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Britain’s top retailers are reviewing their supply chains to Ireland and other European markets as they figure out how to avoid the tariffs imposed by the UK’s post-Brexit trade deal with the EU.
The Trade and Cooperation Agreement agreed with Brussels on Christmas Eve includes detailed stipulations on the rules of origin that determine whether tariffs apply to products that are imported into the UK and then re-exported to EU markets with little or no additional processing. .
“Duty-free does not feel duty-free when you read the fine print,” said Steve Rowe, CEO of Marks and Spencer.
More than 100 retail executives held a call with government officials Wednesday to discuss the problem. One person on the call said the sound of “coins falling. . . now everyone can see significant additional friction issues which is pure cost. “
William Bain, a trade policy advisor to the British Retail Consortium, said “at least 50” of the lobbyists faced potential tariffs on re-exports.
More than 100 retail executives held a call with Boris Johnson and other government officials Wednesday to discuss the tariff issue © Andrew Parsons / No 10 Downing Street
Some companies, including John Lewis and TK Maxx, have suspended deliveries to customers in Northern Ireland, who have to follow EU customs rules, while others are trying to find out if they can continue to supply their EU stores from the UK. United.
“We appreciate that the rules of origin in the [trade agreement] They were designed to facilitate trade in goods, but we need a solution that genuinely reflects the needs of the UK-EU goods supply and distribution chains, ”added Mr Bain.
To qualify for zero tariff treatment, goods must be able to demonstrate that they are “originating” in the EU or the UK, with approximately 50 per cent British content for most products. But the rules are complicated; pitting imported dates from Israel does not count, while smoking salmon from Norway does.
Clothing imports from developing countries such as Cambodia, Myanmar and Bangladesh are duty free under the Global System of Preferences. But if they are re-exported without further processing, they incur tariffs.
“We’re trying to unravel all of this,” said Nigel Oddy, chief executive of New Look, which has 27 stores in the Republic of Ireland sourcing from the UK. He said it also affected sales made through online fashion markets such as Asos and Zalando and delivered to customers in the EU.
Dixons Carphone and Argos also have stores in Ireland sourcing from the UK. A spokesman for Dixons said it was “working on the implications of the new rules.”
Retailers said the fees could still be avoided through the use of transit processes and customs warehouses. The Next fashion chain is among those that have taken this approach. But in many cases this means ditching the logistics designed to serve the UK and Ireland as one market.
Retail executives warned that smaller companies would have a hard time paying for services like customs warehousing. “For large companies, there will be interim solutions that will take a long time, but for many others this will mean paying tariffs or reinvesting in the EU,” Rowe warned.
Another solution is to import directly to warehouses in the EU. Dixons’ substantial business in Scandinavia is conducted in this way, and leisurewear group JD Sports said last year it was investigating options for stocking European stores without involving UK facilities.
But supplying from separate distribution centers means more working capital tied up in inventory, with possible implications for cash flow and debt.
Mr Bain said the BRC was “working with members on short-term options and is seeking dialogue with the government and the EU on long-term solutions.”
The Cabinet Office said this week it was working closely with companies “to help them adapt to new business requirements.” But another retailer said that ultimately a solution would require concessions from the EU.
