Impact of the EU-UK Trade Agreement on Caribbean Exporters

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The Impact of the EU-UK Trade andCo-operation Agreement on Caribbean Exporters

Box 5: The complex situation of high sugar content value-added cocoa products For cocoa powders containing sugar falling under tariff heading HS 180610 (cocoa powder, containing added sugar or other sweetening matter), the rules of origin are more complicated. Not only is a CTH necessary but also all dairy products included must be ‘wholly obtained’ in the EU or UK, while the use of non-originating sugars classified under headings HS 1701 and 1702 must ‘not exceed 40% by weight of the product’. Similarly for cocoa powders containing sugar falling under categories HS 180620–180690, all dairy products included have to be ‘wholly obtained’ in the EU or the UK, while use of non-originating sugars classified under headings HS 1701 and 1702 must ‘not exceed 40% by weight of the product’ and the value of the non- originating sugars must ‘not exceed 30% of the ex-works price of the product’. This needs to be seen in a context where, if ‘originating status’ is lost, theMFN tariffs to be paid range from8 per cent to 14 per cent with, in some instances, supplementary levies ranging from £21/100 kg to £35/100 kg depending on the sugar content of specific products.

place between the EU and GB. This covers the processing of products from cocoa beans (HS 1801) to cocoa paste (HS 1803) or cocoa but- ter (HS 1804) or cocoa powder not containing sugar (HS 1805). This means the onward trade from the EU to GB (and from the UK to the EU) in ‘cocoa paste’, ‘cocoa butter’ and ‘cocoa powder not containing sugar’, produced in the EU27 or GB from Caribbean cocoa beans, will not face tariffs when traded across an EU–GB border. This is quite different from the situa- tion in the sugar sector, where the refining of ACP raw sugar results in the loss of initial orig- inating status. In the cocoa sector, problems arise only where high volumes of non-originating sugar (neither EU nor UK sugar) are included in the cocoa-based product traded across an EU–GB border. 3.5.3 Phytosanitary import control issues along triangular cocoa supply chains In the cocoa sector, phytosanitary import control issues are not an issue along triangu- lar supply chains, although standard sanitary requirements related to pesticide residues, mycotoxins, polycyclic-aromatic hydrocarbons and microbiological contamination such as Salmonella (a low risk for cocoa) will need to be complied with. 3.5.4 Trade administration and border clearance issues in cocoa General border clearance challenges along EU-to-GB triangular supply chains will be faced only after 1 July 2022. After this date, re- exports of Caribbean value-added cocoa prod- ucts may well require the services of customs intermediaries in negotiating new UK border control arrangements along triangular supply chains. Large European cocoa traders will be

fully equipped to deal with the trade adminis- tration requirements, the fulfilment of which will ease border clearance processes. In terms of trade administration requirements, Caribbean cocoa exporters shipping along trian- gular supply chains now need separate EU- and UK-issued Economic Operator Registration Identification (EORI) numbers for entry to the EU and GB, respectively. While most Caribbean cocoa exporters will have already obtained sepa- rate EORI numbers, the intermittent nature of the operations of some Caribbean cocoa export- ers may have seen Covid-19 freight disruptions preventing the shipment of cargoes to Europe since 1 January 2021. Once these exporters re- enter EU or UK markets, the need for separate EORI numbers for shipments along triangular supply chains will need to have been addressed. Alternatively, Caribbean cocoa exporters will need to ensure their EU trade partner has a valid UK-issued EORI number. Particular trade administration challenges would appear to arise for exports of organic cocoa along triangular supply chains. The EU continues to use its electronic organic cer- tification system, while the UK has reverted to a paper-based system for organic trade documentation. While the simple solution to avoid the loss of organic status for cocoa shipped along tri- angular supply chains would involve the UK authorities accepting printouts of electroni- cally transmitted documents, this could prove a problem, since such documents would not carry the original stamp of the organic certifi- cation agency in the country of origin. Unless this issue is addressed, Caribbean organic cocoa exporters, shipping along triangular sup- ply chains, could lose organic status and hence the organic price premium when onward ship- ping to the UK.