Speaking exclusively to The Leaders Council, PDK Shellfish managing director Paul Knight warns that the new regulations governing the export of live produce to the EU following the post-Brexit transition period could spell doom for numerous industry operators.
When it comes to Brexit, the reality is that the last four years of political wrangling and uncertainty will largely boil down to what happens over the next fortnight as British and EU negotiators work tirelessly in pursuit of an eleventh hour free-trade deal. Yet, regardless of whether a deal can be struck between Westminster and Brussels, prime minister Boris Johnson is adamant that the UK will prosper.
While many industries anxiously wait on what the impact of new regulations in a deal or no-deal scenario will be once the transition period lapses on December 31, for some sectors the question mark over whether they will be facing new tariffs in a no-deal situation is not the biggest issue they will be losing sleep over. In the case of sectors which export live goods to the EU, come what may from the negotiations be it tariffs or no tariffs, life is about to change dramatically.
One of the businesses bracing itself for these new changes is PDK Shellfish. Initially established as a sole trader in 1998, the company purchases large quantities of live shellfish from all the Scottish islands and several mainland ports. The shellfish is then transported to Oban on the west coast of Scotland, where it is sorted into customers’ orders and loaded into specially built vivier lorries for further transportation to Europe.
To better understand the impending changes within the live shellfish export industry, The Leaders Council exclusively spoke to PDK Shellfish managing director Paul Knight. His concerns were not focused around being Brexit ready, but rather that the new safety regulations around continuing to export live produce to the EU will make the job nigh impossible to do, leaving businesses and livelihoods like his in jeopardy.
Knight explained: “For a whole host of complicated reasons, everything we do is truly in danger and confusingly it does not need to be. We do not plan to give up on our industry, but what we need to do to operate is about to become so impossibly difficult, simply being Brexit ready will not help us thrive in future.”
Once the transition period comes to an end, the live goods export industry will be subject to a whole range of new regulations. The fish produce needs to be caught and a catch report submitted, before the shellfish is then stored and transported to the haulage vans. These fish then need to be checked by a permitted health inspector registered by the APHA [Animal and Plant Health Agency] and a health certificate signed off before the lorry can clear customs in Europe. In an industry which is time sensitive, considering the goods being transported are live and susceptible to dying on route, these extra delays could pose a significant problem financially and logistically, all during the festive season of Christmas and the New Year which is usually a lucrative time for the sector.
Knight said: “We have the end of the transition period coming up and quite frankly, deal or no deal makes no difference. A deal would be preferred to avoid tariffs of 12 per cent on shellfish, but this is not close to being our biggest problem. With not being in the EU anymore, we must export shellfish the way the rest of the world does and so we have to have a catchment certificate, a health certificate, as well as permits and other documents.
“Before we even think about delays at the borders, the catchment certificate is our first barrier. In order to acquire one, we need to submit line-by-line to Marine Scotland or the Marine Management Organisation the details of the boat that made the catch, their number, the boat owner’s name and the name of the customer the produce is going to. If one boat’s catch is going to be going to numerous customers, I need to make an individual certificate for each one, so for one vessel - of which there are 90 to 100 in England and Scotland that we work with - we could be looking at 30 different certificates and the effort and paperwork required means that it could take up to 20 minutes for one person on one computer to complete all the relevant certificate information for just one boat. With this level of effort required, firstly I am having to weigh-up the prospect of taking on one, maybe two extra staff members just to complete the catchment certificates which makes the operation less viable financially with the additional labour costs.
“Added to that, we usually collect fish on Sundays, Mondays and Tuesdays, then repackage it and send it out. Wednesday, Thursday, and Friday are the days where we then process paperwork while the lorries are on route to the destination. Completing all this new paperwork will take around two days to do. It must be remembered that we must have this completed before the vehicles reach port, because our lorries cannot leave the UK without catchment certificates because they are needed to clear customs in Europe, so we are already up against it.”
