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U.K. Finds a Faulty Shipping Safety Net for Brexit

British policy makers are calling on the shipping industry to bail the country out from the mess that Brexit has become.

It isn’t going to happen, however, for at least a year.

With the March 29 deadline for the U.K. to separate from the European Union looming and fears growing that Parliament will vote down Prime Minister Theresa May’s withdrawal deal later this month, the government is scrambling to prevent a logistics nightmare that could bring shortages of essential goods.

“There will be problems,” said Harry Theochari, chairman of Maritime UK, a group representing the country’s shipping, ports and marine service providers. “You can’t go from a free-trade situation to a border with customs checks. We need more time to figure out the best way to move cargo. It can’t happen overnight.”

Much of the U.K.’s “just-in-time” trade with Europe arrives on trucks riding ferries across the English Channel from Calais in France to Dover in England. Some 10,000 trucks cross the channel in both directions each day carrying products such as food, medicine and auto parts that go straight to assembly lines.

Under a so-called hard Brexit without an agreement on trade and border procedures, customs checks would kick in for the first time in almost half a century.

That will bring a flood of new paperwork, which exporters and freight forwarders describe as a “nightmare.” In the U.K. alone, a quarter of a million businesses will have to fill customs declarations for the first time ever, according to the National Audit Office.

The darkest clouds hang over the Port of Dover, a major transit point for passengers and cargo that has relatively little storage and holding space. Port officials estimate for every two minutes of delay each truck has to spend at the crossing, a 17-mile traffic jam will be created on the M20 highway heading to the port.

The government is considering using one of the highway’s lanes and the abandoned Manston airfield near the port as a giant parking lot for trucks.

“I pray that they keep things as they are now,” said Gregory Tekerides, a Belgian truck driver who has been crossing the channel for 17 years. “I move car parts that go straight to assembly lines. I fear for my job because this kind of cargo can’t be delayed.”

More than 30 car makers, including Honda Motor Co. , Toyota Motor Co. and Jaguar Land Rover Ltd., produce around 1.7 million cars every year in the U.K., according to British motoring group Automobile Association, and depend heavily on parts from the EU.

Some manufacturers are looking at airfreight to replace trucks, but that would add large new logistics costs.

As unease mounts, government officials are rushing out contingency plans focused on shipping operations, often with little transparency. The government recently awarded contracts worth a combined $130 million to three ferry operators that will move around 4,000 trucks a week to other U.K. ports, including Plymouth, Poole, Portsmouth and Ramsgate.

The ship space was booked on France’s Brittany Ferries, Denmark’s DFDS and England’s Seaborne Freight Ltd., bypassing due processes such as tender offers.

The U.K. Department of Transport said there was no time to follow standard practices, citing an “extreme urgency” that could cause a “significant wider disruption to the U.K. economy.”

The $17.5 million contract to Seaborne Freight has raised alarms, however. The firm has never run a ferry service and has no contracts with ports.

Seaborne has hired a Dutch company to dredge the small port at Ramsgate to accommodate big ferries to relieve stress on Dover. Local officials say it would be impossible to get the service running before the March 29 Brexit deadline, however.

Even if such operations can be launched, the contingency plans don’t address the bigger concerns over customs clearance.

“Those goods will still need to go through the same customs procedures in ports, which is where the real problems would be,” UK Chamber of Shipping Chief Executive Bob Sanguinetti told the British Broadcasting Corp.

Given the weight the Dover-Calais connection carries in supply chains, shipping and freight executives hope the crossing somehow can be exempted from the tighter customs procedures, if only temporarily. Longer term, they say, much of the supply chain may have to be shifted from ferries to container ships to provide more gateways.

The ports of Portsmouth and Southampton on England’s south coast can handle more boxship cargo, but moving large amounts of goods in containers would be more cumbersome and costly than moving trucks on ferries and straight into distribution channels.

That would also require far more truckers in a country where drivers are in short supply.

The European Shippers’ Council, a trade group representing the continent’s biggest exporters, said in a statement that the EU and the U.K. must agree on a transition period, at least until the end of the year, to work on a new free-trade agreement.

Otherwise, the ESC says, shipping plans won’t protect them from the chaos of jumping from a hard-Brexit cliff.
Source: Wall Street Journal

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