Whether it’s Brexit or plant health regulations, change is coming to the UK market, meaning global fresh produce operators cannot ignore the trading challenges ahead. That was the key takeaway from the ‘Accessing the UK market’ seminar organised by the Fresh Produce Consortium (FPC) during The London Produce Show and Conference held on 6-8 June, which examined the opportunities to trade with the UK, and how to meet new regulatory requirements.
In summing up the tailor-made seminar – featuring experts from the UK regulatory authority, a global law firm, and the fresh produce industry – Nigel Jenney, CEO of the FPC, warned attendees not to ignore the challenges ahead as he spelled out the UK’s reliance on produce imports.
“Regardless of Brexit, don’t ignore some of the challenges about plant health and food safety standards; these are fundamental,” he urged. “Plant health regulations will change before Brexit, and it has nothing to do with Brexit.”
From a Brexit point of view, Jenney called on produce suppliers across Europe and around the world to encourage and reinforce their governments about their desire for a successful trading relationship with the UK.
“Whatever the free trade agreement or what is subsequently agreed, it is not a one-way process,” he argued. “Britain may have voted for it [Brexit], but the solution will not just come from the UK.
“The FPC has done a considerable amount in terms of lobbying the concerns and needs of our sector. But we have to do more. …Brexit is an international issue. I would encourage you to lobby your governments to make sure that your country is getting the best deal possible deal through this process.”
Indeed, Jenney warned that without Free Trade Agreements (FTAs), Brexit is likely to increase the cost of produce in the UK by 5.1 per cent for fruit and 4.8 per cent for veg.
“We have to find a solution that allows us as an industry to trade effectively,” he said. “This is about feeding the nation. Two thirds of our fresh produce isn’t grown in the UK, and we have to get that product on the shelves.
“There are 6,000-7,000 trucks driving to the Port of Dover from the EU on a daily basis. A minimum of a third of those are carrying fresh produce. It’s absolutely critical to find a solution which meets the politicians’ aspirations that actually allows our industry to trade and helps to feed our nation.”
Opportunities to trade
Considering that the UK imports 70 per cent of the fresh fruits and vegetables it consumes, and with Brits only achieving three of the five produce portions a day recommended by the UK government, Jenney demonstrated the “great opportunity” for the market still to grow.
“Brexit doesn’t mean to say we can’t trade,” he asserted. “The UK market is worth 9 million tonnes of fruit and veg; it’s a substantial market.
“We’re not self-sufficient (we don’t have the land availability), and many people want to buy British, and they do, but that has to meet criteria concerning quality and competitive pricing,” he pointed out.
Given that UK consumers spend 10 per cent of their household income on food and demand produce availability all year round, Jenney outlined the ongoing and “significant opportunity” for suppliers worldwide to trade with the UK.
In particular, he urged not to overlook the potential outside of the UK retail market with regards to the “very substantial” and vibrant wholesale and foodservice sectors, which represent 35 per cent of produce market share.
Post-Brexit impacts & opportunities
To understand the trading environment between the UK and the EU following Brexit on 30 March 2019, Dr. Robert MacLean, Head of International Trade & Customs – Europe at global law firm Squire Patton Boggs, outlined six potential trading models.
At the most intense end of the scale would be an EEA model like the EU operates with Norway, he explained, while at the other end effectively there would be no model, whereby trading with the UK would be subject to World Trade Organisation (WTO) rules.
Although a formal decision remains some way off, Dr. MacLean suggested the most likely future relationship for the UK would either be a Free Trade Agreement with the EU, which would remove customs duties on trades in “substantially” all goods between the EU and the UK, or, a Customs Union partnership with the EU, which would require one common external tariff for the UK at the same levels as those for the EU’s 27 member states that would cover some or most of the fresh produce coming from outside of the EU/UK.
Each possibility, he said, would bring its own set of requirements and impacts. Under the FTA, Dr. MacLean said the European Commission is proposing an EU-Canada (CETA) model. Meanwhile, various options are on the table for the Customs Union, such as the Turkey model.
“The best case scenario for non-EU suppliers would be an FTA between the EU and the UK,” Dr. MacLean advised the audience.
“At the highest level [for opportunities], the UK under an FTA would adopt the EU’s customs duty rates for a temporary period but would have the option of reducing those tariff rates. The UK also would be free to negotiate its own FTAs with other countries … and possibly re-enter FTAs with former Commonwealth countries.
“EU-anti dumping measures (e.g. mandarins from China) would no longer apply (to products sold directly and exclusively to the UK), allowing that merchandise to come into UK without payment of duties.
“There’s also the possibility to reduce costs for produce exporters to the UK by relaxing some EU standards for food health and safety, such as labelling rules, pesticide usage and GMOs. … There would also be new opportunities under the tariff rate quotas split.”
In comparison, Dr. MacLean said the future new potential commercial opportunities are more limited under a Customs Union agreement.
“Duty rates remain quite high for agricultural produce,” he explained. “EU health and safety standards would effectively be the benchmarks for trade in produce to the UK. There would be restrictions on the UK’s ability to negotiate FTAs with third countries.”
With the main impact under both model scenarios relating to logistics and shipments between the EU-27 and the UK, Dr. MacLean recommended that produce suppliers to and importers within the UK could take steps to reduce or mitigate the anticipated additional costs.
