Brexit – Commercial impacts
Updated 8th January 2021
Tariffs and Quotas
The two sides have agreed to remove tariffs and quotas on all goods. However, in order to qualify for tariff-free access, GB goods will need to meet complicated Rules of Origin requirements and some industries, especially food and agribusiness are likely to struggle with this – for example, (a) sugar or rice imported from outside the UK/EU and refined in the UK will not qualify for tariff-free access to the EU; (b) meat products must contain only meat from animals born and raised in the UK or the EU and (c) cars must contain no more than 45% of materials which come from outside the UK and EU
It is worth noting that there is a mechanism in the deal for tariffs to be applied in the future should either the UK or the EU breach agreements in the Brexit deal relating to the maintenance of a ‘level playing field.’
The Brexit deal also includes a 12-month grace period on some specific elements of the Rules of Origin declarations to enable businesses to collate and produce the supporting paperwork. This will be particularly useful to certain industries with complex supply chains who will face the most disruption from the added red tape, notably car manufacturers. During the grace period, businesses still need to ensure that they comply with the rules and meet originating requirements, albeit they will have a year to obtain supporting documents from their third-party suppliers.
All exports of live animals and products of animal origin and plants will need to comply with EU laws. This will require extensive Sanitary and phytosanitary (SPS) border checks, with specialist paperwork and frequent physical inspections required, particularly in relation to animal products.
Technical Barriers – All goods moving GB–EU will need to demonstrate that they comply with EU law – and vice versa. This means that many goods will have to undergo two sets of conformity assessments rather than one, adding additional costs and complexity for businesses.
Customs Procedures – The deal does not remove the need for customs declarations and paperwork for GB–EU traders. Customs checks will apply to GB goods moving into the EU and Northern Ireland from 1 January. The UK has already announced it will phase in these processes for EU imports over a six-month period.
Now, when importing into the UK full declarations are required for controlled goods (e.g. excise goods like tobacco and alcohol). For other goods (standard goods), traders will have to keep sufficient records of their imports, but can to defer full customs declarations until 1 July 2021 (although they may submit customs declarations before if they wish). Full customs declarations will need to be made at the time of import for all goods from July 2021 although some traders may be eligible for simplified procedures. Now full customs declarations are required for all goods being exported to the EU.
Services – Restrictions on service provision by UK businesses may be imposed by individual members states and detailed provisions apply. For example, member states can still impose total bans on UK lawyers advising on their own national law and the question of whether judgments of UK courts will be enforceable in the EU – is not dealt with in the agreement at all ! Financial services market access is subject to a complete carve-out and the parties have only agreed in a non-binding declaration to establish a framework for regulatory co-operation. Short term business visits may be allowed – subject to numerous detailed restrictions. There is no mutual recognition of professional qualifications although the deal provides a route for mutual recognition to be agreed in future (although there is no guarantee of this)
Road Haulage – The deal allows hauliers to continue operating between the UK and EU and to transit through UK or EU territory (which will allow Irish lorries to continue to go through Britain to deliver goods to the EU. UK hauliers operating in the EU will however face more restrictions on their activities than they do now. For instance they will have weaker cabotage rights; meaning they will be able to make fewer laden journeys (picking up and dropping off goods) within the EU than previously.