We are less than a month away from the end of the Brexit transition period and in this time the United Kingdom needs to implement a trade deal with the EU or leave with no deal and revert to the rules laid out by the World Trade Organization (WTO).
At Ethimex, we empathise with the confusion and frustration of the situation but no matter what happens, Ethimex is ready. If a deal is struck then it will likely mean little to no change in business operations. Unfortunately, No-Deal leaves businesses in more rocky waters. Fortunately, Ethimex has been trading with countries outside of the EU, under bilateral agreements and WTO Terms over two decades putting us in a great position to handle a no-deal scenario.
What Does a No-Deal Mean for UK Alcohol Trade?
One of the big implications of a no-deal Brexit means that the UK will default to the global trade rules set by the WTO. This will lead to tariffs being added on to the import and export of products and raw materials between the UK and the rest of Europe. This has caused spirit brands and producers to begin preparations such as stockpiling key materials like neutral alcohol and spirits.
Plenty of businesses have taken this as an opportunity to source UK locally manufactured ingredients, such as UK GNS. This can be good for domestic industries and can also be a more environmentally sustainable option. However, in the case of UK GNS, the supply of it has not increased so the market will have to deal with much stronger demand. Ethimex has picked up increased demand since last March and we’ve taken these developments into account and have since adjusted our stock forecasts for UK GNS for 2021.
We have also been accumulating stocks at our UK warehouse. For GNS imported to the UK, large volumes (by tanker) will not be affected significantly by Brexit. At the same time, European exporters to the UK offering smaller volumes (e.g. Organic GNS in IBC) are facing significant added cost. As for Ethimex, we import per tanker and break bulk in our UK warehouse. This way we ensure that we can provide a regular supply of bulk ethanol and spirits in the event that there are delays at UK ports in the first few months of 2021 (which, unfortunately, we have no control over!).
What Deals Have Been Made?
As of the publication of this post, some agreements have been made between the UK and other countries. The UK and Canada have agreed on a trade deal that maintains their existing relationship with discussion to negotiate a new deal next year. This trade deal ensures that 98% of goods exported to Canada will be tariff-free and there won’t be added tax for Canadian goods, such as Canadian whisky, entering the UK.
It’s not just good news for whisky drinkers, there is also good news for rum fans as the UK and Caribbean countries have also come to a trade agreement which will allow both parties to continue to trade without additional tariffs and barriers. Great news as the UK is a key export market for the Caribbean. In 2017, around 81% of Guyana sugarcane exports and 64% of Jamaican sugarcane exports went to the UK.
Besides trade deals, the UK has set up a new UK GI scheme to protect British food and drink products. This includes an agreement between the UK and the USA to protect the statues of Bourbon, Tennessee whiskey, Scotch whisky and Irish whiskey.
Constant Preparation
While there certainly has been some progress in a year that has been very tough on the industry, there is still a lot of uncertainty and while a future deal with the EU is very much in the balance, we and our third-party logistics providers are prepared for any eventuality.
The team at Ethimex have been constantly evaluating our preparations for Brexit for some time now, and this has been no different ahead of the transition period ending 31st December 2020. In theory, come 1st January 2021, imports from EU countries will broadly be handled similarly to the way that imports from non-EU countries have been handled up till now, something that we have a great deal of experience in. We’ve had our import and export permits already in place for many years and have plenty of experience. While we just don’t know yet which documents we will be using, they won’t be new documents to us.
We are also active members of the WSTA, NAPA and several other trade-specific organisations, which gives us instant access to the latest customs-related information. Moreover, we are active in the conversation and supplying of information in both directions to support the larger industry, so we can respond quickly to changes.
While there is still a lot of uncertainty and confusion with a lot of factors out of our hands, the Ethimex team are as ready as we can be for what January 1st 2021 will bring. Don’t hesitate to contact us for more information on our Brexit preparations or products and service.
