The EU-UK Brexit Deal and Its Implications for Businesses
Just before Christmas, many companies in the European Union and the United Kingdom got the Christmas gift they were hoping for: a trade agreement between the European Union and the United Kingdom. Now that the bells have stopped jingling and Santa has parked his sleigh for another year it is time to look into what the new trade deal means for businesses in the European Union and the United Kingdom.
The New Situation
As of January 1st 2021, the United Kingdom will no longer be part of the European Union and it will become a third country. By leaving the European Single Market and the Customs Union the United Kingdom will lose all the rights it had as a Member State. The Free Trade Agreement that the UK and EU negotiators reached on December 24th 2020 will have an impact on how trade between the United Kingdom and the European Union will flow, but that impact will be far less than it would have been in a No Deal situation, where trade would have been based on WTO rules.
In this blog, we will briefly discuss the impact the trade deal will have on the trading and transportation of goods between the United Kingdom and the European Union.
The European Union and the United Kingdom will form two separate markets. Each will have its own rules and regulations. This means that there will be customs checks and controls on all exports from the United Kingdom to the European Union and vice versa.
On Free, Fair and Sustainable Trade
In other free trade agreements that the European Union have with third countries zero tariffs and zero quotas are agreed on for certain groups of products. The free trade agreement with the United Kingdom goes much further. There will be zero tariffs and zero quotas on all goods originating in the EU and the UK.
Proving where your products originated from will become very important under this new agreement. Businesses must be able to prove that their products fulfil necessary rules of origin requirements. After January 1st 2021 companies will be allowed to self-certify the origin of goods, this applies both to the goods itself and for any processing done in the European Union or the United Kingdom. Shipments are still subject to checks, so the proof will have to be provided if requested.
Customs procedures in both the European Union and the United Kingdom will be simplified. Both parties recognise each other’s AEO Certifications. Customs Support is AEO Certified, which means it will be able to benefit from these simplifications.
On Connectivity and Sustainability
More than 230 million tonnes of goods are traded between the European Union and the United Kingdom each year. Transportation of goods between the parties via road, sea and air are covered in the trade agreement and the flow goods are supported.
Air Freight carriers will be allowed to perform unlimited carriage of cargo between the European Union and the United Kingdom. When a carrier wants to transport cargo from the United Kingdom via a Member State to another Third Country, then this Member State needs to bilaterally and reciprocally agree to this with the United Kingdom.
Road transportation companies will be allowed to carry goods from any point in the United Kingdom to any point in the European Union and vice versa. Transportation companies will also be allowed to pick up a new load before returning. This limits the number of empty kilometers trucks travel on both sides of the English Channel.
The European Union and the United Kingdom will also extensively cooperate on taking on the issues of climate change, for example by cooperating in areas like renewable energy.
Advantages of the New Trade Agreement
While the full details and impact of the new trade agreement are not yet known here are some of the advantages and risks to consider.
- No customs duty or quotas
- No upfront payment of import VAT for qualified traders
- No deferment account needed if you are not paying customs duty or import VAT
- No Safety and Security Declarations on UK imports from the EU
- No Health or Phytosanitary (SPS) Certificates on UK imports from the EU until April 1st 2021
- Excise duty is still payable
- Import VAT is payable upfront for those not appropriately registered
- Safety and Security Declaration on EU imports from the UK are required
- All EU imports of SPS goods from the UK require Health or Phytosanitary Certificates
- Only UK established entities can access UK simplifications using direct representation
- Temporary easements and facilitations do not release traders from their legal liability
- Retrospective audit-based controls from HMRC in the UK should be expected
- Unauthorised use of importers EORI and VAT numbers may result in serious contraventions of regulatory provisions
- Suppliers inability to comply with terms of sale (Incoterms) may result in joint and several liability
- Non-compliance with cross border VAT regulation may result in import VAT being deemed an un-claimable input
We Are Ready to Support You
If you have any questions on trading between the European Union and the United Kingdom we have specialists on both the EU and the UK side that can answer your questions and assist you in ensuring your trade will keep flowing seamlessly after January 1st 2021. Please find all the relevant contact details here.