Analysis: what impact is Brexit having on trade of recyclate into Europe?

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Port of Dover
Port of Dover

The UK and EU ended the Brexit transition period at the end of 2020. But how is the deal between the two affecting trade between this country and Europe of recyclable commodities?

When a deal was agreed on Christmas Eve between the UK and EU, it meant that from 1 January there would be new arrangements for trade between the two.

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Like for many parts of the economy involved in moving goods, it has proved challenging.

The main issues appear to be getting hold of hauliers, paperwork and fears that it may affect demand from European buyers who want material, but may seek easier markets if this challenging situation continues.

Clearly, as has been widely reported, there is great difficulty in trading with Europe.

Road Haulage Association managing director of policy Rod McKenzie said to talkRADIO on Monday: “What we have is a chaotic situation, which is deteriorating, based on a really small number of the usual amount of lorries that go over the Channel and over the Irish sea to bring us goods, because everything we need comes on the back of a lorry.

“And that flow is being disrupted at the moment by a brand new mountain of red tape, which was introduced when we left the EU.”

For those trading recyclable commodities into Europe, they are finding this situation with paperwork and the knock-on effect on haulage having an impact.

IWPP commercial director Chris Burton says: “IWPP started the Brexit planning in July 2020 when it became apparent the issue wasn’t going to go away. Come-what-may, it was clear to me and the hauliers we worked with that customs clearance was going to be an issue, even with a deal.

IWPP commercial director Chris Burton

“The last minute nature of the deal gave no business any real time to sort things”

“The last minute nature of the deal gave no business any real time to sort things. We found that even though we were working on a no deal basis and had things in place for this, the moment we got a deal, it still meant last minute paperwork changes and new terms that needed to be on the paperwork.

“It was a difficult Christmas Eve and during the Crimbo Limbo between Christmas and New Year getting to grips with it all.”

Paperwork is proving to be a huge issue for those trying to ship commodities into Europe. Recycling companies and the hauliers they work with are finding there is a greater amount of form filling required with the UK now treated as a third country out of the single market and customs union.

“We use circa eight different hauliers and a few different clearing agents,” says Chris Burton. “Even if the route from site to mill is the same, the paperwork and layout that each line/agent wants is different. This is crazy given they all have to do the same thing.”

Bolton Brothers commercial director Reuben Bolton

Bolton Brothers commercial director Reuben Bolton is waiting to receive T1 clearance that allows for goods that originated outside of the European Union to move freely within it.

“We applied for T1 approval before Christmas,” he says. “We are still awaiting for HMRC to confirm we can issue a T1 form. This form is needed if trailers are crossing within borders of the EU to get to its final destination.”

Bolton Brothers has also registered with the New Computerised Transit System (NCTS) which is an electronic system that is used to submit Common Transit declarations with HMRC.

But the company is still waiting for a response from HMRC so that it is approved for the Customs Comprehensive Guarantee. This guarantee covers Customs Duty, excise duty and import VAT for companies that trade with the EU.

According to Bloomberg, HMRC has said it is aware of the problems applicants are facing and is conducting an urgent review. In particular, delays on a recent software upgrade to NCTS are to blame and it is currently processing 230 applications per day for transit guarantees and expects them to be completed within a week.

Those companies in all sectors who are using agents to issue transit documents and provide guarantees, are finding that there is a shortage of agents with the authority to issue them.

This is because agents need to put up a financial guarantee, often backed by a bank, to cover these taxes and duties. But almost all these guarantees have been committed.

Liverpool-based freight forwarder Carlton Freight general manager Peter Hayes told Bloomberg: “No one’s got any guarantees left. We’ve had to say no to hundreds of inquiries.”

Vanden
Vanden Recycling UK managing director David Wilson

Vanden Recycling has been unable to ship to the EU this year because of issues with the Government software.

“Every single shipment of ours this year is still in the UK, either in port or on the approaches”

“So far this year, we’ve loaded a few shipments (about 40 or so) of material bound for the EU,” says Vanden Recycling UK managing director David Wilson.

“At the moment, every single one is still in the UK, either in port or on the approaches.

