Written evidence submitted by NFU Scotland (SME0016)
Date : 18 February 2021
- NFU Scotland (NFUS) welcomes the opportunity to submit evidence to the Committee further to the implementation of the Trade and Cooperation Agreement (TCA).
- In NFUS’s view, a so-called ‘no deal’ Brexit outcome would have been disastrous for the Scottish agricultural industry. The TCA ensures that there are no tariffs or quotas on agri-food goods, which is vital. As such, NFUS welcomed the positive conclusion of the future relationship negotiations on 24 December 2020.
- However, what the Agreement does not satisfy is NFUS’s priority for trade in agri-food goods to be friction-free. Whilst the UK has secured ‘national listed status’ for the trade of live animals, products of animal origin and plants, extensive checks Sanitary and Phytosanitary Standards (SPS) are required. This involves substantial paperwork and physical inspections, which is causing friction, delay and extra costs for traders. As per the section below on alignment, NFUS believes it is vital that a solution is found to minimise friction in trade between Great Britain (GB), Northern Ireland (NI) and the EU.
- With new systems being implemented in a live environment, the situation is fast-moving and NFUS is involved in close and regular dialogue with stakeholders and government(s) to address and seek resolution to issues and problems as they arise. Nonetheless, it is important to emphasise that the issues causing trade disruption should not be characterised as ‘teething issues’ – in the vast majority of examples, set out in this submission, there are clear evidence of structural challenges which are creating barriers to trade in practice. It is vital that resource and support is available from both the UK and Scottish governments to support the whole food and drink sector through the short, medium and long-term impacts of any trade disruption.
- This submission identifies the key issues for agri-food and primary agricultural producers at the time of writing.
- As detailed in this submission, many of the export difficulties being experienced stem from the compliance needs associated with export health certificates and customs declarations. The extra cost and time levied by these compliance requirements present a new, but possibly permanent, hindrance to trade.
- NFUS believes that immediate priority must be given to streamlining these forms and processes through digitisation as an absolute minimum. However, it is abundantly clear that it is not in the UK nor the EU’s interest to allow trade friction to continue and additional steps must be taken bilaterally to simplify and minimise the requirements needed through an export health certificate and customs declarations.
- NFUS has always maintained that as both the EU and the UK have the same SPS rules in place, agreements on equivalence and the mutual recognition of each other’s rules should be accepted to ease the flow of these goods. Only when either partner makes a change to those SPS rules should it be necessary to require an export health certificate or customs declaration.
- NFUS understands that the meat industry is taking a cautious approach to exports, with export volumes currently at 25-30% of normal levels as it adjusts to the new rules and adapts to the system in a live environment.
- The main challenge relating to meat exports is the new requirement for Export Health Certificates (EHCs), which require extra time and impose extra costs, with very little leeway on paperwork. Requirements around EHCs have created a whole new set of rules for authorities to follow. NFUS is aware that challenges have been created by lack of detailed guidance from UK Government for certified officers which has created some inconsistency between certifying officers and processing plants on the application of the new rules before products are despatched to customers in the EU.
5.1. A practical example is as follows. A shipment of pork going to the EU now requires 27 different signatures and stamps from an official veterinarian on the EHC. It is therefore clear that difficulties or inconsistencies can arise at multiple points. An error or inconsistency on paperwork will mean a shipment not getting to its destination, and NFUS is aware of delays of up to 48 hours occurring for products reaching end customers.
5.2. EHCs currently prohibit fresh mince exports to the EU. This is an issue that is as-yet unresolved, and will not be mediated by the introduction of the new EU Model Health Certificate in April 2021. NFUS understands that the potential loss in revenue to the sector could be £1.5 million unless alternative buyers can be found within the UK market.
5.3. NFUS is aware that customs checks at EU ports are creating delays of up to three days, increasing the cost of transportation and delaying the delivery of product to customers. This is exacerbating further the already-significant decrease in volumes of red meat being exported from the UK. This increased risk is reducing business opportunity at a substantial rate.
- It should be noted that in recognition of the exponential increase in paperwork, Food Standards Scotland (FSS) has worked closely with industry to increase the number of certifying officers who are working at capacity to ensure throughput. NFUS believes that if there could be a tightening of guidance and training for certified officers then there would be better consistency, therefore reducing capacity for delay and additional cost. This must be a focus for the UK Government.
