BREAKING UP IS HARD TO DO

It's virtually impossible to talk about Brexit – the United Kingdom’s decision to leave the EU – and to not use the word ‘uncertainty’ in the same sentence. As the clock ticks down to the day and time the UK is supposed to leave the Union – 23.00hrs GMT on 29 March 2019 to be precise – so much is still to be agreed, to the point where ‘uncertainty’ is probably putting it mildly.

For companies, the waiting game or the great unknown while British politicians and EU negotiators face off, is massively unsettling. While all sorts of scenarios are being played out and planned for behind the scenes, few companies are going public with their plans and most are simply having to refer back to the plethora of guidance notices being published by officials in Brussels and London.

For supply chains, any interruption to the free flow of goods between the UK and Europe naturally leads to fears of food and medicine shortages, trucks parked for hours at the border and a raft of additional costs, productivity losses and security risks. Preparations to allay such concerns have failed to inspire. Earlier in the year, the UK government organised a ‘practice run for a No Deal  traffic jam’ to see how the port of Dover would cope, sending in a convoy of 87 trucks. All seemed to be going well until someone pointed out that Dover processes some 10,000 trucks a day.

So, what are we to think – and, most importantly, what are we to do at this eleventh hour?

Vigilant asked Jason Breakwell, Vice Chair of TAPA EMEA and Commercial Director of Wallenborn, one of Europe's largest air-cargo road feeder services (RFS) operators, to give us his views on this complex and ever-confusing supply chain conundrum…

It is hard to believe that in a matter of days now, the UK is meant to be leaving the EU and yet we’re no closer to knowing the true impact on supply chains. Or maybe we do; such is the fluidity of the current situation, in the time it takes to read this, everything could be signed and sealed, and we’ll all know exactly where we stand!         

It’s still not certain if Brexit will go ahead at 11pm UK on 29 March or if there will be an extension to allow the negotiating period to be prolonged. The expectation is that a withdrawal agreement will eventually be reached, and Brexit will be followed by a transitional period of at least nine months, and possibly several years, during which time new trade deals, procedures and technological solutions will be agreed and implemented.

Even in the event of no deal, it’s likely that regulations and procedures will not change immediately - for example, the European Council communicated a series of unilateral measures on 19 December covering amongst other things insurance and road haulage, and the UK is expected to confer equivalent rights which will mean that, for example, ECMT permits will not be needed for EU-registered trucks driving in the UK.

However, there remains some uncertainty about what will and won’t change on 29 March, partly because UK government, other governments and the EU have been issuing stark warnings of the consequences of a No Deal in their efforts to force a deal, and also because the media has a tendency to exaggerate and distort facts. I still believe there will be no or very limited disruption, but the fear of disruption could lead to disruption. For example, many organisations are stockpiling and transferring stock from and to the UK and this is already placing pressure on warehousing capacity in the UK. In the weeks leading up to Brexit and immediately after, I expect:

·        a spike in demand for cross-Channel transport- both RoRo and unaccompanied;

·        availability of warehousing in the UK will be very tight, especially cold storage;

·        large movements of stock to the UK;

·        exceptional air and sea operations to the UK;

·        increased demand for ferry services that avoid the busy UK ports of Dover and Folkestone.

 

On 19 February, the UK government announced a six-month delay to the introduction of Entry Summary Declarations when importing goods from the EU, as outlined. This will avoid the need for hauliers to make Safety & Security declarations prior to arriving at UK borders and, importantly, will ease pressure and prevent delays building up at busy Channel ports.

At the time of writing, it’s still not clear if current EU and UK trading conditions will continue post-Brexit. If the UK crashes out without a deal, there is a small risk that WTO terms will apply and Customs entries will be needed for all EU to UK and UK to EU movements of goods. The impact of this would be immense, especially at already-congested ports such as Calais, Dover and Folkestone, and this has prompted the UK government to place contracts with Brittany Ferries and DFDS to operate ferry services on alternative routes to take pressure off the Dover Strait routes.  

Ways to prepare

The UK government has already spent more than £2 billion preparing for Brexit and the private sector, especially logistics companies, manufacturers and retailers, is estimated to have budgeted several times this figure for planning and implementing protective measures. Due to the uncertainty of what will happen, and when and how it will affect supply chains, many SMEs are still not prepared for the worst but it’s not too late to implement contingencies, for example securing extra capacity and planning alternative routes. You should also consider the following:

·        If you send or carry cargo from and to the UK, review your Route Risk Assessments (RRA) paying special attention to alternative routes, ports and truck stops which you may be forced to use;

·        Don’t use suppliers for transport and warehousing that you haven’t validated. You may find that your usual suppliers are overbooked and logistics costs will probably increase in the weeks before Brexit but don’t be tempted to switch to cheaper but unqualified options, including via freight exchanges;

·        You may find that some hauliers refuse to operate to the UK fearing delays and complicated procedures;

·        If ports become congested, truck parks are likely to fill up so you need to identify alternative safe places for your drivers to use and you might need to deploy additional protection for vulnerable cargo;  

·        Be extra vigilant at all times for delays in the vicinity of ports. If trucks are unable to get into secure zones at ports on both sides of the Channel because of congestion, they will be at risk of attack from both cargo thieves and people smugglers, especially on the roads leading into Calais.

·        Add a buffer to truck journey times and adjust transit times in your RRAs. For example, a delay of an hour or two due to congestion, diversion to an alternative port or longer ferry journey could prevent a driver reaching their destination within his or her allotted working hours. If you don’t build this risk into your RRA, a vulnerable load could end up in an unsafe location.

·        Research changes to regulations affecting imports of high-risk food products (FNAO and POAO). In case of no deal, high-risk food products from the E.U. will not need to be inspected on arrival in the UK. High risk foods produced in a third country outside the EU will need to be inspected at the UK border and not all UK ports have Border Inspection Posts (BIPs) and Designated Points of Entry (DPEs), meaning some products will be diverted to other ports. Dover and Folkestone do not have BIPs or DPEs. 

·        It’s not yet confirmed if the EU will require UK food products to enter without inspection at the border or if the Calais BIP will be ready by the end of March.

To do our jobs, we all need to stay very well informed in the weeks leading up to Brexit. TAPA will be sending out alerts during this period, while the UK government has issued a series of Guidance Notices and will continue to do so, and both Eurotunnel and the ferry operators are also good sources of reliable and up-to-date information.

Ultimately, everyone wants and needs goods to move as seamlessly and securely as we have all become accustomed to. One way or another, supply chains will adapt.