New Brexit tariff regime scraps thousands of “unnecessary” tariffs including biscuits, waffles, pizzas

20 May 2020 --- The UK government has announced a new most-favored-nation (MFN) tariff regime, the UK Global Tariff (UKGT), as part of its Brexit transition. “It will scrap red tape and other unnecessary barriers to trade, reduce cost pressures and increase choice for consumers and back UK industries to compete on the global stage,” its guidance outlines. While the policy has been positively received in the local F&B sector, the overlying need to soon establish a bilateral EU trade deal is flagged by some stakeholders.

“I think the most important thing for us to highlight is that this does not substitute for the UK need for a trade deal. It’s good to see the tariff regime simplified and then are certain products which will see lower tariffs than before,” a spokesperson of the British Retail Consortium (BRC) tells FoodIngredientsFirst.

The UKGT was designed following “widespread engagement” with businesses across the UK. As it will come into force next year, it is essential that businesses can familiarize themselves with the new tariff regime ahead of this date. The UKGT will, among other benchmarks, maintain tariffs on agricultural products such as lamb, beef, and poultry.

The new regime will replace the EU’s Common External Tariff (EU CET) on January 1 next year, at the end of the Brexit Transition Period. Pegged as “tailored to the needs of the UK economy,” it aims to facilitate cheaper and easier imports of goods from overseas, compared to the EU CET, and will be in pounds, not euros.
 The UK will scrap over 13,000 tariff variations on products like biscuits, waffles, pizzas, quiches, confectionery,and spreads.

The UKGT eliminates “unnecessary” tariff variations on a range of F&B products, rounds tariffs down to standardized percentages, and eliminates all “nuisance tariffs” (those below 2 percent). The new policy ensures that 60 percent of trade will come into the UK tariff-free on World Trade Organization (WTO) terms or through existing preferential access starting next January. Successful FTA negotiations will increase this.

Under the new policy, the UK government is getting rid of the EU’s Meursing table, enabling the nation to scrap thousands of tariff variations deemed “unnecessary” on products. This includes over 13,000 tariff variations on products like biscuits, waffles, pizzas, quiches, confectionery and spreads.

UK consumers will also benefit from a wider range of F&B options and lower costs on numerous goods, thanks to these zero tariffs. These include, for instance, cooking products such as baking powder (down from 6.1 percent), yeast (down from 12 percent), bay leaves (down from 7 percent), ground thyme (down from 8.5 percent) and cocoa powder (down from 8 percent).

“Without a trade deal with the EU, families across the country are likely to face higher food costs. It remains essential that the UK agrees to a comprehensive deal that reduces friction – such as checks and delays at the border – and allows tariff-free trade to continue with the EU,” says Helen Dickinson, Chief Executive of the BRC.

“UK consumers have become accustomed to a huge variety of affordable food thanks, in part, to tariff-free imports from the EU. Unless a similar agreement is reached in the next seven months, imported agricultural products will be subject to new tariffs, raising costs for consumers,” she adds.

A future trade relationship with the UK is also vital for the EU, as the UK is the single largest trading partner of the EU with a total value of food and drink trade of €47.5 billion (US$51.5 billion) in 2018, according to reports by FoodDrinkEurope. Alongside the F&B body, other representatives across the EU agri-food chain, including Copa-Cogeca and CELCAA, have openly endorsed a Brexit deal that includes a free-trade deal with zero tariffs and quantitative restrictions between the EU and the UK.

Moving forward, William Bain, EU Trade Advisor at the BRC, shares with FoodIngredientsFirst the following Brexit concerns that remain following the issuing of guidance about the new regime:

1. The need for a deal that reduces friction and removes tariffs after Brexit.

2. The need to find ways of reducing checks and red tape.

3. The need for the UK government to build the necessary infrastructure and implement new procedures well before the deadline. Otherwise, businesses will not have time to get used to the new systems.

4. The challenge of dealing with coronavirus adds to the challenges in building and implementing new systems.

“Trade negotiations need to be completed as soon as possible to give retailers time to implement the new rules. Without this, we are likely to see disruption at the border as retailers and border staff grapple with brand new systems, resulting in an interrupted flow of food across the channel,” UK government-issued guidance concludes.

A “common sense” approach to tariffs?
The new regime will be taking on a “common-sense” approach to its new tariff schedule by streamlining and simplifying nearly 6,000 tariff lines and lowering costs for businesses by reducing administrative burdens.

The UK will be maintaining tariffs on a number of products backing UK food industries, such as agriculture and fishing. It argues that this will help to support businesses in every region and nation of the UK to thrive. Some tariffs are also being maintained to support imports from the world’s poorest countries that benefit from preferential access to the UK market.

Ian Wright, Chief Executive of the UK Food and Drink Federation (FDF), expresses, “We welcomethe announcement of the UK’s global tariff. The Government has taken on board FDF’s suggestions to maintain specific and compound tariffs on agrifood goods that limit exchange rate impacts on tariffs, and encourage the use of higher quality and value ingredients. This gives food and drink manufacturers time to prepare for the application of these tariffs after January 1, 2021.”

The FDF has called this move a “sensible step” back from the temporary tariffs set out in March 2019. “This approach will preserve essential negotiating capital for the UK in trade talks with the EU, US and Japan. That said, it is vital that the UK secures a trade deal with the EU before the end of the year to avoid serious damage to manufacturers and for consumers,” concludes Wright.

By Benjamin Ferrer