Back to Brexit for refrigeration

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Hoshizaki is reviewing its stock holding levels to help speed up delivery processes.

We could all be forgiven for forgetting that Brexit is even happening, after the major disruption the coronavirus pandemic has wrought on all of our lives. But with the end of the transition period coinciding with the end of this year, now is a good time to bring the subject back up the national agenda.

At the time of writing, the UK government had yet to finalise a post-Brexit trade deal with the EU, and the timeline for securing one is down to weeks. With the very real threat of a no-deal back on the table, commercial refrigerator manufacturers could be amongst those worst affected, considering this was the first appliance area which has had to comply with EU Ecodesign energy efficiency labelling regulations since 2016.

So how are these companies readying themselves for all eventualities? At Hoshizaki UK, national sales manager Roz Scourfield revealed: “In order to prepare for this and counteract possible delays, Hoshizaki is currently looking at ways in which we can speed-up all processes under our control. For example, in the UK, we are currently reviewing our stock holding levels which will of course help with speeding up delivery processes. We are also currently in discussions with our haulage partners, making sure that they understand how to correctly complete new paperwork required in this case of a no-deal Brexit.”

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As for any effects on the manufacturer’s own supply chain, she detailed: “At present, it is difficult to determine exactly how a no-deal Brexit will impact the equipment supply chain, however if the proposed 2.2% World Trade Organisation (WTO) tariff comes into fruition, it is likely that all manufacturers that import/export overseas will be affected, particularly in terms of costs.”

Scourfield continued: “If there is no deal, we anticipate that importing and exporting refrigerators, both from our Vojens (Denmark) and Telford (England) factories, will be more challenging than present. This is due to the delays that new custom checks and increased amounts of paperwork may cause. However, because Hoshizaki has a significant warehousing and stock holding in Telford, we anticipate that this will have little effect on our customers.

“If there is a deal, Hoshizaki’s importing and exporting will remain a smooth and timely operation.”

But would the firm’s adherence to the Ecodesign regulations be impacted? “Because all of our equipment is manufactured in Europe, Hoshizaki UK’s energy efficiency labelling will not be effected by a no-deal Brexit,” responded Scourfield. “The only regulation that has thus far been confirmed to change following a no-deal Brexit is the exchange of the current CE marking for UKCA (UK Conformity Assessed) marking.

“The UKCA marking is a new UK product marking that will be used for goods being placed on the market in Great Britain from 2021.”

Adande reported its refrigerated drawers have significant export growth to the USA.

British manufacturer Adande Refrigeration doesn’t expect an immediate impact on energy labelling either. Executive chairman and CEO Nigel Bell believes: “The UK was fully involved in the process and it would take a lot of time and resource to create a different approach. In addition, sales into the EU will be governed by the existing regulations and UK companies will need to meet the requirements. Using the same standards would make complete sense. In time, the UK may choose to exclude lower efficiency products from the market in order to contribute to the acceleration towards carbon-zero.”

When asked about the Lowestoft-based company’s own preparations, Bell detailed: “We are following the very helpful guidance provided by our industry association – the FEA, and have taken as many practical steps as possible to ensure we are in the best shape to serve our European customers from 1 January. Overall, we also have good demand for our products globally, and have significant export growth to the USA where we continue to grow our brand footprint.

“We source our components from all around the world, from many different suppliers and do not have large reliance on Europe. Therefore, we expect the direct impact of a no-deal Brexit to be limited. In essence, we’ve had time to look at our supply chain, alongside our business priorities, to ensure stability for our customers should the UK leave with no-deal.”

As to whether the import or export process would be more challenging from next year, Bell summed up: “It could potentially be more time-intensive, rather than difficult. Mainly due to the additional paperwork required and border custom checks. From 1 January, the closer the relationship we have with Europe the easier we would expect the process to be. The opposite will also be true.”

Compatriot company Precision Refrigeration has dotted its i’s and crossed its t’s as much as it can ahead of the end of the transition period. MD Nick Williams reported: “We have everything in place from an import/export perspective as we already buy and sell goods to and from outside the EU. We are also in dialogue with our suppliers to make sure we have everything in place and covered for all eventualities regarding the uncertainty surrounding Brexit. At this stage, as I’m sure is the case with everyone, we just want it to be done so we know the full extent of what we’re dealing with and move on.”

Drilling down into supply chain issues, Williams explained: “Despite being a UK manufacturer, many of our components come from abroad, including our compressors, fans and controllers, which are all made in Europe. In the event of a no deal Brexit, importing these components from Europe will require the same procedure as what we already follow when importing goods from further afield.

Potential tariffs in a no-deal Brexit would increase the cost of importing some of Precision’s refrigerator components.

“The main difference is that some of these goods will attract a tariff and we’ll also need to pay VAT upon importation, which obviously has an impact on our cash flow. It’s unfortunate, but the added procedures and potential tariffs will inevitably increase the overall cost of importing these goods. This is something we are actively trying to mitigate with our suppliers.”

On the topic of energy efficiency labelling effects, he feels: “Apart from changing the flag on the labels to the Union Jack, there will be little change. Thankfully, the UK will use the same standards relating to Ecodesign so there won’t be much change from that viewpoint.

“Of course, we will still need to adhere to the labelling regulations when selling our products into the EU anyway. In fact, these same standards are being adopted in markets much further afield such as in Australia and New Zealand. We’ve made a significant investment in our testing facilities and in the testing of all our products so it’s good that we won’t be subjected to yet more regulations following Brexit – whether we have a deal or not.”

Over at Liebherr’s Great Britain branch, Stephen Ongley, national sales manager – business and industry, appliance division, agrees that the UK labelling regulations will be aligned with current EU directives in the medium term, after having been transposed into UK law. “However, a no-deal scenario is likely to mean tariffs on goods, unless a free trade agreement can be put in place,” he cautioned. “This might ultimately impact on our adherence to EU regulations. Having said that, any UK manufacturer wanting to trade in the EU will have to confirm to EU regulations, whatever the UK stance.”

Liebherr’s own Brexit preparations have included appointing customs agents, arranging additional cash flow for VAT deferment and testing ERP systems. According to Ongley: “Liebherr is well-accustomed to importing from non-EU countries, so none of the new processes will be out of the ordinary. We expect to see market pricing increasing for all imported products, as manufacturers and the supply chain pass on additional costs to the market. Duty remains unknown, but expectations are in the region of +3%.”

In the event of a no-deal, the manufacturer’s supply chain could be saddled with additional complication of customs processes, VAT and duty. Ongley concluded: “It is expected that a WTO level of duty will be applied to all imports from the EU, and VAT will be due at point of entry, creating demand on cash flow. Customs paperwork will take significant additional resources and most likely cause delays at port of entry. There is also a possible impact on drivers’ right to work and entry into the UK, depending on which nation they are passported in.”

Regulatory view

Trade association FEA has been highly involved in ensuring the continuity of foodservice equipment business throughout the Brexit process. So what is the inside view of possible impacts to the industry? According to chair, John Whitehouse: “The latest government information is that ministers are going for a ‘soft landing’ with minimal disruption to the movement of goods. Even so, almost certainly importing and exporting will be more complex, whichever way the goods are moving. There will be greater reporting responsibility and, the way things are going, there will probably be tariffs.

“Imports to the UK will need to adhere to the UKCA mark (the UK version of the CE mark), while exports to the EU will still need to adhere to the CE mark. In addition, exporters will need to have a business in each territory to take title to the goods.

“The UK’s CA mark comes into use from January 2021, and businesses are encouraged to adopt it as soon as possible. However, to allow businesses to adjust, CE marked goods that meet EU regulations will be allowed to be sold in the UK until 1 January 2022.”

Specifically focusing on refrigerators and the effect on energy efficiency labelling regulations, Whitehouse added: “The UK will have alignment with current EU directives for the foreseeable future. In fact, the Energy Labelling and Ecodesign directives have already been transposed into UK law. However, a no-deal scenario is likely to mean tariffs on goods, unless a FTA (free trade agreement) can be put in place.

“This might ultimately impact on our adherence to EU regulations. Having said that, any UK manufacturer wanting to trade in the EU will have to confirm to EU regulations, whatever the UK stance.”

Sealing the deal

FiltaSeal’s refrigeration seal service could prove even more useful to sector manufacturers, post-Brexit.

Filta Group’s operations touch on the refrigeration sector, as the firm manufactures and fits replacement seals. In terms of a possible Brexit impact, the company’s commercial director Edward Palin noted: “We have extensive stocks of raw materials sourced from within the UK and overseas (both inside and outside of the EU) and so we are confident that our service will be unaffected. In fact, it is likely that our unique on-site FiltaSeal service will become even more valuable as refrigeration manufacturers tend not to have the flexibility that our service provides.”

He emphasised: “It’s important to consider not only whether commercial refrigerators will be harder to import/export, but also spare parts too, such as refrigeration seals.

“If there are any supply issues as a result of Brexit and the end of the transition period, then it is likely that traditional manufacturers will find it more difficult to source and supply parts. This is where the value of Filta’s FiltaSeal service becomes more evident, able to manufacture and fit refrigeration seals for almost any manufacturer on-site, in one visit.”

Palin suggested that a broken seal can mean refrigeration equipment is using as much as three times more energy, which could hike up energy bills, adding: “It can also lead to micro-organisms and bacteria entering the food storage compartment, risking potential hygiene issues.

“Any delays to repairs whilst waiting for an OEM seal to be sourced and imported from the EU will inevitably hit the bottom line and increase the risk of hygiene concerns – or even extend downtime if a fridge is left completely out of action due to a faulty seal.”

In terms of Filta Group’s own Brexit preparations, Palin revealed: “Although we don’t envisage any issues with our own supply, we are taking measures to mitigate any small risk of impact. For example, we are increasing stocks of raw materials for replacement fridge seals, working with suppliers in the UK and outside of the EU to maintain a secure supply and reduce our dependence on materials within from the EU. As a global business we have strong connections with the United States and we are able to leverage those relationships if needed.

“We’re also working closely with end users to communicate the benefits of our on-site replacement service. Traditionally, the seal replacement process would require two visits. The first, to diagnose, measure and order the seal, the second, to fit the seal, once it has been sourced.”

Tags : AdandeBrexitFEAfiltahoshizakiLiebherrPrecisionRefrigeration
Clare Nicholls

The author Clare Nicholls

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