New Brexit checks and controls will add to Irish exporters’ costs

After much delay and repeated deferrals, this year has seen the UK introduce EU border controls. January saw the introduction of pre-notification and full customs controls, as well as of health certification on imports of medium-risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU.

Then, in April, documentary, physical and identity checks were introduced for such products, except on goods entering Britain via its west-coast ports; ie, from Ireland. Existing inspections of high-risk plants and plant products from the EU moved from destination to border control posts and a new levy, the common user charge, was introduced.

And there is more to come; at the end of October safety and security declarations will be required for goods moving from the EU into Britain. The UK government has said physical checks for non-qualifying goods moving from the island of Ireland will not be in place before the end of that month.

When the changes take effect, “the importer will be responsible for pre-notification of all relevant goods – except low risk plants and plant products – using the UK’s import of products, animals, food and feed system (IPAFFS), aligning with the requirements currently in place for all other EU imports”, says John O’Loughlin, partner in global trade and customs at PwC Ireland.

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“As part of these changes, Irish companies will face new checks and controls when moving Irish goods from Irish ports, such as Dublin Port and Rosslare Europort, directly to ports such as Liverpool port and Holyhead.”

Exporters whose goods fall into the affected categories will need to provide the appropriate certification. In relation to safety and security declaration requirements, Irish companies will need to make an entry summary declaration before goods arrive in Britain.

Aside from these changes, there has been a noticeable increase in the number of customs audits being conducted on Irish companies, says O’Loughlin.

“Regardless of a company’s size or scale, Irish Revenue now expects customs compliance to be a core function of a company’s business,” he adds.

The sectors most impacted by the UK regulatory changes will be food and drink, including meat and dairy, says Klaudia Dudzinska, Ibec executive for trade and international affairs. Ultimately, she says, the changes will mean more administration, more time and more operational costs.

And behind the checks lurks the spectre of regulatory divergence, which could become an issue down the line, be that in terms of rules of origin, transport, taxation or customs changes.

At present, goods moving from the State to British west-coast ports are being treated differently to goods coming from other EU member states to the UK, Dudzinska confirms. Given that there have already been UK deferrals, there is uncertainty about exactly when that will change; and there are also concerns about delays once the regulations are made applicable to goods coming from the State.

Despite the UK being one of the State’s largest trading partners, more businesses are switching to Ireland-EU shipping routes where possible, says Dudzinska.

“Uncertainty and lack of clarity from UK authorities is a key issue but businesses are doing the work and are proactive,” she adds. “Preparing for the changes is about awareness and ensuring that people are communicating with their supply chains, as they are the first group to experience and become familiar with what’s being changed. It’s important to remain engaged with national authorities as they will always try their best to provide information and support.”

Ibec has partnered with various Government departments and agencies to provide briefings and webinars. It is important that exporters get the processes right, given that food and drink represent a third of the State’s exports, worth around €5.5 billion annually, says Dudzinska.

“While there were lots of fears that trade would be severely disrupted by Brexit, in reality goods continue to flow, but with an additional burden in administration,” says Lorcan Sheehan of PerformanSC, a specialist supply chain management consultancy.

There are now costs involved in both exporting out of the State and into the UK, impacting competitiveness, he adds. Bigger exporters can benefit from economies of scale in a way that smaller businesses, shipping smaller shipments, cannot. One way around the problem has been to store in bulk in the UK, “which is also a cost,” says Sheehan.

“Some small businesses have stopped selling into the UK, while others stopped for a while and are now revisiting that,” he adds.

Much remains to be clarified, including how all this will impact on ecommerce businesses selling direct to UK consumers. Education and training will be critically important. UCD’s Smurfit School of Business has developed a new MSc in Sustainable Supply Chain Management to help.

“In large part, Irish businesses have coped with Brexit,” says Donna Marshall, professor of supply chain management at UCD. “What is happening now has thrown everybody again, given that it is such a bureaucratic system that does not yet have clarity. For supply chain management you need certainty but five times already the UK has deferred the introduction of border controls.”

Training up each time, undertaking scenario planning and constant reassessing have all amounted to a drain on resources, she says.

“Now it’s happening – and so quickly that the farming and food sector are on the back foot. It has been a bit like the boy crying wolf; there’s a sense of, ‘Is this really happening?’” Marshall adds.

The new fees will be particularly onerous for small businesses.

“The costs, ranging from £10 to £149, don’t look too bad for larger businesses, which is what everyone focuses on, but that’s just 2 per cent of businesses in Ireland,” says Marshall. “Some 98 per cent are small and medium-sized businesses, and they are the ones that are really going to suffer from these one-size-fits-all charges, which are like a regressive tax.”