A tenth of British exports to the EU have faced tariffs since the start of 2021, new research finds

Tue 1 Jun 2021
Posted by: Noelle McElhatton
Trade News

Up to £3.5bn of British exports to the EU have paid tariffs they did not have to, according to new research.

Analysis of EU statistics by the University of Sussex’s Trade Policy Observatory (TPO) has found that about 10% of British exports to the EU paid tariffs unnecessarily, the BBC reports.

Although the EU-UK Trade and Cooperation Agreement (TCA) was indicated as a 'no quotas and no tariffs' deal, exporters do not automatically benefit from zero tariffs.

Rules of Origin

No tariffs apply for goods moving from GB to the EU (and in the other direction) but only if the TCA’s Rules of Origin requirements are met.

Evidence of origin must be provided – the importer is required to declare that they hold such proof – and traders need to know how to classify their goods when checking the product specific rules.

The statement on origin must be provided on an invoice or any other commercial document (excluding a bill of lading), describing the originating product in sufficient detail to enable its identification. See further guidance on gov.uk here.

Meet the rules

“Tariff-free trade is only tariff-free if firms not only meet the Rules of Origin criteria, but also can deal with the necessary bureaucracy and paperwork,” said Prof Michael Gasiorek, trade expert at the University of Sussex.

The TPO report looked at trade for the first three months of 2021 and estimates that the TCA has reduced UK exports to the EU by 15% and imports by 32%.

It suggests the impact on exports into the EU is possibly in part because of the increased customs administration. In the first quarter of 2021, around 27% of trade that could have entered the EU tariff-free did not do so.

Millions in tariffs

Businesses and groups told the BBC millions of pounds in tariffs had been paid. Most put this down to complex arrangements for claiming zero tariffs, difficulties over the re-export to the EU of goods processed in Britain and an expectation that some of these fees could eventually be recovered.

Classic car repairer, The Classic Car Mechanic, has incurred tariff bills of hundreds of pounds for car parts sent to Hungary, which could not be valued, and so were hit with a tariff by French customs.

The report also found differences in preference utilisation rates (PURs), which measure the extent to which tariff preferences provided by an agreement are being used.

Data for British exports to Germany shows rates well below half in January and February at 42% and 44% respectively. The trade deal has been used more for exports to France, which reached 77% in March.

Claim it

Guidance on claiming preferential rates of duty for trade with the EU can be found on gov.co.uk.

The latest ONS figures for UK trade, in March 2021, showed total exports of goods increased with both EU and non-EU countries. EU exports were up by £1bn to £12.7bn, while non-EU exports saw a £1.3bn increase to £14bn.

As well as tariffs, UK businesses say they have experienced non-tariff barriers to trade following Brexit. Building reports consultant Aecom that increased labour costs because of post-Brexit emigration and permanent non-tariff barriers are hitting imports of construction products into the UK from the EU and driving up input costs.

Services decline

The service sector has shrank by more than £110bn due to Brexit, according to research by Aston University, reported in the FT.

It found that UK services exports from 2016 to 2019 were cumulatively £113bn lower than they would have been had the UK not voted to quit the EU in June 2016. Financial services exports were the hardest hit, with business services, travel, transport and IT also affected.

Meanwhile, the UK government has established a new independent body with powers to help defend UK economic interests from unfair international trading practices.

The Trade Remedies Authority (TRA) will investigate complaints from UK businesses about injury caused by unfair import practices, such as dumping and subsidies.