The transition period between the European Union (EU) and the UK, with its associated single market, ended at the end of 2020.
The rules around cross border trade have been superseded by the UK-EU Trade and Co-operation Agreement.
This agreement governs the export of goods and services from the UK to an EU country and the wider European Economic Area (EEA).
Export goods to EU
The Agreement stipulates that as long as goods comply with the relevant rules of origin, exporting them to a EU country will be tariff-free. However, as the UK is now viewed as a 'third-country' when they trade with an EU member state, customs declarations must now be made for all goods being imported into the EU/EEA from the UK and vice versa.
If you are a UK business that exports, you need to be aware that your home market and the EU/EEA now have different regulatory regimes with respects to trade.
These may become more pronounced around exported goods as the UK government creates new post-Brexit laws, which in turn may impact customs procedure. Recently, there has been additional complexity reported around customs clearance and how a customs agent may interpret the new rules on trade and if any export control is applied.
To help businesses who export goods to an EU country adapt, the UK government is taking a phased approach to bringing in new border controls with respect to trade. For instance, licensing and certification requirements for exported goods and products with complex custom requirements, such as the trade in chemicals, drugs and plants, will not be required until July 2021.
Export services to EU
The recent Agreement was rather thin in relation to how a UK business may export services to EU countries. It would be sensible for those involved in services export to take advice from a qualified Commercial Solicitor to navigate possible restrictions around owning, managing or directing a company in an EU member state.
There may also be restrictions on the amount of business equity a UK citizen can hold in a company registered in an EU Member State.
The other critical consideration for UK service providers is that their professional qualifications will no longer be automatically recognised in the EU/EEA region. If you are part of a supply chain involved in services export to an EU country, you will need to clarify the professional qualification requirements in each member state.
Regarding financial services. In November 2020, UK government announced that it would be granting equivalence from 1 January 2021 to EEA based financial services in areas such as; credit rating agencies and derivatives trading.
This is a major shift from the previous single market. It is now up to the EU/EEA to decide to what extent equivalence will be granted for UK financial services providers.
The Agreement is complemented by a non-binding Joint Declaration requiring the UK and the EU to cooperate on financial regulatory matters. A Memorandum of Understanding to enable the provisions of the Declaration will be agreed to by March 2021.The EU has similar agreements in place with other nations, including the United States.
Some service providers have transferred part or all of their operations to the EU/EEA region. If this is something you believe could benefit your organisation, a company and commercial lawyer can advise and represent you on the best approach.
Actions to take now
If your business currently, or plans to in the future, export goods or be involved in services export to the EU/EEA, take the following actions now to protect your business and customers:
- Obtain an EORI number (Economic Operators Registration and Identification). Businesses wishing to trade must use the EORI number as an identification number in all customs procedures when exchanging information with Customs administrations
- Plan to pay or account for VAT on imported goods
- Review and update your commercial contracts and terms of trade
- Check if your qualifications will be recognised in the EU Member State/s you plan to export services to
- Verify rules of origin on all goods
- Consider how customs declarations to HMRC systems will be made and whether or not a customs intermediary should be used.
The chancellors recent announcement around Free Ports will also create new rules around customs declaration and excise duty. We await further details in the coming months around how this will impact trade with an EU member state and further afield.
Useful additional information can be found at: