UK Would Temporarily Eliminate Most Tariffs if No-Deal Brexit Occurs

The United Kingdom would temporarily set tariffs at zero for nearly 90 percent of imported goods should it leave the European Union with no transition deal in place, the U.K. Department for International Trade said in a March 13 press release announcing a draft tariff and customs scheme in the run-up to a vote in Parliament on whether to leave with no deal.

Though Parliament ended up narrowly voting the same day that it would not leave without a deal under any circumstances, that vote is non-binding. A no-deal Brexit is still a possibility, if presumably more remote than it was at the beginning of the day (see 1903130070).

Only 13 percent of imported goods by total value would be subject to tariffs under the proposed scheme, in an effort to ease the shock of a no-deal Brexit. “This regime is temporary, and the government would closely monitor the effects of these tariffs on the UK economy. It would apply for up to 12 months while a full consultation and review on a permanent approach to tariffs is undertaken,” the U.K. said.

The U.K. government also posted details of its policy to the Northern Ireland land border with Ireland, an EU member state, should a no-deal transition occur. It would take a “temporary approach to avoid new checks and controls on goods at the Northern Ireland land border if the UK leaves the EU without a deal. The UK’s temporary import tariffs will therefore not apply to goods crossing from Ireland into Northern Ireland,” the press release said.

The run-up to the March 13 vote featured a flurry of activity from the U.K. government’s trade agencies to lay out the no-deal trade and customs plan for parliamentarians. Draft regulations and guidance documents issued that day included a draft U.K. tariff schedule and tariff-rate quota limits, as well as information on how the Generalized System of Preferences would apply in the U.K. after a no-deal Brexit (it still would) and preferential duty rates and rules of origin for the number of recently negotiated trade agreements that would apply for the U.K. post-Brexit.

The U.K. also posted in several formats a list of temporary tariff rates applicable for the year following a no-deal Brexit, and guidance on how to check whether a low temporary rate applies. “For these sectors, MFN [Most Favored Nation] tariffs will be reduced, and (for some products) additional First Come First Serve Tariff Rate Quotas (TRQs) will be introduced, to ensure the impact on consumer prices remains relatively neutral,” according to a March 13 policy paper on the economic impact of the new scheme.

Tariffs would also be maintained on finished vehicles, including cars, trucks, buses and motorcycles, though no additional tariffs would apply to car parts. Any tariffs that are reduced under the temporary scheme would apply not only to the EU, but also to the rest of the world, including the U.S., under World Trade Organization MFN rules.

The no-deal plan would also leave in place retaliatory tariffs against the U.S. for the latter’s Section 232 tariffs, the policy paper said. “Existing EU countermeasures in response to steel and aluminium safeguards have been maintained on a range of products. The countermeasures increase the cost of importing these products from the US. This could induce consumers and users to switch to alternative suppliers or to reduce their consumption. This would reduce US exports of these products to the UK.”

On the Northern Ireland-Ireland border, “The UK government would not introduce any new checks or controls on goods at the land border between Ireland and Northern Ireland, including no customs requirements for nearly all goods,” it said in a guidance document. As mentioned, tariffs would not apply for goods crossing that border. Only a “small number of measures strictly necessary to comply with international legal obligations” would apply, including notification requirements for dangerous chemicals and ozone-depleting substances, and checkpoints and certification requirements for plant materials.

The U.K. cautioned that, without a deal in place, its policies on Northern Ireland would only apply to its side of the border. “Because these are unilateral measures, they only mitigate the impacts from exit that are within the UK government’s control. These measures do not set out the position in respect of tariffs or processes to be applied to goods moving from Northern Ireland to Ireland,” it said.