Stock up and hope for the best appears to be the only reasonable way to approach the UK. Photo credit: Shutterstock.com.

Shippers and forwarders are trying to assess the impact on trade of the Brexit deal currently on the table as well as the consequences of the UK leaving the European Union on March 29, 2019 without a deal in place.

As it stands, British Prime Minister Theresa May and Chief EU Negotiator Michel Barnier have agreed on a 585-page draft of the terms governing Brexit, which, after getting through the Westminister Cabinet, needs to now be approved by the EU members.

The key part of the deal for the cargo supply chain is that it includes a 21-month transition period, during which the current trading rules will essentially remain the same.

“The rules governing cross-border shipments, which are in place at the moment, will remain as they are until the end of the transition period in December 2020,” according to a note to customers by Simarco Worldwide Logistics.

During that period, discussions will continue to determine the finer points of reaching what both sides have described as a “close future relationship” with the aim of that process being completed by July 2020.

However, Simarco said if no agreement on the finer detail was reached by the time the transition period ended, a “backstop” plan would be initiated on Jan. 1, 2021. As part of that, the EU and UK would become part of a single customs territory.

Simerco said according to Article 2 of the withdrawal agreement, "customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the parts of the single customs territory."

However, it is the possibility of a no-deal Brexit that deeply concerns those within the cargo supply chain.

The European Shippers’ Council (ESC) said no deal would result in vehicles traveling between the UK and Europe, regardless of where transport companies were registered, requiring a permit to access the UK and EU haulage markets. Community licences issued by the UK would not be accepted by the EU.

Surface transport

“It is important for road haulage that the existing levels of transport connectivity with the EU remain the same after Brexit without the need for new transport documents or systems. Achieving an agreement that delivers this would be beneficial for all stakeholders,” the ESC said in a statement.

This concern over trucking was also expressed by Sebastiaan Scholte, CEO of the Netherlands-based Jan De Rijk Logistics, who said his trucks made more than 20,000 trips per year between Europe and the UK.

“If there is no deal we will really have a problem,” he told JOC.com. “The World Trade Organization [WTO] rules will apply so there will be high import duties, but we will also need permits for drivers and for trucks. If you go out of the EU, for example into Ukraine, you need to ask the EU for permission, so it is unlikely there will be enough permits to go from the EU to the UK.”

The ESC said a solution put forward was for truckers to make the trips using European Conference of Ministers of Transport (ECMT) permits. The multilateral permits make cross-trade possible but not cabotage. However, the ESC said there were restrictions on the number of trips that could be performed with a given permit and there was a limit to the number of permits issued per country. For the UK, that limit was 1,224 permits annually.

An estimated 14,000 trucks are crossing the UK-EU border every day and 53 percent of UK imports originate in Europe.

The shippers’ council said to avoid the chaos and shortages that would be caused by allocating the the permits on a first come, first served basis, the UK government introduced secondary legislation outlining allocation criteria, such as intensity of use, or the importance of international transport for a given company. The conclusion by the ESC was that even if the legislation was passed by the UK parliament, it would still not be enough.

The likelihood of major disruption to trade after Brexit has seen shippers boosting inventories in preparation for lengthier customs clearance and permit issues for truck drivers and vehicles.

Philip Stephenson, chairman of UK forwarder Davies Turner, said the service provider was dealing with a surge in inquiries from its Europe partners over the availability of warehousing space. The companies want to stockpile more goods than usual in preparation for supply chain disruption that may occur around the as-yet-unknown transition period following the UK’s departure from the EU.

“We suspect that the ongoing uncertainty over Brexit will only lead to more demand for short-term storage in the event of no deal or an unsatisfactory outcome with no mutual recognition or trading agreements in place,” Stephenson said.

Detlef Trefzger, CEO of Kuehne + Nagel, said supply chains would have to be adapted for Brexit. “Our customers have started to build up inventory in the UK and are asking us for 6 to 12 months of additional capacity to build up a buffer until they have a better idea of what the impact will be,” he told JOC.com.

The International Road Transport Union (IRU) has warned that no deal between the UK and the EU could see transport and trade grind to a halt.

“Leaving the EU without a comprehensive multilateral deal on road transport and trade would be the worst possible outcome for the road transport industry, with serious knock-on effects for the economies of both the UK and remaining EU members,” said Matthias Maedge, the IRU’s general delegate of the permanent delegation to the EU.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.