This EU tariff takes the biscuit

If Brexit manages to get rid of this EU monstrosity, it will indeed be an achievement. Exploring post-Brexit tariffs: part 2

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By Peter Ungphakorn
POSTED AUGUST 18, 2016 | UPDATED AUGUST 20, 2016

UPDATE:
The goods schedule for the EU’s enlargement in 2004 to 25 members (EU–25) was certified and circulated in December 2016. Details are here

If you make biscuits in Britain and hope to continue to export to the EU after the UK leaves, you’re in for a treat. Ditto if you make bread, cakes, chocolate, breakfast cereals, food preparations or anything similar

The common assumption is that if the UK leaves the single market and the customs union without any form of free trade agreement with the EU, then British exports will face EU import duties under Brussels’ World Trade Organization (WTO) commitments.

sweet-almond-biscuits-cookies cropped 25pct - pexels - lifeofpix
EU customs used to have 27,720 categories of these. Now they have 13,608

The treat? Discover and marvel at the inventiveness that created these EU tariffs.

Then prepare for indigestion, of nightmare proportions. One neutral expert on tariffs calls the scheme “horrendous”.

IN THIS SERIES
• Part 1 — The Hilton beef quota: a taste of what post-Brexit UK faces in the WTO
• Part 3 — Oranges: a litmus test of UK post-Brexit tariff negotiations

In its WTO commitment, the EU classifies bakery and confectionary products, food preparations and more as “composite agrigoods”. They are not just defined as “biscuits” or “chocolate” but have additional definitions based on the percentages of their ingredients.

This allows an extra set of import duties to be charged depending on how much of four agricultural ingredients are used to make the product: milk fat, milk proteins, starch or glucose, or various forms of sugar.

The result used to be 27,720 categories of composite agrigoods for the purposes of charging import duties. That’s 54 products each having a possible 504 recipes using different combinations of those ingredients. So, 54 x 504 = 27,720.

The figure has now been trimmed to 27 products, still with 504 recipes, in the EU’s current WTO commitment, leaving only 13,608 categories of biscuits, bread, chocolate, etc, each potentially charged different import duty.

That’s quite a feast for customs officers, although I doubt if even they have the stomach for calculations like these.

It could have been worse. They could have added eggs, dried fruit, nuts, you name it.

So, how do you know which tariff category (or “tariff line”) your product falls under? You look it up here.

Meursing table from commitment
Click the image to admire it full size

This is what you do.*

  • Based on the amount of the various ingredients in your recipe, identify its three-digit number from that table and add a 7 as a fourth digit on the front.
  • Next, consult another table listing additional tariff rates for each of those four-digit numbers beginning with 7. Find your four-digit number and its corresponding tariff rates. There could be up to three of them: one in general and one each for flour and sugar. The first is a proper tariff rate, the other two are maximums for sugar and flour. Memorise them all.
  • Finally, go to another table and look up the normal eight digit code number for your product (the four additional digits now make it a 12-digit number). Find the corresponding tariff rate for the eight-digit product and add the first of the additional tariffs you memorised.
  • If there is an appropriate note, then cut off the sugar or flour tariffs (or both) at the maximums you have memorised.

Et voilà.

  • And of course if you add more sugar or reduce the milk fat, don’t forget to start all over again.

That’s how you find out what import duty your biscuits will face as they enter the EU.

What could be simpler?

How about these for starters: football’s offside rule (pdf, pages 108–118); baseball’s infield fly rule; or the Duckworth-Lewis method for calculating who’s won a cricket match that’s been interrupted by rain.

OK, there are online calculators to help you, but they just add to the scheme’s obscurity.

All of this is designed to protect European farmers as well as biscuit makers. The EU has promised to strip it back to “less than 300” categories as part of the WTO’s Doha Round negotiations. But the talks are moribund if not stone cold dead.

The system is so complex that as the UK heads out of the EU, it could do the world a service by binning it before it shuts the door behind it.

How? The UK and EU will have to renegotiate their WTO commitments: the UK to separate its own from the EU’s, and the EU because it is losing a member.

The UK should unilaterally declare it will not use such a devious scheme to set its own tariffs. And as a WTO member in its own right, it should join forces with the rest of the world to refuse to agree on any revised EU commitment that includes the scheme.

After all, as an EU member, the UK has been shamelessly complicit in this monstrosity for decades.


* At least I think that’s what you do


P.S. By the way, the above describes the EU’s WTO commitment. In practice, the EU applies a revised version of that nightmare through its own internal regulation.

P.P.S: If you must, you can see an attempt at an explanation of how the system works here.


Updated: August 20, 2016: adding links to online tool for calculating Meursing codes, and WTO news report on EU presentation to agriculture negotiations; removing bullet point on converting €/100kg tariffs to percentages because it’s unclear whether this is needed.

Photo credit: Sweet almond biscuits | lifeofpix.com via pexels.com | Creative Commons CC0

Author: tradebetablog

I used to work on trade issues and am now retired. I am an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions, with periodic analyses for AgraEurope www.agra-net.com/agra/agra-europe. This blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form or tweeting @CoppetainPU — Copyright © Peter Ungphakorn except where stated