Trading with the European Union at the end of the Brexit transition period.
The UK left the European Union internal market and the Customs Union on 31st December 2020, so the previous system of cross-border trade will no longer exist and there are now changes to the way goods are traded. Below you will how some of these changes will affect trade between the UK and EU.
Rules of Origin
There are now rules of origin requirements under the UK’s deal with the EU (the Trade and Cooperation Agreement) which businesses need to comply with in order to ensure that they pay zero tariffs when trading with the EU. This applies to both businesses that wish to export goods to the EU at zero tariffs, as well as businesses who wish to import goods from EU at zero tariffs. These rules are complex with potential regulatory penalties for none compliance.
With some exceptions, no licence is required to move dual-use items between EU countries. Dual-use items are goods, software and technology that can be used for both civilian and military applications. After the end of the transition period, the movement of dual-use items from the UK to the EU will require an export licence in the same way as for non-EU destinations. For imports to the UK, a new licence issued by an EU member state will be needed.
The EU General Export Authorisations (EU GEAs) permit the export of dual-use items to certain destinations under certain conditions. Regulation (EU) 2019/496 granting a Union general export authorisation for the export of certain dual-use items from the Union to the UK adds the UK to the list of countries covered by the EU GEAs. Similarly, the UK has granted a reciprocal Open General Export Licence for exports of certain dual-use items to the EU, which will come into effect at the end of the transition period (see GOV.UK: Open general export licence (export of dual-use items to EU member states)). Exporters of dual-use items between the UK and EU will need to familiarise themselves with the applicable licence conditions.
Import and export declarations
UK traders have not needed to submit import or export declarations on trade in goods between the UK and EU while the UK has been a member of the EU customs union. Where they export to or import from third countries, they do so, using the Single Administrative Document (SAD). The SAD applies to exports from the EU to third countries and imports from third countries and requires the declaration of prescribed information. The SAD may be presented electronically or by delivery directly to the premises of the customs office.
UK exporters to and importers from the EU will now need to make the appropriate declarations to the customs authorities.
Sanctions and embargoes
Trade sanctions and embargoes are political trade restrictions that are implemented against target countries, groups and individuals, with the explicit aim of maintaining or restoring international peace and security. They are mainly put in place by the UN Security Council Sanctions Committee and the EU. UN and EU sanctions become part of domestic law by the passing of statutory instruments.
Several of the existing EU sanctions have been repealed and replaced by virtue of enabling powers provided under the Sanctions and Anti-Money Laundering Act 2018 at the end of the transition period.
For contracts where one party is based in the UK and the other is based in the EU possible Brexit-related risks include:
Customs clearance. An increase in the time taken for goods to clear customs and then in continuing their journey after clearance. Traders operating in sectors where Brexit has less impact than in other sectors and where customs clearance will be straightforward may nonetheless have to contend with extended journey times because of the "knock-on" effect of customs officials having to deal with other, more directly impacted, businesses transferring goods across the border at the same time.
Haulage costs. The knock-on effect on haulage costs as hauliers can be expected to charge more for journeys that may take longer and the increased volume of paperwork.
New tariffs. Increased costs caused by new tariffs.
Reporting requirements. Increased costs due to the need to extend reporting requirements for rules of origin and other customs formalities, including the need for certain goods to undergo additional compliance checks at the border. This may also include the cost of appointing customs agents or freight forwarders to deal with the customs formalities (whose services are likely to be in demand and whose charges may reflect that).
Warehousing costs. Increased warehousing costs due to the need to stockpile parts or products that were previously supplied on a "just in time" basis.
Insurance. Increased insurance costs.
Exchange rate volatility. In addition to exchange rate risks, there may be other economic factors, such as inflation and a decline in consumer spending.
Carriers. Continued viability of existing carriers and difficulties in finding a replacement.
Non-availability. The non-availability of certain goods (such as perishable goods shipped from the EU).
Workers. The difficulty in recruiting workers (skilled or unskilled) from the EU due to the restrictions on freedom of movement.
Funding. The possibility that some suppliers may lose EU grants and funding.
Regulatory divergence. The possibility that, as UK and EU rules begin to diverge, UK products may no longer be deemed safe and compliant under EU rules.
Data transfer. The possibility that, as UK and EU data protection regimes begin to diverge, EU businesses may be unable to transfer personal data to the UK.
Relocation or refusal to deal. The possibility that some businesses located in the EU may stop dealing with UK businesses if the process becomes too costly, complex or time-consuming. In similar vein, the possibility that some UK businesses may relocate to the EU.
Contact AM Skinner Solicitors for expert legal advice in all areas of trade law, including export controls and sanctions, import & customs controls, Brexit, anti-bribery, ethics, commercial contracts, supply chain and other domestic and international trade law matters.