Editor’s note: At this writing [Dec. 15th] the European Union and the United Kingdom remain at loggerheads over the terms of Brexit – the UK’s separation from the EU. What is clear is that with or without an agreement the “transition” period will end on December 31st 2020 and the EU and UK will separate.
European Union and British negotiators continue last-ditch efforts to fashion a free-trade pact. Otherwise, the United Kingdom will start the new year with what is called a no-deal Brexit, a nightmare of tariffs-laden trade that would batter the UK economy and depress commerce in Europe as a whole.
But even if there is a trade deal, it doesn’t mean that shippers and their customers, transport operators and freight forwarders are home free next month. Far from it.
Expect the worst on January 1, and for months to come.
“It’s going to be carnage,” said Tony Shally, managing director of Espace Europe, an asset light logistics company based in Lichfield, Britain.
With enforced borders come delays, regardless of whether or not goods can enter duty-free. Controls, however expedited they are fashioned, mean that vehicles, their cargo and their drivers must be checked. Customs must be cleared.
Systems linking the UK and the rest of the EU, which have run pretty much seamlessly and effortlessly for the past 27 years, are being overhauled. Everyone in logistics and trade will face new regulations and procedures. Infrastructure and operations will be bludgeoned.
“It will cause immense disruption within the supply chain,” said Aidan Flynn, general manager of the Freight Transport Association Ireland.
“No Plan B”
A no-deal Brexit would wipe 7.6% off Britain’s GDP over the next 15 years, according to the British government’s own conservative estimates, while Brexit with free trade would result in a decline of about 5%. The Covid pandemic will cost the UK an additional 2% in GDP.
Covid-related upheavals have occupied the attention of most businesses, which have only recently turned their attention to Brexit. The British government has been guilty of foot-dragging as well. Confusion has compounded private-sector inertia.
“Exporters aren’t ready. Importers aren’t ready. Equipment systems aren’t ready. European haulers aren’t ready,” said Shally.
Turmoil will take place, despite a transition period of eleven months. The UK actually left the EU in January this year. January 1, 2021, marks a hard deadline. In terms of customs inspections, goods moving into and out of Britain from the EU will be treated the same as if they are traveling to other countries outside the EU. “There is no Plan B. There is no ‘couldn’t it be something different?’,” said Roel van’t Veld, Brexit coordinator for the Customs Administration of the Netherlands. Come next month, “If you don’t have the paperwork ready, there is no transport.”
For the UK, there is no more single market, no more inclusion in the EU Customs Union. No more will the British enjoy effortless travel and commerce within the EU. Ditto those from the EU wanting to enter the UK.
“At the moment what we have is a border that is roughly the equivalent of catching a ferry from New Jersey to New York,” said Duncan Buchanan, policy director at The Road Haulage Association, the trade association of logistics handlers in Britain and Northern Ireland. “We’re going from that [ease] to a border which is less well developed and has less facilities than any of your borders between the United States and Mexico or the United States and Canada. We have thousands of people who are going to have to start making customs declarations immediately on the 1st of January. And we do not have enough people to do the customs brokerage. There is not enough trained staff to do it.”
Shippers and carriers should get better as they become more familiar with the new procedures and as customs officials gain experience as well. In six months, logistics providers believe, data will be automated, methods streamlined.
There could well be lasting changes in what goods are shipped, how they are shipped and to where, however. Gone are the days when shippers in Britain or France could simply load trucks and expect them to be delivered within hours, a system that is both fast and cost-effective.
“It is a very efficient way of transiting, but not if your cargo and the drivers need to be checked every time,” said Wim Dillen, international development manager, Port of Antwerp. Dillen, who heads the port’s Brexit task force, cited the British government, which warned that adding just a few minutes of waiting time for trucks outside the port of Dover would lead to traffic jams that extend miles.
“We have absolutely not the faintest, foggiest idea how long it’s going to take us to cross the border for road haulage between the UK and the EU,” said Buchanan.
Planning will become much more critical. Next-day commerce between the EU and the UK is no longer possible. For the past quarter-century, Shally said, customers have been able to place an order on Monday, have it collected on Tuesday, and in Italy on Thursday. “The days of just-in-time deliveries are unfortunately gone,” said Shally.
One of the biggest logistics changes could be the mode of transportation. Short-sea shipping will increase, many believe. If trucking lanes become as congested as feared, even airfreight will gain, especially in the live animal trade.
