The UK government’s new post-Brexit tariff regime announced today will result in both winners and losers. The new regime is set to replace the European Union’s Common External Tariff from the end of the Brexit Transition Period on 31 December 2020. The UK’s commitment to the ongoing Brexit process and ending the UK’s transition from EU membership by the end of 2020, throws up a challenges for business who will face a number of changes in how they do business on 1 January 2021.
The new MFN (most-favoured-nation) tariff regime, the UK Global Tariff (UKGT), is set in pound sterling and maintains levies on products in the UK’s agriculture, automotive and fishing industries but eliminates tariffs on wide range of products. The UKGT has been designed to “reduce cost pressures and increase choice for consumers and back UK industries to compete on the global stage”. Currently the UKGT removes tariffs on 60% of imports entering the UK – around £30 billion worth of trade. In addition to expanding tariff free trade, the UKGT streamlines nearly 6,000 tariff lines and removes all tariffs below 2%.
The UK’s food and beverage industry will see tariffs lifted for cooking products such as baking powder, yeast and cocoa powder, and will benefit from the government’s decision to scrap the EU’s “Meursing table”, which had imposed complex tariff variations on over 13,000 food products including biscuits, pizzas, confectionery and spreads.
For those in manufacturing, the UKGT also cuts tariffs on products the Government asserts to support the drive towards energy efficiency and a sustainable economy. Hundreds of products such as thermostats, vacuum flasks and LED lamps will be tariff free from 1 January 2021.
The UKGT also makes some specific provision for the life sciences sector. Pharmaceuticals and most medical devices (including ventilators) have been made tariff free. Some medical products are set to maintain a tariff under the UKGT although there will be a suspension of tariffs on personal protective equipment used to fight COVID-19.
Products which have not been made tariff free by the UKGT may be covered by the new tariff-rate quota. This allows a limited amount of a product to be imported at a zero or lower tariff rate. Some tariff-rate quotas are only applicable to products imported from a specified country and the limit may be expressed in units of weight, volume, quantity or value. The government will publish further advice on tariff-rate quotas later in 2020.
Whilst tariffs on trade with the EU and the rest of the world is only one of many Brexit-related issues for businesses to understand, the UKGT is a clear departure from the current EU tariff system and will be an important building block in the UK’s post-EU trading environment.
Commenting on the new regime, Andrew Hood, Partner, Regulatory and Trade at European law firm Fieldfisher said: “The simplification of tariffs is always welcome but the change in the tariff levels will see both winners and losers across the UK.
“Obtaining a comprehensive free trade agreement with the EU before the transition period remains the preference of nearly all businesses we speak to – ensuring no tariffs and no increased administration when continuing to trade with the EU.
“All manufacturing businesses in the UK and those that trade in goods with the UK will need to understand rapidly how this affects their long-term cost base and commercial contracts in the event these new tariffs (and the upcoming tariff quotas) come into effect on 1 January 2021.”