UK Global Tariff to Apply from 1 January 2021: Government Claims That Businesses and Consumers Will Benefit

On 19 May 2020, the UK revealed its new tariff regime, the UK Global Tariff (“UKGT”). Together with the announcement of the UKGT, the UK declared that it is seeking to facilitate imports of goods not competing with British producers. Consequently, it will remove a significant number of tariffs. Indeed, the UKGT is set to remove about £15 billion in “needless” tariffs of below 2% and £10 billion in tariffs on goods that are not produced in the UK. The UKGT is set to enter into force on 1 January 2021 and will replace the EU’s Common External Tariff (CET).

The UK Government has announced that the UKGT will stand as a simpler, easier to use and lower tariff regime in contrast with the EU’s CET. According to the UK Department for International Trade, the new regime will be loosely based on the EU’s CET in terms of classification, but “ tailored to the needs of the UK economy ” and calculated in pounds rather than euros. The UKGT will apply to goods exported from countries with which the UK does not have a preferential agreement.

The UK seeks to facilitate trading with the UK, including by removing “needless” tariffs which are felt to create administrative burdens. All tariffs below 2% will be removed. As mentioned by the UK Government, the customs revenue generated is not worth the extra ‘red tape’. This action will liberalise about £15 billion of trade, scrapping tariffs on items such as bricks and bicycle pumps.

Additionally, the UKGT system will round tariffs down, making them simpler for traders to use. Tariffs under 20% will be rounded down to the nearest 2% band, those between 20 and 50% are rounded down to the nearest 5% band, and those above 50% are rounded down to the nearest 10% band. For instance, frozen vegetables that are currently subject to a 17.6% tariff rate under the CET will, under the UKGT, see a 16% tariff rate.

Hong Kong traders should know that tariffs on goods that compete with British producers, such as certain high-tech goods, will remain unchanged so as to protect the country’s industry. The UK will, however, remove tariffs for imports that support British manufacturing, such as nuts and bolts. the UK is not planning to remove tariffs on £10 billion worth of goods that are not produced in the UK, such as preserved olives.

The UK also aims to simplify its tariff regime by moving away from the EU’s Meursing Table, which defines tariffs on “ composite agrigoods ” such as biscuits or breakfast cereal. Whereas the EU’s CET calculates tariffs depending on the percentage of raw ingredients that make up each product, the UK will apply a flat rate of 8% on such foods.

The UK government has announced that it will:

• Maintain tariffs on agricultural products such as lamb, beef, and poultry.
• Maintain a 10% tariff on cars.
• Maintain tariffs for the vast majority of ceramic products.
• Remove tariffs on £30 billion worth of imports entering UK supply chains. 0% tariffs on products used in UK production, including copper alloy tubes (down from 5.2%) and screws and bolts (down from 3.7%).

UK consumers are also expected to benefit due to “zero tariffs” on a variety of consumer goods. These, which may also create opportunities for Hong Kong sellers, include:

• Dishwashers (down from 2.7%).
• Freezers (down from 2.5%).
• Sanitary products and tampons (down from 6.3%).
• Paints (down from 6.5%) and screwdrivers (down from 2.7%).
• Mirrors (down from 4%).
• Scissors and garden shears (down from 4.7%).
• Padlocks (down from 2.7%).
• Cooking products such as baking powder (down from 6.1%), yeast (down from 12%), bay leaves (down from 7%), ground thyme (down from 8.5%) and cocoa powder (down from 8%).
• Christmas trees (down from 2.5%).

As for its attempt to promote a “sustainable economy” the UKGT will cut tariffs on over 100 products to back renewable energy, energy efficiency, carbon capture, and the circular economy. The following are all dropping to zero tariffs:

• Thermostats (down from 2.1%).
• Vacuum flasks (down from 6.7%).
• LED lamps (down from 3.7%).
• Bike inner tubes (down from 4%).

Almost all pharmaceuticals and most medical devices (including ventilators) will enter tariff free due to the UKGT. However, some products that are used to fight COVID-19 will maintain a tariff, although – for the moment – so as to ensure that those working on the frontline of the crisis can access vital equipment easily, the UK has introduced a temporary zero tariff rate on such products. This temporary relief waives the tariff and VAT for personal protective equipment (PPE), medical devices, disinfectant and medical supplies from non-EU countries. The Government claims to be committed to continuing to waive the tariffs on key COVID-19 items “should this be necessary” upon implementation of the UKGT in 2021. A list of goods for which relief can be claimed can be found on  GOV.UK : the COVID-19 Commodity Codes List.

The Withdrawal Agreement entered into between the UK and the EU will expire on 31 December 2020, ending the formal Brexit process and taking Britain out of the EU’s single market. Upon expiry of the Withdrawal Agreement the UKGT will enter into force.