Written evidence submitted by Quality Meat Scotland (SME0007)

 

QMS Briefing

 

 

Purpose: To provide advice on the impact of EU Exit on the Scottish Red Meat Industry

Prepared By: Sarah Millar Director of External Affairs

Contact: smillar@qmscotland.co.uk

Date: 16/02/2021

 

Quality Meat Scotland is a Non-Departmental Public Body. This advice is provided under the Quality Meat Scotland Order 2008 Schedule 1 point 18   Advising on any matters relating to the red meat sector (other than remuneration or conditions of employment) as to which the Scottish Ministers may request Quality Meat Scotland to advise, and undertaking inquiry for the purpose of enabling Quality Meat Scotland to advise on such matters ‘. This advice is freely available and further information can be provided by the designated contact above.

 

 

  1. Which seafood and meat exports have been particularly affected by border delays and disruptions since 1 January, and why?

 

A range of red meat producers and products have been impacted by border delays and disruptions since the 1st of January. The issues faced can be split down into key issues;

 

  1. Trade to Mainland Europe:

 

    1. One processor has highlighted that they have stopped sending British lambs to the EU due to profit margins being eroded by additional cost, and increased risk reducing the business opportunity.
    2. 2- or 3-day delays at ports are common as customs checks take place, increasing the cost of transportation and consequent delays in getting product to customers. This is a concern because volumes being sent are significantly down at present due to COVID-19 also affecting the EU foodservice markets and companies holding back sending consignments due to the impact of Brexit at the ports.  Some customers are also reporting that their national Government is applying charges releasing for UK imports.

 

  1. Trade to Northern Ireland:

 

    1. Rules of origin is causing one processor an issue as goods are sent from Scotland to NI, then on to Ireland for further processing. This product is then returned to the UK for foodservice. The processor has ceased this operation until they can establish if they will have to pay a tariff when the product is imported back to the UK.

 

 

 

 

  1. Groupage:

 

    1. Removal of groupage service by haulage companies is affecting 3 of the Scottish processors. Two of these processers have been able to rearrange some of their export logistics to mitigate the issue but have only been able to do this because of the larger volumes that they have been exporting.
    2. One processor is unable to do this due to the low volumes (but high value) of product that is currently being exported. This means that this processor is unable to service orders placed by European customers.
    3. All three processors are exporting lower volumes due to issues with groupage.

 

 

 

 

 

  1. The Exporting System:

 

    1. There are a number of processes and systems within the exporting process which would benefit from being upgraded and streamlined to reduce the amount of time and risk when exporting product to EU markets.

 

      1. There are delays being reported in receiving customs documents.
      2. Customs are incorrectly clearing POAO.
      3. Inconsistent application of hygiene controls at BCPs.
      4. Plant numbers missing from Traces (no Scottish plants affected).
      5. Lack of knowledge from importers of customs procedures.
      6. Complaints that UK Gov systems aren’t properly integrated.
      7. Systems problems on the French side.

 

    1. Trade bodies have highlighted the need for a new fully integrated electronic customs system, but this won’t be a quick fix.

 

  1. Export Health Certificates:

 

    1. The issue with EHCs not allowing fresh mince exports to the EU customer is a significant issue for one processor.  The new EU Model Health Certificate that is due to come into place on 21st April will not resolve this issue.
    2. We are still awaiting clarification on two EHC’s for Animal by Products, which we are querying whether they require a 40-day standstill from the final holding pre-slaughter. If this is the case, there will be significant issues within the supply chain to resolve.
    3. Trichinella controls – we are awaiting the outcome of our application regarding the ability to certify other pigs or fresh meat from them as coming from controlled housing without the need for trichinella testing – decision end Feb at earliest. QMS is working with Scottish Government directly to align our QMS Pig Quality Assurance Scheme and Quarterly Vet Declaration to ensure continuity with EHC’s.

