EU Referendum

Brexit: Operation Stack here we come


For all the naysayers and the clever-dicks claiming that I have been exaggerating, the Road Haulage Association a few days ago sounded a graphic warning of what could happen if the Government didn't get its act together on a customs agreement.

Says the Association, adding more detail in a separate report, Brexit could seriously damage Britain's food supplies because customs problems could cripple supply chains, leaving supermarkets short of supplies, as evocatively illustrated by the recent lettuce shortage. Crucially, unless the Government negotiates the right customs controls during forthcoming Brexit talks, the UK's fragile food supply could be seriously damaged. 

The RHA fears that leaving the the EU could generate massive queues of lorries at the ports, with not enough experienced staff to cope with a backlog while fresh food supplies rot. RHA chief executive Richard Burnett says: "Nearly 30 percent of all food consumed in the UK comes from the EU and it all arrives in lorries. At the moment, the process is seamless – it's as easy to deliver from Milan to Manchester as it is from Manchester to Leeds as far as customs processes are concerned". 

"After Brexit", Burnett says, "that will no longer be the case, and we have to get the new processes right. Otherwise the system for getting food into the country could grind to a halt". Massive queues of lorries could build up at ports with not enough experienced staff to cope with a backlog while fresh food supplies rot.

"We are not re-assured by recent government statements", Burnett adds. "The White Paper suggests that HMRC has a world-class customs service. For EU continental road haulage it has NO system. It will face new challenges and government must recognise that and assure business that HMRC will have whatever resources it requires to get the job done".

Burnett then concludes: "The RHA welcomes the government's commitment to cross-border trade being as frictionless as possible. But customs process for containers and air freight will not work for the millions of trucks that move through Dover and our ports". "There are nearly 4.5 million journeys between the UK and Europe each year that are HMRC-free at the moment. These trucks carry jobs, components, products – and 30 percent of our food".

The figure cited works out at over 12,000 trucks per day. We've been using the figure of 10,000 a day from Dover and via the Channel Tunnel. This checks out, as the Association says the "overwhelming majority" of the 4.5 million movements took place on ferries through Dover or by shuttle through the Channel Tunnel. Almost none of these required a customs clearance process at the port.

This detail is from the report accompanying the press release, which affirms that freight traffic between the UK and the EU does not require customs control now. On exit from the EU, it says, it is likely that all shipments will require customs control.

Each vehicle, we are told, can contain many individual shipments, there are no data on the number of individual consignments in vehicles entering or leaving the UK with EU goods, but inspection processes are based on consignments, not truck numbers. Current customs systems (where clearance is usually done on entry or exit from the UK for non-EU traffic) slows the movement of the vehicles. This slow-down is generally between 20 minutes and four hours.

Even at this modest rate, there is no space at the ports to handle the volume of traffic that will require customs clearance exiting or entering the UK, where the current dwell time averages six minutes.

What Burnett is referring to is routine customs control. In any operation, a proportion of the consignments will be picked for inspection. Yet, giving evidence recently to the Home Affairs Committee was Graeme Charnock, CFO at Peel Ports Group, the second largest ports group in the UK. He says that when a container is inspected, its dwell time at the port estate can be anywhere between two and four days.

James Hookham for the Freight Transport Association had already given his view, saying that, at the moment, vehicles entering the UK from across the Dover straits or through the tunnel, undergo virtually no customs interventions at all. Notifications are made for trade-tracking purposes, but there is open transport.

It is, he said, a free border so there is no intervention in the way, for example, that imports or exports from non-EU countries are subject to a physical check and possible inspection at the port of entry, where dedicated space is made available.

Hookham added that the physical space or infrastructure is not available, for example, at Dover or at many of the other ports through which EU traffic, both to the continent and to Ireland, currently pass.

But if there is no space at UK ports to handle routine customs clearance, there is certainly no room on Continental ports to handle the number of inspections especially if, when based on risk assessment of consignments from third countries, the inspection rate can be anything from 20-50 percent for targeted products or carriers.

