Chamber International called in to stop tea export dispute boiling over

Well-known tea blender and creator of Yorkshire Tea, Taylors of Harrogate, sought help from Chamber International’s lobbying service after becoming embroiled in a regulatory dispute with South Korean customs officials about the origins of its blended teas exported to the country.

The dispute, which centres on ‘country of origin‘ labeling and could become an EU-wide issue, arose in 2011 over the definition of the ‘substantive change’ in a tea product which is used to determine its country of origin.

Taylors of Harrogate, acting on advice from HM Customs and Chamber International,  believed that the added value of blending and tasting different teas to create a distinctive, consistent brand flavour constitutes the ‘substantive change’ to warrant the country of origin to be within the EU under the Free Trade Agreement  (FTA) with South Korea.

However, South Korea customs officials argue that the only ‘substantive change’ occurs when the freshly-picked green tea is turned into black tea. South Korean retail labelling regulations also demand that the country of origin where the tea leaf is grown, such as Rwanda or Kenya, is displayed rather than where it was blended.

Among help arranged by Chamber International has been taking the matter up with authorities in South Korea which led to South Korean customs asking HMRC to visit the company to conduct an audit on the tea blending process as part of moves to resolve the problem.

Taylors of Harrogate export sales administrator, Madeline Wolfe, says: “This makes a big difference for our customer supplying South Korea. If they are able to claim EU origin, as we have previously done for many countries for years without any difficulties, they pay lower import tariffs.

“However, the South Korean customs ruling means that they are breaching domestic labelling regulations and risk a substantial fine. If they obey the domestic regulations, they do not benefit from the lower tariffs afforded which is what our customer has been doing.

“This means that our customer cannot buy as much of our blended teas as they might like to and the end price makes our product uncompetitive for consumers who want to enjoy blended teas from Yorkshire which also include our Earl Grey and English Breakfast brands”

The import dispute has significant implications because it comes at a time when EU fermented, and partly-fermented, black tea exports to South Korea are rising rapidly from a value of EUR 194.640,00 in 2009 to EUR 916,690.000 in 2012.

Chamber International senior export advisor, Mike Strawson, says: “While South Korea is not a major international market for Taylors of Harrogate, it is one which is increasing for EU black tea exports generally. This is a very important issue at a time when UK companies are being encouraged to step up exports to help re-balance the national economy.

“In our view, this is a clear case of protectionism on the part of the South Korean authorities. It could be the thin end of the wedge and, if not resolved, this dispute could affect all blended teas exported from within the EU. We are making representations to a number of international trade bodies and working with Geneva-based specialist trade lawyers to try and resolve the matter.”

Update August 2014

AN international dispute over the export of blended teas and ‘country of origin labelling’ involving one of Yorkshire’s best known brands was resolved thanks to Chamber International.

Taylors of Harrogate, which blends Yorkshire Tea, sought help from Chamber International after a deadlock in a regulatory dispute with South Korean customs  over ‘country of origin’ labeling which threatened to become an EU-wide issue.

The dispute arose over the definition of the ‘substantive change’ in a tea product which is used to determine its country of origin.

Taylors of Harrogate, acting on advice from HM Customs and Chamber International, believed that the added value of blending and tasting different teas to create a distinctive, consistent brand flavour constituted the ‘substantive change’ to make the country of origin the EU under the Free Trade Agreement  (FTA) with South Korea.

However the deadlock arose after South Korean customs officials claimed that the only ‘substantive change’ happened when freshly-picked green tea is turned into black tea, something which is always done at the plantations. The country’s retail labelling regulations also demand that the country of origin where the tea leaf is grown, such as India or Kenya, was displayed rather than where it was blended.

Taylors of Harrogate said that the stance taken by the South Korean customs officials made a significant difference for their customer supplying South Korea. If they were able to claim EU origin they would pay lower import tariffs, and therefore would be able to offer cheaper prices to consumers.

However, if the customer obeyed the country’s domestic regulations, they would not benefit from the lower tariffs afforded under the EU FTA with South Korea.

The dispute, which had lasted more than two years until Chamber International became involved, meant that Taylors of Harrogate’s customer could not buy as much of the company’s blended teas as they might have wanted, as the end price made them uncompetitive for consumers wanting to enjoy Taylors of Harrogate blended teas, including Yorkshire Tea, Earl Grey and English Breakfast.

After being asked to try to resolve the dispute, Chamber International sought legal advice from specialist international trade lawyers in Geneva and was preparing an appeal to the EU when senior export adviser, Mike Strawson, took the issue up with the British Embassy in South Korea. Soon after this, the South Korean Customs asked HMRC to visit Taylors of Harrogate.

After her visit, the HMRC officer upheld Taylors of Harrogate and Chamber International’s view that the ‘substantive change’ necessary for country of origin labeling happened in Harrogate and submitted a report to South Korea whose customs officials immediately backed down – a move which benefits all EU tea blenders.

Chamber International senior export advisor, Mike Strawson, says: “We are very pleased that events we set in motion on behalf of Taylors of Harrogate led to this case being resolved in their favour.

“While South Korea is not a major international market for Taylors of Harrogate, it is one which is increasing for EU black tea exports generally. This was a very important issue at a time when UK companies are being encouraged to step up exports to help re-balance the national economy.

“Our view was that this was a clear case of protectionism on the part of the South Korean authorities. It could have been the thin end of the wedge and, if not resolved,  could have affected all blended teas exported from within the EU. “

Taylors of Harrogate export sales administrator, Madeline Wolfe, says: ”This was a complex and worrying dispute and we’re very pleased that Chamber International managed to resolve it for us.”