- Similarly, NFUS believes the UK Government should seek to secure assurances from the EU that there will be a consistent approach for European EHCs, and a wider commitment to simplify SPS requirements going forward.
Seed potato sector impacts
- A major failure of the trade deal from the perspective of Scottish agriculture is on seed potatoes. Despite negotiations taking place for over two years, it was not possible for the UK and the EU to agree equivalence on seed potatoes, resulting in significant prohibitions on seed exports to the EU and, by extension, NI. The consequence for growers has been immediate and grave.
- As an EU Member State, Britain exported around 30,000 tonnes of seed potatoes, worth £13.5 million, to mainland Europe each year and the majority of these were high-health stocks grown in Scotland. This is therefore an issue which is particularly damaging to the sector in Scotland due to loss of these lucrative markets.
- NFUS welcomed the rapid action of Defra in submitting an application for equivalence to the European Commission in the first week of January. However, it is hugely disappointing that the EU Standing Committee on Plants, Animals, Food and Feed has continued to block the application on what NFUS considers to be increasingly spurious grounds.
- The primary area of disagreement between the UK and EU has always been on Dynamic Alignment. Whilst it has not been possible to agree to Dynamic Alignment on standards for seed production, it is NFUS’s view that the EU position is not in the spirit of the TCA due to the fact that the TCA specifically incorporates measures to deal with Sanitary and Phytosanitary (SPS) measures in the absence of Dynamic Alignment.
- NFUS’s analysis is that the TCA requires that decisions should be science-based and “that Parties’ SPS measures do not create unnecessary barriers to trade”. NFUS’s assessment is therefore that by signing the TCA, the UK has agreed to SPS provisions within it including requirements to:
12.1. Give notice of any changes that might affect our capacity to fulfil EU SPS import requirements;
12.2. Notify changes in our competent authority;
12.3. Provide reports of our official controls and results;
12.4. Allow the EU to verify our controls.
- The UK’s 2020 seed potato crop was produced in compliance with EU regulations so there is no greater risk to the EU than there was while the UK was a Member State. Similarly, Scottish systems of production have not changed, there are no proposals to change and there is no wish within the UK potato industry to change it in ways that would compromise the plant health. Scotland is an exporter of seed to many countries outside of the EU; it is not in the industry’s interest to lower standards. NFUS therefore strongly believes that the requirements above provide the EU with essentially the same controls as it has now with its Member States to ensure that seed potatoes that are marketed within the Union meet its standards. To continue blocking the UK’s application for equivalency in order to export is therefore incompatible with the TCA in NFUS’s view.
- NFUS emphasises that there is some urgency to this issue, as Scottish seed potato growers need to decide by the end of February if they are to plant the varieties wanted in Europe or instead the processing varieties that growers in England will need to replace those that have normally been sourced on the continent. The seed potatoes grown in 2021 are the raw material for the crops that will be grown in England and elsewhere in 2022. The sector therefore requires clarity now if the UK supply chain is to have any chance of adapting for this season.
- Of equal importance is the joint UK Farming Union policy that seed potato trade with the EU must be reciprocal. The current derogation that allows EU seed potatoes to come into the UK until the end of June 2021 has, in NFUS’s view, been unhelpful in encouraging an agreement on equivalence. This asymmetrical arrangement is putting UK producers at a disadvantage and NFUS is advocating strongly for this not to be extended.
Vegetable sector impacts
- The vegetable sector has also encountered issues exporting to NI and EIRE. Seven days’ notice of exports are required, making it impossible to meet short notice requests from buyers. Inspections and the requirements to complete additional paperwork are also adding cost, and this issue has been exacerbated by a shortage of staff who can undertake inspections. NFUS understands that SASA are undertaking recruitment in order to ease this issue.
- There are emerging issues for firms who use groupage. Prior to 1 January, it was possible for firms to group various products into a consignment and back-fill loads, therefore keeping cost and logistics at a minimum. With the introduction of EHCs, groupage has now become a major difficulty as each product and each company will require separate EHCs, which vastly multiplies cost. As a result, exports are either not going at all, or companies or having to send their loads in smaller trucks or vehicles that are not filled.
- Where groupage is happening, this remains bureaucratically burdensome and costly for those exporters. This is hugely problematic for the Scottish food and drink sector where there are a large number of small producers and exporters to whom groupage is extremely important. It is therefore important that measures are put in place to assist with groupage and to enable consolidated loads to be exported – otherwise there could be significant implications for the medium to longer-term expansion of the Scottish food and drink sector.
