Overview

At present, movements of goods between Ireland and the UK are not subject to customs and most other controls. They are similar in status to movements within a single country. In contrast movements from an EU country to a country outside the EU whether by way of import or export are subject to the European Union customs code.

If United Kingdom leave the EU and 29 March 2019 (postponed to 31 October 2019) without a deal or at a later date without membership of a full customs union, then customs and other regulatory controls will apply. The controls will be broadly similar to those applicable to exports and imports from third countries.

In the event of a no deal Brexit the UK would be treated as a third country with whom the EU has no trade agreement whether comprehensive or partial. This will mean that the UK is treated in the same way as a third country with no preferential or facilitate of trade arrangement or relationship with the European Union.

Customs Declarations on the UK Side

In the event of no deal Brexit, customs formalities and control will apply to the export of goods to the United Kingdom and to import into the United Kingdom of goods from the EU.

At present HMRC is introducing its new customs declaration service (CDS) which is intended to replace its customs handling of import and export freight (CHIEF) system. The CDS version of the import trade tariff will be used to make customs declarations. More information will be required traders who make declarations directly or use an agent. CDS is intended to benefit business by bringing the capacity to include more items per declaration thereby reducing the number of declarations.

The UK has announced simplifications which would apply for a temporary, but potentially extended period, in the event of a no deal Brexit. See below.

EU Tariffs

The EU will apply its third country tariff and trade treatment to imports from and exports to the United Kingdom. Most commentators on the requirements of the World Trade Organisation to which the EU and UK are party, are of the opinion that UK would be obliged to apply the same rules, tariffs and treatment to trade with the EU.

This is because of the most-favoured-nation principle which effectively requires a WTO state to apply the same most favoured nation treatment to all third countries that applies to any third country in the absence of a comprehensive trade agreement or customs union covering substantially all trade.

UK Customs Laws

The UK customs tariff will follow the format of the EU tariff each being in accordance with the harmonised system developed under the World Customs Organisation.The UK has indicated that there may be differences in the rates offered in some cases. There have been suggestions that the UK may offer lower rates, which under WTO rules must generally be extended to all third countries

The United Kingdom has replicated EU customs laws in domestic UK legislation. Trade with the EU will be on non-preferential World Trade Organisation terms. The legislation allows the UK to put in place a trade preference scheme.

UK Customs Tariffs

The presumption is that the UK tariff will replicate the existing EU tariff. The UK had announced that it does not intend to deviate from the current commodity code list published in the UK trade tariff unless it is  necessary to maintain alignment or for trade remedies purposes (i.e. in the event of trade disputes)) .

There are some opinions to the effect that the EU and UK would not be obliged to apply third country least favoured nation treatment to one another and could continue to have a zero tariff regime perhaps without customs barriers between them while the future trading relationship is being negotiated. The WTO agreement refers to a reasonable time period which may be up to 10 years. It has been suggested that an interim agreement might be permitted under these principles.

However it is not obvious  that the EU would be willing in principle to enter an interim agreement  The interpretation is controversial and is not accepted by many trade lawyers. It is discussed in greater detail in the article on Trade.

In March 2019, the UK published a temporary tariff, to apply in the event of a no-deal Brexit.. This reduced many tariffs to zero. Other tariffs, particularly in relation to agriculture and vehicles are retained.

VAT

The UK intends to have a VAT system similar to the present EU VAT system. The relevant UK legislation is in place to replicate EU VAT legislation.

The effect of UK being outside the EU is to change the VAT treatment of imports from and exports to the United Kingdom. The United Kingdom government has indicated that it will afford businesses postponed accounting arrangements in respect of import VAT on goods brought into the United Kingdom.

Deferred VAT accounting would  means that businesses will be able to incur  import VAT on the VAT return rather than paying it at the point of entry withc ustoms duties. The change will apply both to EU and non-EU imports. A guarantee will be required but some period of grace may be allowed to obtain it, in the event of a hard Brexit.

Origin of Goods

EU origin Goods already placed on the UK market prior to Brexit may continue to circulate. In addition goods that meet EU requirements and were tested by an EU recognised conformity assessment body may be placed on the market for a time-limited period.

A significant issue after a hard Brexit would be that goods with an UK content may not qualify as EU goods for the purpose of EU preferential trade agreements with third countries. It is possible for states to agree cumulation arrangements in the future with third countries, but it not apparent that cumulation can continue under existing third country trade agreements.

Rules of origin issues will complicate the rolling over trade agreements. Trade agreements provide specific rules and requirements for preferences under their terms. In principle it can be agreed to accumulate UK and EU content for the purpose of the minimum threshold of domestic content but this would require third country agreement.

The pan-Euro Mediterranean rules of origin convention allows for cumulation of orgin  between all parties provided there are trade agreements in place between the contracting parties concerned. The EU agrees to cumulation typically only if all countries involved have free-trade agreements between themselves, which may be an issue in the event of a hard Brexit

Conformity of Goods I

Conformity assessment undertaken  in the United Kingdom will no longer be recognised in the EU. This will require that UK producers and exporters ( and Irish importers of UK goods)  to the EU to acquire new EU based certification after Brexit.

