Brexit: The new UK-EU Trade and Cooperation Agreement explained (Part I)
What does it mean for cross-border trade?
The news of a new trade UK-EU deal were broadly perceived well, particularly due to the facts that a no-deal was averted, and cross-border trade remains tariff free. These are two good reasons to be relieved, however, they also induce a false sense of security.
The EU and the UK are now two separate markets; two distinct regulatory and legal spaces. This will recreate barriers to trade in goods and services and to cross-border mobility and exchanges that have not existed for decades – in both directions, affecting public administrations, businesses, citizens and stakeholders on both sides.
Trade deals are reciprocal – these new rules apply to traders in the UK and the EU alike. However, in this piece we will focus on how your UK business with a client base in the EU/EEA/NI will need to adapt your business practices. These are the changes that might affect your cross-border trade:
UK businesses regularly processing data of EU individuals, eg, you hold a data base of your EU clients/suppliers, need to appoint an EU Data Representative.
Trade in goods (with the EU and NI)
Customs clearances: You now have to complete customs declarations for every consignment destined for the EU/NI. You can do this yourself or commission forwarders/agents. Fortunately, each other’s programmes for trusted traders, such as Authorised Economic Operators (AEO), will continue to be recognised.
EORI numbers: As an exporter you will need a UK EORI number, you can apply for this at the HMRC. You will also need an EORI number from the EU country you are exporting to, you can apply for it at the customs authorities in this country. If you use this country as a bridge to distribute goods further to other EU countries this one EU EORI number will be sufficient. If you export directly from the UK to a number of EU countries, you will need an EORI number for each country.
Tariffs: The good news for traders is that neither tariffs nor quotas will be imposed – as long as you qualify for tariff free cross-border trade under the Rules of Origin (RoO).
Rules of Origin: These rules ensure that goods from third countries outside the UK and EU are not imported through the back door, and they will substantially increase your paperwork for the goods crossing UK-EU borders.
Basically, you need to prove where the components/ingredients of your goods come from and what further processing was applied where. Depending on the type of product, its composition and processing you may need to pay tariffs on EU exports.
VAT payments: There are quite a few new VAT rules applying to imports, to consignments above or below a value of £135, to exports, to B2B or B2C trade in goods or services etc. Basically, too much to list, so for in-depth information check with the Institute of Chartered Accountants (ICAEW).
One positive aspect: The government has introduced ‘postponed accounting’ for import VAT on goods brought into the UK, which means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border.
Food safety: From now on there will be Sanitary and Phytosanitary Standards (SPS) checks at the borders for live animals, products of animal origin and some plants and other agri-food products to ensure they comply with EU food safety and biosecurity regulations.
Product Safety: The European CE product marking has been replaced by the new British UKCA marking. This means that UK businesses will lose their CE certifications and therefore cannot sell goods that require a CE mark to Europe or NI anymore.
Labelling requirements: UK Food Business Operators (FBOs) exporting packaged food and beverages to the EU or NI must now print an EU or NI address on their labels.
Trade in Services
Despite 80% of UK exports are services, this sector has hardly been touched. The two main changes for UK businesses are:
Financial services: UK businesses cannot offer financial services from the UK anymore – they need to be established in the EU.
Qualifications: Easy recognition of professional qualifications has ended, this will have effects on HR decisions and trigger the need for additional qualifications.
What are the solutions for exporting UK businesses?
Read everything about hands-on solutions to mitigate the risks of Brexit here.
Trade with Europe Ltd provides one-stop solutions for UK businesses to export and grow European markets. Circumvent trade barriers and manage your EU trade from the UK with only minimal disruption to your everyday business.