“The sticking point is data entry on the Customs website, which keeps crashing. This is quickly turning into a pretty nasty situation.

“Hauliers are now asking themselves why should they load when they won’t be able to do the required data entry. They are backing away from offering a service. LKW Walter and another large EU carrier have both said they won’t carry anything until February. This has nothing to do with problems entering the EU. We don’t even know yet if there is a problem there as we haven’t managed to get anything out of the UK in 2021!

“All the while, the Government was telling industry to get ready, but it turns out for us anyway that the downfall is a Government-run website.”

The issue with paperwork has had the knock-on effect of making it much harder to get hold of hauliers. It is a two-headed problem with some having lorries held at ports crossing into Europe, or some not wanting to deal with the paperwork and deciding to wait until things calm down as mentioned by David Wilson above.

“I believe things will get tougher in terms of availability,” says Chris Burton. “Some EU hauliers are tired of bringing in goods and taking them out again, possibly having been held up by paperwork issues and deciding they don’t want to come back.”

Reuben Bolton adds: “A lot of trailers are stranded at ports coming from the continent awaiting Customs’ clearances which are causing delays/availability in loads being sent back over to the continent.”

“Hauliers have increased their freight rates in some cases by at least 35%”

He also notes that haulage prices are also rising: “Due to the extra time taken at borders, hauliers have increased their freight rates in some cases by at least 35%. The Customs charges for export and import can total €180 (£160) per trailer. The majority of our customers in Europe are agreeing to split the customs clearing costs, but not all.

Reuben Bolton also makes the point that European customers were not prepared: “Some of our customers in Europe are just not organised or have not even thought about Customs import clearance until last week. A few are not even interested in sorting it out. Therefore we have to arrange for hauliers who can also provide Customs Clearing House services.”

The problems involved in shipping to Europe is also having an impact on those who are collecting material and looking for markets for it.

Biffa commodities trading manager Trevor Williams

Biffa commodities trading manager Trevor Williams says: “There have been some challenges and different degrees of preparedness from brokers and hauliers in terms of new requirements.

“Most of those issues have been resolved relatively quickly, but the issues now are around the speed at which shipments can be processed and the knock-on effect that has on availability of transport.

“We have had to make provision for higher stock holding than we would like to see. But this is a situation the industry has experienced more than once in the past, for example when import bans and quotas into China were put into effect.

“It’s a challenge, but we adapt. We have also moved some grades of recovered fibre into alternative markets, but we see this very much as a short-term measure.”

He notes though that while bulk shipments of glass into the EU are going well, availability of trailers for loading recovered fibre is a concern in the short-term. Biffa exports very little plastic into the EU, so this isn’t such as issue for the company.

Chris Burton also adds that there are regional variations in the UK in terms of impact on the recovered fibre market: “I feel some areas have been hit a lot harder for transport. Seemingly the business we do out of the South East, North East and Midlands is stable. However, the South West, North West and Scotland have been particularly difficult.

“These were arguably difficult in normal times, but in a Covid/Brexit world it is really tough.”

In terms of the outlook, there are mixed views on how long this situation will last and whether it will get worse.

“There is good demand from Europe for UK recyclate”

Trevor Williams says: “Clearly nobody benefits from any delays, regardless of whether you are an importer or an exporter, or indeed on what side of the channel you operate. It’s in no one’s interest to let ‘teething issues’ develop into longer-term problems, so we would hope to see early intervention to avoid this. There is good demand from Europe for UK recyclate so all parties will push to make things work.”

For Chris Burton, the EU has now become comparable to shipping to the Far East and that is how he sees it developing once everybody gets used to the new situation.

“As an industry and a country, we are now a third party to the EU. Shipment out of the UK to the EU should be handled the same as UK to Far East. The paperwork needed is pretty much on a par in my experience. But the planning now needed is far greater than it once was when we were in the EU.”

David Wilson worries though that there will be a long-term reputational issue on UK plastic exports to the EU: “I wonder how long our EU customers will tolerate this? We need to be able to give reliable information about delivery dates and we simply can’t.

“I know these problems will be relatively short-term, but the damage right now is extreme. We’re going to need to see one hell of a Brexit upside to make up for this.”

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