Trade News - Thursday 21st April 2022

By Nicholas Booth

Plastic packaging tax creates an opportunity for ‘sustainable’ packaging

Businesses that make or use plastic packaging must work out who in the supply chain is going to pay the new Plastic Packaging Tax. It’s going to affect everyone in business but only one in six businesses has taken the first step and registered with to begin the process of accounting.

Andrew Thurston, customs duty consultant at accountancy group MHA, said importers would also find it “difficult and costly” to get evidence from overseas suppliers of the recycled content of packaging.

The tax will affect everyone from transport providers who use bubble wrap packaging, through retailers importing items like bin liners, drink bottles and carrier bags to publishers importing plastic for laminating books, according to accountancy firm RSM.

On 1 April 2022 the new tax was introduced and many of us suspected it was a joke. But it’s real and it applies to any business that makes or imports 10 tonnes or more per year of plastic packaging containing less than 30% recycled plastic. Firms that meet these criteria will be taxed at £200 per tonne.

Suzanne Alecrim, a trade and customs consultant at the Institute of Export and International Trade (IOE&IT) Academy, said the tax only needs to be paid once, at the “final substantial point of manufacture”. But who by? This was the subject of an IOE&IT webinar on April 14th, which is available online.

Great sections of the plastic supply chain will be affected by the confusion, said Alecrim. “There has been a bit of a misunderstanding about the tax,” said Alecrim. “People say everyone in the supply chain must pay the tax. That’s not the case. You must establish where that final substantial point of manufacture is. That’s the only point that it does get paid.”

Five hundred businesses attended the webinar live, of which most said they are affected by the tax and 16% said they’d be “greatly impacted”. However, only 13% of them had already registered on to account for the tax, which came into force four weeks ago.

Helene Roberts, head of the British Plastics Federation’s plastics and flexible packaging group, said food-grade items that cannot use recycled plastic, like soup pots, should have been exempted until technology has advanced.

The good news? There are exemptions to the tax, which Alecrim described in the webinar, however, they are rare. “Food packaging comprises 40% of packaging in the UK so excluding it from the tax would severely blunt its impact,” a government spokesman told the FT.

So the one good piece of news is that there’s an opportunity for traders who can find recyclable food packaging.

Is World Trade Organisation order to ‘diversify’ a coded message?

Governments have failed to provide the perfect response to the leak of a deadly virus from a Wuhan laboratory, the suppression of health information by the World Health Organisation and the lack of transparency provided by one of the world’s most oppressive regimes and the outbreak of war in Ukraine, according to the new leader of the World Trade Organisation (WTO).

WTO Director-General Ngozi Okonjo-Iweala has written a piece for the Financial Times that points out all the supply chain crises that ‘institutions’ must address.

“Supply chain disruptions have been painful for companies and consumers alike and the war in Ukraine is adding to the strain,” said Okonjo-Iweala. None of this will come as a revelation to anyone. What practical advice or help can the WTO offer?

The WTO’s Trade Facilitation Agreement (TFA) will cut unneeded bureaucracy, expedite customs clearance and cut trading costs, according to the DTO’s director-general. But how, exactly, will this be done? No details were forthcoming, only the revelation that “bold, coordinated action” is needed. What exactly is the message? Is the WTO hinting the unsayable?

Okonjo-Iweala also issued a plea to governments to boost investment and grant more fast-track planning approvals for port operators wanting to improve things. “Dramatic increases in freight rates [are] diverting shipping capacity towards the most lucrative routes, smaller businesses risk finding themselves locked out of global supply chains.”

The two biggest problems she identified were the freight disruptions across Chinese ports caused by Covid-19 and Ukrainian shipments being halted through Black Sea ports. These revelations were followed by a criticism of governments and international institutions for “not working together” to try to ameliorate the problems.

“Structural weaknesses were pressuring supply chains even before the pandemic,” said Okonjo-Iweala. However, a search of its website provides no evidence that the WTO did anything to warn about these structural weaknesses.

“Traders often don’t know about upstream or downstream disruptions until it is too late to reroute or reschedule cargoes,” she added. “This has made the current supply crunch even harder to manage.”

The Russian invasion of Ukraine has destroyed the value of global trade by just 2.8%, according to figures from the Kiel Institute for the World Economy.

At a recent virtual meeting of government officials, heads of major ports and logistics companies, Okonjo-Iweala called for what she called a ‘reglobalisation’ of the global economy – bringing more countries back into international production networks.

