Announced in May, the UK Global Tariff (UKGT) is the UK-specific tariff regime that will apply to goods imported into the UK from January 2021, with tariffs on an additional £30bn of imported goods cut to zero.
During the Brexit transition period, until 31 December 2020, the EU Common External tariff continues to be applied to goods imported into the UK.
Once the transition period is over, the UKGT will apply to goods imported into the UK from countries which the UK does not have a Free Trade Agreement and not covered by any other exemption.
Analysts reviewing the Border Operating Model released in July have uncovered indications that May’s UKGT may not be the final operational version.
The Border Operating Model confirms that “The tariffs applicable to UK importers will be published…when they are finalised and before implementation”. Which suggests, perhaps unsurprisingly, that the UK’s tariffs are part of the negotiation tactics and are unlikely to be the final version, until the outcome of the trade negotiations are known.
It is still critical that businesses work with the best information available to prepare their Brexit modelling and understand the impact of the new UK Global Tariff on goods imported into the UK from 1 January 2021.
The UKGT includes a UK applied Most Favoured Nation tariff schedule that is intended to apply to all countries by default, although this may change with respect to EU countries depending on the deal reached by the UK with the EU.
The UKGT will not apply to:
– Countries that the UK has a trade deal with
– Countries that are part of the UK Generalised Scheme of Preferences (more information on this can be found HERE)
– Where an exception applies, such as relief or tariff suspension
What are some of the key changes?
The net effect of the tariff regime according to a summary by the Department for International Trade is as follows:
– 47% of products will be tariff-free, compared to 27% under the CET and
– Average tariffs will be reduced from 7.2% under the CET to 5.7% under the UKGT
This is achieved through changes to rates of tariff by lowering rates, reducing rates to zero or rounding rates down.
Outside of these changes, the UKGT will convert CET rates into GBP sterling and maintain tariffs in certain sectors including agriculture, ceramics and chemicals.
What could the UKGT mean for business?
The impact of the UKGT on business will depend on what the UK’s trade relationship looks like with the EU and the relevant business sector. This is currently a moving picture.
In the event of a no-deal Brexit, it is likely to become more expensive to import goods from the EU to the UK as tariffs will now apply to certain goods from the EU where they have not previously applied. With time in increasingly short supply, it is time to take stock (perhaps literally) to ensure additional costs are factored into the business planning process.
However, businesses importing goods from outside of the EU into the UK are likely to benefit from the UKGT due to the Government liberalising, simplifying and reducing tariff rates on a number of goods meaning importation should be comparably cheaper.
For further information and advice on our Brexit brokerage solutions, please contact Grant Liddell or Chris Carlile for assistance.