Retailers tell government of concerns about tariffs and Rules of Origin for re-exported products

Fri 8 Jan 2021
Posted by: Noelle McElhatton
Trade News

marks and spencers

UK retailers have expressed concern that new post-transition customs and trade requirements, as well as the possibility of delays at the borders, are impacting their supply chains with Europe. 

According to the BBC, there is concern that, under the Rules of Origin provisions in the UK-EU free trade deal, tariffs will need to be paid on goods not fully made in Britain.

Tariffs for UK hub

The UK’s trade deal with the EU was billed as preserving its zero-tariff and zero-quota access to the bloc’s single market. However, major retailers using the UK as a distribution hub for European business could face possible tariffs if they re-export to the EU.

Some parcel operators have suspended UK-EU goods movements as a result of the changes. DPD UK has paused its European Road Service due to the “increased burden” of customs paperwork for packages heading to the EU.

The company said 20% of parcels had “incorrect or incomplete data attached”, which meant they would have to be returned.

Added friction

The FT reports that the UK’s leading retailers are reconsidering their supply chains to avoid tariffs. 

The ‘UK-EU Trade and Cooperation Agreement’ includes detailed stipulations on Rules of Origin that determine whether tariffs apply to goods moved.

More than 100 retail executives held a call with government officials on Wednesday to discuss the problem. The FT reports a person on the call saying there was the sound of “pennies dropping... everyone can now see significant issues of additional friction which is pure cost”.

William Bain, trade policy adviser at the British Retail Consortium, said that “at least 50” of the lobby group’s members are facing potential tariffs on re-exports.

Speaking to Reuters ahead of its trading statement today, Marks & Spencer chief executive Steve Rowe said: “Tariff-free does not feel like tariff-free when you read the fine print.”

No overseas delivery

The BBC also reports that John Lewis is among those scrapping overseas deliveries. The retailer said the move was not because of post-transition rule changes, but due to a renewed focus on its UK business. However, other retailers have suspended European deliveries due to confusion over new trading rules.

ASOS and Fortnum & Mason have suspended deliveries to Europe, while Debenhams has temporarily shut down its online store in Ireland.  

Michelle Dale, of accountants UHY Hacker Young told the BBC that many UK businesses exporting to the EU will be hit by tariffs.

“Businesses have also been completely blindsided by the Rules of Origin part of the deal, which leaves them at a major competitive disadvantage when selling in the EU,” she said.

See here for a free-to-access recording on the UK-EU Free Trade Agreement and Rules of Origin.

The IOE&IT provides training on new processes, including Rules of Origin, that have taken effect since Great Britain left the EU’s customs union on 31 December.