A major part of the 60% of UK petfood exports go to the EU and to UK petfood manufacturers rely heavily on imported raw materials. The reimposition of tariffs and the changing of the rules of trading will have a huge impact. Smooth import and export, as seen today, depends on the relative simplicity of loading a product onto a lorry.
Brexit negotiations and the impact of Coronavirus
2020 should have been the year dedicated to negotiating the future terms of the trade deal that might rule the trading relationship between the EU and the UK. However, this negotiation process has been made more difficult due to the combined effects of significant positions on fisheries and business subsidies all made more difficult with the Coronavirus pandemic.
With less than 1 month until the end of the post-Brexit transition period, this impasse raises the specter of a no-deal Brexit and has commercial implications for the petfood sector. Failure to agree a trade real means that World Trade Organization (WTO) rules would apply meaning different customs duties on kibble, snacks & treats and wet petfood.
A no deal Brexit also risks triggering additional CV-19 supply chain disruptions and further costs for businesses and pet owners.
Although we still don’t know the outcome of the UK and EU trade deal negotiations, to reduce Brexit related logistical and commercial risks in the petfood sector, it is important that we prepare now. Currently, some commentators believe there is only a 50: 50 chance of a deal happening with less than 1 month to go.
Plan now to reduce Brexit related logistical and commercial risks
From 1/1/21, the UK Government will implement import controls on goods moving from the EU to GB and vice versa, similar to the UK’s current trading arrangement for Rest of World (RoW) goods.
This means significant changes will come into effect. UK petfood trade to and from the EU will be subject to regulatory controls, customs controls, tariffs, and duties. All pet food operators will need to take account of these and adapt accordingly to ensure business continuity across the UK EU borders.
Plan now to reduce Brexit logistical and commercial risks
Petfood and treats are both complex and diverse and it is beyond the scope of this article to provide an exhaustive list of all requirements. This blog post provides a general overview for the most relevant changes.
To ensure continuity of trade between the UK and EU, in general terms, business operators must review and prepare for change in areas like:
- Nominating a European representative
- Risks e.g. mycotoxins, aflatoxins, pesticides, salmonella, associated with import of high-risk feed
- Customs duties and procedures.
UK petfood producers, exporting to the EU or planning to, are strongly advised to prepare now, and must firstly nominate a holder of an EU Feed Business Operator license to act as their 3rd Party Representative. Details of this company and their EU license number must appear on their pet food products otherwise they can’t be sold in the EU.
Products subject to customs clearance for the first time, will be inspected more rigorously for compliance. Inspection will look for compliance with every requirement of regulation (EU) 767 2009 and due to increased Brexit workloads might take up to 20 days or longer.
A major area on future UK – EU trade is in tariffs and nontariff barriers. These are likely to add additional costs due to the requirement for export health certificates, the requirement to prove petfood raw material origin and veterinary inspection at the border.
Depending on the petfood / treat composition and customs code, custom duties and tariffs could result in additional costs of up to €1000 per tonne or 9.6% of the tax base. Additional costs include:
- Emptying containers / lorries
- Customs / veterinary inspection
- Local support at the point of designated entry
- Potential product losses through damage.
These require time, cost, and adequate numbers of trained border control inspectors.
Even if a trade deal is reached, its conditions are today unknown and unpredictable. Whilst this uncertainty exists, UK and EU food and petfood operators have received letters from governmental departments advising them to prepare for changes that will be effective from 1 January 2021.
Plan now to avoid future failure
Despite any trade deal uncertainties, to minimize the risk of unexpected costs, excessive delays, and disappointed customers, remember the simple message, if you fail to plan now, you are planning to fail after 1 January 2021.
(This blog is adapted from an article by David Primrose and Dr Paola Cane (Crisis Management expert and CEO of Mia Solution, Italy, that appeared online on the “Petfood Industry” website “Pet food and Brexit: Failing to plan means planning to fail”)