Red meat exports: potential administrative costs of trade under WTO rules

3. Administration and Processes – Post-Brexit

There is consensus from red meat exporters and those involved in the supply chain that doing business with the EU post-Brexit will cost more. There are direct financial impacts which can be defined and determined, such as the cost associated with the EHC and the tariffs that will be applied. Indirect costs are more challenging to identify, but nonetheless can have a significant impact. Whilst the fixed costs apply to any business whatever their size, the indirect costs are more variable and likely to be more damaging to small businesses.

Larger processors are likely to have a dedicated resource to undertake the various tasks and adsorb the additional administrative costs. In a smaller business, with fewer employees, the impact of the new processes will add a disproportionate amount of cost to exporting.

The major change will be the need to provide an EHC for every customer shipment. It is anticipated that the number of certificates will increase post Brexit assuming that all business with EU customers is maintained.

Each EHC will also need to be authorised by a vet before the order can be dispatched. The authoriser will need to be booked in advance to be present at the plant in time to support the departure of the order. According to industry feedback, the additional costs for the origination of the EHC alone, could become a deterrent to exporting.

A new online process is being developed by the UK Animal and Plant Health Agency (APHA) that will be used to request the EHC and is expected to speed up the process. Once that is established, it is estimated that using the APHA online portal to apply for a certificate should take around 15 minutes.

A summary of the order and purchasing process post-Brexit is shown in the diagram overleaf.

Figure 2: Order and Purchasing Process - Post-Brexit

A summary comparison of the order and purchasing process pre and post-Brexit is shown in the table below.

Table 1: Pre and Post-Brexit Order Processing Actions Summary

Admin Task	Current	Brexit	What are the implications or different actions needed post Brexit?	Who by?
Respond to Order Enquiry	√	√		Sales Team
Seek Transport Quote	√	√	Anticipated volumes of traffic to be processed at the Calais BIP from the Channel Tunnel may encourage hauliers to look at other route options via ferry operators	Operations Team/Haulage Company
Determine Pricing	√	√	Import tariffs will need to be confirmed and added to invoicing and official documents for travel, depending on the trading terms agreed between supplier and customer	Sales Team, with Accounting input
Prepare Quote	√	√	New estimates on journey time will require to be built into order lead times, taking into account new consignment approvals and border inspections	Sales Team with Accounting input
Send Quote	√	√		Sales Team
Receive Order	√	√		Sales Team
Confirm Production	√	√		Sales Team with Production Manager
Confirm Transport	√	√	There will be a need to work closely with the hauliers to ensure availability of transport to satisfy orders, taking into account the longer lead times to the EU	Operations Team with transport provider
Order Packaging	√	√		Operations Team
Acknowledge Order	√	√	Need to ensure commodity codes are correct for different meat cuts and that correct tariff is applied	Sales Team
Book Production Slot	√	√	Once the order is confirmed between the exporter and the customer, the order is planned into the production plan.	Production Manager
Order Health Certificate	X	√	Once the order is confirmed and the purchase order received from the customer, an application will be made using the APHA online system to order the health certificate. This will be carried out by admin support in the meat processing companies	Operations Team
Book Vet/CSO	X	√	Once production is confirmed and planned and transport has been organised, the vet will then be booked to finalise the Export Health Certificate. A Purchase Order will be raised to pay for the vet	Operations Team
Produce Invoice	√	√	Any new trading terms, duty and import tariffs will need to be detailed on this. This may require amendments to be made to the format and layout of the invoice	Finance Team
Finalise Health Certificate	X	√	Plan time for vet visit to finalise and authorise shipment	Production Manager
Advise Agent or Importer	X	√	The Importer will help manage the goods into the EU and is responsible for sending the EHC to the BIP in good time.	Operations Team
Organise Duty Payment if Required	X	√	Duty may need to be paid, depending on the trading terms	Finance Team
Complete Paperwork and Dispatch Goods	√	√	A single Commercial Document must accompany the goods.	Operations Team
Border Inspection	X	√	Goods will need to be processed at a BIP on arrival in the EU	Driver
Potential Time To Deal with Delays	X	√	Delays at the BIP could also create knock on time delays if the trunker is carrying several customer orders, if the driver exceeds his maximum driving time as well as the return journey.	Driver/Transport Company
Tracking of Shipment and Troubleshooting	Limited	√	Time and resource cost unknown at present	Sales and Operations Teams

3.1 Summary of Key Issues for Industry

The following table highlights the key issues that will impact trade with the EU following Brexit.

