June 22nd, 2020

Brexit: Free-Trade Agreement (FTA) & Border Arrangements

Brexit & FTA

Free-Trade Agreements (FTA)

The UK formally left the EU on 31 January 2020, losing its membership of the EU’s political institutions such as the European Parliament and European Commission. The Transition Period began immediately after Brexit day and is due to end on 31 December 2020. During this 11-month period, the UK remains in the EU customs union and single market, which means that the current rules on trade, travel and business for the UK and the EU continue to apply.

The UK and the EU are currently negotiating what the future relationship will look like, notably a comprehensive Free-Trade Agreement (FTA). Such an agreement is defined by the World Trade Organisation as an agreement between countries that removes tariffs and other restrictions on ‘substantially all’ goods traded between them.

Unfortunately, though the UK and the EU share the goal of a Free-Trade Agreement, like the EU’s agreement with Canada with no tariffs and no quotas, there are huge differences over how to reach it. Goods travelling between Britain and Northern Ireland remain a major issue. Additional disagreements include access to British fishing grounds and data protection. The EU will not allow the UK unfettered trade access as this would undermine the EU’s single market, whilst the UK will not accept requirements to align with EU rules.

Despite the Coronavirus outbreak, Boris Johnson’s government insists it will not extend the Transition Period. Although little time remains, EU-UK talks will intensify through July, August and September with the hope of securing an outlined deal by autumn where the future trade of goods and services will be outlined.

If a new trade agreement between the UK and the EU cannot be agreed in time, then the UK faces the prospect of having to trade with no deal in place.

Border Arrangements

Regardless of whether an agreement is done with the EU or not, the UK government has confirmed that border controls on imports will be introduced at the end of the Transition Period.

The UK had committed to introduce full import checks on EU goods at the border after the Transition Period, but Coronavirus has forced the UK government to rethink. Instead, border controls for EU goods imported into the UK will be three-phased, to give business affected by Coronavirus more time to prepare.

Phase 1) From January 2021: In this first stage, full custom checks will be imposed on ‘controlled’ goods, such as alcohol and tobacco, and on animals and high-risk plants. Importers of ‘standard’ goods, ranging from cloths to electronics, will need to prepare for basic customs requirements, such as keeping sufficient records of imported goods, and will have up to six months to complete customs declarations. Businesses will also need to consider how they account for VAT on imported goods.

Phase 2) From April 2021: Checks will be extended to all products of animal origin, including meat, pet food, honey and milk, with pre-notification of imports required by the authorities.

Phase 3) From July 2021: All goods will be subjected to customs declarations at the point of importation and relevant tariffs, which will be determined by the outcome of the current Brexit talks.

Here is more detailed information from the government’s website.

Checks on exports to the EU are being determined by Brussels and in response, the EU has said it will implement full checks on UK exports at the start of 2021.

How to prepare your business (if moving goods between the UK and the EU)

  • Make sure you have an Economic Operator Registration and Identification (EORI) number. Goodwille can help you with this.
  • Look into how you want to make customs declarations and whether you need a customs agent. The government has put together a list over customs agents who can help you with this.
  • Refresh understanding of any logistics or supply chains involving UK-EU trade.
  • Set up a limited company or branch to ensure continued operation in the UK market. Goodwille can help you with this.

Data protection & Brexit

If the UK leaves the EU with a limited or no deal at the end of the transition period, you will need to take certain steps to ensure that data can continue to lawfully flow.

If you are a UK business that receives data from the EEA, you will need to take extra steps to ensure that the data can continue to flow freely and lawfully. The UK Government has stated that transfers to the EEA will note be restricted, but data coming from the EEA will need to be handled in a GDPR-compliant way. There are some tools available in the GDPR legislation which enable data transfers from the EEA to third countries, and for most businesses the use of Standard Contractual Clauses are likely to be the best way to keep data flowing to the UK.

If you are a UK business with offices, branches or other establishments in the EEA, your European activities will be covered by EU law, while UK activities will be covered by the Data Protection Act 2018.

Goodwille can support your business in many of the areas mentioned above, including setting up a Limited Company or a UK branch, help applying for an EORI number, as well as advice you on any HR and staff related questions. Contact us for more information on how we can support your business in preparing for Brexit. 

Sources and more information: