The UK Government's Planned Regimes on Trade and Customs

By Richard Eccles


The UK government has published two important pieces of draft legislation in the trade and customs area, to take effect on Brexit, the Trade Bill and the Taxation (Cross-border Trade) Bill (referred to as the "Customs Bill").  These Bills follow the publication by the government in October 2017 of two papers setting out details of this planned legislation.  The Trade Bill  and the Customs Bill  received their respective first readings in Parliament on 7 and 20 November 2017.  Both of these Bills will be necessary to establish a UK legislative framework to be implemented following Brexit, whatever the outcome of the Brexit negotiations.  At present, trade and customs are essentially a matter of EU law, dealt with under the EU Common Customs Union. 

Intra-EU trade is free of customs duties and customs processes by virtue of the Customs Union and trade between the EU and third countries is subject to the Common External Tariff pursuant to the EU Customs Union and to trade agreements negotiated by the EU on behalf of the member states, so as to ensure uniformity across the EU in relation to external trade.  Meanwhile, trade defence measures are dealt with, within the World Trade Organisation (WTO) rules, by the EU as the Customs Union representing all the member states collectively.  The UK will need to establish its own regime and infrastructure for dealing with trade measures when it becomes an active WTO member in its own right following Brexit.

The Customs Bill

A standalone UK customs regime will be necessary as from Brexit.  The UK government's intention is that its new customs legislation will provide continuity for businesses by being mostly based on the EU Customs Code and by keeping the administration of VAT and excise regimes largely the same as at present. The legislation will enable the UK to charge its own customs duties on goods (including goods imported from the EU), set quotas, vary the rates of duties, specify when goods are relieved from duties, determine when additional territories may form part of a customs union with the UK, and provide for preferential tariffs, for example in relation to developing countries.    

The practical operation of a new UK customs regime for trade with the EU27 needs to be agreed with the EU, and this will be addressed in any UK-EU relationship agreement negotiations as and when they commence.  The government has issued a Future Partnership Paper on Future Customs Arrangements setting out its proposals regarding the logistics of UK customs arrangements for UK-EU trade, which we have explained in a separate briefing note: Customs arrangements following Brexit: the UK's and the EU's positions.    

The government has stated that irrespective of the outcome of the UK-EU discussions, i.e. whatever the shape of a UK-EU deal or even if there is a "no deal" scenario, the UK will in any event need to establish its own customs regime.  The government stated in its paper that a "no deal" scenario is not its preferred outcome, but that the new customs legislation will establish the customs regime that will be needed whatever the result of the EU negotiations.

Accordingly, the Customs Bill will introduce import duties in respect of the importation of all chargeable (i.e., non-domestic) goods into the UK and an obligation to make a customs declaration on importation.  The Treasury is required to compile a customs tariff by means of a statutory instrument classifying types of goods according to their nature and origin, using codes and specifying the rates of duty and rules for determining the amounts of duty applicable. 

The Customs Bill provides rules for determining the place of origin of chargeable goods.  Goods are to be regarded as originating from a country or territory if they are wholly obtained in that country or territory.  Where goods are obtained in two or more countries or territories, the goods are to be regarded as originating from the last country or territory in which substantial processing of them took place which was economically justified. 

The HMRC Commissioners are required to establish a system enabling traders to apply for rulings by HMRC officers to determine the applicable code in the customs tariff and/or the place of origin, for particular goods. 

The Customs Bill will establish a system of UK trade preferences to enable the UK to provide support to eligible developing countries, by means of preferential duties which are lower than the applicable rate in the customs tariff, possibly subject to specified conditions being met. 

The Customs Bill will further enable quota arrangements, by enabling separate provisions to be made for the amount of import duty applicable to goods which are subject to quota arrangements made by the UK government with a government of a non-UK country or territory. 

The Customs Bill makes important changes to the VAT regime by amending the existing VAT legislation so as to replace the reference to charging VAT on the acquisition in the UK of goods from EU member states by the principle of VAT being charged on all imports from outside the UK.  The Bill enables the HMRC Commissioners to introduce, by regulations, an excise duty regime applicable to non-UK persons in respect of the sending of goods to the UK by post.  It is notable that the Bill's provisions concerning VAT and excise duty state that any directly applicable EU law to be retained in domestic law under the European Union (Withdrawal) Act 2018 relating to VAT or excise duty, respectively, is disapplied.  Such matters are now to be dealt with under the domestic legislation resulting from the Customs Bill. 

