Brexit and International Shipping
6 minutes to read
It’s now a little under two years since the UK’s historic referendum decision to split from the European Union. If the government’s Brexit plans continue on track, Britain will leave the EU on 29 March 2019, with a further 21-month transitional period until 31 December 2020, intended to provide a buffer period during which new rules can be put in place and businesses can prepare for regulatory and other changes. In this blog we’ll look at what changes are likely to occur that will affect international shipping and logistics, concentrating on ocean freight, air freight and road haulage.
New laws and regulations
The government’s primary legislation relating to Brexit is the so-called “Great Repeal Bill”. This is intended to convert all EU-derived legislation into UK law when Britain leaves the EU. The government can subsequently decide to keep, repeal or amend laws as necessary, without the gaps or uncertainty that would exist if all EU-derived law was repealed without replacement. This means that in the short-term industries would continue to operate broadly within the prior EU legal framework, with more changes coming throughout the transitional period and beyond.
One of the primary reasons for the Great Repeal Bill is to allow the UK to continue to trade with other nations post-Brexit – this was highlighted as a priority in the Prime Minister’s letter invoking Article 50. In addition to the Great Repeal Bill, more specific legislation around various aspects of trade and shipping – such as the Haulage Permits and Trailer Registration Bill (see below) – will need to be passed.
The issue of the Irish border continues to be perhaps one of the most contentious issues for Brexit, and it remains to be resolved. New laws or regulations that might potentially introduce additional customs checks at the Irish border post-Brexit could be particularly problematic. Understandably, the Freight Transport Association’s (FTA) stance on this is that: “Freight movements between Northern Ireland and the Republic of Ireland should not be impeded by border control checks or by protracted administration procedures post-Brexit.”
Impact on ocean freight
At present, Britain’s access to the EU’s single market and customs union means goods can be moved from the UK to any other EU country – and vice versa – with no taxes or duties. Given the government’s apparent stance that the UK should withdraw entirely from these agreements, it seems likely that this will no longer be the case post-Brexit, which is likely to affect both trade, and procedures at both UK ports receiving cargo from EU nations, and EU ports receiving vessels or goods from the UK.
The FTA has urged the government: “Non-tariff barriers, such as administrative formalities, delays at the border, or regulatory barriers to trade, could be as damaging as tariff barriers, and ensuring that they are reduced to a bare minimum should be a key priority for government.” Amongst other measures, the association has called for the “bilateral implementation of a technology-based solution for roll-on, roll-off ports which could consist of pre-arrival notification of consignments on a port IT system, linked to customs declarations and vehicle registration numbers so that vehicles were not required to stop at the border, enabling traffic to flow smoothly.”
Impact on air freight
For the past 20 years, UK air freight carriers have benefitted from open access to European skies via an EU-wide single market called the European Common Aviation Area (ECAA). After Brexit, UK airlines will no longer have automatic access to the ECAA and, in theory, could lose their right to fly to, from and between the remaining EU member states. While the UK could join the ECAA in its own right – membership isn’t restricted to EU nations – this would mean having to continue complying with EU aviation laws. Alternatively, the UK and EU could work out a direct bilateral air services agreement.
Similarly, the UK currently benefits via the EU from negotiated air agreements with third-party countries, for example the EU-US Open Skies Agreement. To maintain air access to other nations post-Brexit, Britain would need to either renegotiate access to such agreements as a non-EU member (which Norway currently does on the Open Skies Agreement), or negotiate a new bilateral agreement with each nation.
Impact on road haulage
Transport Secretary Chris Grayling has acknowledged that “our road haulage industry is right at the heart of the £110 billion of trade that takes place between the UK and EU every year”. However, as recently as February the Road Haulage Association (RHA) has expressed concerns regarding government legislation on cross-border haulage as Britain forges ahead with its preparations for Brexit – particularly in the scenario of a “no-deal” Brexit. The Haulage Permits and Trailer Registration Bill is (at the time of writing) undergoing review in the House of Lords. Its intent is to “support UK hauliers operating internationally after the UK leaves the EU” and to “maintain and develop the existing level of transport connectivity with the EU, as part of the wider future partnership”.
The problem, however, lies in the lack of detail. While the bill currently passing through parliament seeks to provide government with the “powers” and the “necessary framework” to allow hauliers to continue operating post-Brexit, it significantly does not “suggest a preferred set of future arrangements” or “dictate what any future arrangements might look like”. RHA chief executive Richard Burnett has said: “It is standard business practice to have an effective contingency plan in place if things go wrong. In this case we need to see clear government commitment that it will seek an agreement that does not impose new permits, quotas or limits on UK international operators. The road freight industry needs clarity as soon as possible as regards what is being negotiated.”
As a contingency measure – which could be potentially seen as a positive or a negative – the UK is signing up to the 1968 Vienna Convention on Road Traffic. In the event of a no-deal Brexit or any other exit deal in which EU nations opt not to recognise UK-issued driving licences or vehicles, the 1968 convention would allow for the registration of trailers and the issuing of international driving permits. However, the UK had previously resisted adopting the 1968 convention as being too burdensome and, unless specific exemptions are negotiated, could mean Britain being forced to adopt different rules on aspects of UK road usage such as pedestrian crossings, parking, and use of headlights.