The result from the UK referendum about EU membership was to leave the EU. This will have direct consequences for UK customs legislation and businesses in the EU who trade with the UK both at an administrative level and for the physical flow of goods. The Brexit period will coincide with the implementation of UCC in the EU. Which changes can we expect to see from a customs and trade compliance perspective over the next few years as the transition gets under way.
As the dust is settling after the outcome of the UK referendum on continued EU membership on 23 June it has become apparent that neither the Brexit side in the UK nor the EU itself had a “ready plan of attack” in their back pocket for what to do now. There is Article 50 from the Lisbon Agreement that will form the basis for the exit negotiations but right now it is uncertain when the UK will take this next step and invoke Article 50. As the probability that there eventually will be an exit from the EU by the UK is high, it is still worthwhile to have a look at what the likely consequences are from a customs and trade compliance perspective.
No longer part of the EU Customs area
After the Brexit the UK will no longer be part of the EU Customs Area and as such they will have to launch their own customs legislation including detailing customs procedures, customs permits, customs codes, customs declarations, customs duty levels and simplifications and how they want to interact with trade in connection with submitting declarations (i.e. software). Considering the EU is just in the starting phase of implementing its new UCC customs legislation and this will continue until at least the end of 2020 and that the UK has also been part of designing this new customs legislation we can expect some similarities with the UCC all be it probably a somewhat simplified version.
New free trade agreements necessary
A Brexit also means that the UK will no longer be part of the EUs Free Trade agreements and instead will have to negotiate its own trade agreements with the EU and other key trading partners. As the UK Brexit referendum outcome sprung out of a desire take back own control over national borders and other policy decision making that in part now has been deferred to the EU, the scenario that the UK gets a similar free trade agreement to Norway is unlikely as this includes the free movement of goods and people and also paying fees to the EU. However, The UK is known as a country that likes international trade so they will most likely strongly focus on negotiating free trade agreements with key partners and will also design its customs legislation in such a way as to encourage trade rather than hinder it.
Flows to and from the UK from EU will be subject to customs declarations
However, for businesses trading with the UK post Brexit will mean that the goods flow will be subject to export declarations out of the EU and import declarations into the UK. This will most likely also mean having to apply for local UK customs permits, VAT and Excise registrations. The two new EU customs simplifications Centralized clearance and Self-assessment will not incorporate the UK when they become possible to apply for either.
AEO Safety – a question mark
Another area to consider is whether the UK after Brexit will be inside or outside EUs Safety area for AEO. Being outside this safety area would mean much more complexity for all types of transports to and from the UK from the EU. Being on the inside would require the UK to at least have its own AEO program.
Good customs knowledge will help with the necessary transitions
There is still a lot of unknowns connected with the Brexit but companies with good customs knowledge distributed around the business will be able to follow the development, make necessary plans and act on these to minimize the negative impact of the changes and maximize the continued trade potential with the UK post Brexit.
KGH will continue to follow the developments from a customs and trade compliance perspective.
Catharina Olofsson, Consulting Director