REGULATORY BREXIT
preferential zero tariff when completing their customs declarations. The World Trade Organisation (WTO) explains rules of origin to be “the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.” If they do not meet the criteria, the standard Most Favoured Nation tariff applies, as is standard with other WTO members, attracting customs duties on goods.
For cosmetics, one such example is olive oil. Given that Britain does not have the infrastructure to produce the ingredient, it must be imported. One source told Cosmetics Business that post-Brexit for every 100kg of olive oil, be it any grade, £104 must be paid in tariffs, which works out at £1.04 per kg. By the time clearance agents have ‘cleared’ the batch into the UK, it can cost up to £1.50kg to get olive oil into the UK, while 12 months ago, it was free. On the face of it, a £1.50 per kilogramme charge per 100kg, might not seem bank- breaking. But for a small supplier wanting to import into the UK, it’s not attractive to distribute in Great Britain. Meanwhile, the knock-on effect of these added charges and rules of origin have made it harder for cosmetics brands to source materials from Europe – a key supplier of many materials and resources, be that ingredients, packaging or labour.
THE BREXIT STING
The bureaucracy at play throughout the process of Britain leaving the EU has also led to logistical nightmares that are bringing the supply chain to its knees. According to Kerfoot, certain European countries are asking to see veterinary certificates of bees when beeswax is supplied for cosmetic products.
“Everyone knows a bee is not killed to produce the wax, it is a byproduct of bees. But now, since Brexit, certain European countries simply will not allow beeswax into their country without a veterinary certificate,” he says. “Before Brexit, it was not an issue, you could ship it anywhere and whatever.” And that’s just one example of the issues to which brands are now beholden. Charlie Walker, Head of Sales for
Walker Logistics, explains that brand owners are struggling to navigate the new legislation. “Companies have not
48 November 2021
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Individual customers are reluctant to buy from the UK now even though we offer complimentary international shipping
needed to know these things: how to prepare commercial invoices, for example, and all of these challenges that obviously people are now very familiar with, but 12 months ago, they might never have heard that term. “With cosmetics products, some of the ingredients that are in them, you need to put things like certificates of origin and be able to prove where these different ingredients were
manufactured; all of that information that people might not necessarily have thought about or have at their fingertips, all of a sudden, they’re having to provide vast amounts of detail to export these products, which they might not necessarily have done previously.” The knock on effect of this bureaucracy, on both sides of the border, will inevitably see customers on both sides side-step doing business together. Already UK online orders from Europe have dipped 10% in the last 12 months – likely not what Johnson had in mind when he announced Britain’s master trade deal with Europe. “We’ve seen some of our customers in the UK turn off ships into the EU, because it’s too much hassle. No question about that,” adds Walker. And this is something White has also seen across her business. “Individual customers are reluctant to buy from the UK now even though we offer complimentary international shipping, it seems.”
FIGHTING ON ALL FRONTS Brexit isn’t the only problem brands are having to worry about in 2021.
The world is currently in the midst of a shipping crisis, with containers full of stock, quite literally, moored in the wrong place, and weeks behind schedule. And while containers remain as scarce as hens’ teeth, the price for one is soaring. Walker notes that a 40ft container, shipping from the far east to the UK, would have cost around US$2,000. Now it’s $20,000.
“I’ve never seen prices that high in my lifetime,” he notes. “I certainly would have thought that prices would have gone down by now, but they haven’t and the costs, and the crisis show no signs of abating.”
And big names in the beauty business are forecasting for these problems to continue into 2022. Asos, a major retailer for cosmetics, has predicted a profit fall of between £110m and £140m due to freight and labour costs at record highs.
Cosmetics owner Procter & Gamble hiked its full-year forecast for commodity and freight costs by around $400m, or more than 20%. Unilever is also thought to be particularly exposed to huge price rises that could make the beauty player cut its profit margin forecast for the second time in 2021.
Whatever the outcome of Brexit, the pandemic and whether or not the shipping crisis will be able to untangle itself, cosmetics brands should likely bank on 2022 being another difficult year in a similar vein to the last 24 months. Time is a great healer, but how long the industry will need to recover is anyone’s guess
cosmeticsbusiness.com
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