This we saw recently in relation to Turkish Lemons where, after an increase in the number of detections of high levels of pesticide residues, the European Commission announced it was upping the inspection rate from ten to 20 percent. This is for a country with an established relationship but, as we pointed out yesterday, as a third country, the UK will have no track record. This automatically puts us in the high risk category.

Then, missing from the Committee evidence, and the RHA report is any mention of the need for exports to be routed via Border Inspection Posts (BIPs). I don't know what it will take to get BIPs into the public consciousness, but since the UK legacy media have ignored the issue, with recent exception of The Sun, I guess it will take some time yet.

And this is without resourcing issues for HMRC. According to the World Customs Organisation's Annual Report, the UK has about 5,000 customs staff. But the actual figure of staff with experience in the administration of international trade related customs procedures is likely to be significantly less.

This compares poorly with similar-sized countries, such as France (16,500 customs staff). An extra 5,000 officers, for example, with relevant overheads such as office space and pension contributions, could easily amount to £250m per year (£4.8m per week) for the government to fund.

One further concern is that HMRC has very few experts in key technical areas, such as in "valuation" or "origin" – two prerequisites for determining the correct amount of tariff duties. Business practitioners familiar with the customs service warn that several of the few individuals are close to retirement.

Nevertheless, one organ that hasn't ignored the cross-border issue is the Irish Examiner which is conveying views that Taoiseach Enda Kenny's desired "special deal" between the Republic and the North is not legally possible.

Customs legal experts Michael Lux and Eric Pickett also point out that a free trade agreement only means that goods made entirely or substantially in the partner country are free from import duty. Import VAT and excise duty are still due and will be collected in the context of an importation. The main goal, they say, is to ensure that the customs procedures and formalities will be as seamless and frictionless as possible for private persons and businesses.

The impossibility of a special deal is exactly as we pointed out yesterday, saying that the "colleagues" could not allow the UK to have a special deal, for fear of prejudicing the entire customs regime for third countries. And if, as a result, it is averred that Ireland is heading for Brexit "disaster", where does that put the UK?

That a "disaster" is on its way is indicated by the RHA's recommendation that a working group be established to deal with Ro-Ro and Irish land border issues. The RHA wants industry participation so that it can help prepare for the improved service levels that will be needed to ensure supply chains are not disrupted.

The very fact that a major trade association is recommending this means that it isn't currently happening, illustrating quite how unprepared the Government is. One of the very first things it should have done after the referendum was to set up such a working group. Seven months down the line with no action is seven months wasted.

More than anything, though, this points to the extraordinary complacency of the Department of Brexit, and the air of unreality conveyed by the White Paper. That publication has Malcolm Barr, an economist for J P Morgan, giving a damning verdict, saying it is far too light on detail and underestimates the size of the challenge facing Britain.

Barr says: "As a distillation of the state of knowledge within the UK government six months after the vote, and with the beginnings of a time-compressed negotiation just weeks away, the shallowness of the analysis and absence of detail are matters of great concern, in our view".

He highlights a lack of detail on EEA membership, the UK's likely liabilities upon leaving the EU, what regulatory bodies and regimes will need to be replaced upon exit, and says there is "no meaningful detail" on how the government will control migration.

He then adds that the government is "misjudging both the political and practical scale of the task ahead" and warns "we see increasing grounds for concern that the plan as constituted cannot be credibly delivered".

This takes on an extra urgency when we see EU Commission Vice President Jyrki Katainen declare that it will require "a little miracle" for Britain and the European Union to complete Brexit negotiations in two years, with Commission officials are bracing for "extremely difficult" negotiations.

As far as customs control goes, if that means food rotting in lorries as they wait for customs clearance, and queues stretching all the way to Leeds (and beyond), we will have visible evidence of the Government's incompetence, in even expecting that a deal could be made in time.

By then, though, it will be too late. One can genuinely see a state of emergency being declared, with the Army called out to escort truck-loads of food to besieged supermarkets – ending Tory electoral chances for a decade or more. It will be small consolation that they will only have themselves to blame.