SITE VISIT: FreshLinc haulage and logistics
On 27th November 2023, the UK Trade and Business Commission team went on a site visit to FreshLinc haulage and logistics in Spalding, Lincolnshire.
The introduction of the new Border Target Operating Model (TOM) from the end of January next year will see import checks introduced on products coming into the UK from the EU of plant and animal origin.
As a logistics and haulage business, a huge number of FreshLinc's suppliers are affected by the changes, and FreshLinc is having to navigate the new regulatory landscape on their behalf. With the introduction of the TOM repeatedly pushed back, coping with uncertainty and shifting expectations has been challenging for FreshLinc.
The UKTBC team attended FreshLinc to find out more about the challenges they're facing, and what they need from Government to ensure that the introduction of the TOM does not negatively affect their business.
INTRODUCTION
On 27th November 2023, the UK Trade and Business Commission (UKTBC) visited FreshLinc, a Lincolnshire-based storage and logistics company founded in 1996.
FreshLinc is a multi-divisional business that operates within the just-in-time supply chain for chilled, ambient, horticulture and other third party logistics. FreshLinc includes several subdivisions which deal with specific types of haulage and storage. During the visit, the Commission was shown both the main FreshLinc site as well as the company’s plant subdivision, FloraLinc.
FreshLinc HQ deals with refrigerated food transport - and it has several other areas of haulage business which are undertaken by its subdivisions: FloraLinc, FLX Logistics, FLB, DirectLinc and PRS Product Recovery Services.
FloraLinc handles horticultural distribution, FLX is their ambient business, FLB provides bulk haulage services for grain, sugar beet and cereal, DirectLinc offers container and specialist transport, while PRS Product Recovery Services deals with issues that arise during the haulage process - such as distressed loads or clandestine product entry.
FreshLinc operates out of 21 bases placed across the UK, and has 400 tractor units and 900 trailers. Their haulage network covers 38 million miles per annum, and they carry roughly 3.5 million pallets a year.
THE BORDER TARGET OPERATING MODEL
In 2024, imports into the UK from the EU will be affected by the introduction of the Border Target Operating Model (BTOM), which is due to be phased in from January, with physical checks on medium risk animal, plant, food and feed products being introduced from April. Companies like FreshLinc have had to make several adaptations in order to prepare for the BTOM being introduced. The introduction of the BTOM has been delayed five times, which has caused significant uncertainty for businesses who have had to repeatedly prepare for the new regime.
The BTOM is part of the UK’s obligations under the terms of the EU-UK Trade and Cooperation Agreement. Currently, UK exporters to the EU face the costs and administrative burdens of checks on their produce as it enters the single market, while EU exporters to the UK have been able to enjoy a relatively frictionless process, with little extra administrative work and costs to slow their consignments down. The delays to the introduction of checks on EU imports to the UK have led to accusations that the UK Government is failing to ensure a level playing field between the UK and EU.
The new Border Target Operating Model is set to function as follows:
31st January 2024 will see the introduction of health certification for medium risk animal, plant, food and feed products originating in the EU.
30th April 2024 will see the introduction of identity and physical checks on medium risk animal, plant, food and feed products originating from the EU. Inspections will be required to take place at control points. Low risk imports originating from outside the EU will see the checks they have to undergo reduced.
31st October 2024 will see the introduction of the requirement for safety and security declarations into GB from the EU.
Unlike the original proposal, the new model will see reduced digital safety and security requirements, the digitisation of health certificates and some experimentation with pilot models to see if established and ’trusted’ importers can be facilitated to manage the Target Operating Model requirements more smoothly.
During the visit to FreshLinc, the UKTBC heard how FreshLinc has adapted their operations to facilitate the introduction of the BTOM so as to minimise disruption. The team learned about how the broader FreshLinc operation remained resilient to the challenges of the past few years - and how the different subdivisions had coped with the changes. The team learned of how innovation has been crucial to FreshLinc’s continued success - but recognised that this innovation and creativity perhaps would not have been needed if it weren’t for the significant alterations in the UK’s relationship with the EU.
WHO WE MET
DAVE MARTIN, General Manager Customs & European Operations
JONNY BROSTER, General Manager FloraLinc
ROBIN HANCOX, Executive Chairman
LEE JUNIPER, Chief Executive Officer
SHANE BRENNAN, Outgoing Chief Executive, Cold Chain Federation
KEY FINDINGS
LARGER COMPANIES ARE ADAPTING TO THE BTOM BY BECOMING CONTROL POINTS
In order to manage the challenges of the upcoming introduction of the Border Target Operating Model (BTOM), FreshLinc has joined a UK Government trusted trader pilot scheme so that, in addition to being a point-of-destination for imports, they also become a Control Point. When physical checks are introduced as part of the BTOM in April 2023, FreshLinc will be able to carry these out onsite.
