A Summary of Key Contractual Concerns Arising from the Brexit Process

Given potential Brexit related disruptions to the delivery of ACP horticultural exports to customers in the UK a critical issue arises as to the point at which ACP horticultural exporters get paid for the delivery of their products. 

For instance, ACP horticultural exporters who utilise triangular supply chains delivering products to UK customers via initial points of landing in EU27 member states the critical issue to be addressed is whether the ACP exporter is paid for: 

  • delivery to the initial point of landing in a EU27 member or the UK (for exporters using triangular supply chains); or
  • delivery to the UK port of unloading; or
  • delivery to an inland distribution centre or individual retail outlet in the UK.

If the ACP horticultural exporter using a triangular supply chain to serve the UK market is paid for delivery to the initial point of landing in a EU27 member then it is the EU trader who will bear all the Brexit-related trade disruption risks faced in onward shipping the ACP goods to the UK market. While these risks may be reflected in the price offered for ACP exports, any unforeseen costs and losses will fall primarily on the EU trader unless the contract concluded stipulates otherwise. 

However if the EU27 partner of an ACP horticultural exporter is simply a logistics service provider and the ACP horticultural exporter remains responsible for the product until delivery to an inland distribution centre or individual retail outlet in the UK, then it is ACP horticultural exporter who will bear all the Brexit-related trade disruption risks faced in onward shipment of horticultural products to customers in the UK. 

Similar issues with direct exports to the UK of horticultural products. If the ACP horticultural exporter remains responsible for the product until delivery to an inland distribution centre or individual retail outlet in the UK then it is the ACP exporter who carries the risks associated with any internal UK border control or transportation-related trade disruptions. 

Given the administrative changes, the UK’s departure from the EU customs union and single market will give rise to an important additional dimension the contracts concluded arises, namely determining which party will be responsible for clearing goods through UK customs

If the contract places the obligation to clear goods through UK customs on the ACP horticultural exporter, and the ACP exporters current EORI number was issued by a EU27 customs authority, then they will need to ensure the timely issuing of a valid EORI number and associated BTI and BOI decisions issued by the UK customs authorities in order to be able to continue clear exports through UK customs. 

Similar considerations arise for exports to the EU27 market by ACP horticultural exporters currently using an EORI issues by the UK customs authorities. In this case, a new EORI will need to be issued by a EU27 customs authority with the associated BTI and BOI decisions being secured before goods can be cleared through a EU27 customs border.

There are several aspects of the contractual arrangements for the delivery of horticultural products to customers in the UK and the EU27 to which ACP horticultural exporters will need to pay close attention if additional costs and losses arising from the Brexit process are to be minimised.

 

Contract Issues in Brexit-related Disruptions:
The Illustrative Example of the Impact of Yellow Vest Protests on Cameroonian Pineapple Exports


Press reports in 2019 highlighted how the ‘yellow vest’ protests in France caused severe disruptions to Cameroonian pineapple exports to the EU. According to Jean-Pierre Tchatou, the owner of Cameroon’s largest pineapple exporter to France (Exotropique), as a result of ‘roadblocks, many shopping centres are closed and cannot receive our fruits’, with merchandise consequently remaining in warehouses and trucks. 

This saw smaller exporters facing proportionally ‘massive losses’. Indeed, it created a situation where orders for Cameroonian pineapples simply dried up, while exporters of products caught up in the ‘yellow vest’ protests simply didn’t get paid and had to carry all the costs of shipment to France for no payment.

This experience of Cameroonian pineapple exporters highlights the relatively large commercial losses ACP horticultural exporters can face when supply chains are disrupted under the current commercial terms and condition for exports to the EU28 market. 

According to Nestor Soh, general director of Tropical Fruit, Cameroonian exporters generally sell on a commission basis with French clients not paying anything upfront and exporters even carrying the costs of aircraft fees, as well as their other expenses. This means that it is exclusively the exporter who suffers the losses arising from any disruptions along the supply chain, such as those experienced as a result of the ‘yellow vest’ protests. 

Given the potential for severe trade disruptions along triangular supply chains if a No-Deal Brexit were to materialize this experience highlights the extreme vulnerability of ACP horticultural exporters if contracts stipulate payment only upon delivery to individual retail outlets

For ACP horticultural exporters the payment stipulations in contracts concluded for the delivery of horticultural exports to UK customers could thus take on critical significance in the coming period.
 

agencecamerounpresse.com, ‘Cameroon the pineapple industry affected by the yellow vests movement’, 21 March 2019
https://www.freshplaza.com/article/9085006/cameroon-the-pineapple-industry-affected-by-the-yellow-vests-movement/


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