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Brexit: where are we now?

Jul 01, 2020
By Carol Lynch

As we know, the UK left the EU on 31 January 2020. While the UK is currently a non-EU country, the transition period means that importers and exporters have experienced no change in trade with the UK to date.

Earlier this year, discussions started on a Free Trade Agreement, which is to be concluded between the parties before the end of the transition period (31 December 2020). The impact of COVID-19 severely hampered negotiations and as most people will be aware, these talks have not progressed particularly well with serious differences emerging over the ‘level playing field’ requirement of the EU, among other things. To add additional pressure, the UK decided not to request an extension to the transition period (the deadline for which was 30 June 2020) and a full economic Brexit will now come into effect on 1 January 2021.

Negotiations are now back on, but the UK insists that they must be complete by the end of the summer. There is additional pressure in this regard as David Frost, the UK’s Brexit negotiator is due to move on from the Brexit talks to assume the position of Chief Security Advisor around September.

So where does that leave us from a Customs perspective? There will be no frictionless trade from 1 January 2021. At that point, Customs formalities and procedures will come into effect. An open question, however, is whether a Free Trade Agreement will be concluded in time. This would mean, for the most part, no customs duties between the UK and Ireland, but additional documentary requirements for importers in terms of proving and verifying the origin of their goods.

These two aspects, along with an update on Northern Ireland, are summarised below.

Customs compliance

Customs declarations will be required on export from Ireland and import into Ireland. This will involve companies lodging their declarations directly with the Customs authorities or engaging a customs clearance agent to lodge these declarations on their behalf.

A simplification on the lodging of customs declarations on import into the UK was introduced to allow particular importers to defer the lodging of a declaration until July 2021. The full import details must nevertheless be provided. Export declarations will also need to be lodged.

It is important to be aware of the information to be supplied to the revenue authorities in both jurisdictions, as the importer/exporter of record is liable for the quality and accuracy of the information provided.

Customs duty rates

If a Free Trade Agreement is not reached, customs duties will apply on imports into Ireland and on imports into the UK. For the UK, this payment may be deferred until July for specific importers but will be payable at that point.

Importantly, the new UK tariff was published in May. While last year’s proposed tariff introduced mostly 0% import rates across the board, this has now been scrapped with positive duty rates applied to most products.

If there is a Free Trade Agreement, importers must be able to comply with the rules of origin in the agreement and register with Revenue to issue a confirmation of the origin status of the goods.

Northern Ireland

The Northern Ireland Protocol in the Withdrawal Agreement provides for no customs border between Northern Ireland and the Republic of Ireland. If you buy goods from Northern Ireland or sell goods into Northern Ireland under this agreement, there will be no customs formalities.

However, there are several complexities in the agreement which are currently being discussed by the Joint Committee, particularly concerning imports to Northern Ireland from Great Britain, transit through the Republic of Ireland to Great Britain, and access to EU/UK Free Trade Agreements.

What should importers and exporters do?

I recommend that businesses continue to take all steps to:
 
  • Ensure that they have the procedures in place to import and export goods post-Brexit.
  • Have all necessary documents and authorisations in place.
  • Decide on how to clear goods, either in-house or through a third-party.
  • Become familiar with the free trade rules.
  • Become familiar with the talks regarding Northern Ireland, where relevant.

Carol Lynch is Partner, Customs and Trade, at BDO.