Table 2: Post-Brexit WTO Status – Key Issues

Future Status	Export Certification	Border Controls
At the time of writing, the detail of when Brexit will take place and the trade implications are unknown The UK’s listed status application has been agreed by EU Member States after it achieved the animal health and biosecurity assurances required for a third country to export live animals and animal products. National listed status is the EU’s classification for non-member states A Competent Authority is an organisation that has the legally delegated or invested authority, or power to perform a designated function, normally monitoring compliance with the national statutes and regulations Within the UK, all establishments handling, and processing meat and meat products need to be approved by the Competent Authority It is anticipated that the Food Standards Agency (FSA) will take on the role of the Competent Authority for the UK	Following Brexit, each shipment of meat, or meat-based product, will need an export certificate before it can be dispatched to the customer Individual countries may also have specific requirements in terms of the types of documentation needed The export certificate needs to be issued by the APHA and authorised by a vet on the processor’s premises	Meat and livestock from the UK will also be subject to veterinary checks on arrival in the EU. The EU deems animal products as presenting a high level of risk and imposes more stringent import requirements Meat products will need to be channeled via border controls (BIPs), requiring additional paperwork to support the shipments Scottish processors will be required to provide a range of documents and declarations to comply with the Single Administrative Document, the passport required for exporters to bring goods into the EU. These include: Certificate of Origin Transit Permit (where a transit agreement does not exist between the third country and the EU) Commercial Invoice to show the calculation of tariffs and for customs declaration, security certificates, freight documentation VAT certification Customs valuation document Paper import license CVED (Common Veterinary Entry Document) (more info on Border Controls in Appendix 5)
Future Status Issues	Export Certification Issues	Border Control Issues
Clarification is still required as to whether Food Standards Scotland (FSS) will take on this role)	Not enough vets to deal with a quadrupling of export health certificates A significant reliance on EU nationals – 14% of the 2,500 vets working in Scotland are EU graduates[2] Uncertainty around the role CSOs in assisting vets with export health certificates: Will they be accepted by the EU? How many will be employed in Scotland? Where will they be based? What will it cost to hire them?	Uncertainty as to the level of product inspections that will take place at the BIP: a straightforward examination of paperwork may be required, or a more detailed inspection, encompassing both paperwork and physical cargo inspections Almost all the red meat exports from Scotland are moved to the EU via Eurotunnel and there are concerns that even short delays could have a damaging impact on fresh meat reaching the customer on time Time delays add cost and make the work more marginal, both for the transport company and the exporter

3.2 Additional Non-Tariff Costs

Currently, it is difficult to determine the extra cost of administration, as the exact process is not yet known and times needed for extra tasks are also unclear, but estimates have been calculated, based on the information available and the knowledge and experience of both the team and the meat exporters consulted during the research.

Assuming any new systems and processes are fully up and running and understood by everyone, it is estimated that the additional administrative tasks will add at least 50 minutes for each order – 40 minutes for administration and 10 additional minutes for calculating the duty and financial information. This covers the new tasks for each order, including requesting the health certificate via APHA, booking the vet, calculating and paying the duty, finalising and dispatching the health certificate and liaising with the importer.

A summary of these additional non-tariff costs is shown in Tables 3a and 3b overleaf.

Assumptions have been made that where tasks are undertaken by an administrative assistant, the rate used will be the Scottish Living Wage of £9 per hour (https://scottishlivingwage.org ), equating to £0.75 per 5 minutes.

Tasks undertaken by a finance manager have been calculated at £30 per hour, equating to £2.50 per 5 mins (a figure arrived at as an average cost, based on the information received from processors and previous experience of the team).