- As per the terms of the Agreement, varying rules of origin percentages apply for different products and some issues are beginning to emerge with composite food and drink products where the constituent parts come from several different sources and countries. This is causing major issues for the processing sector who use composite products and in some cases are unable to export. There is risk and opportunity in this issue:
19.1. The risk is that if processors and companies lose sales as a result of being unable to export composite food and drink products they may look to relocate, which could mean a lost market for Scottish primary producers. Scottish primary producers are extremely vulnerable to supply chain shocks and any loss in processing/manufacturing capacity could create major and immediate implications at the farm-gate.
19.2. Conversely, there is a potential opportunity for primary producers if composite products can be identified within the domestic market rather than being sourced from outside the UK. However, any opportunity to realign the domestic supply chain in order to find solutions to problems with Rules of Origin for composite goods may require investment and assistance from government.
- NFUS understands that there are logistical problems in the supply chain for animal feed and fertiliser. The feed sector is still trying to establish whether EHCs are required for exports the EU (and by extension, NI) of feed containing certain processed animal proteins. This is particularly relevant for feeds containing materials such as milk and milk derived products, gelatine, hydrolysed proteins, eggs, dicalcium phosphate and collagen. Currently, there is no clear guidance on certification, and as a result livestock feed exporters are unable to export products to NI or the EU. NFUS understands that FSS are pursuing this issue.
- NFUS had been made aware that in the initial days of implementation of the TCA there were logistical issues relating to export of GB grain to the EU. The issue related to confusion of customs staff in the EU who were not aware that grain shipments did not require a phytosanitary certificate, which led to consignments being held up on the border. This issue has now been resolved, however it is an important example of where early intelligence and intervention from customs officials and governments is vital in order to ensure everyone is operating from the same rules and that the matter is swiftly resolved.
- Moreover, it is important to emphasise the obvious concern that if exports from the UK continually do not arrive on time then customers in the EU may look to source from other suppliers. Once the customer has found another supplier it will be difficult to win back the business. Due to the Border Operating Model, suppliers from the EU able to service UK customers with no friction or disruption, which creates an asymmetric situation between traders either side of the Channel. NFUS wishes to see more urgency from the UK Government to push EU counterparts for more flexibility for UK exporters who are at a disadvantage. NFUS continues to believe that had there been a grace period in place to allow the same system to apply on both sides of the Channel whilst businesses adapted to new rules then this situation may have been avoided.
- The edible and ornamental horticulture and potatoes sectors must bring in seasonal workers from outside of the UK if the seasonal harvest is to be successfully completed. The UK Government has confirmed that it will expand the Seasonal Worker Pilot Scheme to allow an additional 30,000 workers to enter the UK to undertake essential seasonal work in 2021, in addition to returning workers from the EU who have Settled or Pre-Settled Status, and workers from the domestic population.
- NFUS has strongly welcomed the increase in Seasonal Worker Pilot Scheme permits. Throughout 2020, stringent protocols were in place to ensure that seasonal workers arriving in Scotland were exempt from travel restrictions to undertake work on-farm immediately and safely. These protocols, agreed between the industry and the Scottish Government, proved very effective. NFUS understands that similar exemptions from Covid-19 travel restrictions and hotel quarantine will apply to the seasonal workforce in 2021, which will be vital as the season moves towards its peak. Without non-UK seasonal workers it will not be possible for the seasonal harvest to be completed, with a risk of crop loss and disrupted supply to the domestic and export markets.
Sheep scrapie monitoring
- A further non-tariff barrier that has been introduced by the Protocol on Northern Ireland relates to the movement of sheep from Great Britain to Northern Ireland. New technical requirements now require live sheep being moved from GB to NI either be from a scrapie monitored flock, or to have passed a genotype test. Due to the substantial time and investment involved in fulfilling these two requirements, it essentially spells a prohibition for traders. NFUS has raised these concerns with both the Scottish and UK Governments to seek a resolution.
 NFU Scotland press release, 24 December 2021: https://www.nfus.org.uk/news/news/union-reacts-to-eu-trade-deal-announcement
 Article SPS.1: Objectives, page 42.
 NFU Scotland press release, 22 December 2020: https://www.nfus.org.uk/news/news/huge-nfu-scotland-lobbying-effort-secures-seasonal-worker-scheme-for-scottish-horticulture-sector