The virtual meeting between Johnson and Usrula Von der Leyen took place yesterday and resulted in a bland statement about 'intensifying' the talks which said "that significant gaps remained, notably but not only in the areas of fisheries, the level playing field, and governance. They instructed their Chief Negotiators to work intensively in order to try to bridge those gaps." It was more or less a restatement of what Frost and Barnier had said at the end of last week's round of talks.
I thought most instructive was the careful use of the phrase "notably, but not only" when referring to where the gaps are. I think we learned that there are more sticking points than just fisheries and LPF matters. There is talk among Brussels watchers that an agreement could come as late as November now. This is going to be an extremely long (650 pages+) treaty of huge complexity with ramifications for every authority, industry and business in Europe and for millions of people in this country.
MEPs will be given what amounts to a matter of a few weeks to study the details, to consult and vote on the ratification and then prepare to implement it. We still don't know if the agreement will be 'mixed' or not, requiring national parliament approval as well. The treaty can come into force but could be subject to the approval of 27 legislatures later. Our MPs will have no say but industry will need to implement it on 1 January 2021. I am not sure this is even a remote possibility which is why I think there will have to be another 'implementation' period.
I say all this a couple of days after the BBC (the BBC!) published a report by Simon Jack their Business editor who says "Thousands of UK firms may need to set up an EU office." I quote from it:
"Both EU and UK law will require companies to 'have a door to knock on' if there are any disputes over payment and compliance with customs changes that will treat the UK as if it were any other non-EU country after 1 January.
"Many EU companies do not want the additional risk and cost of being responsible for compliance with customs procedures. Large EU importers of UK goods want the products delivered to their warehouse door, with the UK exporter taking that responsibility.
"One other option is to pay an official distributor or a customs and freight forwarding agent in the EU to bear the risk that new paperwork and payment obligations are satisfied.
"Given the new complexities, industry sources have told the BBC that few agents will be prepared to take that risk. Those willing to take a risk will likely charge a 'king's ransom' to do so.
"Simon Sutcliffe, Blick Rothenberg's customs expert, told the BBC: 'Any agent will be 'joint and severally liable' for any customs debt should something go awry or the local fiscal authorities find a problem with the consignment. Understandably, these agents charge a lot of money to bear that risk."
I noticed a similar report in a Scottish newspaper last week and dismissed it as just another reporter waking up to the facts. But now the BBC report it as news.
This has been known for years - since before the referendum - and has been regularly featured on blogs. If exporters to the EU didn't realise before now that the importer of their product inside the EU becomes legally responsible for their goods then we are in real trouble.
The BBC say UK companies might need to set up an office - no, they don't need to do that but some larger businesses might. Most will find a distributor or agent or will use an existing one. BUT - and here's the problem, they won't do it for the percentage they took before. Becoming joint and severally liable is a big responsibility and you need to have faith and trust in the supplier and you will want a far higher share of the profit - a King's ransom as Jack puts it.
If any exporter didn't know this already I would be amazed, but some may not and they are in for a shock from January.
One small issue that threatens any exports to the EU which goes out on pallets, is the question of them being compliant with ISPM (International Standards for Phytosanitary Measures)15 which requires heat treatment to eradicate bark beetle and fungal infestations and have stencil marking to show compliance.
According to a report we use 100 million pallets for our trade with the EU and there is a shortage of ISPM15 pallets:
"Timber Packaging and Pallet Confederation president John Dye said he had asked the government for an extension to get sufficient pallets produced, noting in July that 'it is ever more unlikely that the 1 January compliance date will be met'.
"The industry has faced setbacks from a lack of kilns, for the heat treatment, as well as Covid-19 adding delays."
I have had a link on this blog (RH side bar in the blog list) to a post on The Irish Border blog from March 2019 highlighting this problem. That's eighteen months ago and we are still not ready!!
I happen to know a bit about pallets, having spent half my life selling machines to stack products onto them. There are quite a lot of different sized standard pallets - over here 1200 x 1000 CHEP (blue) pallets are quite common but Europe uses 1200 x 800 (Euro pallet) mainly but there are a range of sizes and types for a reason. Some are returnable, some are not.
The product and stacking pattern often determines the pallet size. Sometimes a bit of overhang is acceptable but not if the product ever has to enter an automatic warehouse. It can be a tricky business. The point of mentioning this is that the Europeans could quite easily waive the need for ISPM compliance for six months or a year - but they may choose not to, as is their right.
It is another example of people becoming aware of another door that has to be opened in January where the EU has the only key. It isn't the only door and I doubt that David Frost is even aware of it. But it is the reason why we will need a deal and why the UK government will have to compromise - a lot.