External vet fees varied between £40.00 to £60.00 per hour. Hours billed included travel time and usually an additional fee for fuel. The feedback was that 3 hours would be a reasonable average, along with £20 for fuel. Working on this basis, the most expensive vet costs would be £200.00 and the least expensive £140.00, though this could of course vary, depending on location and travelling time.

The CEVD document is charged on a weight basis and estimated at £65 in this worked example.

The calculation shows that per shipment to the EU (which could range from a single box, to a pallet, or a full truck load), the additional non-tariff costs will be within a range of £216.00 to £276.00. Smaller processors would most likely be towards the high end of the range and larger processors towards the lower end.

Many small producers send smaller orders of approximately 100kg, which will make the cost considerably more proportionally expensive per order. This may price these products out of the market, and simply make export business to the EU unviable.

It is the unknown and unquantifiable costs that perhaps present a greater financial risk. These include the waiting times to access the BIP at Calais, the late arrival of an order which is rejected and needs to be disposed of, or sold to another customer at a lower cost, as well as the knock-on impact from the haulage industry of additional costs. Research undertaken by the European Livestock & Meat Trades Union (UECBV) highlights that a delayed driver at a border crossing with a refrigerated truck costs approximately £500 per day.

The higher costs do present a commercial risk to businesses in the Scottish red meat sector, as profitability will be reduced when operating in these markets. This may deter some from continuing to do business with customers in the EU, whilst others will try to absorb the costs to maintain and protect their sales and customer relationships.

Table 3a: Estimated Costs of Additional Administrative Tasks Post-Brexit (based on vet at £40.00 per hour for 3 hours and £20.00 expenses)

Task	Current Status	No Deal Brexit	Internal Admin £	External Fees £	Cost £
Respond to Enquiry	√	√
Seek Transport Quote	√	√
Determine Pricing	√	√
Categorise Cuts	√	√
Prepare Quote	√	√
Send Quote with Delivery Schedule	√	√
Receive Order	√	√
Confirm Production Dates	√	√
Confirm Transport Arrangements	√	√
Order Packaging	√	√
Acknowledge Order	√	√
Book Production Slot	√	√
Book Transport	√	√
Order Health Certificate	X	√	0.75
Book Vet	X	√	0.75	140.00
Produce Product	√	√
Produce Packing Note	√	√
Produce Invoice	√	√	5.00
Finalise Health Certificate	X	√	0.75
Send Health Certificate to BIP	X	√	0.75
Confirm Arrival of Health Certificate Before Product Shipment	X	√	0.75
Advise Customs of Shipment in Advance (may be required)	X	√	0.75
Organise Duty Payment (may be required)	X	√	0.75
Advise Importer	X	√	0.75
Ship Product	√	√
Pay Fee for CVED document	X	√		65
Deliver Product to Customer	√	√
Total Additional Costs			£11.00	£205.00	£216.00

Table 3b: Estimated Costs of Additional Administrative Tasks Post-Brexit (based on vet at £60.00 per hour for 3 hours and £20.00 expenses)

Task	Current Status	No Deal Brexit	Internal Admin £	External Fees £	Cost £
Respond to Enquiry	√	√
Seek Transport Quote	√	√
Determine Pricing	√	√
Categorise Cuts	√	√
Prepare Quote	√	√
Send Quote with Delivery Schedule	√	√
Receive Order	√	√
Confirm Production Dates	√	√
Confirm Transport Arrangements	√	√
Order Packaging	√	√
Acknowledge Order	√	√
Book Production Slot	√	√
Book Transport	√	√
Order Health Certificate	X	√	0.75
Book Vet	X	√	0.75	200.00
Produce Product	√	√
Produce Packing Note	√	√
Produce Invoice	√	√	5.00
Finalise Health Certificate	X	√	0.75
Send Health Certificate to BIP	X	√	0.75
Confirm Arrival of Health Certificate Before Product Shipment	X	√	0.75
Advise Customs of Shipment in Advance (may be required)	X	√	0.75
Organise Duty Payment (may be required)	X	√	0.75
Advise Importer	X	√	0.75
Ship Product	√	√
Pay Fee for CVED document	X	√		65
Deliver Product to Customer	√	√
Total Additional Costs			£11.00	£265.00	£276.00