Post Brexit - Keeping the wheels turning
07 April 2017
Mike Josypenko, Senior Director of Special Projects at the Institute, looks at some of the issues facing the UK’s Roll on / Roll Off (Ro/Ro) freight sector and for exporters and importers after Brexit.
Many of us pass through the UK’s ferry ports without a second thought. Their operational systems ensure that travellers and freight clients alike can enter and leave the country by sea smoothly, and with minimal delay. However, when the system is disrupted, because of weather conditions, strikes, security issues or breakdown, the consequences and delays are noticeable, and scenes such as “Operation Stack” for trucks on the M20 are high-profile illustrations of this.
The UK Chamber of Shipping (UKCS), estimates that more than 40% of the UK’s international trade, by value, arrives in and leaves the country in lorries and trailers on ferries, or the Channel Tunnel. The port of Dover and the Channel Tunnel collectively handle around 4 million in or outbound trailer movements per year. Other Channel and North Sea ports handle more than 2 million freight vehicle movements, while freight traffic to the Irish Republic through the Irish Sea ports is estimated at around 850,000 per year.
The majority of cargo is carried by “driver accompanied” vehicles. A large percentage of this consists of time-sensitive goods, such as items destined for “Just in Time” sectors like the automotive industry, fresh or perishable products, or goods which are specifically required for timed contracts. At Dover port and the Channel Tunnel, virtually all freight traffic is driver accompanied.
The physical and geographical limitations of operations at ports such as Dover mean that a delay-free transit is essential. Dover operate a “Turn up and Go” service where trucks are booked onto the first available sailing; spending as little time in the port as possible. Incoming vehicles arriving from French Channel ports will complete security and immigration checks before embarking in the port of loading; on arrival, no customs formalities are currently required for EU originating cargo, and arriving vehicles will typically pass directly from the ferry ramp out of the port area – the exceptions being the sample of vehicles which are selected for intelligence-led physical checks, and the relatively low numbers of vehicles arriving from outside the EU requiring formal customs clearance.
In the same way, vehicles arriving at Dover or Eurotunnel for an outward crossing will undergo French immigration controls, before proceeding to the loading area for the next available departure. According to Tim Reardon, Policy Director of UKCS, Ro/Ro ports depend on this speedy throughput of vehicles for their operations. Ro/Ro ports typically have space only for one shipload of vehicles per berth, and frequently have no over-spill area, so any delay to freight vehicles can cause major disruption to the port’s operations and beyond.
This smooth transit depends on the absence of any formal customs formalities for goods originating from, or destined for, EU Member States under the EU Single Market. After leaving the EU, it is highly likely that some form of customs formalities will be necessary, regardless of whether tariffs are imposed. The form which these will take will need to be considered carefully if the UK’s ports are not to become gridlocked. The Port of Dover reported its busiest day ever for freight traffic in November 2016, handling 10,558 freight vehicles. Even a small increase in the time spent in port for customs or security formalities has the potential to cause major delays and congestion to the port and the wider region.
Providing extra space and facilities to cope with this would take several years and huge investment: in many cases land may not be physically available to expand port facilities due to geographical constraints.
The situation is further complicated by the fact that a large number of trucks handle “groupage” traffic; i.e. multiple shipments from different shippers and consignees. The potential for delays when clearing customs is considerably increased; as one shipment with incorrect or incomplete documentation can delay the entire vehicle and its contents.
The traditional model of customs clearance from non-EU countries has two functions: security control, which enables goods to be identified, and, where necessary, undergo physical examination, and the fiscal process, which requires goods to be declared for statistical purposes, and to collect import duties, VAT or other taxes. If ports are to be able to operate effectively, this activity must be removed from the place of entry to - or exit from - the UK as a standard operating procedure.
Historically customs procedures have allowed goods to be cleared through customs away from the place of entry. In this IT-enabled age, it is surely possible to design an electronic process for customs and security data for EU transactions, both outbound and inbound, to be submitted for scrutiny and processed by HMRC before the goods physically arrive at the port. However, to be effective and ensure smooth flow of traffic, it will need to be accessible to all traders, and not just to those who achieve Authorised Economic Operator (AEO) or similar status. Given that much of the traffic has operated under the Single Market for more than 20 years without serious problems, many observers argue that a “light touch”, or simplified version of customs clearance could be introduced, perhaps drawing on some elements of existing EU VAT reporting formalities.
Another important factor to consider is the training and skills required to complete customs declarations. Although the trader is legally responsible for customs declarations, most exporters and importers would expect these to be undertaken by the forwarder or haulier as part of the transport process. However, after 20 years of customs-free EU trading, a generation of road carriers has emerged who may not have the necessary knowledge or resources. This can be handled externally by forwarders or customs agents, but new skills and facilities will need to be developed to manage the new and considerable workload, which will require time and investment to set up.
Choppy seas may lie ahead!
The author would like to acknowledge the assistance of the UK Chamber of Shipping for the factual content of this article.