Tesco, Marks & Spencer and over 50 British retailers face possible tariffs for re-exporting goods to the EU, possibly explaining recent empty shelves.
he Brexit trade deal agreed upon December 24 was supposed to preserve the UK’s zero-tariff and zero-quota access to the EU. However, goods sourced outside the EU – or even inside – that are brought into the UK and then re-exported to the EU could be subjected to tariffs.
This could help to explain why one M&S in Dublin had empty shelves, although a spokesperson said it was due to “systems” at the time. She further explained that it was IT related but had no comment on whether Brexit was affecting supplies.
M&S CEO Steve Rowe said: “Tariff free does not feel like tariff free when you read the fine print (of the deal).”
“For big businesses there will be time consuming workarounds but for a lot of others this means paying tariffs or rebasing into the EU.”
Speaking on Morning Ireland, Paul Kelly of Food Drink Ireland said food importers in Ireland have started to see the effects of Brexit on supply chains, causing “concern”.
“Quite a cause of concern,” he said.
He said that many of the supply chains are set up with the close proximity of Great Britain to Ireland in mind.
“The nature of the industry is that a lot of the existing supply chains work on the basis of distribution hubs that are in Britain at the moment. What we’re facing when they split out those products and then send them on to Ireland, having originally come from the continent, is the full EU tariffs, which is a problem, because in a sense they’re actually returning to the EU,” he explained.
Meanwhile the British Retail Consortium represents over 170 major retailers, including the big supermarkets, and is working with its members to seek short-term options to the tariff issue.
“We appreciate that the rules of origin in the Trade and Co-operation Agreement were designed to be facilitative on trade in goods, but we need a solution which genuinely reflects the needs of UK-EU supply and distribution chains for goods,” William Bain of the BRC said.
Tesco, Britain’s biggest retailer, said it was in talks with the UK and Irish governments about the issue and was working to find a satisfactory resolution as quickly as possible.
The issue is complex, as there are varying limits on the percentage of a product that can come from outside the EU but still qualify as a non-tariff product under the free trade agreement.
For example, in dairy it is 20pc by weight, for white chocolate it is 40pc by weight.
There are also rules around “transformation”, covering what is required to turn something that contains say three products from countries outside the FTA into one UK product. For example, stoning dates from Israel is not permissible, but smoking or pickling products is.
“This makes unravelling the genome sequence look simple,” said M&S chairman Archie Norman, who fears the issue will damage overall UK competitiveness.