“There is an overriding need to reorganise and/or review supply chains for non-direct UK shipments,” he said, explaining that operators should ensure timely deliveries due to anticipated additional border formalities and control, and to plan delivery schedules well in advance in view of the time that would be needed for customs clearance and phytosanitary inspections.
“With almost certain additional transportation delays, you should take steps to manage the risk of damage to produce, i.e. via insurance or hedging,” Dr. MacLean added. “You should also review all major contractual terms to manage risk.”
Satisfying regulatory requirements
When it comes to complying with UK plant health and food safety standards, both fresh produce suppliers to and their importers within the UK need to be aware of new rules coming into force via two new EU regulations: New Plant Health Regulation (PHR) and Official Controls Regulation (OCR).
“You need to understand the interception of products,” stated Jenney from FPC. “As we move through this process, the rules will get stricter and you may have your supply chain interrupted if you’ve made a bad decision about the wrong product from the wrong country.”
From December 2019, there will be a significant extension to the list of goods that will require a phytosanitary certificate when entering the EU, as well as an extension to the list of commodities that will be refused entry until a risk assessment is completed to demonstrate that trade can continue. The more detailed underpinning legislation is still being negotiated, however.
“We hope that by later this year [2018] we should have a good idea of what’s going to be on those lists; they’re still up for discussion,” stated Richard McIntosh, Assistant Chief Plant Health Officer at Defra (The Department for Environment, Food and Rural Affairs in the UK).
“Between the different EU member states there are differences in opinions with regards to what is high risk trade and what isn’t,” McIntosh added. “We hope towards the end of this year, we’ll have clarity on both those lists.”
On the upside, McIntosh said the changes will improve biosecurity, create a risk-based approach, introduce faster decision-making and drive greater collaboration between both EU member states and plant health services. He also noted there will be opportunities for lower costs through reduced import checks.
To help avoid falling foul of these new rules, McIntosh suggested that exporting countries should take proactive action to avoid trades appearing on the EU Alert List. Importers, meanwhile, can help their case by careful sourcing.
“Do what you can to ensure full compliance via proper training and inspection services,” he explained. “If there are problems, follow up early on and make sure all interceptions are reported back. Timely follow-up is really important.
“If that doesn’t work, the plant health authority might want to go a step further to limit exports from certain exporters, or you could consider voluntary suspension. This has been quite effective when implemented by some countries.”
Otherwise, McIntosh recommended ensuring early follow-up to any warning letters and full cooperation and transparency when it comes to audits.
Maximising global opportunities
From the supplier side, José Antonio García, Director of Ailimpo in Spain, and Jaime Cárdenas, director of the Peru Trade & Investment Office in the UK, reassured UK buyers that Spain and Peru are prepared and accustomed, respectively, for the changes ahead.
With Spain representing the EU’s largest fresh fruit and vegetable supplier to the UK by far – accounting for 43 per cent of the 3.2m tonnes imported in 2017 according to Eurostat – García was keen to point out the steps his country has taken already.
“We [Spain] are quite dependent on the UK market,” he admitted. “We have a responsibility to analyse the situation to push our own politicians to get a good [Brexit] agreement. What’s most important is to get ready, to identify the best opportunities, to make proposals, to lobby, to try to motivate both the private sector and the public authorities.”
García said each EU member-state is pursuing its own strategy, explaining that the UK’s second-largest supplier, the Netherlands, recently announced 700 new inspectors to handle new controls likely to come into place regarding pesticides, plant health, etc.
As for Spain, García explained that the fresh produce industry has been represented at several high-level meetings where a number of issues have been raised with regards to post-Brexit produce exports to the UK. Those include questions surrounding: organic certification, PDO and PGI certification, labelling and marketing standards, phytosanitary certificates, Maximum Pesticide Residue levels, among various others.
“So far, we’ve had a lot of meetings during the last year,” García said. “We have the questions but not the answers. Nobody knows what is going to happen. Once a political decision is made [regarding the trade agreement], we’ll start receiving some answers.”
Cárdenas had a similarly positive take on the UK opportunities for Peru both now and post-Brexit as he detailed Peru’s aim to double its agriculture exports to US $4.23 billion in value by 2021.
“The UK is Peru’s third-largest [agro-industry] market in Europe [after the Netherlands and Spain],” he explained, specifying that 16 per cent of the nation’s total exports were sent directly to the UK in 2017, of which Hass avocados featured highly.
“We trust that the [EU] Withdrawal Bill will bring the same conditions as [currently experienced] with the EU in the UK market,” he continued. “If that doesn’t happen, we will go back to the TSP system with single tariffs for most products.”
Regardless of the outcome, Cárdenas remarked that Peru is accustomed to change, having experienced five government cabinet changes in the past two years alone, and inflation reaching 8,000 per cent in the 1980s.
Moreover, Cárdenas was keen to highlight the future potential for Peru in the UK by noting his country’s growing “new exportable offer” which appeals to the “adventurous” tastes of British consumers. Such products include squash, aguaymanto and figs, in addition to physalis, cherimoya, lúcuma, custard apple, passionfruit, granadilla, cactus fruit and lulo, among others.
“There is a trend towards, and a very notable increase in the consumption of exotics,” he said. “We believe this is a platform from which to work. These are the possibilities for us [Peru].”
To view all the presentations made during the ‘Accessing the UK seminar’, visit The London Produce Show and Conference website here.
