Some certainty for UK plastic converters in the midst of Brexit chaos

In his column this month, our resident materials expert, Mike Boswell, looks at what impact the latest Brexit updates will have on import duties.

Whilst UK politicians have been trying to find a solution to the challenges of Brexit, UK plastic converters have continued to face the uncertainty of what may happen to prices in terms of import duties.

This is of particular significance in the UK because the installed capacity to manufacture plastic raw materials is 1.6 million tonnes per annum compared with a requirement from UK plastic converters of some 3.2 million tonnes per annum, and, when account is taken of both exports of plastic raw materials manufactured in the UK along with polymers and grades that are not currently produced within these shores, it is estimated that UK plastic processors are 70 per cent – 80 per cent reliant on imports.

To date the majority of these imports either come from EU27 producers or have been imported from outside of the EU27 and stored in mainland Europe before being subsequently imported into the UK. Whilst the UK remains a member of the EU, the movement of goods between the EU27 and the UK are without duty and plastic raw materials entering from outside the EU28, unless there is a specific trade agreement, are typically subject to a 6.5 per cent import duty.

For UK processors there has been the concern that were the UK to leave the EU that raw material input costs will increase as a result of additional import duties, and that in the case of imports from outside EU27 that are stored in mainland Europe before shipment to the UK, these could be subject to double duty resulting in a compound 13 per cent+ premium.

It should be noted that under WTO (World Trade Organisation Rules) the maximum or ‘bound’ rate of duty is 6.5 per cent on plastic raw materials. However, in a move to provide some certainty the UK Government has just announced that in the event of a ‘no-deal’ that all plastic raw material imports apart for PET resin for bottles would enjoy zero duty for an initial 12-month period, after which time the situation would be reviewed. Not only does this announcement remove the risk of double duty, in the event of goods from outside the EU27 clearing customs before onward delivery to the UK, it maintains the status quo on materials produced in the EU and those countries that have a trade deal with the EU, but also improves the competitiveness of supply from the rest of the world, which, under EU membership carries a 6.5 per cent premium.

Whilst this looks like the UK could have a competitive advantage in the event of a ‘no deal’ BREXIT, what is not known is what import duty the EU27 may impose on plastic raw material and plastic products imported from the UK. Furthermore, even in the event of a deal the trading relationship between the UK and the EU27 still needs to be negotiated, although from a plastics perspective the likelihood is that the outcome for our sector would at least be neutral.

It should also be noted that in addition to import duties other factors and especially exchange rates will have a major, and potentially greater impact, than import duties.

Who is ‘Polymerman’?

Mike Boswell is Managing Director of UK materials distributor, Plastribution, as well as the Chairman of the British Plastic Federation’s Polymer Compounders and Distributors Group and its ‘BREXIT Committee’. ‘Polymerman’ is the title used for announcements made via his Twitter account. This column is compiled using data from PIE (Plastics Information Europe) www.plastribution.co.uk | www.pieweb.com