The Customs Bill enables the Treasury to adopt regulations imposing export duties by reference to all exports or exports of specific goods from the UK.  Such regulations may provide for an export tariff to be established.

The Trade Bill

The Trade Bill lays the groundwork for the UK to operate independently to protect the UK's trading interests, in the context of the WTO agreement.  We have summarised the WTO regime with an explanation of how this will be affected by Brexit in relation to the UK, in a separate briefing note: Brexit: WTO and Future Trading Arrangements.  The government is committed to the UK operating a transparent, rules-based international trade policy in its own right once it exits the EU. The government intends the UK to become an independent member of the WTO Government Procurement Agreement and to achieve continuity regarding the UK for existing EU trade agreements with third countries by adopting and continuing such agreements as an independent party. 

The Trade Bill will enable the following:

  • The implementation of free trade agreements (and other international agreements relating mainly to trade) between the UK and other countries which currently have such an agreement with the EU; and
  • the implementation of obligations arising from the WTO Government Procurement Agreement once the UK joins this Agreement as an independent member outside the EU.

Such implementation will be by means of regulations (statutory instruments) to be made by the relevant minister.

The Trade Bill establishes the Trade Remedies Authority.  However, it is the Customs Bill which sets out the Authority's functions in relation to unfair trade practices by other countries.  The present Bill requires the Authority to provide the Secretary of State with such advice, support and assistance as the Secretary of State may request in connection with the conduct of international trade disputes and the functions of the Secretary of State in relation to trade.  When making any such request, the Secretary of State must consult the Authority and have regard to its operational independence and its ability to make impartial assessments. 

Trade remedies pursuant to the Customs Bill

The Customs Bill will make the Trade Remedies Authority responsible for implementing and applying a UK system of anti-dumping and anti-subsidy (or countervailing) measures and safeguards against increased imports causing injury or serious injury to UK industry, with a view to ensuring fair competition and avoiding or addressing injury to UK producers.  Such an independent UK trade remedy framework will be needed following the UK's exit from the EU, because trade remedies are currently an EU competence. 

The Trade Remedies Authority will be required to operate under transparent and objective processes (set out in Schedules 4 and 5 of the Customs Bill) to investigate dumping, subsidies and increased imports, and, subject to the specified thresholds being met, to make recommendations for the imposition and determination of amounts of anti-dumping or anti-subsidy duties or safeguarding amounts.  These are effectively increased import duties.  In the case of safeguarding amounts, they will be possible where there is a significant increase in the levels of imports.  In such cases, the Trade Remedies Authority will also be able to recommend the imposition of import quotas.  Following receipt of any such recommendations, it will be for the Secretary of State to decide whether to impose such duties, amounts or quotas.  The new framework will include the application of an economic interest test prior to the application of trade remedy measures. 

Separately, the UK government is expected to seek a transition to the UK of existing EU trade remedy measures that affect or protect UK industries.  The government aims to ensure continuity and will where appropriate adapt such EU measures to the needs of the UK economy.

Conducting trade disputes

The Trade Bill enables HMRC to collect information on exports and to disclose trade information to the Secretary of State. This could assist in enabling the UK to refer trade disputes involving the UK economy to the WTO dispute settlement procedure, in place of the European Commission which currently manages trade disputes on behalf of the EU and its member states. 


The Trade Bill and the Customs Bill will establish a framework for the implementation of an independent UK trade policy following Brexit, within the WTO framework.  This has not been necessary whilst the UK has been in the EU Customs Union; the negotiation and implementation of external (third country) trade agreements have been the exclusive competence of the European Commission, pursuant to the Customs Union. 

The government's Trade Policy paper expressly takes account of changes in global trading patterns.  The Trade Policy white paper shows that the share of global exports accounted for by developed economies has fallen, from 69% in 1980 to 54% in 2013.  This is offset by growth in developing countries' share of global trade, including that of China and other developing economies across Asia.  The paper quotes EU-sourced data indicating that approximately 90% of global economic growth in the next 10-15 years is expected to be generated outside Europe.  The white paper further indicates that the Commonwealth is home to a third of the world's population, many of its fastest growing economies and half of the world's top 20 emerging cities.  This network is stated to provide opportunities for UK business and for the UK to promote multilateral free trade.  The government's well-publicised aims of achieving free trade agreements with specific Commonwealth countries as from Brexit can be seen in this context.

This article is part of our Brexit series