Along with the additional labour required to process the catchment paperwork, Knight is concerned that completing this and the health certificate documentation within the tight margins of time that the industry demands to get the product to market in Spain may not be possible.
To provide additional context, Knight revealed that on a normal trip at the present time there is usually a live produce wastage of around five to 10 per cent. The haulage vans transporting the fish leave the processing plant in the early hours of the morning, usually at 4:00am or before.
For the health certificate to be completed alongside the catchment certificate, which is again necessary to clear European customs, the health inspector accredited by the relevant authorities must be on site in the early hours of the morning to sign off the paperwork before the lorry leaves.
The lorries must then travel to port with the relevant certificates and there is only a 50-minute delay window to avoid missing the ferry. If the lorry is caught in traffic or customs or there is a breakdown delay, it sets the delivery back by around six to 12 hours and more of the shellfish produce will die, leading to more wastage and further commercial loss.
Knight elaborated: “Shellfish export is a time sensitive industry. Produce dying on the lorries is a given so further time to account for delays is one thing we simply do not have, so we cannot simply have the shellfish loaded on lorries a day ahead of time to allow for extra time to complete the paperwork because it will still die. Now, when shellfish die on a lorry and they have been dead in water for an unknown period of time when they arrive at their destination, you cannot use it. Payment has to be made to Spanish companies to take dead produce away to be destroyed, because dead shellfish will rot in water ten times quicker than when out of water.
“We have a 50-minute delay margin as things are now, and we usually make the ferries each week with an hour to spare without all of these new paperwork disruptions that will come in. If we miss the ferry, we are set back by several hours and more fish will die, and the value of the shipment goes down.”
Knight also warned that it is not possible to simply change the way that the shellfish are stored on the lorries to help keep them alive for longer periods of time.
He explained: “One cannot replace the stagnant water the shellfish are kept in on the lorry once it is loaded and when one shellfish in one container dies, it pollutes the water and will start a chain reaction that will kill off the rest that are in there over time. If we miss the morning lorry, our loss rate goes up from five to 10 per cent of the shipment to 10-15 per cent, if we then miss the afternoon ferry and have to take the night-time one, we are looking at 20-25 per cent loss, but at that point we will have likely missed the Spanish markets for seafood which traditionally are open to the public on Wednesdays and Thursdays, so it is all pointless at that stage. Each shipment that goes out, with the 5-10 per cent losses factored in as they are, is valued at £100,000. Any further losses we will incur because of delays are then going to be removed from that value so we will be losing income.”
Furthermore, Knight was not optimistic that following the end of the transition period, it would be possible to summon health officials on-site in the early hours of the morning to complete the relevant health certificate which will allow the transport lorries to leave.
He added: “We need an environmental health officer to sign off every load we send, and the lorry is loaded already so we are on a time limit to keep as much of that produce alive as we can. We need the health inspectors to be on-site in the early hours to sign off the certificate and allow the vehicles to leave and clear customs once arriving in Europe, and it falls outside their operating hours.”
While Knight acknowledged that the government is looking to get around this issue by setting up ‘hubs’ where health inspectors will be consistently present to fill out the relevant health paperwork, he remained concerned that these mechanisms are only suited for exporters who have other companies exporting produce on their behalf, rather than transporting produce themselves.
“Hubs work in theory but not in practice. We build specialist trailers for live shellfish, with different species kept with their own kind in polyboxes. None of these hubs are used by companies that transport produce themselves and nobody is interested in trying to assist us, it only works if another firm transports for you. Yet, despite this we must make sure we have the paperwork ready at customs or we get turned away at the border, and I do not know how we can possibly get government agencies coming to the pier at 01:30am to sign off the documents like we need.”
If a solution cannot be found to ensure that lorries arrive at customs with the relevant paperwork and can be on the ferry and departing on time, Knight was clear in his warning that the industry would struggle.
He said: “In short, we have to find a way of doing catchment certificates to avoid delays or we have no business and the system for compiling them is far too time consuming currently.
