The EU Britain seafood trade following Brexit

EM5 21 TM BrexitExpect more friction before things improve

This article was featured in Eurofish Magazine 5 2021

The departure of the UK from the EU was never going to be easy. The EU is the UK’s main trading partner and disentangling a half-century-old relationship has proved as tricky as foreseen by some. The seafood sector on both sides is struggling to adapt to the new reality.

The transition period from the end of January to the end of December 2020 shielded many seafood tra­ding companies from what was to come because everything continued as before. However, starting from 1 January 2021 British seafood companies trading with the EU started to feel the impact of Brexit as exports to the EU faced several new requirements. Exports the other way had an eas­ier time of it.

 

Staggered vs immediate implementation of requirements


The difference was because the EU introduced all border requirements immediately on 1 January, while the UK elected to stagger their implementation. However, new rules on collecting VAT have convinced many smaller EU firms to sell less to Britain, and when sanitary and phytosanitary rules come into force in autumn, food supply chains will be further disrupted, notes The Economist. In addition, the departure of EU citizens from Britain has affected sectors such as food processing and hospitality where many of them were employed. The impact of Brexit on the seafood industry in the UK and the EU was ­discussed at a webinar organised by Eurofish in June. The objective was to clarify some of the likely implications of Brexit for seafood production, consumption, and trade, to highlight changes in rules and regulations, and to recommend how companies should adapt to the new circumstances.

Changes to procedures caused by Brexit usually only apply to Britain (England, Scotland, Wales) and not to Northern Ireland which is governed by the Northern Ireland Protocol (NIP), said Ivan Bartolo, Regulatory Affairs Advisor at Seafish. This effectively keeps Northern Ireland in the EU to prevent a hard border between the province and the Republic of Ireland. But this comes at the cost of creating a border in the Irish Sea so that goods bound for Northern Ireland from Britain go through all the procedures that govern exports to the EU.

Trade may be tariff-free, but non-tariff barriers are a big hurdle

Dr Francis Murray from Foresight Aquaculture provided some background on the UK’s accession to the EU back in 1973. Since then, eight EU countries have developed close fisheries-related ties to the UK translating into 6,000 jobs at the time of the Brexit negotiations, jobs that the EU wanted to retain. As a member of the EU over 70% of UK exports of seafood went to the EU and there was a substantial trade in the other direction as well. Seafood supply chains were highly integrated and EU fleets fished in UK waters. The EU-UK Trade and Cooperation Agreement (TCA), the treaty governing the relationship between the partners, envisages a transition period of five and a half years of mutual tariff- and quota-free trade. However, as Dr Murray explained, this is a very narrow agreement UK importers with supply chains that go through EEA countries may be subject to tariffs depending on the EEA country they go through and where they are processed. Norwegian fish processed in the UK, for example, cannot go tariff-free into the EU, nor can Russian fish processed in Poland enter Britain without tariffs. As a result, UK importers have been realigning their supply chains looking for alternative suppliers and even establishing processing facilities in the UK. In addition, Mr Bartolo pointed out, under the TCA imports in both directions may be tariff-free, but they are still subject to non-tariff barriers such as sanitary and health checks, customs declarations, IUU catch certification, and entry through border control posts. Goods imported into the EU from third countries can no longer be freely exported to Britain unless they enter the EU through a customs transit procedure. They are then considered a direct import and qualify to enter Britain tariff free. But a health certificate will still have to accompany the consignment and it can only enter Britain through a border control point (BCP).


More requirements and less flexibility affect small companies in particular

Although requirements are being introduced gradually on the UK side, they are all in place in the EU and this situation has affected trade in both directions and has been particularly tough on small enterprises. The situation is fluid because it depends also on ­bilateral agreements the UK strikes with EEA countries that are not EU members (Iceland, Liechtenstein, Norway), said Dr Murray. As examples of the phased implementation of regulations on the UK side, from 1 October 2021 goods from the EU will need to be accompanied by an export health certificate (using the new GB format) and be pre-notified to the UK using IPAFFS (import of products, animals, food and feed system) and from 1 January 2022 entry into the UK will be via border control posts with the possibility of samples being taken and identity checks. New BCPs have been set up, existing facilities are being upgraded to accept seafood, and staff are being hired to deal with the increased tasks. EU companies exporting to UK must be on an approved list maintained by a new body, the UK Office for Sanitary and Phytosanitary Trade Assurance

