Fecc and CBA’s webinar: The UK View: The chemical supply chain post-Brexit
On Monday 20th June, Fecc and the Chemical Business Association (CBA) collaborated on the organisation of a webinar: The UK View: The chemical supply chain post-Brexit. Tim Doggett, CEO of CBA, Lisa Robertson, Supply Chain Lead at CBA, and Elain McGavin, CBA's Regulatory Affairs Specialist, took to the virtual stage to present on the current situation in the chemical supply chain and how these factors along with policy and regulations may shape its future. During the Q&A sessions, they were accompanied by Douglas Leech, Technical Director at CBA.
Change is the only constant
Tim Doggett started the webinar by looking back on some major 'once in a lifetime' events that changed the world. For example, a rapid increase in globalisation brought with it a major migration of chemical manufacturing assets and investment from the UK, enabled by a highly optimized, efficient, and cost-effective global supply chain. As a result, China has around 40% of global chemical revenue. There are both risks (an extended supply chain, dependency on efficient operation and it remaining economically viable) and opportunities (lower costs per unit, cheaper labour and energy, increased competitiveness) involved with globalisation.
Brexit had a significant impact on trade as well. Overnight, considerations such as rules of origin, commodity codes, and Incoterms became standard requirements for trade between the UK and EU. Additionally, the Northern Ireland Protocol resulted in different conditions applying for trade with Northern Ireland, something that continues to cause disagreement and ongoing discussions between the UK and the EU.
Other disruptions, such as strikes, political issues, covid lockdowns and the Ever-Given blocking of the Suez Canal for six days impacted the supply chain. A rise in energy costs, volatile supply, a massive increase in freight rates and inflation continue to challenge the global supply chain, as well as shortages in drivers, raw materials, and equipment. Most recently, we have been facing another global crisis following the Russian invasion of Ukraine. The consequences of this are far-reaching and have wrought further havoc on the already disrupted global supply chain.
Zooming in on Brexit
On December 31st, 2020, the UK completed its separation from the EU. In the UK, life after Brexit became defined by increased costs, frustration, and different interpretations of rules. Many of the issues that were faced in January 2020 have continued to be prevalent through 2021 and 2022. Many UK exporters are still reporting issues with Supply Chain Disruption both for European and domestic movements. Common issues are disruption at borders, extended delivery times, additional paperwork, delays in shipping, increased freight costs, etc. One of the key issues since 1st January 2021 is the incorrect use of, or misunderstanding of the requirements for so-called Incoterms. Incoterms are a set of internationally recognised 3-letter trade terms. They describe the practical arrangements for the delivery of goods from sellers to buyers and allocate the obligations, costs, and risks between the 2 parties. They are produced by the International Chamber of Commerce (ICC) and updated periodically to reflect changing trade practices.
So, what is next?
When leaving the EU, the UK's intention was that UK regulation would strongly resemble EU regulation. However, the UK as a sovereign country with an independent legislative process would not blindly follow the EU's footsteps, and would actively make decisions with the UK's best interest at heart. The reality is that there has been a divergence in regulation. The EU has been making changes and amendments to its regulations, while regulation in the UK has mainly been at a standstill. At the moment, it is unclear how they will advance.
This legislative process proves challenging for international trade. In the case of Chemical regulation and Reach, for example, Northern Ireland operates under EU regulation (EU REACH and CLP NI), whilst the UK operates under its own regulation (UK REACH and CLP GB).
What can be concluded, is that chemicals and supply chains are of major importance for our society and economy. Fortunately, they are on the agenda of politicians and decision-makers. The future will hold more uncertainty and change. Businesses, as well as regulations, will have to keep working to keep up.