Northern Ireland feed companies ‘still learning’ about the finer points of the EU-UK trade deal
Declan Billington is the chief executive of John Thompson and Sons, the largest animal feed processor in Northern Ireland (NI), employing around 200 people. We talked to him about the impact of UK’s new trading relationship with the EU on NI industry, notably the feed sector.
Companies in NI have a lot of new rules to wade through: “You have a new free trade agreement between the UK and Europe and, sitting on top of that, you have the NI protocol with its own set of rules, another layer of complexity that needs to be navigated.”
The NI Protocol, a deal reached by the UK and EU in 2019, ushered in new arrangements. It was established in order to prevent a hard border between NI and the Republic of Ireland – to achieve that end, it keeps NI in the EU's single market for goods and has NI apply EU customs rules at its ports. This allows goods to flow from NI to Dublin and the rest of the EU as they do now, with no customs checks or new paperwork. All commercial goods entering NI from Great Britain (GB), however, do need a customs declaration, under the protocol.
Flow of goods from GB to NI
The big focus, therefore, since January 1 has been on trade from GB to NI, stressed Billington. “There are a lot of issues, companies struggling to move goods. Direct NI to GB trade is fine, there are no problems. But to move goods from GB to NI requires GB businesses to handle export declarations – and it is the same problem that we have been seeing between GB and Europe – a lot of GB businesses did not really gear themselves up to handle such customs procedures and they are now struggling.”
To prepare for all the potential uncertainty from Brexit, when everyone was in the dark over whether a deal or no deal would be heading their way, a lot of NI businesses moved to build up stock. The idea was such a maneuver would “buy companies time so that they could cut their teeth in the first couple of weeks on figuring out how to do everything right until normal flows returned.”
Logistics companies are, generally, well prepared, but some aspects of shipping remain challenged, such as ‘groupage’ - a type of haulage where goods from different companies for different customers are grouped together on one lorry. A lot of small and medium food companies in NI would regularly receive products as part of groupage shipments, as they might only need to bring in a pallet load of goods from GB rather than a container full.
This has now become a much more complex transaction. “Effectively each product from each supplier requires a declaration," commented Billington.
However, facilitations are being put in place, and quite quickly, to find workarounds for these kind of shipping issues, he said.
Food products arriving in NI from GB will be subject to new documentation and checks, but the changes will not be fully implemented until April. Key to this trade is an Export Health Certificate (EHC). Companies are running on a generic EHC now, he noted, but they need to be more product specific and consignment specific come April. "And that will pose a second tier of challenges, getting everyone geared up to issue five or six specific health certificates, not just one. Overall, people are still adapting to something that is new. It is not what is was and will never be as it was, because new procedures add burden and delay. You are never going to get back to the perfect outcome."
Sourcing of feed raw materials
In a nutshell, the UK-EU free trade agreement is only between two custom territories and for goods that originate in those countries – it does not allow for the movement of goods duty free from third countries if those goods are not, thereafter, altered or sufficiently reprocessed.
So what does all that mean for NI feed businesses in terms of sourcing?
“If European products are customs cleared into GB and brought to NI, they could face duty. If a business was buying a calf milk replacer, for example, to put into its rations, and it bought that product out of GB, but the calf milk replacer in question had originally come from Europe, and all that happened was that it came into GB in bulk, was repacked, and sent on, either to Belfast or Dublin, then, due to the insufficient processing and accumulation rules, the product would fail the trade agreement and duty would be payable on it.”
A recent incident further illustrates the more complex nature of trade in feed ingredients for NI millers since January 1, 2021. A shortage of soy hulls in NI in the last few weeks prompted a business there to buy them in England and bring them across to NI. “The hulls had been duty cleared into GB but they had to be duty paid into NI because they were not a European origin good and they were not a UK origin good.”
It may come down to avoiding buying goods from places that could create problems.
“If we are taking wheat or barley from the UK, we need to make sure it is of UK origin. If there is a commodity trader that happens to be storing European wheat and ships it to NI out of the UK, in theory, we could be paying duty on it because it fails the processing test," explained Billington.
What feed millers will end up doing is looking at the raw materials of the cheapest origin and then determining what are the implications in buying maize from Ukraine or South America, for example, and whether they will trip over any of the rules and the protocols that may apply, he said.
Essentially, it will be importers, though, that need to track all that when it comes to bulk feed raw materials, they need to understand the risks and the appropriate duty rates, apply those to product originating outside of Europe and build those into the offers they make to feed millers, said Billington.
“There will be reduced origins on offer until everything settles down."
Where a NI feed company like Thompsons does take in goods from GB such as premixes, there is a again a potential duty payable risk: “I will need to make sure I segregate the premixes and can account for their usage only in products sold in NI. We don’t know what kind of records are needed at this point [in relation to that]."
Even securing European origin spare parts for feed manufacturing equipment via GB is problematic, he said. Though workarounds now exist that NI firms can leverage regarding the import of such products, such as employing ‘at risk’ declarations for those, said the Thompsons boss.
Industry across the UK, NI and Ireland is still learning about the finer points of the trade agreement, he stressed. “Essentially, businesses are carrying risk until they have certainty over the rules.”
Unfettered access to two marketplaces
The good news is that there are benefits for Northern Ireland businesses, with free access to the GB and European Union marketplaces: “Exports from NI to GB are unfettered - no rules of origin, no customs paperwork, and exports from NI into Europe generally have no SPS, no export health certificates, or customs requirements, so NI is unique within the European continent by being able to export both ways, having access to a market of 510 million people. The price and penalty we pay for that is the bureaucracy involved in importing from GB.”