“To help give us more time to do the paperwork, we have looked at installing printers and wi-fi in lorries to allow us to complete the catchment certificate after it leaves the processing plant and then the driver can print the paperwork on route, but things can still go wrong like a loss of connection. There are external companies who charge a significant amount of money to put all the paperwork together on your behalf, but we are yet to find one who will compile all of these certificates together into a customs declaration for us at the times of day we require them.”
Should PDK Shellfish and other similar industry operators be able to navigate the issues surrounding health and catchment certificates, another administrative barrier lying in wait is the requirement to have a vehicle permit from June 2021 to allow the transport lorries to operate in EU territory.
Dissecting the issue, Knight explained: “The UK government has already said that we won’t limit the number of lorries coming into the UK from Europe because we need food imports from them more often than they do from us. Lorries going into Europe from the UK after Brexit, however, will need to have a permit if they are to run on the continent and earlier this year the EU began its process for allocating permits. The issue here was that the bloc issued a mere 1,600 permits for more than 10,000 applicants. We were unsuccessful during that application process.
“Without vehicle permits for each of our lorries, we cannot transport our product to the continent even with the relevant health and catchment certificates and as explained, we cannot simply get another firm to do the transporting for us.
“Thankfully, the need for vehicle permits has been pushed back to the end of June so that has temporarily sorted itself out so we will not have to worry about it immediately after December, but this is going to be a lingering problem which could have serious implications in future.”
Even if a vehicle permit, health certificate and catchment certificate is completed, and the transport lorries can arrive at port on schedule, Knight added that there is then the problem of potential queues and delays at port as well as complying by driving hours rules which could leave the company resigned to losing more of its produce on route to market.
“The fears around delays and queues at ports are well documented, and this is inevitably going to lead to us losing some of our product even if we manage to complete the paperwork and get our transport to port on time. On top of that, our drivers need 11 hours of rest on route, so we have to make sure we are compliant with that and they are not driving tired. If this is factored in with delays already in mind, this will only set us back further meaning we lose more product.
“We are in a difficult situation because we cannot change the rules we are governed under and we cannot amend our processes too much to accommodate these requirements because more shellfish will die, and we will lose more money through waste. If we manage to get the catchment certificates sorted, we still have the health certificate problem and need inspectors on site and on time in the early hours. Even if we solve all that, it is in vain by the middle of next year if we don’t secure vehicle permits.”
Should the company be unable to get around these logistical constraints and is left to fail, Knight was worried that there would be no other firm who could step in to take their place and continue benefiting the local economy.
“While PDK Shellfish is not a massive company, we do contribute something to our economy, last year we had £7,500,000 turnover, and we are now at major risk of not being able to trade, putting all of our employees at risk, and indirectly the 100 or so fishing boats that work with us around Scotland and some parts of the UK. We are not big white fish boats you here about in the news, we are the unnoticed overlooked people.
“These 100 or so boats cannot simply go and sell their live produce to the frozen foods market if we go bust. They are catching the best value live ethical produce and the product will be purchased for far less in the frozen market and they will lose probably 60 per cent of their current income if they go and sell to a frozen food processor.
“We know we are not a huge part of the sector, but there’s potentially 200 people on these boats who rely on us for their livelihoods. We know the overall industry is being looked at, but there is no other way of doing that little part that we do.”
To add insult to injury, on the catchment certificates that PDK Shellfish are required to compile, it is necessary to provide all suppliers’ contact details to customers, which in Knight’s view goes against one of the fundamental principles of business.
“We are forced by law to give our customers all our suppliers details. These customers will immediately contact our suppliers. It is not just a less than ideal sales tactic; it is the biggest no-go in the existence of business.
“In short, deal or no deal, we are staring oblivion in the face without anybody really noticing. I am not complaining about Brexit, but those in power need to know that with the new safety regulations and added costs, what we do is not going to be commercially viable and being Brexit ready as we are just is not enough to weather the storm. We know that we cannot change the rules we are governed under, but something has to be altered somewhere or we have no business.”
