Free Trade Agreement with the United Kingdom

On December 24, 2020, the lead negotiators for the United Kingdom and the EU reported that they had reached a last minute agreement over the future relationship between the parties.   Despite all the joy and euphoria, important questions now arise regarding export and export practice.  Some will be highlighted below.

First of all, there will be neither tariffs nor quotas between the EU and the UK.  However, the UK is no longer part of the EU’’s single market and is therefore a third country.  As for VAT, this means that from January 1, 2021, intra‑Community deliveries and purchases between the UK and EU will no longer be possible, but exports and imports between them will continue.  For services, there may be different place-of-supply rules than before.

In terms of customs law, the free trade agreement applies as far as the incurrence of customs duties is concerned.  However, this does not affect the status of the UK as a third country, so that, unlike before, customs formalities are now required.  As of January 1, 2021, import declarations will be required for all goods, and exports will be carried out in accordance with the existent export procedures.

Note:
While the free movement of goods made it possible to transport between Great Britain and Germany without problems until December 31, 2020, customs checks will be carried out from January 1, 2021 onward.  The movement of goods despite all efforts during the negotiation process will become significantly more complicated and time consuming than before Brexit.  In particular, therefore, the procedures for exports to and imports from the United Kingdom will have to be changed.  Agreement was reached only on the economic outcome, according to which goods will not be burdened with customs duties and thus should not become more expensive.

The Free Trade Agreement provides for the non‑creation of customs duties only for products which have the corresponding originating status, i.e., are originating goods of the EU (in the case of export to the UK) or of the UK (in the reverse case of imports from the UK).  It is imperative to deal with the rules of origin in the Agreement.  Prohibitions and restrictions (VuBs) must also be observed with regard to both exports to the UK and imports from the UK.

Note:
It is important to keep in mind that the UK will now establish its own customs and foreign trade regulations  independently.  This means that Union Customs Code and other EU regulations (e.g., the EC Dual Use Regulation) will as of January 1, 2021 no longer be applicable to the UK authorities.  While the UK’s new rules are expected to be based on the EU’s, there nevertheless may be deviations.  It is therefore advisable to study the relevant new rules of the United Kingdom, as these must now be observed.  For example, instead of the CE-marking which is employed in the EU, the UK observes a separate conformity marking system (UKCA), which must be observed by any companies supplying to the UK.

Conclusion:
The fact that there continues to be no import duties for originating goods in the UK or the EU does not mean that “everything stays the same.”  On the contrary, the clearance of goods for import will become significantly more complicated.

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