of affairs to the electorate.

customs clearance haulage
Just for show
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Back in July, The Guardian ran a story about the building of a  Border Control Post (BCP) at Portsmouth (The Guardian, July 6 2022, page 33). Port owners, Portsmouth City Council stumped up half of the GBP 25 million price tag for a building that remains firmly shut.
There is still  no sign of the UK being in a position to staff or operate these facilities. Despite Britain’s commitment to carrying out phytosanitary tests on plant matter and veterinary inspections of animal products, not to mention animals, there is no political will to deliver.
For a start, any tests carried out in the BCP will be charged to the owner of the goods in transit, pushing up the customs value and with it the VAT levied on the goods. To be sure, food may be zero-rated but haulage and product testing are not, nor is import VAT, the running total of the VAT chargeable on crossing the border.
Home truths like this can really mess with support for the Tories, who might be regretting the talk of an “oven-ready” Brexit deal. Instead, they have spent a total of GBP 450 million on port facilities they appear to have no intention of using, at a number of ports around the UK.

customs clearance livestock plants
Animal, vegetable, mineral
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These three words help us to navigate the arcane world of customs codes, which do in fact follow logical rules. The underlying structure is called the Harmonised System. This is made up of groups of traded commodities, referred to as chapters which add up collectively as a schedule. Merchandise is listed in the order animal, vegetable and mineral.

The first part of the Constitutio Renovata (reformed regulations) displayed on a board at the port in Lyme Regis, dated 1489. It lists the harbour charges and duty for goods unloaded there.
The first part of the Constitutio Renovata (reformed regulations) displayed on a board at the port in Lyme Regis, dated 1489. It lists the harbour charges and duty for goods unloaded there.

The opening chapters cover live animals, followed by carcases and meat, moving on to animal products. Animals are followed by fish. Plants come next and are similarly classified in the order of seeds, then plants followed by retail fruit and vegetables.

A guide to the detail of customs classifications is in preparations and will be downloadable from this page in the coming weeks.

customs clearance Europe fruit haulage lorry plane plants retail ship vegetables
Amber light for greens
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UK fresh produce wholesalers were among the first adopters of end-to-end database-driven stock management. In the early 90s, when multiple retailers were rolling out electronic Point Of Sale systems, overnight there was enough reliable data to drive ordering and procurement systems.

To maintain year-round availability of core inventory, wholesalers needed to be very granular in what constitutes an SKU. By the standards of the day, the databases they developed were ahead of their time. By around 1994, one wholesaler was tracking product grades by (16-bit) colour, calibration range, farmgate and dockside Brix, crop/season dates, with regional adjustments for weather bringing seasons forward or holding them back.

The SKUs were effectively large matrices, with a very long tail of incremental detail that went far beyond grower details and crop varieties. The database effectively became the business and was stored in triplicate on hard drives that were lodged in rotation with the bank: one active, two off-site, rotated daily.

With a global reach, shiploads of third country fresh produce were being sold while the goods were still on the water. Title remained with the consignee until after the ship had docked and unloaded.

For third country fresh produce, the transition from the Common European Tariff to the UK Global Tariff is a detail for which the variables are knowable in advance. For third country produce, the UK already has the PEACH system (Procedure for Electronic Application for Certificates) which is run by DEFRA. Visit https://www.gov.uk/guidance/automatic-licence-verification-between-defra-rpa-and-hmrc where you can download a spreadsheet that maps CN numbers on to plant varieties and gives handling details for importers. The back end of PEACH is currently plumbed into TARIC-3, so a UK-based replacement  is doubtless in hand.

Import duty on imported fresh produce can be agreed on the  basis of a Method 4 valuation, agreed by HMRC (https://www.gov.uk/government/publications/fresh-fruit-and-vegetables-under-method-4-valuation). EU-grown fresh produce should be transferable to this method when the time comes, as the need arises.