Boardroom Brexit: What the deal means for trade in goods

Boardroom Brexit

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Tariffs and Quotas

Under the TCA, there will be no tariffs or quotas on the cross-border trade in all goods between the UK and EU. This is a hugely positive outcome for businesses with UK and EU supply chains, particularly in sectors such as automotive and agri-food where tariffs are high. The TCA not only maintains the status quo; it also provides much needed certainty for businesses seeking to assess the cost-impact of Brexit.

Rules of Origin

Only goods which are of EU or UK origin will benefit from zero tariffs under the TCA. A product will attract a tariff if a certain percentage (beyond a “tolerance level”) of its pre-finished value or components are either not of British or EU origin. The tolerance levels depend on the product type and are contained in Annex ORIG-2: Product Specific Rules of Origin.

Importantly, the UK and EU have agreed full bilateral cumulation (cumulation of both materials and processing) which means that a manufactured product can be made equally from UK or EU-origin material, or equally from industrial processes in the UK and EU, and still be considered UK-origin when imported into the EU, and vice versa.

There are however new rules which require traders to self-certify the origin of their exports. To self-certify:

  • Exporters will need to make a statement of origin which declares the origin of the goods being exported. This statement should be contained in the commercial invoice or another document that describes the originating product in detail. The statement of origin can be valid for up to 24 months from the date it was made. It may apply to a single shipment of one or more products; or multiple shipments of identical products imported into the UK/EU within the period specified in the statement of origin, which should not exceed 12 months.
  • Claims of preferential tariff treatment will then be based on the importer’s knowledge and their verification that the goods in question originate in the UK or EU. The importer shall be responsible for the correctness of the claim for preferential tariff treatment and for compliance with these requirements
  • Exporters and importers must retain copies of the statement of origin and any other documents that demonstrate that the product satisfy the requirements for obtaining their originating status for a minimum of four years and three years, respectively.

The TCA commits the UK and EU to cooperate to ensure that businesses comply with the rules of origin, and UK and EU customs authorities will have the power to verify traders’ originating statements.

In sum, businesses should ensure they understand the originating status of all the goods they trade between the UK and EU to ensure they are eligible for the preferential trade terms i.e. zero tariffs and quotas under the TCA; and that their supply chains understand the new self-certification procedures for proof of origin.

Technical Barriers to Trade (TBTs)

The TCA also addresses the potential regulatory barriers to trade between the UK and EU. Both sides commit to allowing each other the freedom to regulate goods in the way that is most appropriate for their own markets whilst also agreeing to promote and facilitate trade as much as possible. For instance, the UK and EU will:

  • when proposing technical regulations, consider the non-regulatory alternatives to the proposed technical regulation in order to see if their objectives can be met that way.
  • align with relevant international standards as much as possible when proposing new technical regulations;
  • cooperate with each other on areas of technical regulation, conformity assessment, standardisation, accreditation, market surveillance and marking and labelling; and
  • share information on dangerous and non-compliant products on each other’s markets.

There are also a number of sector-specific Annexes which seek to promote cooperation and tackle barriers to trade. There are the following sector specific Annexes: 

  • Annex on medicinal products – This provides for mutual recognition of Good Manufacturing Practice (GMP) inspections and certificates, meaning that manufacturing facilities do not need to undergo separate UK and EU inspections.
  • Annex on motor vehicles and equipment and parts thereof – This confirms that the UK and EU will mutually recognise approvals based on UN regulations; establishes dedicated cooperation mechanisms to address regulatory barriers; and provides for information exchange to support activities including market surveillance.
  • Annex on organic products – This provides for an equivalence agreement between the UK and EU which means that products that are certified as organic in one market will be recognised as organic in the other. In addition, there are provisions for effective regulatory cooperation to combat fraud, upholding the integrity of organic food production and control systems; and provision for the collaboration on the future development of organic standards.
  • Annex on trade in wine – This sets out simplified certification, documentation, labelling and packaging requirements for the imports of wine produced by the other party, which will reduce costs for exporters and consumers. There are also provisions to share information and to jointly review the TCA in future with a view to further facilitating trade in wine.
  • Annex on chemicals – This aims to facilitate trade in chemicals, whilst ensuring high levels of environmental and health protection. It provides for cooperation between authorities and includes joint commitments to the comprehensive implementation of international classification and labelling rules, as well as commitments to ongoing cooperation and information exchange.

Customs Facilitations and Authorised Economic Operator (AEO) Status

UK customs authorities will recognise AEO status of EU customs intermediaries and vice versa. This is an important benefit for importers, meaning that more goods will be fast-tracked through customs.

Otherwise, the customs facilitation measures in the TCA are weak. They are “best endeavours” provisions to improve cooperation, particularly at roll-on, roll-off ports.

We expect customs facilitations under the TCA to be enhanced in due course.

Product standards

As of 1st January 2021, the EU and UK will be two separate regulatory and legal regimes. This means that all products exported from the EU to the UK will have to comply with UK technical regulations and will be subject to any applicable regulatory compliance checks and controls. Similarly, all products imported from the UK to the EU will need to comply with EU technical regulations and will be subject to all applicable regulatory compliance obligations , checks and controls.

Nonetheless, the TCA contains a number of provisions aimed at preventing and addressing unnecessary TBTs. In particular the UK and EU have agreed a definition of international standards that identifies relevant international standard setting bodies. This will help ensure that both sides’ domestic product standards and technical regulations are based on the same international references to the extent possible, thereby reducing the burden on manufacturers to produce to differing UK and EU standards.

In the field of conformity assessment, the parties have agreed to maintain simplified access to each other’s markets through, in particular, the continued use of self-certification of conformity by the manufacturer where this is currently applied in both the EU and the UK. This covers a very large share of bilateral EU-UK trade.

There will be new changes to food safety standards under the TCA. UK agri-food exporters will have to meet all EU Sanitary and Phytosanitary (SPS) import requirements and be subject to official controls carried out by Member States’ authorities at border control posts. Similarly, EU agri-food exporters will have to meet all UK SPS import requirements.

On a positive note the TCA allows for either party to unilaterally decide to reduce the frequency of certain types of border import controls, taking into account the extent to which their SPS rules converge. It also allows for a simplified process for the approval of imports where relevant by drawing up lists of establishments that are eligible to export to the other party based on guarantees provided by the authorities of the exporting party.