Business

Lidl lines up suppliers to cover no-deal costs

beef cattle Image copyright Getty Images
Image caption Tariffs on food such as beef and milk can be high

Lidl's Irish business has reminded British suppliers they are expected to pay any EU import tariffs imposed on goods crossing borders after Brexit.

Currently, as both countries are member states, no tariffs are paid.

But Lidl's current contracts with suppliers contain a clause saying goods must be delivered with tariffs paid.

The supermarket said it had held workshops with British suppliers to make sure they had the necessary information to "avoid any disruption".

"We have been working closely for over two years with external consultants, not only to get our business Brexit ready, but also to ensure our valued suppliers are as prepared as possible.

"All existing Lidl contracts contain a DDP ('delivered duty paid') clause. In an effort to understand the level of preparedness of key UK suppliers we are communicating proactively with them and working together to resolve any potential barriers to supply," the supermarket said in a statement.

The delivered duty paid clause means that the cost of transporting goods, including tariffs on EU exports, are the responsibility of the supplier.

In the event of a no-deal Brexit, tariffs on EU exports would come into force automatically, according to World Trade Organization (WTO) rules.

EU tariffs on food can be both high and complex.

On some types of beef it is 12.8% plus 265 euros per 100kg for meat from outside the EU. The average for dairy products is more than 35%.

Image copyright Getty Images

Suppliers told the Times newspaper that other supermarkets are also likely to enforce deals similar to Lidl's agreement.

A supermarket source told the newspaper that the potential costs were too high for all suppliers to be able to cover them.

Prime Minister Boris Johnson has said that the UK will leave the EU with or without a deal on 31 October.

While he has committed to cutting most tariffs on foreign goods being imported into the UK, tariffs for goods exported from the UK to the EU are outside of his control.

Dr Peter Holmes, fellow of the UK Trade Policy Observatory, told the BBC: "The UK suppliers will pay tariffs going into the EU, and EU suppliers will pay tariffs going into the UK [if there are any].

"You can avoid this if you sign a free trade agreement, and the UK can unilaterally remove all trade tariffs but it has to do so for all trading partners and this would not remove the tariffs on UK exports to the EU."

He said that suddenly implementing WTO rules would be a "serious shock" to the economy.

"The point to make is that, tariffs are in general passed on from the supplier to the consumer, so it doesn't really make any difference who actually directly pays them. If Lidl lines up suppliers to cover no-deal costs, as soon as they can suppliers will pass those costs on, or withdraw from the market."

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