 

    1. Overall, the complexity of completing EHC and additional customs administration is significantly increasing export costs. In the red meat industry, where margins throughout the supply chain are slim, this reduces the business appetite for export. Specifically, processors have cited the below issues with the EHC system:

 

 

      1. EHC process and system cumbersome & needs fixing.
      2. There are missing boxes on forms for product codes.
      3. Page numbers require to be added by hand.
      4. Data on EHC & Traces must be identical – if there is a slight misalignment, the load is stopped.
      5. If there are any typos within the EHC or customs paperwork, the load is stopped.
      6. We are awaiting clarification on whether frozen and chilled product can be certified on the same EHC.
      7. There is no SOP for vets to complete EHC’s and many of the questions are subjective, leading to some inconsistencies.
      8. There is no SOP for vets to complete EHC’s and many of the questions are subjective, leading to some inconsistencies. (FSS have circulated an SOP checklist)

 

    1. There has been an inconsistent approach at ports regarding accepting amendments, particularly when they are handwritten.

 

 

 

  1. What impact have delays and non-tariff barriers on seafood and meat exports to the EU had on UK businesses?

 

    1. Loss of business due to prohibitions and restrictions, particularly with there being no EHC for fresh mince. The inability to export fresh mince etc into European customers will result in a collective drop in revenue in the region of £1.5m unless alternative buyers can be found within the UK market, which will all probably be at a discount price. This will have an additional impact on carcase balance. The new EHCs due to come in in April will not resolve this.
    2. The pig processing sector face around an extra cost £75k pa for meeting the EU’s trichinella testing requirements.
    3. Across the entire sector, SAMW estimate the annual bill for EHC charges to the processing sector will be circa £1m.
    4. Removal of groupage service by haulage companies is affecting 3 of the Scottish processors. Two of these processers have been able to rearrange some of their export logistics to mitigate the issue but have only been able to do this because of the larger volumes that they have been exporting.
    5. One processor is unable to do this due to the low volumes (but high value) of product that is currently being exported. This means that this processor is unable to service orders placed by European customers.
    6. All three processors are exporting lower volumes due to issues with groupage.
    7. 2- or 3-day delays at ports are common as customs checks take place, increasing the cost of transportation and consequent delays in getting product to customers. This is a concern because volumes being sent are significantly down at present due to COVID-19 also affecting the EU foodservice markets and companies holding back sending consignments due to the impact of Brexit at the ports.  Some customers are also reporting that their national Government is applying charges releasing for UK imports.
    8. Scotland’s red meat exporters have reported that exports in January 2021 were running at 20-25% of January 2020 levels. While a significant proportion of this reflects reduced demand from the foodservice sector, a large proportion reflects the challenges caused by non-tariff barriers and, if the foodservice sector were to recover, export volumes would remain depressed below historical levels.  At 20-25% of January 2020 levels, beef exports are estimated to have fallen by approximately £2.8m-£3m from a baseline estimate of £3.7m for January 2020.  Meanwhile, at 20-25% of year earlier levels, lamb exports are estimated to have fallen by £1.5-£1.6m from January 2020 levels of around £2m.

 

 

 

(a) What are the medium to long-term implications of the non-tariff barriers for UK exporters and supply chains?

 

    1. There are some concerns building that longer term export markets look less attractive to businesses, particularly when margins are slim, and the risk to disruption (for example, risk to carcase balance) negates the business opportunity from expanding into new markets.
    2. We are currently sheltered from the worst of the impact. For example:

 

  1. What steps should the UK Government take to mitigate these issues? What should its short and long-term priorities for action be?

 

Short term:

 

Long term:

 

 

 

4. How effective and timely will the Government’s proposed £23 million support package for seafood exporters be?

 

5. How useful and responsive were the guidance and support provided by the Government to business, before and since 1 January?

6. What can the UK learn from other countries who export food to the EU?

 

7. How ready is the UK to introduce checks on food imports from the EU during 2021, and are there lessons to be learnt from the issues that UK exporters have faced?

 

 

 

February 2021