The UK Government's Planned Regimes on Trade and Customs

By Richard Eccles


The Government has enacted the Taxation (Cross-border Trade) Act 2018, to establish an independent UK trade and customs regime. This will be necessary as from Brexit when the UK leaves the EU Customs Union. Whilst the UK is still a Member State of the EU, trade and customs are essentially a matter of EU law. The Taxation (Cross-border Trade) Act establishes a system of import declarations and duties on non-domestic goods entering the UK, sets up a system of export duties, and makes changes to the VAT regime. The Act will also empower the Trade Remedies Authority to take anti-dumping and anti-subsidy measures against imports causing injury to UK industry. The government is in the process of establishing the Trade Remedies Authority through a separate piece of legislation, the Trade Bill.

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 WTO rules, by the EU for  the Customs Union representing all the member states collectively. The UK needs 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.

Import duties and VAT

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 enables 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 government previously stated that whatever the outcome of the UK-EU negotiations, i.e. whatever the shape of a UK-EU deal or even if there is a "no deal" scenario, the UK would in any event need to establish its own customs regime. The government issued a Future Partnership Paper on Future Customs Arrangements setting out its proposals: Future Customs Arrangements. The government stated in its paper that a "no deal" scenario is not its preferred outcome, but that the new customs legislation would establish the customs regime that will be needed whatever the result of the EU negotiations.

Accordingly, the Act will result in 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 Act 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 Act provides by, way of exceptions, that import duty will not be payable where the goods are declared to be subject to a storage procedure, a transit procedure or an inward processing procedure. These provisions enable goods to be imported on a temporary basis and held in bond in an authorised customs warehouse for re-export without being released for circulation in the UK, or to be imported especially for processing prior to re-export.

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 Act establishes 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 Act also enables 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 Act 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 for on all imports from outside the UK.  The Act 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 Act's provisions concerning VAT and excise duty state that any directly applicable EU law to be retained in domestic law under the EU Withdrawal Act relating to VAT or excise duty, respectively, is disapplied.  Such matters are now to be dealt with under the domestic legislation resulting from the Taxation (Cross-border Trade) Act. 

The Act 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 Act provides for relief against export duty where goods are declared for an outward processing procedure. This enables the goods to be exported from the UK in order to be processed outside the UK and re-imported into the UK within a temporary period specified by the HMRC by notice in response to the relevant declaration.

Trade remedies

The Act 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. However, these provisions of the Act will be brought into force only when the Trade Bill has been enacted and when the Trade Remedies Authority has been established under that legislation.

The Trade Remedies Authority will be required to operate under transparent and objective processes (set out in Schedules 4 and 5 of the Act) 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.


The Act 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 Act provides the statutory framework for implementation of an independent UK trade and customs policy following Brexit. 

This article is part of our Brexit series