Lidl lines up suppliers to cover no-deal costs

beef cattle
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Tariffs on food such as beef and milk can be high

Lidl’s Irish business has reminded British suppliers they are expected to pay any EU import tariffs imposed on goods crossing borders after Brexit.

Currently, as both countries are member states, no tariffs are paid.

But Lidl’s current contracts with suppliers contain a clause saying goods must be delivered with tariffs paid.

The supermarket said it had held workshops with British suppliers to make sure they had the necessary information to “avoid any disruption”.

“We have been working closely for over two years with external consultants, not only to get our business Brexit ready, but also to ensure our valued suppliers are as prepared as possible.

“All existing Lidl contracts contain a DDP (‘delivered duty paid’) clause. In an effort to understand the level of preparedness of key UK suppliers we are communicating proactively with them and working together to resolve any potential barriers to supply,” the supermarket said in a statement.

The delivered duty paid clause means that the cost of transporting goods, including tariffs on EU exports, are the responsibility of the supplier.

In the event of a no-deal Brexit, tariffs on EU exports would come into force automatically, according to World Trade Organization (WTO) rules.

EU tariffs on food can be both high and complex.

On some types of beef it is 12.8% plus 265 euros per 100kg for meat from outside the EU. The average for dairy products is more than 35%.

woman with Lidl bags
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Suppliers told the Times newspaper that other supermarkets are also likely to enforce deals similar to Lidl’s agreement.

A supermarket source told the newspaper that the potential costs were too high for all suppliers to be able to cover them.

Prime Minister Boris Johnson has said that the UK will leave the EU with or without a deal on 31 October.

While he has committed to cutting most tariffs on foreign goods being imported into the UK, tariffs for goods exported from the UK to the EU are outside of his control.

Dr Peter Holmes, fellow of the UK Trade Policy Observatory, told the BBC: “The UK suppliers will pay tariffs going into the EU, and EU suppliers will pay tariffs going into the UK [if there are any].

“You can avoid this if you sign a free trade agreement, and the UK can unilaterally remove all trade tariffs but it has to do so for all trading partners and this would not remove the tariffs on UK exports to the EU.”

He said that suddenly implementing WTO rules would be a “serious shock” to the economy.

“The point to make is that, tariffs are in general passed on from the supplier to the consumer, so it doesn’t really make any difference who actually directly pays them. If Lidl lines up suppliers to cover no-deal costs, as soon as they can suppliers will pass those costs on, or withdraw from the market.”

Ren Zhengfei
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Ren Zhengfei says a Western buyer could modify his firm’s products to meet the US’s security concerns

Huawei’s chief executive has proposed selling its current 5G know-how to a Western firm as a way to address security concerns voiced by the US and others about its business.

“[Huawei is] open to sharing our 5G technologies and techniques with US companies, so that they can build up their own 5G industry,” the NYT quoted Ren as saying.

“This would create a balanced situation between China, the US and Europe.”

Speaking to the Economist he added: “A balanced distribution of interests is conducive to Huawei’s survival.”

A spokesman for Huawei has confirmed the quotes are accurate and the idea represents a “genuine proposal”.

At present, Europe’s Nokia and Ericsson are the main alternatives to Huawei when it comes to networks selecting what 5G cell tower base stations and other equipment to install.

South Korea’s Samsung and China’s ZTE are other alternatives.

But while American firms including Cisco, Dell EMC and Hewlett Packard Enterprise have developed 5G-related technologies, the US lacks an infrastructure-equipment specialist of its own.

Beyond the licensing fee, Huawei could benefit because it might convince Washington to drop restrictions that currently prevent it buying US-linked technologies for its own use.

One consequence of this is that Huawei faces having to launch an Android smartphone later this month that will not offer Google apps such as YouTube or the Play Store.

A deal would also help ensure Huawei gets its 5G technologies widely adopted.

For instance, 5G supports two different coding techniques for data transmission to help tackle interference.

Huawei has developed a technique called “polar codes”, which it says will give 5G devices longer battery life than an alternative favoured by many Western firms called “low density parity check”.

If polar codes are widely adopted, Huawei will earn more patent fees from device-makers that support them.

Intelligence law

One company-watcher, however, suggested Ren’s proposal was doomed to fail.

