The UK will complete its departure from the EU at 23.00 on 31st December 2020. As that date approaches, there is still uncertainty about whether the EU and UK will reach agreement on their future relationship, and if so whether the deal will apply at the end of 2020. Should no agreement be reached, the likelihood is that trade between the two will be undertaken on WTO terms, which would mean tariffs being applied on goods in each direction.
The UK has laid out its tariff proposals in the UK global Tariff (link) https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021 , but these have not yet been put into legislation. However, the UKs proposed tariffs on grains and flour replicate those of the EU, while proposed tariffs on bakery goods are lower.
Information on EU tariffs can be found here: https://trade.ec.europa.eu/access-to-markets/en/content/welcome-access2markets-market-access-database-users . In general, EU tariffs on grains and grain-based foods are in the range 20-50% by value. For example, the tariff on flour is €172 per tonne, around 35% of the value of the product.
There are special arrangements in place for Northern Ireland. IN terms of tariffs, businesses in NI will be able to import goods from the EU tariff free. They can then be used in manufacturing and sold throughout the EU or UK markets without any tariffs applying.
Goods imported from GB to NI may be subject to tariffs if they are moved onto the EU market, but the details of arrangements are not yet clear
The UK Flour Millers team is ready to answer questions in relation to EU exit, but for more information on the broader impact of no deal, or the changes that will be required even if there is agreement, please visit the EU exit food hub https://euexitfoodhub.co.uk/ this is an information site compiled by UK trade associations, including UK Flour Millers, which provides up-to-date information and will help to answer most immediate questions (where the answer is known – there are still many uncertainties).
UK Flour Millers objectives in relation to EU trade negotiations
Throughout the long negotiations, we have had two key objectives:
1. that millers continue to have access to the range of wheat that they need to make the flours that customers require, on terms as close as possible to those that exist today. That means maintaining access to wheat from the EU and third countries without duties, and continuing to encourage the production of suitable wheat in the UK; and
2. that UK based millers can continue to supply their customers in the European Union without the payment of duties and with a minimum (ideally nil) of additional paperwork and inspections. In the jargon, as frictionless as possible.
Managing the impact of a “no deal” Brexit
The reality is that failure to reach agreement will severely impact trade in our sector as tariff levels are substantial. However, our sector has done what it can to prepare to mitigate the impact.
Exports from Great Britain to the EU
Should discussions break down completely, meaning that tariffs are introduced on trade between the UK and the EU, use of the inward and outward processing relief (IPR and OPR) systems, which exist in the EU and the UK has replicated, could help to substantially mitigate the impact of tariffs. Basically, this would allow wheat to be exported from the EU and re-imported in the form of flour at a reduced tariff. The exact level of tariff will depend on the relative value of the wheat and flour traded. This mechanism is far from ideal, but could be used to reduce tariffs on flour to a level similar to the cost of freight from mainland Europe to the island of Ireland. The inward processing relief system can be used by, for example, Irish pizza manufacturers who can import flour from the UK tariff free provided it is then exported in the form of pizza back to the UK. UK Flour Millers has worked with customs specialists to provide advice to members on the use of these schemes
The UK government announced in May 2020 a package of tariffs to apply to all countries which do not have a free trade agreement with the UK, which would include the EU in the event of no deal. For grains and flour, the tariffs replicate those of the EU. For bread and bakery products, the UK tariffs will be lower, but still substantial. Because of the uncertainty about whether there will be an agreement, importers (including flour millers) have been seeking to build stocks of imported materials in order to minimise the immediate impact of no agreement. in order to minimise millers and other importers have been in the event of a “no deal” departure from the EU. For grains, flour and bread the tariffs were all set at zero, meaning that millers will continue to have access to wheat duty free (as they do now). This should allow for consistency in supplies to the domestic market. However, in order to take advantage of the outward processing relief scheme highlighted above, grain will have either originate from the EU or have been customs cleared there before entering the UK for processing.