“As of next year, we will see a move from the traditional ferry transport, accompanied transport, to unaccompanied transport,” said Dillen. “We believe that in the midterm, you will see an increased containerization of the cargo that transits now over the Channel with trucks, in ferries,” said Dillen.
Dillen, whose port stands to gain from an increase in short-sea, containerized freight, is understandably upbeat about the prospects. “The container solution might now become more attractive because it’s very reliable,” he believes. “But it’s also more efficient and faster than if you have to wait and lose hours of time in a ferry port.”
Containers, Dillen added, can be pre-cleared, and unloaded from a ship the moment it reaches the berth, allowing rapid transshipment. Dillen also believes that in some cases, trucks will be placed on ferries and transported across the Channel without drivers, although this poses logistical problems as well, as they must be driven off the ferries immediately upon landing.
Already, many shippers and their agents have moved from a single, central warehouse to a dual or multi-system, one in Britain and others in the EU.
There are serious limitations to overcome, however. Smaller warehouses throughout Europe just don’t have the proper footprint to service containers. British container haulers will be sorely stretched as well, and British container ports will likely face capacity issues. What’s more, maritime containers hold less than a truckload worth of goods, and the weight of the container itself diminishes cargo, said Buchanan.
“I can see both [containers and unaccompanied transit] being deployed, but they will not rapidly address supply chain problems that they are going to have in January when the thousands of lorries that actually come across that border today almost seamlessly will have to do a vast array of paperwork, where every single shipment has to have the customs declaration, every single shipment going into the EU has to have a separate safety and security declaration,” said Buchanan.
Right now, everyone is attempting to get their hands around regulations, which will govern trade. They are complex and involve a dizzying array of software protocols, data entry and customs declarations. Logistics providers just don’t have the manpower available to service every shipper who is now rushing to meet the Jan. 1 requirements.
“If they haven’t got the data in the right format, then we can’t even pick the goods up. So we can have the best systems in the world and the best trained staff in the world. But if that commercial invoice doesn’t get to us at the right time with the right information on, we can’t move the goods,” said Shally. “That’s an education piece that traders really do need to get their heads around. They’ve never had to worry about it before.”
The one-two punch of Covid and Brexit has made preparations that much trickier and, in many cases, delayed action.
To imagine the scope of the problem, envision passport control. Even the most efficient — say, Singapore — can get bogged down by dozens of plans disgorging thousands of visitors at once. Think about what happens when one of those in line doesn’t have proper papers. The delays cascade back in line.
Now, apply that to trucks moving in and out of Britain. Beginning in January, each driver must present documents on what goods are being shipped, necessary clearances and his or her own passport. The most efficient control will mean a delay of minutes. But what happens if a driver lacks the proper documentation?
“Everyone will be penalized for other people’s mistakes,” said Shally.
The British government itself has predicted a nightmare scenario if there’s no free-trade agreement, where as many as 7,000 trucks will be stuck outside the port of Dover waiting for ferries for transport across the channel. The government is constructing some 29 inland border checkpoints throughout the country, but there’s little accommodation for trucks in the queues to the ports.
The same kind of horrible delays could well be felt on the French side as well.
Nightmare visions could turn into self-fulfilling prophecies, regardless of what officials do to improve conditions. Thousands of drivers could bail on cross-Channel haulage, not wanting to get stuck in the morass, triggering acute capacity problems. Or, more likely, they’ll demand compensation, increasing the cost of cross-border haulage.
There’s all sorts of finger pointing, but it appears that the British have planned and executed far less than their EU counterparts, perhaps because they were too focused on negotiating a trade deal than preparing for the detrimental impacts of Brexit. Eugene Drennan, president of the Irish Road Haulage Association, told the BBC that “mayhem” could ensue in the ferry port of Holyhead because while the Irish authorities have shown a “reasonable degree of preparedness,” the British still won’t make necessary decisions. They underestimate the difficulties transport operators and their customers will face, critics charge.
This refusal to face reality became most apparent when Johnson’s Conservative Party compatriots threatened to walk away from the accord governing Northern Ireland trade with Ireland and the rest of the EU. (see box on this page).
“We’ve all spent the last 20 odd years trying to break down borders so quickly and obstructions get in your way. It just makes things very, very difficult for everybody,” said Flynn.
“At the moment, there is just a huge lack of knowledge of what needs to be done what the new norm is going to look like,” concluded Shally. “We’ll get there, but it’s going to take months of pain.”