LONDON, ENGLAND — The last-minute trade deal between the European Union and the United Kingdom, removing the prospects of tariffs on grain from the start of 2021, came as a huge relief to Britain’s flour milling sector. Trade in its raw material (wheat) can, for the most part, continue as normal, although new rules make life more complicated if flour is produced with, for example, Canadian milling wheat.

The UK’s close relationship with the EU ended on Dec. 31, 2020, with a last-minute deal that means no tariffs but leaves trade between the two subjects to the usual customs formalities between separate countries. It comes with the added complication of Northern Ireland, part of the UK, being effectively still within the EU for customs purposes, a provision made necessary by the Good Friday Agreement, the 1998 deal that largely ended the political violence that had been rife in the region since the 1960s.

Under the agreement, guaranteed by the United States, there can be no “hard” border, which means no customs checks, between Northern Ireland and the Republic of Ireland.

The deal was finally reached right at the deadline. The UK, which formally left the EU on Jan. 21, 2020, spent the rest of the year in a transition period due to end on Dec. 31. With the UK government having rejected the idea of extending the transition, something foreseen in its Withdrawal Agreement with the EU, the prospect of leaving without a deal loomed.

 The “Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part,” was agreed on Dec. 24 and formally signed by EU Council President Charles Michel, EU Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson on Dec 30.

“We are relieved that an agreement was reached between the EU and the UK, even if it was at almost the last possible moment before the end of transition,” Alex Waugh, director general of UK Flour Millers (formerly the National Association of British and Irish Millers (nabim)) told World Grain. “It means that UK flour millers will continue to have access to wheat from all origins in the same way as today, ie without tariffs applying to wheat from the EU.

“In this season, following a poor UK crop in 2020, access to EU wheat is very important in our mission to provide customers with a full range of competitively priced flour. Similarly, for the most part, the agreement means that trade in flour between the UK and the EU, in each direction, can continue without tariffs.”

However, there are some wrinkles that are less attractive, Waugh said.

“All trade now will be on ‘third country’ terms, meaning that full customs declaration and documentation will be required on movements between the UK and the EU, including between Great Britain and Northern Ireland where goods could in theory be diverted to the Republic,” he said. “This will add extra cost on all sides. Furthermore, the Rules of Origin, which define the goods gaining access to preferential (ie zero) tariffs can be restrictive. For flour, the maximum content of third-party wheat is limited to 15%, which has implications for millers on either side using Canadian wheat, US durum or Black Sea grain as part of their feedstock.”

With these provisions, the agreement leaves millers to concentrate on other business critical matters, he said.

“The top priority is the continuing impact of the COVID crisis as infection rates are once again on the rise and the hospitality sector again closed,” he said. “Every business has measures in place to protect staff and maintain supplies. However, the longer this situation continues, the greater the likelihood of a longer-term impact on supply chain structure. Stronger, diversified businesses are more likely to survive with weaker, possibly smaller businesses losing out.

“Meanwhile, the whole chain has had to cope with very strong wheat prices around the world, with bread wheat quotations in the UK now comfortably above $300 per tonne, an increase of more than 30% year-on-year.”