The entirety of FreshLinc in and of itself is not a Control Point. Instead, two FreshLinc sites will have Control Points - that are completely distinct from each other. One will be situated at the main FreshLinc HQ and will deal with chilled products and medium risk products of animal origin. The other will be at the FloraLinc site, and will carry out checks on horticultural products.
The FreshLinc team has been able to innovate and work with the UK Government to mitigate the challenges that the new BTOM requirements present. But they did observe that not every point of destination will be able to become a Control Point - meaning that the entry of imported animal and plant goods into the UK may become complicated by delays between Control Points and points of destination when physical checks come into place next April.
These new operations are complex - and companies will likely face increased costs and resources in adapting to the new requirements. There are particular challenges associated with checks on chilled foods, where the dwell time in the haulage centre is just an hour or two - but FreshLinc has set up their operations with time-sensitivity in mind.
THE UK RISKS BEING ACCUSED OF BREAKING WTO RULES
In its failure to implement a full import checks regime, the UK could be seen to be breaking WTO rules by differentiating between how it treats imports arriving from the EU versus from the rest of the world. Rest of the world inbound goods already face a physical checks regime - and the UK could be seen to be offering the EU preferential treatment in its failure to implement an equivalent regime for EU inbound goods.
DISTRIBUTING GOODS TO NORTHERN IRELAND CONTINUES TO POSE ADDITIONAL CHALLENGES
It is clear that moving goods between GB and Northern Ireland continued to be more diicult than moving them to other parts of the UK - and that the challenges associated with the operation of the Northern Ireland Protocol and the subsequent Windsor Framework are still being felt. Examples of the challenges faced by logistics companies include entire consignments from Great Britain destined for Northern Ireland being rejected on account of a ‘DE’ (i.e. Germany) marking on a single product.
Consequently, Northern Ireland could see a reduction in the distribution of goods from Great Britain on account of the diiculties of transit.
THE ADMINISTRATIVE BURDEN COMPANIES FACE IN THE WAKE OF BREXIT IS SIGNIFICANT, BUT MANY ARE TAKING CHANGES IN THEIR STRIDE
Workforce shortages have pushed up labour costs, while increased rules and regulations around imports have led companies like FreshLinc to take on additional costs.
New challenges - such as a seed, plant and plant pot set has to be sent over from Eastern Europe as its separate component parts (soil, seed and pot), whereas prior to Brexit that same set could have come over to the UK as a single package. This separation of components naturally adds to the resource companies need to deploy and inevitably adds to costs. To navigate these challenges, companies like FreshLinc are required to exhibit a great deal of innovation and creativity.
CONCLUSIONS
While FreshLinc is an example of a success story, many companies have had to spend a significant amount of time and resources to adapt to the changes to import rules in the wake of Brexit.
Preparations for the introduction of the Border Target Operating Model (BTOM) have been complicated by the UK Government’s repeated postponement of the date for the BTOM to be introduced. Preparing for something that never actually came to fruition on multiple occasions represented a significant business investment - and it was challenging to FreshLinc to operate amidst such uncertainty.
While FreshLinc has been able to adapt and set up its own Control Points in order to manage the physical checks aspect of the BTOM, not every point of destination for imports into the UK from the EU will be able to do this.
The introduction of the BTOM means companies face additional costs, which will inevitably be passed on to the consumer in future. This may lead to further inflationary pressures, with a spiral of rising prices particularly for foodstuffs leaving consumers out of pocket.
While companies are likely to acknowledge the importance of the BTOM rollout in order to comply with WTO laws, it remains the case that these changes would not have needed to happen were it not for the UK’s departure from the EU.
To reduce the additional friction that the BTOM will inevitably introduce, the UK must seriously consider a policy of Beneficial Alignment with EU standards and regulations, and enter talks to secure an SPS agreement with the EU. Both a policy of Beneficial Alignment and an SPS agreement would reduce the burden of physical checks and the paperwork (digital and physical) associated with notification and declaration around import and export health. While companies such as FreshLinc have already invested in preparations for the introduction of the BTOM, ongoing costs associated with continued checks and paperworks will be reduced and hopefully eradicated should Beneficial Alignment or an SPS agreement come into place.
Thinking about the long-term - and the UK’s broader trading relationship with its nearest neighbour - a commitment from the UK Government to reduce friction in order to pave the way for a less costly future for traders would be an important strategic step.