UK Announces New Tariff in Preparation for Brexit

In an effort to get a leg up on trade talks post-Brexit, the United Kingdom (UK) has announced a new UK Global Tariff (UKGT), set to go into effect January 1, 2021.

Taking four main approaches to the new tariff, the UK government published details on May 19, which are contained within the online tariff. However, only two of these approaches apply to most importers:

1. Liberalised tariffs- Approximately 15% of the current tariff subheadings has been reduced to zero.
2. Simplified tariffs- Rounding down or “banded” tariffs allowing duty rates to be expressed as a single percentage. This approach means minimal duty reductions with a maximum of 0.9%. It affects just over a third of all of the tariff subheadings.

As Reuters characterizes it, the new tariff “aims to simplify what some UK officials call an overly complex EU system and help Britain negotiate trade deals with the United States, the Brussels-based bloc and others.” Under the proposed scheme, the tariff removes 30% of the current number of tariff subheadings by merging various existing subheadings—simplifying the tariff but also removing many full 10-digit codes, which most importers are accustomed to using.

Below are key takeaways to prepare for the end of the Brexit transition and the end of borderless access to the EU:

• Many 10-digit codes will become invalid and relevant products will need to be re-classified. Be sure to review current Brexit planning given new duty rates and the classifications you have established for current products into the “EU.”
• Check post-Brexit duty exposure by reviewing the new rates imposed on your products.
• If you are currently utilising a Free Trade agreement for your imports, analyze your duty exposure in case this Free Trade agreement will not be replaced with a new agreement by the go-live date of this new tariff. With that, review the thresholds currently in place with your Customs Comprehensive Guarantee and/or Duty Deferment Facility.

For about 40% of the headings, nothing will change and duty rates will remain exactly as they are currently. Moreover, nearly 75% of the total number of tariff subheadings will remain unchanged or have a minor rate correction, less than 0.9%.

To learn more about the impact of the new UK Global Tariff on your business, contact a Flexport customs expert.