Import tariffs: post-transition guidance

The transition period ends on 31 December 2020. After this, UK companies importing goods will have to apply the new UK Global Tariff (UKGT) to goods from all countries except where there is a trade deal or special trading conditions. Read this briefing to understand what might change, and how your business can prepare.

What will change at the end of the transition period?

At present, customs duties (tariffs) do not apply to UK goods imports from the EU, and there are tariff reductions on goods imports from those countries with which the EU has a free trade agreement (FTA), and from less economically developed country partners. Tariffs need to be paid on imports from all other countries.

Under new government plans for the end of transition period, British businesses will have to apply new UK Global Tariffs to all goods imported into the UK, except those:

• Where the country you are importing from has a trade agreement with the UK
• Where the goods come from less economically developed countries which are part of the Generalised Scheme of Preferences
• An exception applies such as a relief or tariff suspension.

You can check what the new UK import tariff will be under the new system on the government's website. The website will allow you to compare the future tariff with the present tariffs on goods being imported from outside the EU under the EU’s external tariff and notes where there has been a change.

At the end of transition, where duties do apply, these would be levied on UK imports on goods from all countries where a trade deal is not in force, including potentially countries in the EU. For example, there will be:

• A mixture of tariffs and quotas on beef, lamb, pork, poultry, and some dairy products
• Tariffs retained on finished vehicles
• Tariffs retained on protected goods, including certain ceramics, fertiliser, and fuel
• Tariffs retained on goods sourced from developing countries, including bananas, raw cane sugar and fish.

The exceptions will be on imports from countries with which the UK has its own free trade agreement in place at the time of exit, or for developing countries which already benefit from preferential access under existing agreements.

To understand whether a country has a trade deal with the UK, you will need to check the government's latest updates on existing FTAs. This resource includes links to the detail of individual trade agreements. For example, read the detail of UK future trading arrangements with South Korea. 

Read the government guidance on arrangements with developing country partners.

Some goods will be covered by a tariff-rate quota (TRQ). This allows a limited amount of a product to be imported at a zero or lower tariff rate, expressed in units of weight, volume, quality, or value, and is sometimes only applicable to products imported from a specified country. Once the limit is exceeded, a higher tariff rate applies. In other words, if there is a TRQ on the product you are importing you can apply to import a limited amount at a reduced rate of customs duty. The government has promised to publish further advice on TRQs later in 2020, based on the quotas in the UK goods schedules at the WTO.

How might the new UK global tariffs impact my business?

The UK Global Tariff (UKGT) will impact companies in different ways depending on the goods they import, the location of their supply chains and the outcome of individual trade negotiations. But in any scenario, your firm will probably need to pay different rates of customs duty on imports. 

These new rates will apply from 1 January 2021 and will be different from the proposed rates under previous no deal scenarios. Previous no deal preparations were based on the UK’s ‘temporary’ most favoured nation (MFN) tariff schedule published in March 2019. The new tariff is significantly different, so companies’ modelling assessments will now need to be refreshed. 

Businesses importing goods into the UK from overseas will have to comply with customs procedures. In the case of imports from the EU, this will mean the application of duties and administration which has not previously been needed. Further guidance on changes to import and export procedures are available on CBI papers covering exporting goods to the EU, importing goods from the EU and trading outside the EU.

The UKGT will result in 60% of relevant imports into the UK being tariff free (as compared to 47% under the EU’s Common External Tariff and 88% under the UK’s previous no-deal tariffs). Its key features are:

• It simplifies 40.2% of tariff lines by rounding tariffs down and eliminating low and so-called nuisance tariffs
• It eliminates tariffs on certain products where UK domestic production is zero, or very low, for example, cotton, textile fibres and wood
• It scraps the Meursing table, which is currently used to determine tariff codes on foodstuffs; this should result in a significant reduction in the complexity faced by businesses in determining the rate of customs duty applicable to over 13,000 goods
• It retains high tariffs on sectors the EU wishes to protect, including the agricultural, automotive and ceramics industries by aligning these tariffs broadly to the EU Common External Tariff
• It will impose high tariffs on agricultural imports, e.g. up to 12% + £254GBP/100kg on beef, and £139GBP/100kg on cheese.
• It leaves imports of finished pharmaceutical products and most medical devices tariff-free, but applies a duty imposition of 6% on Active Pharmaceutical Ingredients (APIs) and key chemicals to produce APIs
• It imposes a temporary zero tariff rate (and VAT waiver) to certain products used to protect against COVID-19 including Personal Protective Equipment (PPE), medical devices, disinfectant, and medical supplies from non-EU countries
• It applies a 0% rate of customs duty to imports of aircraft, helicopters, and many aircraft parts
• It cuts tariffs on over 100 low-carbon products
• It duplicates the EU’s Generalised Scheme of Preferences so that products from the poorest countries will continue to attract no tariffs to protect their trade.

Features such as tariff simplification and lowering duties on sustainable products are welcome, and could bring long-term benefits to the economy. In contrast to the previous no deal tariffs, the UKGT represents a better balance between the needs of the UK’s consumers, producers, and trade negotiators (who cannot secure good trade deals if the UK makes too many concessions up front). However, the new tariff rates do represent a change and, coming in tandem with new processes, will require businesses to adapt.

Most importantly, companies will continue to face uncertainty; tariff rates cannot be fixed, so there is a conclusion to outstanding negotiations. For example, some companies, such as those who import textiles from Turkey, will be concerned about the imposition of new tariffs, having not paid these before.

Why can’t tariffs on UK imports stay the same?

Without a trade agreement with the EU or any other trading partner, it is not possible to continue to deliver tariff-free trade on goods moving between both areas. This is because, under WTO rules, countries must treat their trading partners in the same way. It’s not possible to offer one country a special favour, like lowering customs duty, unless the same benefits are available to all other WTO members. Therefore, the UK cannot maintain zero tariffs on EU goods while keeping duties on non-EU products at today’s rates.

The key exception to this rule – otherwise known as the most-favoured nation (MFN) principle – is when two countries sign a free trade agreement (FTA) that covers substantially all trade.

If the UK doesn’t sign an FTA with the EU, it must treat the EU the same as other trading partners. This means applying the same set of tariffs to all countries with which the UK does not have a bilateral FTA, or which are not developing country partners.

What will happen to tariffs on UK exports to other countries?

The UK has no control over the tariffs that the UK will face on exports to any other country, except for those countries with whom the UK is currently negotiating, or has already finalised, an FTA. Check the government updates for the latest information on signed FTAs.

In the government doesn’t sign an FTA with the EU, UK exports to EU countries would face tariffs. View consolidated database of the EU’s external tariff to find out what duties could apply.

Where can business find further information?

• Read the The Department for International Trade’s (DIT) one page explainer on UKGT
• Search for individual tariffs either by product description or by tariff code at the government’s UK Global Tariff Tool
• Read the 50 page DIT guide on features of the new UKGT system.