Suppliers must foot the bill on EU tariffs, says Lidl

posted by Charlie Hart
19 August 2019

Lidl Ireland has told British suppliers that is their responsibility to pay EU import tariffs after Brexit.

Lidl Ireland’s contracts with suppliers contain a Delivered Duty Paid (DPP) clause, which means the cost of transporting goods, including tariffs, is the responsibility of the supplier. 

This would include tariffs on exports to the EU, which will automatically come into force if no-deal is reached, according to World Trade Organisation rules.  

Both Ireland and the UK are currently member states, which means no tariffs are paid.

The supermarket said: “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.”

It said it had met with British suppliers and held workshops to ensure they had the necessary information to "avoid any disruption".

Suppliers told The Times that they expect other supermarkets to follow suit and enforce deals similar to Lidl’s agreement. 

CIPS economist John Glen said: “Lidl today have provided another clear indication of the costs of a no-deal Brexit. Not unsurprisingly UK suppliers to Lidl will have to carry the costs of any import duties and this has already been written into supplier contracts.

“What has not yet emerged is who will carry the cost of delayed supplies, damage to perishable goods which are delayed in transit or increased demurrage costs of goods held up in UK ports because EU drivers are unwilling to accompany the freight into the UK for fear of being delayed on the return leg. Project fear has left the building and reality is beginning to bite.”

Meanwhile, a leaked government report has warned cross-Channel disruption after the UK exits the EU could last for at least three months.

The 'Operation Yellowhammer' dossier, seen by the Sunday Times, added that severe extended delays could result in shortages of medicines and fresh food if the UK leaves the EU with no-deal on 31 October.

The dossier said up to 85% of lorries using the main channel crossings “may not be ready” for French customs. It added that HGVs could face queues of two-and-a-half days. 

Disruption crossing the border would have an impact on the supply of medicines and medical supplies unless there is mitigation from other sources, it said.   

Last week, the Department of Health and Social Care launched the procurement process to secure an ‘express freight service’ to ensure that vital medicines and medical supplies can be imported at short notice as part of Brexit preparations.

The report added that delay would also see a decrease in supplies of fresh food. Elements of the food supply chain including ingredients, chemicals and packaging may be in short supply, limiting choice and availability and increasing prices for customers. 

It added while public water services are likely to be unaffected, the most significant risk is a failure in the chemicals supply chain. 

Jonathan Cohen, a senior associate at legal firm Mayer Brown, predicted there would be a major uptick in supply chain disputes and warned firms to look carefully at the wording of contracts to “assess their legal liabilities and options”. 

“We expect there to be an increased focus on force majeure clauses, which provide for what is to happen to the parties' obligations if an event outside their control occurs (such as Brexit) and makes performance of the contract more difficult or impossible. 

“The impact of a failure in the supply chain can be significant, from the imposition of late or non-delivery penalties through to a total shutdown of production. As a result, we expect to see an increase in disputes (and potentially litigation) around supply chain failures in the event of a no-deal Brexit,” he said.

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