Brands have called on the government to address a “gaping hole” in the EU Brexit trade deal around rule of origin.
In a letter to the government signed by hundreds of firms, Fashion Roundtable asked for a meeting to resolve impacts on supply chains for UK fashion retailers and manufacturers from the rule, which has left firms vulnerable to unforeseen tariffs.
As products are often made from many parts imported from non-EU countries, such as India, China and Turkey, they don’t qualify for the tariff-free access to the EU.
Tamara Cincik, CEO of Fashion Roundtable, said: “The rules complicate matters for firms that make products containing many parts made abroad, such as fashion retailers.
“To qualify as originating in the UK products need to satisfy certain criteria, such as having a minimum value of parts originating in the UK/EU or having undergone a ‘substantial change’.”
Fashion Roundtable said the “Percy Pig problem” had left retailers facing unexpected customs duties of up to 12%.
It added: “The so-called Percy Pig problem concerning rules of origin is significant, as some goods sold will still be subject to substantial tariffs even if manufactured within the EU, imported to the UK, and then re-exported to the EU.”
The letter accused the government of being “out of touch with the realities of how the sector works” and asked for the same levels of support that were given to the fishing industry in a £23m package.
Firms have been advised by the government to set up distribution hubs in Europe to get around the rules, a “costly and time-consuming process” rarely possible for the 50,000 SMEs in the sector.
The letter referred to reports UK retailers have abandoned or burnt goods in the EU that were returned by EU customers, as bringing them back to the UK would involve paperwork and customs charges.
Four major UK High Street fashion retailers are stockpiling returns in Belgium, Ireland and Germany due to this complication, and one brand will have to pay almost £20,000 for returns, the BBC reported.
There are more than 450 signatories to the letter including Vivienne Westwood, Kurt Geiger, Liberty London, Givenchy, Tommy Hilfiger.
Meanwhile, DHL Supply Chain has responded to Brexit trade obstacles by offering use of its 30 European-based warehouses to online retailers.
Hendrik Venter, CEO at DHL Supply Chain MLEMEA, said: “Even larger retailers find maintaining that kind of presence is often financially heavy from a cash flow perspective or not cost-effective.”
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