“Deeper, more diversified international markets remain our best bet for supply resilience,” said Okonjo-Iweala. That’s a message that could mean everything and nothing.

Wrexham’s Global Attractions breaks export record with South-East Asia contract

Wrexham is now a world-leading soft play centre, thanks to the emergence of local creative force Global Attractions (GA), which makes family entertainment units. It is now busily recruiting more staff after securing international contracts to build and export soft play centres to shopping malls in Pattaya City and Bangkok.

The seasoned Welsh exporter’s growth was aided by government support from UK Export Finance (UKEF).

GA’s sudden upsurge on the international stage could be a source of inspiration for many exporters. It takes a long time to become an overnight success and in the last 25 years, it has mostly supplied domestically with McDonald’s, IKEA and KFC being clients. However, a contract from Ferrari World Abu Dhabi helped it expand, all from its base in Wrexham.

The company won the overseas contracts as its high-quality designs began to come to wider attention. Its soft play centre inventions will feature in one of Pattaya City’s largest malls, with 4 floors dedicated to family-friendly activities that attract 1 million residents in the city just south of Bangkok. To bring the seeds of the idea to fruition it needed a supportive finance package to compete overseas and, amazingly, this nurturing was provided by the UK government.

UKEF support for the project, provided through the London Forfaiting Company, allowed Global Attractions to offer its buyer favourable repayment terms, helping the company win the contract ahead of overseas competitors.

“Securing finance unlocks vital overseas trading opportunities for us,” said Andy Davies, GA’s finance director, “the collaboration between UK Export Finance and the London Forfaiting Company has allowed us to find that.”

GA’s has got its work cut out now though. Its parent company, SPI Global, wants it to be the number 1 full concept supplier in the world. Luckily the deal has opened a new trading market and another contract in Bangkok was recently clinched, also with UKEF support.

Last year, UKEF provided £12.3 billion for over 550 companies, which is estimated to have supported over 100,000 UK jobs directly and in the supply chain. Traders can contact their Export Finance Manager here.

Can warehouse space accommodate Brexit backlog?

The office of National Statistics (ONS) has reported that business premises for transport and storage were 88% more voluminous in 2021 than in 2011. The trend is accelerating as numbers have risen 21% since 2019, according to The Rise of the UK Warehouse and the Golden Logistics Triangle.

The growth was inspired by the surge in online shopping, coronavirus restrictions and supply chain adjustments to Brexit.

New orders for warehouse building were worth £5.6bn in 2021, the highest figure since 1985. The Covid effect meant that the proportion of online shopping peaked at 38% in January 2021 and has since fallen back to 28% for February 2022.

However, the UK Warehousing Association (UKWA) said the real figure is much larger since the study didn’t include retail players and wholesale logistics users such as Amazon, Tesco and DHL.

Amazon alone is to create five new warehouses and more than 10,000 jobs in the UK. It has some of the UK’s largest warehouses including a 2m ft2 centre in Tilbury and a 1m ft2 centre in Dunfermline.

UKWA said the ONS’ findings were in line with the conclusions from its own report which showed that the transport, storage and logistics sector is critical to the government’s levelling up agenda.

Since transport and storage growth is the fastest growing of any industry group, Clare Bottle, chief executive of the UKWA called for more support from government.

“Our sector, along with e-commerce, is expected to continue to grow. Yet there is little or no government support in meeting the serious challenges of current labour shortages, planning and the transition to net-zero,” said Bottle. According to the report, demand for logistics space across England has been underestimated in planning policy for a decade and future demand is likely to be at least 29% higher than the levels seen in recent years

Country Guide updates

Russian Federation – General – Trade Sanctions.

Ukraine – General – 2022 Russian invasion of Ukraine, UK-Ukraine Trade Agreement; Commercial Invoice; Certificate of Origin; Product requirements; Transport Documents – Postal Exports, Financial Details – Currency; Customs Procedures – Import Regulations, Preferential trade, Duties; Political and Cultural; Economic; Helpful contacts.

Guinea, Republic of – General; Commercial Invoice; Certificate of Origin; Transport Documents – ECTN; Financial Details; Insurance – Export Credit Risk; Customs Procedures – Regulations, UK/Guinean Importers, Duties; Helpful contacts.

Ramadan – Not ice for Ramadan added to Public Holidays for various countries.


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Trade News - Thursday 21st April 2022

Businesses that make or use plastic packaging must work out who in the supply chain is going to pay the new Plastic Packaging Tax.