Catch certificates for wild-caught fish must be provided for exports to Britain. If more countries are involved than the vessel’s flag state and the destination, then, according to the IUU regulation, further documentation such as a storage document or processing statement is also required. Export health certificates are documents signed and stamped by a veterinary officer. This can be tricky as, for example, farmed fish is often harvested in remote places or at ungodly hours when a veterinary officer is not available. According to Mr Bartolo, Norwegian exporters have experienced delays of up to four hours and longer transport distances because of this requirement resulting in a lower shelf life for the product. The requirement to use IPAFFS will also be new for traders who import only from the EU as this has not been necessary until now (traders importing from outside the EU will be familiar with the system), but to assist them the UK Department for Environment, Food & Rural Affairs will organise training sessions on how to use the system.

Carlos Da Conceicao, who works for a wholesaler and distributor of seafood imported mainly from Europe and Japan, illustrated the challenges traders face with Brexit. The additional paperwork, increased delivery times, and the use of agents all pushed up costs. The company’s wholesale business in Germany stopped completely because of the complexity of the paperwork involved in bringing goods to the UK from the EU and sending them back to the EU again. The company now concentrates on the British part of its business and sources more fish directly from Cornwall and other coasts of England.


Exporters to the EU had very short notice

In trade terms the UK is a net importer of fish and seafood and has been since 1984. In 2019 imports were valued at GBP3.5bn and exports at GBP2bn, figures that have stayed fairly stable since 2006. About two thirds of UK consumption stems from imports from the EU and the rest of the world. In volume, the UK is a net exporter to the EU with a surplus of 104 thousand tonnes in 2019. Salmon, tuna, and cod are the UK’s biggest imports from the EU and Germany, Sweden, and Denmark its main importing partners in the bloc. UK exports to the EU are mainly salmon, pelagics, and shellfish and France, Spain, and Ireland are the main destinations. The volume of exports to the EU dropped following Brexit ­suggesting the impact of non-tariff barriers. This was not altogether surprising, said Mr Bartolo, as British exporters were given little warning of the scale of the changes and so were caught unawares when the new rules abruptly entered into force on 1 January 2021.

The single most exported species from the UK to the EU is farmed salmon and although export value in Q1 2021 increased 19% to GBP100m compared with 2020, exporters can expect losses from delays due to customs and health certification requirements as well as increased costs from paperwork, logistics, and veterinary procedures. Before Brexit small fishers could send a few pallets of fish across to the continent. This has now changed as exporters need to be approved, they need to provide customs export declarations, catch certificate, and a health certificate signed by an officer all of which is time consuming and expensive. Jimmy Young from the University of Sterling added that in the case of live shellfish exports delays contribute to higher mortalities and the perception that the product is no longer as high quality and therefore commands a lower price.


A lack of certain specialists in Britain compounds the problems

Some companies have hired customs agents to complete the formalities, but there is a shortage of these specialists, said Mr Bartolo. Catch certificates can be applied for online in a straightforward procedure and they are free. For health certificates a fee must be paid, and the certificate must be signed by a certifying officer who too are in short supply. Shipping a small consignment to the EU has thus become much more inflexible and expensive. Groupage is one way around the complications of a health certificate. Here, several small consignments are bundled together into one that then gets a single health certificate. There are three groupage facilities in Scotland and two in England. For many companies both in the EU and the UK the additional certification is more burdensome than tariffs and will lead them to look for alternate supply chains or markets.

James Green, owner of the Whitstable Oyster Company, an SME in Kent illustrated some of the issues his firm faced because of Brexit. An exporter of live oysters to France, his market vanished more or less overnight after Brexit. The EU does not accept product from Class B waters in non-EU countries that has not been depurated or tested. The company now exports to Hong Kong and has also increased sales on the domestic market, but it suffered a very difficult six months and capacity is still not fully exploited. For Mr Green the lack of notice and the impact on cash flow were the most severe irritants with Brexit, but he is earning a better unit price from his UK sales and is optimistic about the future as he sees increasing interest in shellfish, especially oysters, particularly among younger consumers.

As it adapts to the irritants Brexit has introduced, the industry is already discovering new opportunities. Time will tell if these compensate for what has been lost.