Brexit Bulletin, 30 October 2020

Oct 30, 2020

After weeks of stalemate on the Brexit front, there has been a shift in the mood music in recent days. Latest reports state that EU and UK negotiators have made significant progress this week towards resolving some of the biggest divergence issues that have delayed Brexit talks so far. BRead this week’s Brexit Bulletin to get the details of the current state of play, including reports that the Irish Government is pressing EU and UK to allow Northern Ireland exporters to benefit from existing and future free trade agreements between the EU and other countries around the world. You can also read Institute guides on how Brexit will change VAT and Customs rules in Northern Ireland as well as practical steps businesses can take now to prepare for Brexit.

Brexit negotiations enter phase of “serious negotiations” as both blocs inch closer to a deal

After weeks of stalemate on the Brexit front, there has been a shift in the mood music in recent days. As per recent reports, EU and UK negotiators have made significant progress this week towards resolving some of the biggest divergence issues that have delayed Brexit talks so far. Both sides have been in intensive negotiations moving back and forth between London and Brussels since Thursday 22 October. While this might raise hopes that a deal could be reached by early November, the differences between the two sides are still substantial, particularly in relation to the level playing field, governance, and fishing. However, certain reports have emerged stating that there is some progress being made on working through legal texts, which is in line with the organising principles of the negotiations.

“Time is running out” …

Meanwhile, Irish Minister for Foreign Affairs Simon Coveney has stated that while a Brexit deal is possible, it will not be easy. While he has reassured that EU negotiators are working hard to reach an agreement, a "no-trade deal Brexit" is very much still a possibility as the timeline to complete negotiations is tight. “The cost of failure politically is very expensive for all sides, that is why we are likely to get a deal. But it won't be easy”, said Minister Coveney.

Keeping in mind disruption to trade and increase in goods prices, the Irish Government has also reportedly been pressing the EU and UK to allow Northern Ireland exporters to benefit from existing and future free trade agreements between the EU and other countries around the world.

This issue is particularly important, as under the Northern Ireland (NI) Protocol, any goods produced in NI can circulate freely throughout the EU while it adheres to EU Customs Union rules. However, because Northern Ireland will still be legally part of the UK's customs territory, those goods will not be recognised as “EU goods” for the purposes of being exported as part of existing EU free trade agreements (FTAs) with countries like Canada, Japan and South Korea etc. This would mean that NI exporters would miss out on nearly 60 FTA markets, and the European Commission would potentially need to negotiate tweaks to pre-existing agreements to accommodate NI goods as EU goods.

This would also have serious implications for Irish goods as a number of them comprise of components or ingredients from NI that are then exported around the world under EU free trade agreements. This would have an adverse impact on cross-border businesses as well. For example, those in the dairy industry in particular would be hard hit as well, as nearly 70 per cent of dairy produced in NI crosses the border to be processed in the Republic of Ireland.

The Government’s main argument to press for this is that NI businesses are being asked to take on the complex implementation of the NI Protocol, and that despite their complying with all EU regulatory requirements, they still can’t benefit from EU trade deals. It is understood that the Government has raised the issue informally at the highest levels with the European Commission and the UK government. This issue has also been raised at the EU-UK Joint Committee on the Withdrawal Agreement.

Actions to take regardless of the outcome of talks

Even in the best-case scenario, if the UK and EU reach some sort of agreement on trade, there is not enough time for it to be comprehensive. Any deal that is reached will likely prioritise avoiding the imposition of tariffs and quotas on goods and is unlikely to extend fully to services. Read the practical measures that businesses trading goods and services should now adopt to prepare:

If you trade goods:

  1. Register online with HMRC or Revenue for an EORI number – you cannot trade without one.
  2. Critically examine your supply chain. Contact your suppliers and logistics providers about the continuity of goods and services you need for trade. Consider whether you need warehousing space.
  3. Check if your non-UK suppliers use the UK as a land-bridge. If they do, ascertain whether this will cost and cause delays.
  4. For customs duties purposes classify the goods that you import or export and ascertain their origin.
  5. Seek out a customs agent or enhance inhouse customs knowledge.
  6. Ensure that you have a line of credit to deal with any customs duties that could arise on imports from the UK or Ireland.
  7. Check whether your current certifications, licences or authorisations will be valid post-Brexit.
  8. Use the government supports available.

If you trade in services:

  1. Leaving the EU Single Market will lead to additional barriers to trade and to the cross-border mobility of services and people. Make yourself aware of what trading outside the Single Market means, particularly when it comes to procurement.
  2. Depending on whether you are EU or UK based, look at your business supply chain and consider your interaction and reliance on UK or EU markets for service provision.
  3. Review cross-border service level agreements/existing contracts for product licences, insurance policies and data transfers to ensure you are legally protected or recognised post-Brexit.
  4. Companies operating in regulated sectors may need to take steps such as contacting the relevant regulator to mitigate the impact of Brexit.
  5. Consider whether you need to seek alternative service providers.
  6. The UK will be regarded as a third country – consider what this means for GDPR and data flows.


NI Protocol brings new VAT and Customs regimes in 2021

The Protocol on Northern Ireland/Ireland will bring changes to the VAT and customs regime in Northern Ireland. Our “at a glance” series give you an overview of what changes will be in place from 1 January 2021 regardless of the Brexit outcome.

 

Brexit and VAT (NI)

Brexit and VAT (ROI)

Brexit and Customs (NI)

Brexit and Customs (ROI)

 

Brexit Bites

 

For all Brexit updates, visit our Brexit webpage.