Things are beginning to look up. It is nearly Spring, an end to lockdown is (almost) in sight and… this week is British Pie Week. British Pie Week occurs every year and celebrates everything wonderful about pies. The United Kingdom is a nation of pie lovers and there is no denying the Great British Pie has an iconic culinary status. As Sylvia Plath appropriately said, “Cut yourself a big slice with the silver server, a big slice of pie. Open your eyes. Let life happen.”
Now that the Brexit transition period has ended and the UK has officially left the EU, there are numerous implications for the food and drink industry.
Without doubt, it will become more complicated to sell products in the EU than previously, namely due to the “rules of origin” condition which was at the heart of the trade deal. This condition is to be applied to all goods crossing the border, and the rules of origin may turn into a costly headache for businesses. The Trade and Co-operation Agreement, which was signed between the UK and EU on 24 December 2020 and came into force at the start of this year, provides that manufacturers can use ingredients made in the UK or the EU and will not be required to pay tariffs when exporting the finished product to an EU country.
However, if ingredients are brought in from outside the free trade area, and are exported to the EU, tariffs may be applied depending on the proportion of the final product that they make up. This is an area plagued with complex regulation.
The rules mean tariffs can be applied to exported goods depending on their place of origin. Arguably, one of the biggest issues surrounding the rules of origin condition for those in the baking industry involves flour, as additional tariffs are being applied. This condition has implications for producers using Canadian wheat, US durum or Black Sea grain in their flour for export as, for instance, local traders will see that the Trade and Co-operation Agreement stipulates that if the wheat used to make flour is more than 15% of third country origin, the full tariff of €172 (US$209) per metric ton becomes payable. This is equivalent to a 50% increase in product cost.
This is having a significant effect on trade, particularly within the Republic of Ireland where there is a heavy reliance on flour imported from the UK, much of which contains a high proportion of Canadian or American wheat. The tariffs applied to imports are increasing costs at a rate that could lead to Irish consumers facing a 9% rise in the price of bread. This could have a significant knock-on effect on flour trade between the two nations.
This issue does not come as a surprise to many in the industry, with Alex Waugh, Director of UK Flour Millers, noting that “The impact of this issue, and indeed the concerns of the flour milling sector, were raised directly with the European Commission and the UK Government on more than one occasion before the TCA was signed”.
However, there are some potential solutions, and perhaps the most apparent solution would be to have a slight adjustment to the product-specific rules of origin applying to wheat flour. This would then mean that it would be acceptable to make flour from a third country grain where the originating grain would itself have been subject to the same tariff in both jurisdictions. The Trade and Co-operation Agreement does note adjustments to the rules of origin, where it is recognised that materials from third countries are an essential product component.
There is no doubt that, irrespective, these changes will have an impact on all food and produce, but for now let us all just enjoy a slice of pie!
How can we help?
MacRoberts has a strong track record in helping food and drink businesses nationally and internationally when exporting and importing their goods. We are also part of a global network of international law firms with whom we regularly work and can call upon for support in exporting to overseas markets.