The recent end of the transition period has brought the reality of Brexit into sharp focus for any business moving goods to and from the EU. Since January 1, 2021, EU law has ceased to apply in the UK, but, so far at least, the practical impact of Brexit on business has been commercial, not legal. Legislation has been passed to retain most existing EU law as UK domestic law, with wide powers for the Government to amend this going forward. The immediate issues facing business relate to arrangements for trade with the EU. Signed on December 24, 2020, the UK and EU trade relationship is now governed by the EU-UK Trade and Cooperation Agreement (TCA).
Under the TCA things are very different. The UK is now a “third country” and, consequently, the EU/UK trading relationship is subject to more restrictions and red tape. Most organisations will be affected to some degree; clearly, businesses with suppliers and/or customers in the EU must get to grips with the paperwork and compliance processes required under the new rules. A practical challenge for SMEs may be adapting to new requirements in relation to customs declarations, duties and taxes.
What are the key issues for import and export of goods?
- Preferential treatment –The TCA facilitates tariff-free trade between the UK and EU, but this only applies to goods that comply with TCA rules of origin i.e. that the goods originate in the EU or UK. There are detailed provisions for determining where components are made and where products are assembled, which must be proved by obtaining a supplier’s declaration. In addition, in order to import or export goods to and from the EU, businesses require an economic operators’ registration and identification number (EORI).
- New customs regime – Customs declarations are required for imports and exports. Now operating as a “third country”, a UK business importing goods from any EU country must complete detailed customs forms and comply with a customs regime. Although such compliance will be familiar to businesses used to importing goods from outside the EU e.g. China or the US, this is a new requirement for trade with the EU.
- VAT – the rules relating to imports and exports to and from the EU have changed and the special rules that related to trade with EU countries no longer apply.
- Product standards – The TCA provides no agreement for cross-border product standards or regulation. Essentially compliance with regulations in the EU and UK is necessary if goods are to be offered for sale in both markets.
- Packaging and labelling – product labelling and marking requirements have changed. Businesses need to update product labels to ensure dual compliance if goods are to be sold both in the UK and EU.
Understanding the practical implications and ensuring compliance with the new regime is essential and businesses face a steep learning curve over the next few months as they adapt to the new trading environment.
Amy Peacey is a senior associate in the Southampton office at Clarke Willmott LLP. She specialises in advising businesses on all matters relating to commercial contracts, including compliance with data protection legislation.