Urban Food Chains

the links between diet and power

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.

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.

Europe food manufacture haulage retail Switzerland
Migros marks major milestone
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Swiss retail giant Migros has achieved the first stage of its 2030 carbon neutrality plan. All the multiple’s retail premises have completed their transition to become carbon neutral.

As the country’s largest food business and retailer, Migros operates the lion’s share of the national retail park. It has been a dominant force on the national retail scene for decades.

Between now and 2030, Migros will cut a further 80% of its greenhouse gas emissions from its business activities, including its extensive food manufacturing arm.

Instead of buying carbon credits to offset its remaining environmental overheads, Migros will “inset” its remaining emissions. One example of this arrangement is a project working with 1,000 Thai peasant families to raise the environmental standards of their rice growing. For instance, there are gains to be made by not flooding paddy fields, which area significant source of methane emissions. The result is a contribution towards a potential reduction of  60% in  the crop’s carbon footprint worldwide.

food production haulage livestock pigs
British pigs overlooked in Brexit preparations
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Urgent requests for government involvement in setting up the commercial infrastructure that would be needed for trading as a third country after Brexit were mostly ignored, according to pig industry body the National Pig Association (NPA). In November 2020, with less than two months before the end of the transition period, the association had “…a long list…” of unanswered procedural questions for the export of breeding pigs and pork products after Brexit.

While the NPA continued to work closely with the environment ministry DEFRA, NPA chief executive Dr Zoe Davies warned that: “…time is now running short and we need more urgency and engagement from across Government before it is simply too late.”

She observed that the UK pig sector faced the very real prospects of being unable to continue the vitally important trade in breeding stock to the EU and of severe delays, as well as higher costs and reduced market access for pork exports. “The impact could be devastating,” she warned.

Some of the unanswered questions required solutions regardless of whether or not there was a Brexit agreement in place after the transition period. Topping the list was a lack of Border Control Post (BCP) facilities in key European ports for live pigs and in some instances pork products. Once the grace period ends for customs health checks on imports, serious doubts persist about the availability of qualified veterinary professionals to process a tidal wave of additional certificates. The NPA estimates that the paperwork alone will increase fivefold.

“We are still waiting for an indication of whether or not the significant extra veterinary resource required can be met,” explains Davies. In 2020 DEFRA told the NPA to persuade the key EU port authorities to invest in the necessary BCP facilities and left the association to its own devices. “There has been no interest from the Government in helping us engage at either Commission or Member State level.”

The required investments in BCP facilities will also be required for consignments arriving in the UK once the transition period is over. “There are no seaport BCPs in the UK at present either,” explains Davies.

“Defra has pointed out that, as it is phasing in import checks, these won’t be needed until July 2021. However, we will need to know well in advance what the exact requirements will be for testing and inspection, while any port operating as a BCP will require time to put the necessary infrastructure in place.” The financial commitment involved is significant: it includes specialist veterinary staff appointments as well as buildings and laboratory facilities.

A further practical consideration that was still unresolved at the end of the transition period was transport. “Hauliers will require separate authorisations and qualifications in both the EU and UK. There is still a complete lack of clarity as to how companies will be able to register and hold multiple authorisations without adding huge cost.”

The operational impact on the slaughtering and processing sector of losing large numbers of qualified non-UK EU vets is not a new concern. The issue was raised in the House of Lords report number 15 published during the 2017-8 session of Parliament. (https://publications.parliament.uk/pa/ld201719/ldselect/ldeucom/15/15.pdf)

This post first appeared about 10 days before Christmas. Today, December 25, it is clear that the government has learnt nothing from this episode; there is a lingering temptation to suggest that this was the intention all along. More than 30,000 healthy pigs have been culled at the expense of pig producers up and down the country. Many of them have gone or will go out of business through business through no fault of their own.

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.