Government consults on post-Brexit tariffs: should you respond?

FAQs on the UK's proposed tariff schedule

How can the UK reduce tariffs when it has already agreed to adopt largely the same WTO tariffs as the EU?

The UK has indeed agreed to commit to a WTO tariff schedule which largely mirrors the EU's WTO commitments.  However, these are "bound tariffs" which set the maximum rates of duty that the UK is allowed to apply to imports from WTO member states.  The UK will be free to apply lower rates if it wishes (known as "applied tariffs") – and it is this possibility which has prompted the current consultation.  In a welcome move, the Government is also proposing to set applied tariffs based on "rounding down" the bound tariff rates – for example, a tariff of 19.2% will be rounded down to 17.5% and tariffs of 2.5% or less will be removed altogether.

What has happened to the idea of removing tariffs from most goods by value in the event of "no deal"?

In 2019, the Government indicated that if the UK left the EU without a deal, it would – as a temporary measure - apply zero tariffs on 87% of goods by value (whether those goods originated from the EU or the rest of the world).  The thinking was that this would help to offset the adverse economic impact of "no deal", particularly additional costs and delays produced by the re-introduction of customs formalities on trade between the EU and the UK.  More recently, the Government has indicated that it will not pursue this policy.  

It is possible that this is a negotiating stance ahead of the start of negotiations with the EU on the future trading relationship.  It may also have been prompted by reports that the no deal tariffs policy led to the refusal of countries such as Canada to agree to "roll over" the terms of the EU-Canada trade agreement after the end of the transition (click here for more detail).  That said, in principle, there would be nothing to stop the  Government reverting to the policy if a "no deal" exit appeared likely at the end of the transition period – although as things stand, businesses should prepare on the assumption that tariffs will apply to EU imports in the event that a zero-tariff trade deal cannot be agreed by 31 December 2020.

Why do you say that the cost of importing goods from the EU will go up even if a zero-tariff trade deal is agreed?

Removing tariffs would be helpful, but even if there is a trade deal, importing goods from the EU will still become more expensive because of the additional burdens of dealing with customs formalities and related border "red tape";  it would only be possible to remove those additional costs if the UK remained within a customs union with the EU and also agreed to regulatory alignment on goods (both of which the Government has ruled out).

Some press coverage suggests there could be massive savings for UK consumers from these tariff reductions – is this right?

Some of the press coverage of this issue appears to have assumed that tariff reductions of X% would result in reductions of the same amount in the retail prices paid by consumers – hence claims of significant savings for consumers.  This is not correct, as tariff reductions will only affect the price paid by importers – which is only a proportion of the retail price paid by consumers, once the retailer has applied a mark-up (which will often be significant owing to the cost of the retailer's premises/distribution etc).  It also assumes that importers will always pass on any savings to their customers (and that retailers will do likewise with their customers). 

In practice, importers may wish to retain the benefit of the savings, especially if they help to offset increases in the cost of imports of other products from the EU.  Nevertheless, retailers should keep a careful eye on whether their suppliers are benefitting from material tariff reductions without passing on any of the benefit or using the savings to avoid increasing the price of other products.

If your business is keen to respond and you would like any further guidance on the consultation before doing so, please do get in touch.