TRADE BARRIERS & GLOBAL

AGRI-FOOD TRADE:

IMPLICATIONS FOR FOOD

SECURITY & FRAUD

Michael Haverty

November 20181/13

ASSESSING FOOD FRAUD AND TRADE

Sources: SSAFE and PwC

Food Fraud

VulnerabilityOpportunities Motivations Control

Measures

SSAFE-PwC Food Fraud Assessment Framework

Rules of Origin

Complex

supply-chains

Arbitrage (price

divergence)

Profit

Corruption

level

Competitive

environment

Official &

Customs controls

Traceability

systems

Legal framework

& enforcement

Resourcing

Geographic

proximity

Sudden

changes to

Terms of

Trade

2/13

TRADE BARRIERS -

TARIFFS

3/13

MAJOR SOYBEANS TRADE FLOWS (TONNES)

Sources: Rabobank / Bloomberg / USDA

EU 28

5M

37.5M

13.5M

48M

20.5M

ChinaUS

Brazil

Argentina

Rest of

World

22.5M

9.5M

8.75M

4/13

US-CHINA TRADE WAR IMPACTS

• US agricultural exports to China estimated at $20 billion

- soybeans ($12bn) account for 60% of this amount

- 25% tariff projected to reduce US trade by >38% ($4.5bn)

- more US soybeans coming into Europe.

- Brazil is gaining and prices are 20% higher than US.

$200

$250

$300

$350

$400

$450

US $

per

Ton

ne

US $/T

Brazil $/T

Potential

Fraud

Opportunity?

China announces

plan to impose 25%

tariff

Sources: USDA / CEPEA / Andersons 5/13

CHINA – IMPACT ON FOOD SECURITY

Sources: Rabobank / Bloomberg / USDA

Commodity Trading (5 Year Average)

220,100

116,100

94,320

55,622

12,743

40,211

7,543

0

50,000

100,000

150,000

200,000

250,000

Corn Wheat Soybeans Pig meat Chicken

meat

Dairy Beef &

Veal

Imports

Domestic Production

6/13

NON-TARIFF BARRIERS

(NTBS) AND BREXIT

7/13

UK-AGRI-FOOD TRADE SITUATION 2017

Sources: HMRC / Andersons

-10.0 -5.0 0.0 5.0 10.0 15.0

Others

Beverages, spirits & vinegar

Fruit & vegetable preparations

Misc preparations (cereals, starch, etc.)

Cereals

Fruit & nuts

Vegetables (incl. tomatoes)

Dairy, eggs, etc.

Meat & edible offal

Live animals

£ Billion

Exports (EU)

Exports (Non-EU)

Imports (EU)

Imports (Non-EU)

8/13

BREXIT TRADE EFFECTS

Trade Deal

with EU?

Yes

Little change in

prices. Small

due to extra trade costs (customs etc.)

NoCurrent Trade

Balance?

Net Importer (e.g. beef, cheese,

pigmeat, etc.)

Net Exporter (e.g. lamb, feed

wheat, etc.)

Prices fall. Due to tariffs on exports

Post-Brexit UK

Tariff Level?

High (e.g.

similar to

current EU)

UK prices rise. Due to tariffs on imports

Low (‘cheap

food’ policy or

trade deals*)

UK prices fall. Cheap imports

* with rest of the world – Brazil, NZ, US etc. 9/13

NTBS – MEAT IMPORT MAPPING PROCESSES

Rural Payments

Agency (RPA)

Shipping

Line

Competent Authority (CA) /

Port Health Authority (PHA)

HM Revenue

& CustomsPort

Mo

nth

s

ah

ead

Weeks

/ D

ays

ah

ead

Po

st-

Cle

ara

nce

At

arr

ival

Entry into the EU / UK

Mandatory step (De-Facto Mandatory step)

Agent/haulier return

empty shipping

container to shipping

line (usually at port)

RPA returns security

after licence is used

up

Agent sends stamped

CVED to final destination

(Final destination keeps

copy of CVED for one

year)

(If released from port into any

procedure other than Free

Circulation compliance with

relevant procedures applies)

Importer/Agent keep applicable

records

Importer/Agent receives

Shipping Line’s ETA

(Importer receives EUR1 Cert.

of Authenticity & Origin

Documents if applicable)

Shipping line pre-notifies

HMRC with Shipping Manifest

Agent makes declaration to

HMRC (incl. reference to RPA

licence)

Agent sends supporting

documents to HMRC’s

National Clearance Hub

Importer sends all relevant

documents to Agent

Importer receives original

Veterinary Health Cert.

from Exporter

Importer/Agent prepares

CVED and submits to PHA

via TRACES

Agent sends paper copy of

CVED & supporting

documents to the BIP

(Ship arrives at port’s

stevedore & offloads cargo)

Shipping line releases cargo

(HMRC may conduct inspection)

HMRC request CVED copy &

supporting docs, if not already submitted by agent

Ensure copy of stamped CVED is

sent to HMRC’s NCH

HMRC releases its hold on cargo

Agent pays applicable port

charges

Agent arranges collection of

cargo from port using port

community system

(Appointed haulier collects

& delivers cargo to final

destination)

Agent pays all

applicable PHA fees

(PHA conducts applicable checks and stamps CVED))

Agent collects/receives

stamped CVED

Sources: Derived from

Grainger (2013); FSA/Gov.uk

Importer applies

for licence

Sets up security

Importer receives

RPA’s confirmation

Importer/Exporter/Agent

books vessel

Ensure that both third

(exporting) country and

concerned dispatch plant

of import are EU-

approved

(Agent books and pays for

VBS premium collection

slots)

Have customs and Border

Inspection Post (BIP)

authorisation

(Note: For Peer Review Only) 10/13

POTENTIAL NTB IMPACTS

• Customs and official controls would rise significantly

- estimates of increased checks vary from 325% - 800%

- Official Controls require physical checks (20% red meat; 50%

poultry; 5% cereals)

- exports to non-EU require new certification processes

- severe staff shortages, no clear plans on addressing gaps

• Various studies on effective ‘cost’ of NTBs

- Andersons’ N. Ireland meat study suggests 5.7% tariff

equivalent if no agreement on standards between EU/UK

- increases with divergence (e.g. >25% for US→EU agri-food)

- UNCTAD suggests 131 NTBs imposed by EU on 3rd countries

• Greater effect on ‘just-in-time’ products (meat) than bulk

commodities (grain) - 2 min delay at Dover = 17 mile tailback

11/13

CONCLUDING REMARKS

• Protectionism is rising and is causing distortions which

increase vulnerability to food fraud.

• Biggest impacts in geographically proximate markets

vulnerable to illegal substitution, concealment etc.

• US protectionism unlikely to change in short-term.

• Brexit: upheaval as trade affected by new processes

- prices for agri-food goods to be more volatile

- cross-border trade to cost more (currency + NTBs)

- on average, lower profitability in the industry

- agri-food supply chains will be less ‘lean’ (storage, staffing etc.)

- greater incentive to commit fraud, affect food security

• Key means to mitigate this is continued standards

harmonisation (processes and outcomes)

12/13

CONTACT INFORMATION

Tel: +44 (0) 79 00 90 79 02

mhaverty@theandersonscentre.co.uk

Michael Haverty

Thanks For Your Attention!

Merci De Votre Attention!

Any Questions, Please Contact:

13/13