UK Files Divorce Papers with the European Union: What Global Traders Need to Know Now

Posted by Arne Mielken

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Brexit-2.jpgThe official government website of the United Kingdom (www.page.gov.uk) cites three main steps to obtain a divorce in the United Kingdom. These steps provide a  very formal process and detail the lengthy list of official documents to be obtained.  Basically here is the procedure:

  • Step 1: Apply for divorce and give reasons why you want the marriage to end.
  • Step 2: Obtain a formal “no objection” document from the court.
  • Step 3: After waiting at least 6 weeks, get a legal document that ends your marriage.
Separate from the paperwork, you and your ex-partner need to work out arrangements, amongst other issues, to divide your money and property. There’s a deadline if you want to make this legally binding. You can usually avoid going to court hearings if you agree about children, money and property and the reasons for ending your marriage.

In a way, the actions we are witnessing between the United Kingdom and  European Union, are just that; a divorce. How clean cut – or messy it will get is anybody’s guess. As global trade professionals, it is important to understand the implications of this Bri-vorce – during and after.

Sounds serious! What actually happened?

Today, the Prime Minister of the United Kingdom filed the divorce papers to separate from the European Union. Put into more formal language, the UK formally notified the European Council, the co-decision making institution of the European Union, of its decision to withdrawal from the blog of 28 countries. An unprecedented move!

What are the reasons for wishing to end the marriage?

There are multiple political reasons for this action, but ultimately divorce from the EU is needed due to the results of a non-binding, In-or-Out referendum in June 2016. The vote  resulted in 51.9% of voters in favor of leaving the European Union.  The withdrawal is commonly referred to as Brexit, a combination of the words "Britain" and "exit".

Did the UK also get a formal “no objection” document?

With successful passage of the “European Union (Notification of Withdrawal) Bill 2016-17” neither the UK Parliament nor the Queen herself can provide a reason why the UK can’t officially separate from the EU.

How long is the waiting period before the UK and the EU are officially divorced?

Britain's complex negotiations to exit the EU can only begin when Article 50 of the Treaty of Lisbon is formally triggered by the UK. Article 50 states that that EU law will automatically cease to apply in a maximum of two years from today, unless it is unanimously decided by the UK and the EU to extend this period.

Brexit-1.jpgAnything but the kitchen sink: Will the EU and UK also conclude a settlement agreement?

We hope so! Ideally, the EU and the UK should spend the next two years working on withdrawal (settlement) agreement. There is lots to agree on beyond trade in very little time, from financial matters, rights of EU/UK, transfer of regulatory responsibilities just to name a few. The of course, what happens with the “children” – in this case Ireland, Scotland, and Wales need to decide if they want to stay with the UK or EU.  (There isn’t an option for co-parenting and weekend visits.)

What is the future relationship between the European Union and the United Kingdom?

We don’t know! We know that the UK hoping to secure a bespoke deal that secures a high degree of access to the EU Single Market in goods and services through a Free Trade Agreement. But allow me to remind you: First of all, these negotiations are a two-way street – the EU Council, European Parliament with its veto powers, and the 27 Member States (and possibly some regional parliaments) with different interests will also have to agree to any future deal. Secondly, negotiations will, by far, not only focus on future trade arrangements. Any of the many other, amazingly complex issues can derail an agreement on the future collaboration of the UK and the EU.

To sum up the challenge for the UK and the EU, I am often reminded of two important sayings with encompass the essence of the magnitude and grandeur of the task ahead: “Nothing is agreed until everything is agreed” and “Too many cooks spoil the broth.”

What is at stake for global business?

Potentially a lot.  Trading with the UK and the EU may become more complicated, especially where supply chains include the UK. EU and international trade agreements, customs and border arrangements would need to be revised carefully to take account for the UK’s exclusion from the EU. A UK “outside the EU” needs to rethink its entire trade and customs policies, including everyday essential global trade matters. This will affect the quota, tariff, valuation, origin, supply chain security of every company trading with the UK.

How are supply chains affected by Brexit?

Overall, it’s fair to say that many UK supply chains are firmly integrated into the European Union. Since last June’s historic decision, 40 years of supply chain integration between the UK and European countries have been examined. Scenarios planning and procurement options are being discussed behind closed doors in boardrooms and warehouses alike.  Mergers and acquisitions like the takeover of the UK’s Vauxhall/Opel plants by French Peugeot Citroen in the beginning of March 2017 means that the ultimate decision on the future of these supply chains no longer reside solely and exclusively in the UK. Add to this the imposition of duties and non-tariff trade barriers like licenses and certificates and you see how in the future, well established supplies chains can shift over time, especially in areas of high regulatory control (take for example the car manufacturing trade or the textiles and apparel trade), in particular where there is no access to the EU Single Market and the Customs Union.  This can have significant impacts on supply chain directions in the future.

Is a deep and comprehensive Free Trade Agreement between the UK and the EU the best option ensuring free trade between the EU and the UK?

It is important to recognize the limitation of a Free Trade deal. It is contract between two nations and can never be as ambitious as sharing a free and open Single Market, like the EU has with its member nations now.

  • “Free trade” may mean a duty reduction, but it will require of the development and passage of massive administrative infrastructure, documentation and certificates.
  • Rules of Origin will need to be understood and intensely managed.
  • Long Term Supplier Declarations may need to be solicited. 
  • The contracting of partners put in place based on WTO trade rules set rules; and this does not eliminate red tape, contrary to free movement in a Single Market and a Customs Union.

I fear that an EU-UK FTA is not the solution for frictionless trade as most UK business is advocating for. And don’t forget that border clearance, even though as electronically advanced possible, will have to be re-introduced on both sides. Trade delays and disruptions may need to be accounted for.

How does Amber Road support our clients in these divorce proceedings? 

As trade rules change dramatically over the coming years in the UK (and the EU), businesses trading with both countries turn to our advanced global trade management software solutions providers to assist them in automating the enhanced UK and EU trade compliance needs of the future. Amber Road’s software suite tightly integrates government regulations and international business rules of over 147 countries into functional tools to manage sourcing, production and cross-border shipment of goods. We call this comprehensive and robust database of global trade content Global Knowledge®.

Throughout the Brexit process, our in-house Trade Content Professionals stand ready to collect, interpret and disseminate the new UK trade, customs and export control laws as soon as they are published and integrated them seamlessly into our software. Download our solutions brochure to learn more about Amber Road Global Knowledge.

Global Trade Content

This post was published on March 29, 2017 and updated on March 29, 2017.

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Topics: Global Trade Management Software, Global Knowledge