Goods already on the market prior to Brexit of EU origin will be able to continue to circulate in United Kingdom. Goods meeting EU requirements (testifying EU recognised conformity assessment body) may be placed on the market for a time limited period.

There will be a new UK conformity assessment regime. Manufacturers may fix new UK conformity marking before placing the product on the UK market. Existing EU standards will become  UK designated standards.

Products tested by UK based notified body may require to be retested by EU recognised conformity assessment after Brexit. This may require manufacturers in the UK to arrange for the files to be transferred to an EU recognised notified body to allow certificates of conformity issued by a UK based notified body to continue to be valid.

Conformity of Goods II

Non- harmonised goods originating from United Kingdom may  circulate on the EU market prior to Brexit in accordance with the general EU Treaty principles of mutual recognition. Other EU states may refuse recognition unlimited grounds of public safety public policy and public morality only. Judicial action can be taken in any court to challenge illegitimate barriers to trade. These grounds are narrowly interpreted.

In addition the EU mutual recognition regulation seeks to ease procedures and facilitate the marketing and legitimacy of goods which comply with the rules and regulations of one EU state in other EU states. The regulation puts an onus on states to justify differential rules. It also established product contact points which respond to requests about national regulations.

After Brexit  non-harmonised goods must meet UK national requirements if any. Accordingly some categories of goods which may previously have been lawfully marketed under the EU rules may fail to meet UK national requirements and not enjoy the protection of the overriding EU presumptions.

Equally non-harmonised goods exported from UK must meet EU national standards. In each such cases the present EU rights with a very strong presumption of recognition of standards other than where  strictly justified will cease to apply in the UK and in respect of UK goods in EU markets.

The UK has indicated that it will recognise EU/EEA exhaustion of intellectual property rights. The general position that once a product is lawfully marketed and sold in one EU/EEA state from an intellectual property compliance perspective  may freely circulate throughout the EEA thereafter notwithstanding for example a purported limitation of intellectual property rights to one EEA state. The UK has announced that will accept that products and goods lawfully marketed in the EU/EEA be imported into the UK free of any further claim to intellectual property rights. This continued parallel import provision were last for a period and will be reviewed in due course.

UK temporary simplified customs procedure

In the event of the UK leaves the EU without a deal HMRC has announced transitional simplified procedures to make it easier to import goods from the EU using roll on roll off locations like Dover or the Channel Tunnel. They will be reviewed after 3 to 6 months. If they are to be withdrawn HMRC has committed to giving 12 months notice to allow businesses to prepare to undertake full  import processes for third country trading.

The simplification is stated not to apply to importing and exporting between Ireland and Northern Ireland. HMRC states that they will communicate with traders separately about these arrangements.

HMRC will take payment of the duties and taxes by direct debit on the 15th of the month after the goods arrive in the United Kingdom.

The simplified procedures reduce the information required in an import declaration by deferring the obligation to give a full declaration and the obligation to pay duty.

Qualification for Simplification

If tariffs apply to the goods being imported a trader who wishes to use the transitional simplified procedure must apply to defer any duties. A financial guarantee is required by 30 June 2019 for duties deferred. HMRC indicate that it will write to traders when the simplified process is available

The transitional simplified procedures require that the trader

  • has an EORI number
  • is  established in the United Kingdom
  • is  importing goods from the EU into the UK

The facility is not available

  • for importers from outside the EU
  • those using special customs procedures
  • agents such as freight forwarder
  • traders who do not have a tax compliant record

The Procedure

The standard goods procedure requires a customs declaration to be made within commercial records when goods cross the border. The information must include

  • date and time the goods arrived in the United Kingdom
  • description of the goods under commodity code and quantity
  • purchase and if available sales invoice numbers
  • the customs value
  • the serial numbers if appropriate
  • delivery details
  • supplier details

After goods have been imported, the trader must send a supplementary declaration by the fourth working day of the month following the arrival of the goods into the United Kingdom. HMRC will take payment on the 15th day of the month after the goods arrive in the United Kingdom if taxes or  duty apply.

Controlled Goods & Simplification

Controlled goods are those which require a licence to import or excise goods such as alcohol and tobacco. Persons importing controlled goods from the EU who wish to use the transitional

  • simplified procedure may use the controlled goods procedure. This requires
  • sending a simplified frontier declaration before import of the control goods into the United Kingdom
  • ensuring the goods are accompanied by the supporting documentation such as the relevant licence
  • making a supplementary declaration by the fourth working day following the arrival of the goods

Entry Summary Declaration Requirement Temporarily Lifted on UK side

On 19 February 2019 the UK announced simplification of the entry summary declaration procedure.

The entry summary declaration for the United Kingdom will be phased in and will not apply for a six month period from 29th of March 2019.

The measures are designed to give business more time to prepare for changes to the EU/ UK trade arrangements. It is intended to build on the plans of the transitional simplified procedures which can be used for at least 15 months for customs declarations.

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