The UK wine and spirit industry is global and must remain so. It’s worth over £49 billion in economic activity and supports over 350,000 jobs. The UK is the world’s largest spirits exporter, it’s a hub for wine as the second largest importer, and it’s a major centre of the fine wine trade. The introduction of wine import documentation could damage this position.
Brexit obviously poses its challenges, but unlike many other sectors, alcoholic drinks businesses are well versed in moving goods under complex controls; supply chains are heavily integrated and sophisticated to prevent fraud, while strict regulations ensure high standards, safety, and authenticity of goods.
The Wine and Spirits Trade Association (WSTA) does not have a huge shopping list of regulations to get rid of at the end of the transition period, as the majority of the rules protect both consumers and businesses.
That is not to say some things can and should be done a little differently from 1 January 2021, or that adapting to the new regulatory landscape will be easy. For example, introducing mutual recognition could offer a boost to the UK trade, while losing access to some EU systems will be tough. But other wise the industry is in a reasonably good position – with one exception.
Wine import documentation
What the government is proposing on wine import documentation makes no sense and threatens the competitiveness of UK businesses.
Unlike spirits which are covered by EU food regulations, wine is regulated by separate rules which stem from the EU’s Common Agricultural Policy and result in added layers of complexity. These include a requirement which means wine imported into the EU must be accompanied by a paper form called a ‘VI-1’.
The UK government intends to roll over the current EU regulations, which means that once the UK leaves the EU, all wine imported into the UK will have to be accompanied by one of these forms, and this will be in addition to the import declarations that will be required for all goods coming into the UK from the EU. Similarly, the EU will impose the same requirements on UK wine exports to the EU.
While the requirement sounds relatively simple in principle, the process is more complicated. In order to complete the form, producers will be required to have each batch of wine tested by an authorised laboratory.
The suite of tests cost approximately £300 to carry out, and include information such as dry extract, sulphur levels and three types of acidity – all of which, with exception of sulphur dioxide levels and abv, are unnecessary.
Following the test from the laboratory, the form will need to be stamped by a registered ‘competent authority’, which could cost an additional £30. The paper form will then need to accompany each batch of wine in each consignment until it is released into free circulation. The WSTA estimates the cost of producing the forms will be around £70 million to the UK wine industry alone.
There are some major issues which have not been resolved.
The EU has never been required to produce these forms. The list of authorised laboratories and competent authorities for each EU country does not yet exist, and even if it did, there is a question of capacity for the sheer volume of forms that will be required.
In terms of exports to the EU, the UK will need to register its own competent authorities and labs with the EU – these have yet to be confirmed.
The cost of producing those forms would particularly impact smaller producers, for whom it may be simpler to bypass the UK altogether, having a knock-on effect to UK SMEs and independent merchants for whom speciality wines are their unique selling point.
For the fine wine industry there is an even greater challenge in that you would have to open a bottle of wine to test it – which is not economically viable when a bottle of wine can be worth over £10,000 per bottle.
It is not inconceivable that the fine wine industry, which makes up a significant proportion of wine exported from the UK, could decide to operate from elsewhere to avoid having to produce these forms.
So why should the UK care about a product it does not produce?
Quite simply, UK consumers and UK businesses will suffer because of the new requirements. Wine is the UK’s most popular alcoholic drink, but those 33 million consumers will see the price of wines from the EU increase and UK importers may well see a decrease in the range of wines they are able to offer.
The EU produces two thirds of the world’s wine: it is not possible to simply replace EU wine with wine from third countries.
It is easy to use wine as negotiating capital with the EU, but in doing so the government fails to recognise the value UK wine imports bring to the UK economy. But this is also an opportunity.
The UK excels at wine trading – the UK sells more wine to Hong Kong by value than the world’s biggest wine producer, Italy – and lowering red tape burdens would enhance the UK’s place as the world wine hub.
The solution is simple.
The UK wine industry does not want to lower standards, and some of the information required on a VI-1 form is helpful.
By reconfirming the previously agreed nine month grace period for wine imports from the EU after the end of the transition period, the government could get itself an opportunity to redefine the UK and its role in the world’s wine industry and create a new, electronic system for wine imports from both the EU and third countries which is fit for purpose.
The government doesn’t have to wait until the outcome of negotiations with the EU. It can act now and commit to suspending the introduction of the new requirements pending a review of what a future regime should look like. That would give a welcome boost for both UK businesses and UK consumers alike.
By Rebekah Kendrick, Head of Brexit and EU Affairs, Wine & Spirit Trade Association.