Huawei launchImage copyrightGETTY IMAGES
Huawei faces having to launch the Mate 30 without some of Android’s most popular apps

“Huawei misunderstands the underlying problem,” Hosuk Lee-Makiyama, from the European Centre for International Political Economy, told the BBC.

“The issue is not the trustworthiness of Huawei as a vendor but the legal obligations that the Chinese government imposes on it.

“China’s National Intelligence Law requires Chinese businesses and citizens to surrender any data or ‘communication tools’ they may have access to, under strict punitive sanctions.

“Any equipment or software that Huawei licenses to an US entity would still fall under this obligation, and there is no way that the licensing entity or the intelligence agencies could scrutinise millions of lines of code for potential backdoors.”

But Prof Tsang said the proposal was still a “smart move”.

Even if Huawei’s offer is ultimately rejected, he explained, it demonstrates that the company is willing to go to remarkable lengths to try and win the West’s trust.

Saudi Arabia oil production reduced by drone strikes

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Abqaiq is the site of Aramco’s largest oil processing plant

Saudi Arabia’s oil production has been severely disrupted by drone attacks on two major oil facilities run by state-owned company Aramco, reports say.

Aramco is not only the world’s biggest oil producer, it is also one of the world’s most profitable businesses.

The Khurais oilfield produces about 1% of the world’s oil, and Abqaiq is the company’s largest facility – with the capacity to process 7% of the global supply. Even a brief or partial disruption could affect the company, and the oil supply, given their size.

There was a sharp intake of breath as analysts I spoke to today digested the information that reports suggest that half of Saudi Arabia’s oil production could have been knocked offline by these attacks.

The country produces 10% of the world’s crude oil. Cutting this in half could have a significant effect on the oil price come Monday when markets open.

However, Aramco has yet to confirm the scale of the damage.

The success of the drone strike shows the vulnerability of its infrastructure, at a time when it is trying to show itself in its best light while gearing up to float on the stock market.

And it raises concerns that escalating tensions in the region could pose a broader risk to oil, potentially threatening the fifth of the world’s supply that goes through the critical Strait of Hormuz.

An attack method open to all

This latest attack underlines the strategic threat posed by the Houthis to Saudi Arabia’s oil installations.

The growing sophistication of the Houthis’ drone operations is bound to renew the debate as to where this capability comes from. Have the Houthis simply weaponised commercial civilian drones or have they had significant assistance from Iran?

The Trump administration is likely to point the finger squarely at Tehran, but experts vary in the extent to which they think Iran is facilitating the drone campaign.

The Saudi air force has been pummelling targets in Yemen for years. Now the Houthis have a capable, if much more limited, ability to strike back. It shows that the era of armed drone operations being restricted to a handful of major nations is now over.

Drone technology, albeit of varying degrees of sophistication, is available to all – from the US to China, Israel and Iran – and from the Houthis to Hezbollah.

Who are the Houthis?

The Iran-aligned Houthi rebel movement has been fighting the Yemeni government and a Saudi-led coalition.

Yemen has been at war since 2015, when President Abdrabbuh Mansour Hadi was forced to flee the capital Sanaa by the Houthis. Saudi Arabia backs President Hadi, and has led a coalition of regional countries against the rebels.

The coalition launches air strikes almost every day, while the Houthis often fire missiles into Saudi Arabia.

Mr Sarea, the Houthi group’s military spokesman, told al-Masirah that operations against Saudi targets would “only grow wider and will be more painful than before, so long as their aggression and blockade continues”.

Houthi fighters were blamed for drone attacks on the Shaybah natural gas liquefaction facility last month, and on other oil facilities in May.

There have been other sources of tension in the region, often stemming from the rivalry between Saudi Arabia and Iran.

Saudi Arabia and the US both blamed Iran for attacks in the Gulf on two oil tankers in June and July, allegations Tehran denied.

In May four tankers, two of them Saudi-flagged, were damaged by explosions within the UAE’s territorial waters in the Gulf of Oman.

Tension in the vital shipping lanes worsened when Iran shot down a US surveillance drone over the Strait of Hormuz in June, leading a month later to the Pentagon announcing the deployment of US troops to Saudi Arabia .

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