This chapter looks at the possible or likely treatment of traders’ sales into GB from NI under the NI Protocol. Once again, as in the case of purchases from GB into NI, the detailed rules have not yet been made. They are intended to be made in the EU /UK Joint Committee as referred to in the last chapter. In principle, they may be made by the middle of 2020.This date may extend the extended if the effective Brexit date is extended.
This chapter covers cases where there is a direct sale by a NI established business to GB established with the goods moving from NI to GB. It does not cover scenarios in which the goods are physically remitted to GB say from the Republic of Ireland or elsewhere in the EU. This would be an import transaction after the effective date of Brexit in Great Britain and may lead to anomalies and complications which would need to be carefully considered.
The chapter does not deal with sales from GB to other EU countries, the Republic of Ireland or third countries. The chapter doesn’t deal with services which are not covered by the NI Protocol at all. In principle services provided by traders to a GB customer are internal UK services which would be invoiced on the same basis as at present.
In broad terms, the controls on NI to GB trade are much less than those on GB to NI trade. Broadly speaking this is because the EU is concerned with exports that come from the EU customs territory but is not concerned with imports into the United Kingdom. This is a matter for the UK government so that the UK can apply other rules as it chooses. However, it might apply controls of some sort to avoid the artificial avoidance of UK import duties and rules (if applicable) by routing through NI. If there was a mini or comprehensive trade agreement, between the UK and EU, there might be no or minimum duties. Origin certification may be required, but this may be less of a concern for the company.
Broadly speaking, the controls on exports are (for normal goods) far less significant than those on imports although declarations and much of the information filed can be broadly similar. There are very rarely export duties.
There are sometimes restrictions on exports from the perspective of sanctions. So-called dual-use goods which have potential military use and other regulatory reasons can be reasons for checks. Goods which are capable of military use can be (for example) be subject to controls. Traders can check on the EU TARIC or HMRC with the goods commodify code and it will tell whether there is an export restriction at present for export from the EU.
There may be circumstances where goods are in free EU circulation in Northern Ireland, and for some reason, there is an EU prohibition on them going to third countries including GB. One would expect that both sides would make enormous efforts to avoid this scenario which is hard to imagine in practice. One would expect alignment on sanctions and restricted goods. There are very strong declarations in the Withdrawal Agreement in favour of Northern Ireland’s access to and ability to trade with Great Britain.
Northern Ireland to Great Britain Controls
Goods entering Northern Ireland from Great Britain are be subject to customs control only if they are at risk of moving out of Northern Ireland into the Republic of Ireland or the rest of the EU. The exact rules for applying the risk criteria and the degree of intervention at the NI /GB border are to be agreed in the UK EU Joint Committee which is to operate under the Withdrawal Agreement.
The UK has given a political commitment that there would not be any barriers on NI to Great Britain trade. In reply to a committee of the Houses of Parliament in October 2019, the Brexit secretary Steve Barclay had to correct himself to say that EU exit requirements would apply. Politically, however, the United Kingdom is likely to take every conceivable measure to ensure that goods entering Great Britain from Northern Ireland are not subject to controls.
This could lead to the possibility of distortions in respect of EU goods entering the UK via Northern Ireland. The EU exit declarations mentioned above are intended to control the exit of goods from the EU side, which is rarely the most critical customs issue but is important from a VAT perspective.
Under the Withdrawal Agreement, the United Kingdom is entitled to procure unfettered access for goods moving from Northern Ireland to Great Britain. Provisions of EU law prohibiting the exportation of goods out of the EU shall only be applied to the extent strictly required by international EU obligations. This is intended to be very narrow.
There is an anomaly which may ultimately cause GB to put some restrictions or checks on NI to GB trade. As mentioned above, there are controls tariffs and declarations for goods coming into NI from GB that may go onto the EU (including the Republic of Ireland). However, there are no corresponding checks on goods coming into NI from the Republic of Ireland/EU that may onto GB.
It is not clear to what extent Great Britain will seek to prevent Northern Ireland being used as a conduit for avoiding Great Britain customs duties on imports from the EU and related customs processes. There may be at least a general legal requirement that artificial without commercial justification, shunting of trade through Northern Ireland cannot be used as a means of avoiding GB import duties and obligations. The risk should reduce considerably if and when there is an EU UK trade agreement.
Withdrawal Agreement and Guidance
The EU and UK are to use their best endeavours to facilitate trade between NI and GB in accordance with applicable legislation. The position is to be kept under review by the Joint Committee of the EU and UK under the agreement.
