The UK Government’s EU (Withdrawal Agreement) Bill finally passed the House of Commons moving exit from the EU one step closer. Passing with a majority of 124, the bill will now be debated further in January but is expected to pass into UK law before the 31st January 2020
If that is the case, then on the 31st January the Withdrawal Agreement with the EU will apply and the UK will enter a transition or “implementation period” whereby it continues to follow EU legislation under the terms of the Withdrawal Agreement up to 11.00pm UK time on 31 December 2020 (‘IP completion day’).
During the implementation period UK and EU businesses should be able to continue to access EU and UK markets as they do today, but do not let that lull you into a false sense of security.
Despite the possibility that with such a majority the Government would soften its approach to an absolute deadline of 31st December 2020 to agree a trade deal with the EU, the opposite is the case with the Withdrawal Bill explicitly prohibiting a Minister of the Crown agreeing to an extension of the implementation period. As with any act of parliament this could be amended by further legislation but that seems unlikely at this stage with the Government explicitly stating
“The Government will not extend the implementation period beyond 31 December 2020. To reaffirm this commitment, the Bill prohibits Ministers agreeing to an extension of the implementation period in the Joint Committee”
DEXU – Department for Exiting the European Union.
Indeed, the only thing that may affect the time / date is any changes to the EU summertime arrangements!
Therefore, on IP Completion day of the 31st December 2020, we will probably see the UK cease applying EU legislation other than that covered by the Withdrawal Agreement in respect of Northern Ireland or otherwise agreed as part of a future trade deal.
Whilst the UK hopes to have as comprehensive trade deal as possible, the likelihood is that a standard Free Trade Agreement may be at best what is possible in that time especially considering the UK apparent preference for a clean break from EU regulatory alignment.
This will almost certainly mean that importers and exporters moving goods between the EU and the UK will need to prepare for making Customs declarations from 1st January 2021.
For trade with non-EU Countries in many cases the UK has agreed carry over provisions with countries such as the EEA and EFTA countries (Switzerland, Norway etc) so trade with those countries should differ very little from today. Click here to see current position.
However if the UK does strike a Free Trade Deal with the EU then it is perhaps unlikely to implement its temporary No Deal tariff that saw 87% of goods fall to a zero duty rate, instead it is likely to implement or continue to negotiate separate Free Trade Agreements with individual trading partners.
With regards to Northern Ireland, the Government position is that the Northern Ireland Protocol within the Withdrawal Agreement ensures that the whole of the United Kingdom will be a single customs territory outside of the EU customs union but with a system whereby Northern Ireland remains in step with specific EU rules including on customs, goods and VAT.
Quite what that system will finally look like will be eagerly anticipated. Whilst the protocol applies EU tariffs in Northern Ireland except for movements within the single customs territory of the United Kingdom, how it will be managed in practice is yet to be determined. However, some form of customs declarations, periodic accounting and/or data exchange is likely, and companies need to be prepared. With EU tariffs being applied to goods at risk of entering the EU how the UK will apply a system of reimbursement and waivers is also yet to be confirmed but again increased record keeping and tracking is likely to be required.
For Excise goods the question of how the movement of excise goods travelling under suspension from the UK through or from Northern Ireland to the Republic be handled is still open. Will it be one movement throughout with the UK sharing data with the EU or two separate movements on the UK and EU EMCS systems. Will Excise traders in Northern Ireland moving goods to the South require access to both?
The impact assessment clearly identifies possible administrative, tariff and compliance costs would occur post the Implementation Period for traders operating between Northern Ireland and the rest of the UK. Whilst most of this will be on “East-West” traffic there could be some costs “West-East” where exit formalities are required to comply with EU commitments. Will bringing those declarations in-house reduce costs?
Finally, there remains the prospect that Safety & Security declarations will apply to goods moving both ways between the EU and the UK. For airlines and deep-sea shipping lines this may well be an extension to the declarations they make today but for short sea shipping lines, ferry companies and hauliers this could be a completely new experience and requirement.
You Need to Act Now
For a while UK Companies have been told to prepare for a Day 1 No Deal and on a number of occasions it has not occurred and therefore scepticism is understandable BUT this time feels very different.
As demand is expected to be high during 2020 companies should act now to be to be ready for 1st January 2021, see below:
- Have a solution for submitting customs declarations (Import, Export, Transit, Excise).
- For carriers and hauliers have a solution for submitting safety & security declarations.
- Having a solution for customs warehousing to defer paying duty unless goods are definitely entering the UK or EU market.
- Apply for any simplifications or authorisations that will ease your supply chain.
- Consider applying for AEO (Authorised Economic Operator) to reduce your financial obligations and potentially ease access to authorisations or simplified procedures.
Descartes can help with all of this. Contact us today (info@descartes.com)
to discuss your needs and how we can support you both in the UK and EU by providing:
- Import, Export, Transit and EMCS Declaration solutions in the UK and other EU Member States
- A solution that is fully compatible with both UK HMRC CHIEF and CDS systems (Descartes Systems were the first software provider live with the new CDS System in the UK) and TSP and EIDR ready.
- Customs Warehousing, Duty Management and Temporary Storage solutions
- Safety & Security declaration solution for the UK and across Europe
For more information and the latest news on Brexit Click Here
Director, Product Management