Farm Ireland
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Thursday 15 November 2018

Analysis: Brexit risks for farming grow more real as talks go down to the wire

Photo: AFP/Getty Images
Photo: AFP/Getty Images
Carol Lynch

Carol Lynch

While Brexit talks hit another impasse over the weekend ahead of the EU Summit in Belgium, the risk for the agriculture and food sector is becoming increasingly real.

The results of Brexit negotiations and their impact on Ireland are outside the control of the Irish farming and food industry. However, there are a number of steps businesses, both food and farming, can take to ensure the impact of changes to trading policy with the UK are mitigated.

A significant amount of Irish companies sell over 50pc of their goods to the UK, and also buy critical raw materials. As a result, Irish food and drink companies buying from or selling to the UK are going to be seriously impacted by Brexit.

In addition, the all-Ireland economy for food and drink products will be put under huge stress if there are border controls introduced between North and South.

The extent of controls will depend on whether a trade agreement is put in place firstly, and the extent of regulatory alignment secondly. While these issues are currently under negotiation, there is no forward progression and the risk this poses to agriculture and food is becoming increasingly real.

At this point, the Government and EU are advising companies to put in place contingency plans for a worst-case outcome, whilst still hoping for best case scenario of a transition period to December 31, 2020.

As mentioned, the impact of Brexit on farming and agriculture could be extensive.

Let's start with customs duty. When goods are imported into the EU from a non-EU country, customs duties are applied - unless there is a free-trade agreement (FTA).

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Unfortunately, customs duties on food and agri products can be extremely high, and these products are also often subject to additional CAP rates.

As a first step, all importers therefore need to check what these rates might be. Similarly, the UK may apply customs duties on EU or ROI imports. We do not know what these rates may be but, at worst, they may be the equivalent of EU rates. Therefore, scenario planning needs to be carried out to determine the potential best and worst-case scenarios.

One of the major issues with Brexit so far has been Britain's attempts to negotiate the terms of a free-trade agreement. If such an agreement is concluded, then it is likely there will be no customs duties on originating products traded between the UK and EU (ROI).

This is however dependant on the goods being traded qualifying as "originating".

There are very strict rules for determining origin status which involve firstly determining the tariff classification of the finished product, secondly determining the status of the inputs, and finally calculating whether there is sufficient added value to meet the origin determination. In other cases there are specific rules required, such as that all meat must be produced from EU livestock.

This is a complex area but needs to be taken into account in determining whether you will qualify for a FTA.

In order to obtain the FTA rate, you will also need to issue documentation (EUR1s/Invoice Declarations) to prove to customs that your goods do qualify for the rate.

Imports of food products into the EU are subject to very tight food safety and border controls. Food of animal origin may require veterinary checks and certificates and need to be presented at approved Border Inspection Posts (BIPS) and food of non-animal origin will require certain veterinary certs.

In addition, food importers may require to be registered with the Department of Agriculture, provide advance notice of importation and meet other packaging and labelling laws.

Finally, in some cases, imports are only allowed from approved establishments. This can slow down the process of clearance and can add additional costs - a problem for perishable products in particular.

The UK position in this regard is not yet known, but should be made clearer in the coming weeks.

With regards to food legislation, there are strict EU controls on food labelling and standards which imports from the UK will now need to comply with.

I recommend obtaining specialist advice from a food lawyer in this area. There are resources available to support businesses with their Brexit preparations; including several Brexit funding options such as the Brexit Loan Scheme, the Enterprise Ireland Be Prepared Grant, Bord Bia's training and preparation programmes. It cannot be emphasised strongly enough that businesses need to consider every element of Brexit including border delays, supply chains, contracts and price changes.

If you are involved in importing or exporting food, agricultural products or livestock, you need to start preparing for the impact of Brexit as a matter of urgency. As this is an extremely complicated area, we recommend obtaining specialist support.

In addition, I would strongly recommend contacting Bord Bia who run a number of Brexit support and training workshops both in customs and other areas such as supply chain and currency which will all be impacted by Brexit.

We are now close to the wire with a high risk of a no deal Brexit happening by default. Therefore, it's become vital that businesses continue to prepare for Brexit or immediately start if they have not done so.

Carol Lynch (partner) BDO Customs and International Trade Services department

Indo Farming

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