- Nothing in this Protocol shall prevent the United Kingdom from ensuring unfettered market access for goods moving from Northern Ireland to the rest of the United Kingdom’s internal market. Provisions of Union law made applicable by this Protocol which prohibit or restrict the exportation of goods shall only be applied to trade between the territories referred to in Article 6(1) to the extent strictly required by any international obligations incumbent on the Union. The United Kingdom shall ensure the full protection of international requirements and commitments that are relevant to the prohibitions and restrictions of exportation of goods from the Union to third countries as set out in Union law.
- Having regard to Northern Ireland’s integral place in the United Kingdom’s internal market, the Union and the United Kingdom shall use their best endeavours to facilitate, in accordance with applicable legislation and taking into account their respective regulatory regimes as well as their implementation, the trade between the part of the territory of the United Kingdom to which Regulation (EU) No 952/2013 applies by virtue of Article 6(2) and other parts of the territory of the United Kingdom. The Joint Committee shall keep under constant review the application of this paragraph and adopt appropriate recommendations with a view to avoiding, to the extent possible, controls at the ports and airports of Northern Ireland.
The UK has published the following impact assessment information.
Some practical information will need to be provided electronically on the movement of goods West-East. Due to data limitations it has not been possible to monetise the associated additional costs to business. In a no deal scenario there would be no customs costs for businesses moving goods from Northern Ireland to Great Britain. The Protocol would result in additional costs as described above.
As with current arrangements, there will be no tariffs payable on goods moving from Northern Ireland to Great Britain. There will be no additional costs from tariffs relative to current arrangements. In a no-deal scenario, there would be no tariff costs for businesses moving goods from Northern Ireland to Great Britain. The Protocol would therefore result in no additional costs or benefits compared to a no-deal scenario.
Leaked Treasury Document on Likely Rules
The leaked Treasury document referred to in the previous chapter confirms that there would be some customs declarations and safety and security declarations on sales from NI to GB. The safety or security declaration or exit summary declaration is a subset of the export customs declaration. It is generally possible to combine them in one.
The paper puts a question mark as to whether rules of origin, i.e. certification of the origin of goods from NI into GB would be required. It seems clear that this is something which the EU would not require. GB/UK might choose to put origin type checks in place to ensure that there are no abuses of the system by sales from EU to GB being routed through Northern Ireland to avoid UK import tariffs and controls.
The paper places a question mark as to whether import declarations would be required in GB for purchases from Northern Ireland. Once again, this is something that might be required by GB to avoid abuse but would not be an EU requirement. In view of the very strong commitments to free Northern Ireland access this would be a significant barrier as all things being equal it would make GB purchasers less likely to buy from NI.
Insofar as the EU requires controls on NI to GB trade, it would relate only to the export aspect. As mentioned, this is much less significant than the import aspect. The no export tariffs. There are export restrictions for certain classes of goods. They would not appear likely to apply in traders’ sector.
One of the major reasons why exports are subject to controls is for VAT. Generally, exports out of the EU are zero-rated. However, the most likely scenario is that a single UK system of VAT will remain without wholly separate GB and NI VAT areas. This would remove this key objective of export control in checking that goods are not wrongfully zero VAT rated as export goods.
Therefore, for NI to GB trade, there are likely to be EU export declarations to be made by traders or their agents (including carriers), probably with a lot less detail than applies to exports to third countries. There are likely to be safety and security exit summary declarations (which may be incorporated the export declarations) in the part of carriers. They may be undertaken by the trader on behalf of the carrier. Undertaking these obligations will have a certain cost and would need to be handled in the same way as import declarations.
The detailed VAT rules have not been made. However, they are not likely to be anything radically different from the position at present.What we have said in the last chapter regarding how VAT may be treated under the Northern Ireland Protocol is applicable to the West-East context the same way as to the east-west context.
We have set out in the previous chapter how there could, in theory, be a situation where the Northern Ireland VAT area is separate to GB VAT area. This would involve zero-rated sales to GB. For the reasons set out in that chapter, we believe that it is far more likely that the UK will remain a single VAT area because the same issues of onward sale that arise in the context of customs do not arise in the same way for VAT. Therefore, sales from Northern Ireland to GB would be subject to UK VAT in the exact same way as a present. This would reduce the amount of controls necessary for export.
This chapter deals with procedures on sales from NI to GB. They would be much lighter than in the case of GB to NI trade.
We would expect no import GB procedures. There may be export declarations on the exit side from an EU perspective. They normally handle such issues as exit of the goods for VAT and other purposes and restrictions on controlled goods. We would expect that there would be minimal.
The withdrawal agreement contemplates that they would be kept at the very minimum absolutely necessary in terms of export restrictions. It is likely that NI will remain single VAT area with GB so that this control would not be necessary.