The Withdrawal Agreement and Political Declaration on the future relationship between the UK and EU was endorsed by leaders at a special meeting of the European Council on 25 November.
The Withdrawal Agreement sets out the terms of the UK’s smooth and orderly exit from the EU and the Political Declaration sets out the framework for the future relationship between the EU and the UK.
A no no deal scenario is not desired. However, it is the duty of a responsible trader to prepare for a range of potential outcomes, including the event of no deal. In the event of leaving the EU without a deal, legislation will be necessary to ensure the UK’s Customs, VAT and Excise regimes function as intended after the UK leaves the EU and so, on a contingency basis, HM Treasury and HM Revenue and Customs have confirmed that they will lay a number of Statutory Instruments (SIs) under the Taxation (Cross-border Trade) Act 2018 (TCTA) and the EU Withdrawal Act 2018 (EUWA).
As these SIs are laid they, and any accompanying documentation, will be published on this page. This will include an impact assessment, draft notices and public notices that will be made before exit, under these SIs and the TCTA respectively. In addition to this, as two of the SIs incorporate a number of documents by reference, these documents are also listed and linked below, beneath the SI to which they relate.
This legislation is designed to broadly replicate the current EU legislation and minimise disruption of a no deal scenario on the UK’s international trade. To further support this there are HMRC have also step by step guides to importing and exporting which explain the steps that businesses can take to prepare for a no deal scenario.
If the UK exits the EU without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.
The UK intends to establish an independent trade remedies system by the time the UK exits the EU. There will also be implications for a range of specific goods regulated under EU legislation. Here are the key changes to expect:
Customs and Excise
Businesses can currently move goods freely between EU countries. For customs, this means that businesses trading with the rest of the EU do not have to make any customs import or export declarations, and their trade with the EU is not subject to import duty. Certain goods are subject to excise duty.
This is a tax charged on the production and importation of alcohol, tobacco and oils. These goods are currently free to move between the UK and the rest of the EU with the excise duty-suspended. If the UK leaves the EU on 29 March 2019 without a deal, there will be immediate changes to the procedures that apply to businesses trading with the EU.
It would mean that the free circulation and movements of goods between the UK and EU would end. HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system.
From 2359 hours on 29 March 2019, for businesses trading with the EU, the impacts would include:
businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as are currently applied in cases where goods move between the UK and a country outside of the EU. This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration). For imports into the UK a separate safety and security declaration needs to be made by the carrier of the goods (this is usually the haulier, airline, freight train operator or shipping line, depending on the mode of transport used to import goods). For exports from the UK, the export declaration includes the safety and security declaration
the EU applying customs and excise rules to goods it receives from the UK, in the same way it does for goods it receives from outside of the EU. This means that the EU would require customs declarations on goods coming from, or going to, the UK, as well as requiring separate safety and security declarations for imports into the EU
for movements of excise goods, the Excise Movement and Control System (EMCS) would no longer be used to control dutysuspended movements between the EU and the UK. However, EMCS would continue to be used to control the movement of duty-suspended excise goods within the UK, including movements to and from UK ports, airports and the Channel Tunnel. This will mean that, immediately on importation to the UK, businesses moving excise goods from the EU, including those in duty suspension, will have to make a customs declaration and the goods placed either into a customs or excise suspensive arrangement or the duty must be paid at that point.
UK Trade Tariff
In the event of a ‘no deal’ exit, goods traded between the UK from the EU after 2359 hours on 29 March 2019 will be subject to the same requirements as third country goods, including the payment of duty. The actual duty rates that will apply to each item imported into the UK may be different to the rates currently applied under the EU’s Common Customs Tariff (CCT). For UK exports arriving at the EU border, the EU will require payment of customs duty at the rate under the EU’s CCT. In preparing for a ‘no deal’ scenario, businesses should be aware of the following:
the Taxation (Cross-Border Trade) Act 2018 will provide the necessary powers for the UK to set its own tariff for UK imports when it leaves the EU
trade with the EU will be on non-preferential, World Trade Organisation (WTO) terms. This means that the EU’s Most Favoured Nation (MFN) tariffs and non-preferential rules of origin would apply to consignments between the UK and EU
the EU will apply its MFN rates to goods imported into the EU from the UK. The EU MFN rates are set out in the CCT, where they are listed as ‘erga omnes’ (which means ‘towards all’), rather than stating a specific country. The EU may change these rates between now and March 2019, but this provides an indication
the Taxation (Cross-Border Trade) Act 2018 enables the UK to put in place a UK trade preferences scheme for developing countries. The UK intends to provide the same level of access to developing countries as the current EU trade preference scheme
the UK intends to continue our existing EU Free Trade Agreements as now. Maintaining these benefits is of clear importance to businesses, consumers and investors, and will ensure a smooth transition for users of these provisions as we leave the EU.
HMRC have confirmed that the UK does not plan any immediate deviation from the current commodity code list published in the UK Trade Tariff, which is currently applied by the EU, except where necessary to maintain alignment or for trade remedies purposes.However, importers of goods into the UK will no longer be able to rely on EU Tariff information published on the EU TARIC portal – the integrated Tariff of the European Union.
Hammad specialises in Customs and Excise law and can assist with planning in relation to a Dear or No-Deal Brexit. Please contact Hammad's clerk's should you wish to discuss further.