UK retailers face tariffs for re-exporting goods to EU, trade body says

By James Davey

LONDON, Jan 7 (Reuters) - More than 50 British retailers,
including Tesco and Marks & Spencer, face
potential tariffs for re-exporting goods to the European Union,
their trade body said on Thursday, amid warnings this could make
Britain less competitive.

Britain clinched a Brexit trade deal with the EU on Dec. 24
that was billed as preserving its zero-tariff and zero-quota
access to the bloc's single market of 450 million consumers.

But it has since emerged that goods or commodities that are
sourced from outside, and even inside, of the trading bloc that
are brought into the UK, and then re-exported to the EU attract
a tariff under so called rules of origin.

"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," said
William Bain of the British Retail Consortium (BRC).

The BRC, which represents more than 170 major retailers
including the big supermarkets, is working with members on
short-term options and is seeking dialogue with the government
and the EU on longer-term solutions to mitigate the effects of
the new tariffs.

“Tariff free does not feel like tariff free when you read
the fine print (of the deal)," said Marks & Spencer (M&S) CEO
Steve Rowe.

"For big businesses there will be time consuming workarounds
but for a lot of others this means paying tariffs or rebasing
into the EU."

The issues are complex.

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 20% by weight, for white
chocolate it is 40% 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.

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.
(Reporting by James Davey. Editing by Jane Merriman)