The UK government published detailed guidance in July 2020 for traders on the trade and customs requirements to be fulfilled for trade between the UK and the EU following the end of the Brexit transition period on 31 December 2020. At that point, the UK will cease to be a member of the EU Single Market and of the EU Customs Union, and trade between the UK and the EU will generally be subject to the same requirements as those for trade between the UK and the rest of the world.
The government has also published policy papers, in August 2020, regarding trade between Great Britain and Northern Ireland having regard to the requirements of the Northern Ireland Protocol under the UK/EU Withdrawal Agreement. Under the Protocol, the soft border between Northern Ireland and the Republic of Ireland will be maintained, but EU customs duty and VAT requirements must be fulfilled on transit from Great Britain to Northern Ireland in respect of any goods which are at risk of onward movement from Northern Ireland to the EU, i.e. in practice the Republic of Ireland. The policy papers published by the UK government in August are the first step in the process of establishing the detailed requirements that will apply in relation to the Northern Ireland border. The government is also setting up a Trader Support Service to assist traders in relation to the Northern Ireland border requirements.
Trade Between the UK and the EU
The requirements that traders must follow are set out in a detailed government “Border Operating Model”, The Border with the European Union – Importing and Exporting Goods which can be found here.
As from 1 January 2021, customs declarations will be required in respect of both imports from the EU and exports to the EU, and customs duties will be payable on imports from the EU under the new UK Global Tariff. For this purpose, importers will need to determine and state the origin, classification and customs value of the goods. However, as regards imports from the EU, it will be possible to defer customs declarations on standard goods by up to six months and also to defer the payment of customs duties on such imports until the declarations are made. Importers will also need to account for and pay VAT on goods imported from the EU. Importers who are VAT-registered will be able to use postponed VAT accounting. Importers who are not VAT-registered will have the same options to report and pay import VAT as they do for customs duty.
Safety and security declarations will be needed on exports and imports of goods between the UK and the EU. These will be needed for exports from the UK to the EU as from 1 January 2021. However, safety and security declarations on imports from the EU to the UK will only be required as from 1 July 2021.
Customs declarations will in any event be required for controlled goods and excise goods (including alcohol and tobacco products). There will be additional checks on all high risk live animals and plants (with a requirement to pre-notify for certain movements). Products of animal origin, including meat, milk and egg products and all regulated plants and plant products will require pre-notification and health documentation as from April 2021. However any physical checks will be conducted at the point of destination (rather than a border control post) until July 2021.
Some of the requirements foreseen in the government's Border Operating Model could be removed or reduced in scope if a free trade agreement were concluded between the UK and the EU with effect from the end of the transition period, depending on its contents. For example customs duties might be eliminated by such a free trade agreement, though insofar as they are merely reduced, the relevant arrangements on the Model will still apply. In any event, the Border Operating Model does not apply to matters covered by the Northern Ireland Protocol (please see below).
There are a number of steps that traders can take to prepare for compliance with these trade and customs requirements. These are specified in the Border Operating Model and include the following:
- Apply for an EORI (Economic Operator Registration and Identification) number;
- Appoint a customs intermediary (such as a customs agent, a fast parcel operator, a freight forwarder or a broker) to carry out customs declarations and other formalities; and
- Apply for a duty deferment account, to enable payment of customs duty, excess duty and import VAT by monthly direct debit instead of on individual consignments.
Trade between Great Britain and Northern Ireland
Requirements concerning trade relating to the Northern Ireland border will remain subject to the decisions of the special committee of the UK/EU Joint Committee under the Withdrawal Agreement. However, the UK government’s August 2020 policy papers are indicative of its proposals, reflecting the fact that Northern Ireland will remain part of the UK customs territory but that the government will need to respect the requirements of the Northern Ireland Protocol (under the UK/EU Withdrawal Agreement) concerning transit of products from the UK via Northern Ireland to the EU (in particular the Republic of Ireland). The Withdrawal Agreement and the Northern Ireland Protocol will continue to apply even if no UK/EU free trade agreement is concluded.
The Northern Ireland Protocol to the Withdrawal Agreement is explained in our note.
The UK government's August 2020 policy papers indicate the following:
Trade from Northern Ireland to Great Britain: The UK government intends to ensure unfettered access for Northern Irish businesses to the rest of the UK internal market, so that trade from Northern Ireland to Great Britain continues as it does now, without any declarations, tariffs or new regulatory or customs checks. This will apply to Northern Ireland businesses including businesses headquartered in Great Britain with operations in Northern Ireland. Businesses in Ireland will need to follow the normal processes for importing goods into the UK, including the submission of customs declarations and payment of any import duties.
Trade from Great Britain to Northern Ireland: In accordance with the Northern Ireland Protocol, the UK authorities will apply EU customs rules to goods entering Northern Ireland to ensure that applicable EU tariffs are paid in respect of goods at risk of transiting to Ireland. This will require new administrative processes including new electronic import declaration requirements and the provision of safety and security information, all of which are intended by the UK government to be streamlined and simplified to the maximum extent.
Trade between Northern Ireland and the EU: There will be no change as regards the movement of goods between Northern Ireland and EU Member States taking into account Northern Ireland’s status under the Northern Ireland Protocol of being subject to EU customs rules and a wide range of EU Single Market rules as regards goods. There will therefore be no new paperwork or tariff or quota requirements or rules of origin requirements within the EU Single Market as regards goods in free circulation in Northern Ireland. As a result, Northern Ireland businesses will be able to trade freely within both the UK internal market and the EU Single Market. This arrangement reflects the requirements of the Belfast Agreement (also known as the Good Friday Agreement), which are safeguarded by the Northern Ireland Protocol.
Trade between Northern Ireland and the rest of the world: There will broadly be no change to trading processes as between Northern Ireland and non-EU countries. As Northern Ireland will continue to be part of the UK’s customs territory, Northern Ireland will benefit from future UK free trade agreements. Tariffs will apply to goods imported from non-EU countries to Northern Ireland in accordance with the UK tariff regime, unless (where UK and EU tariffs differ) the goods are considered to be ‘at risk’ of moving into the EU. The final regime in this respect will be determined by the UK/EU Joint Committee under the Northern Ireland Protocol.
Under the Northern Ireland Protocol of the Withdrawal Agreement, Northern Ireland will continue to be subject to EU VAT legislation for goods, in order to avoid a hard border between Northern Ireland and Ireland. The European Commission has proposed amendments to the VAT Directive 2006/112 to enable EU VAT provisions to be applied to goods in accordance with the Protocol requirements. The aim is for these amendments to be adopted rapidly with an implementation date in line with the end of the transition period on 31 December 2020.
However, as regards services, Northern Ireland will be treated, along with the rest of the UK, as being outside the EU. There will therefore be dual VAT systems in Northern Ireland, for goods and services respectively.
This article is part of our Brexit series.