Non-tariff Brexit is a tariff minefield after all. Now that the UK is entirely separate from the EU, the full effects of what that separation entails from a trade point of view are becoming evident in the real world.
Here in the UK, we found out very quickly the negative impact Brexit is having on the export of fresh seafood to the EU, with delays at ports resulting in fish rotting on European quaysides (it’s ironic that fishing rights was one of the major sticking points just getting to a trade deal in the first place). We also know that musicians and entertainers are up in arms as they see the cost of touring on the continent rising to the point of unaffordability, if we may coin such a term. However, it is small and medium sized businesses – the backbone of the economy – that are feeling the pressure of doing business with the EU, due mainly to increased red tape and form filling, as well as, more worryingly, several extra Brexit-related charges for exporting into the EU that eat into their profit margins. The smaller the firm, the harder the hit, as extra costs hit small consignments proportionately harder because each one attracts a charge. Their online sales to EU markets have been particularly hard hit as extra charges are often hidden from the buyer, who frequently only finds out about them when they receive a customs demand or the courier turns up at their door with the goods and a VAT invoice (this works both ways, of course, as EU buyers of UK goods have found out to their cost).
The difficulty of post-Brexit trade is heightened by the hitherto highly integrated nature of UK-EU supply chains and distribution networks. One perverse consequence is that EU goods sold into the UK tariff-free are subject to tariffs if re-exported to the EU – unless they have undergone sufficient processing in the UK. This is particularly a problem for the island of Ireland, for whom the UK has long acted as a land bridge for EU products. For many UK-EU traders, accepting tariffs may be easier in the end than trying to jump through all the administrative hoops – though that will adversely affect their profitability/cost of production. Read more about all the above here.
For the food and beverage industry, potential pitfalls abound. For instance, packaged goods manufactured in the UK with some ingredients sourced from EU countries, will face additional tariffs when exporting back to the EU if they do not meet the applicable ‘rules of origin’ rate.
In effect, leaving the EU will require changing the trading habits of 4 decades and the process will not be painless, despite what any politician may have said in the past or imply today. If you’re in the food and beverage industry and would like to chat about new UK/EU trade requirements – or US to UK/EU markets, give TradeScope’s Ted Horton a shout here. With representatives in Germany, France and the UK, TradeScope is a specialist in selling and marketing food and beverage products into the EU and the UK from the US. And we know Brexit.