Supply Lines: A real cliffhanger

Supply Lines
Bloomberg

Spare a thought for Tim Reardon, the head of European Union exit at the Port of Dover, which is used by up to 10,000 trucks daily. 

He's at the heart of the biggest man-made supply-chain problem Britain has faced in decades: how to replicate the status quo — where lorries seamlessly flow off ferries and through his port — when the U.K. needs to impose customs controls on EU goods, as is the consequence of Brexit?

The iconic geography of Dover is part of the challenge. With sheer cliffs on one side and the English Channel on the other, there is no space for hundreds of vehicles to be parked to await a customs inspection, and any slight delay in the flow of traffic would cause miles-long queues.

The U.K.'s proposed answer is a so-called pre-lodgement model, where customs declarations are submitted electronically in advance, before a truck is allowed to enter the port and board a ferry.

How will the system work? A draft government plan seen exclusively by Bloomberg News gives some clues. Companies will have to obtain a valid reference number from a new and untested IT system before being permitted to send a truck to the port. Details of how this will be enforced are light.

'Much Work'

"There is much work still to do in order to define the physical processes and associated data flow for lorries moving between the U.K. and France," Reardon said. "The next few weeks and months will be busy."

Britain knows it is in a bind over its new customs checks with the EU. In light of the coronavirus pandemic and concerned about the readiness of businesses for the change, it has given traders a six-month grace period on complying with new red tape for EU imports. However, the EU has said it will impose full controls on exports from the U.K. as soon as it completes its split from the bloc, due on Jan. 1.

This means Reardon has plenty to be concerned about in the months ahead. If trucks wanting to travel to the EU try to cross to France after Brexit without the correct paperwork, they will be held up in Calais. Blockages in Calais quickly mean bottlenecks in Dover. And that is a sight the British government desperately wants to avoid.

It's also what road hauliers and others in the logistics world fear, as it would spell a hit to their profits and unhappy drivers. Plus, it would disrupt an essential artery in Britain's supply chain, risking perishable goods such as fresh fruit and vegetables headed to British or EU supermarkets.

"We need clarity, and we need clarity fast," said Rod McKenzie, managing director of policy and public affairs at the Road Haulage Association. "There are so many gaps, so many unknowns."

Joe Mayes in London

Charted Territory

 

European leaders talk of shortening supply chains and curbing China's "Belt and Road" plan. But on the ground, companies find they are in no position to cut ties with the Chinese.

Today's Must Reads

  • Phase-one watch | China's purchases of U.S. goods increased last month as the economy continued its recovery from the coronavirus shutdowns, but imports are still far behind the pace needed to meet the terms of the "phase one" trade deal.
  • Licensed to sell | The Trump administration made it harder to export sensitive American technology to Hong Kong, escalating pressure on China as lawmakers in Beijing prepared to hand down a national security law that limits the former British colony's autonomy.
  • Farm pressure | The U.K. will set up a new commission to inform its post-Brexit agricultural policy, bowing to pressure from British farmers and potentially complicating trade negotiations with the U.S.
  • Diversifying sources | A souring relationship with Australia and iron-ore supply shocks in Brazil may reignite China's ambitions to reduce its dependence on major overseas producers for the material critical to its giant steel industry.
  • Long-running dispute | The Japanese government blocked South Korea's initial request for a World Trade Organization dispute inquiry into Tokyo's export-license restrictions on electronics components.
  • Standoff fallout | Imports from China have been piling up at Indian ports pending government clearances, causing concern that a recent border standoff between the two nations could have an economic fallout that will disrupt supply chains.

On the Bloomberg Terminal

  • Stealing shine | Palladium-supply disruptions, such as mine closures to curb the Covid-19 pandemic, could keep the market in a deficit and cushion the virus-price downside risk, Bloomberg Intelligence writes.
  • Easing pain | As a lack of last-mile credit availability may further deepen the economic recession, governments and central banks across most Asian markets are trying to incentivize banks to lend and lower borrowing costs for cash-strapped small and medium-sized enterprises.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.
 

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