Brexit, international trade and the potential implications for the GI sector

RWA recently spoke with a leading insurance broker regarding the threat of Brexit on the UK GI sector, and in particular, on one of their specialist areas, international trade.

The broker kindly agreed to capture their concerns and share them with regular readers of RWA Insight, as follows:

The UK Brexit Secretary, Dominic Raab, told a technology conference on Wednesday 7th November: "We want a bespoke arrangement in goods which recognises the peculiar, frankly, geographic, economic entity that is the United Kingdom.

"We are, and I hadn't quite understood the full extent of this, but if you look at the UK and if you look at how we trade in goods, we are particularly reliant on the Dover-Calais crossing.

"And that's one of the reasons why, and there's been a lot of controversy about this, but one of the reasons why we wanted to make sure that we have a very specific and very proximate relationship with the EU to ensure frictionless trade at the border, particularly for just-in-time manufacturing goods whether it's pharmaceutical goods or perishable goods like food.

"I don't think it's a question so much of the risk of major shortages but I think probably the average consumer might not be aware of the full extent to which the choice of goods that we have in the stores are dependent on one or two very specific trade routes.”

According to BBC reports (https://www.bbc.co.uk/news/uk-politics-46142188 November 2018), “Dover is indeed an important port for the UK. It is by far the biggest UK destination for roll-on roll-off ferries, handling 2.9 million lorries last year. Of the 120,000 cargo-carrying vessels that arrived in the UK in 2016, 13% of them came into Dover.

“But that doesn't make Dover the biggest freight-handling port. In fact last year it was only the ninth biggest by tonnage, handling 26.2 million tonnes, which is about 6% of the total amount of freight handled at UK ports. Those specialising in containers and other forms of bulk freight such as Grimsby & Immingham, London, Southampton and Liverpool handled considerably greater tonnage.

“Dover is vital for trade with Europe though, particularly for time-critical items. Its freight also tends to be high value, handling 17% of the UK trade in goods.”

Regarding international trade, there are definite unknowns. These will only become more concerning as we approach the end of November given that unless a satisfactory deal is in place by then the UK government will not have adequate time to implement legislation.

Insurance-related concerns 

There are numerous insurance-related concerns; while insurance brokers are not in a position to provide any advice, they should have an awareness of the issues at hand.

UK firms need contingency planning – this should probably have started many months ago but as the deadline looms there are some insurance-related issues to bear in mind.

Stockpiling

If there is a reliance on (non-perishable) goods imported from the EU then stockpiling may be considered. Would storage facilities be required? If so such storage facilities may become in high demand and short supply so urgent contingency plans would be essential (space may need to be reserved and paid for even if not used). Whether stockpiling takes place at a firm’s location(s) or at a storage facility an appropriate increase in stock sum insured would be required plus any required transit cover.

If a storage location is used then appropriate property and business interruption covers are needed with applicable risk information obtained and provided to insurers.

If a firm is reliant on a particular item of plant where there is already a lengthy replacement period (e.g. a German manufactured printing press) then the delivery time of such may well increase post-Brexit thus a review of the business interruption indemnity period is recommended.

Road travel

In the event of a No Deal Brexit there are issues as follows : 

  • We face a return to insurers having to issue Green Cards to facilitate vehicles being used in the EU (and other territories signed up to the current agreement). Despite technological developments, Green Cards will have to be paper-based. Are motor insurers geared up for the volumes of such and what will the cost be?
  • International driving permits will be required rather than the use of UK licences.
  • If you do make it to France (or beyond) make sure you are not involved in a collision. If you are unfortunate enough to be injured in a vehicle collision and want to take legal action against a third party then any legal action would have to take place in the EU state where the collision occurred.

The Office of the Traffic Commissioner has issued the following important guidance.

The ECMT international road haulage permit system allows journeys between 43 member countries.

Currently, the UK issues Community Licences to cover international journeys, which are recognised in the EU.

Preparations have been made in case ECMT permits are needed for road haulage operations to the EU after March 2019.

The number of permits available will be limited and a permit needs to be carried in each vehicle that's making an international journey.

In order to apply for an annual ECMT permit, you need to be registered via the Vehicle Operator Licensing System (VOL) by 12 November 2018.

Applications for permits can be made between 26 November and 21 December.

There will also be some monthly ECMT permits available next year. Applications for these will open at a later date.

The government has issued a fact sheet about the process. This can be found at: www.gov.uk/euexitdriving.

If a firm is using a haulier to transport goods from the UK to the EU then urgent enquiries must be made with haulage firms utilised as to their plans for VOL registration. The major concern here is the statement that the number of permits available will be limited.

Imported goods 

It is even more important to make sure correct Incoterms are used.

Overseas operations 

With the likely cessation of outgoing passporting rights, UK insurers will face difficulty in providing insurance for business operations in the EU. Hence a UK company with a factory in Spain needs to address their Spanish insurance needs to make sure cover does not come to an abrupt end.

Other implications 

Outside the remit of insurance brokers but there will be concerns about delays and increased costs in crossing borders; performing cross-border services, e.g. restrictions on the movement of people; delivery timescales and tariffs.

About the author

The author of this article has opted to remain anonymous.

The opinions expressed in this article are the author’s own and do not necessarily reflect the view of RWA Compliance Services Ltd.

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