FDI highlights tariff and costs impact of Rules of Origin on the Irish bakery sector

January 25, 2021

Food Drink Ireland (FDI), the Ibec group representing the food and drink sector, has expressed concern about the impact of Rules of Origin in the EU-UK Trade and Cooperation Agreement (TCA) on the Irish bakery sector which will result in tariffs being applied to flour imports and increased costs for the sector. FDI has called for a derogation for the Irish bakery sector in order to avoid these tariffs. 

FDI Director Paul Kelly said: “Under the Rules of Origin in the TCA, there is a requirement that the wheat used should be of UK or EU origin, with a maximum tolerance of 15% for grain from other countries such as Canada or USA. If the wheat used to make flour is more than 15% of 3rd country origin, the full tariff of €172 per tonne becomes payable. This is a significant problem for the Irish Bakery industry, which purchases flour from millers in Great Britain (GB) with a high proportion of 3rd country wheat, mainly Canadian or US which is rarely below the 15% tolerance level. 
“There are no industrial milling options available in Ireland since the closure of a number of mills in recent years and since then Ireland has not been self-sufficient in flour. 80% of the flour used in the baking sector is imported, mainly from GB and the product specifications for much of that requires a higher percentage of US/Canadian wheat than allowed for in the tolerance rule.  

“This results in a distorted marketplace where a GB, Northern Irish or EU-based bakery competitor, using the same specification flour, but not facing the same tariff will be at a significant competitive advantage selling their finished product in the marketplace versus an Irish-based bakery. This is a problem uniquely faced by Irish based bakeries. 

The implications of this for the bakery industry are very serious:  

By exceeding the tolerance, the full tariff of €172 per tonne will apply to flour imported from Great Britain. This is equivalent to a 50% increase in product cost. 
Based on ERSI projections, this would equate to a 9% consumer price increase in bread. 
The tariffs will have significant negative impact on the competitiveness of Irish based producers of breads and bakery products both on their domestic and export markets. 

“In order to avoid distortion of trade and negative impacts on Irish consumers we are seeking a derogation for the Irish bakery sector from this specific Rule of Origin in order to deliver a tariff free solution and put the businesses on a level playing field with UK and EU bakery competitors.”