Although Big Ben has been taken out of commission for the next four years while it is being refurbished, the UK is making sure commerce and trade will be running after its departure from the European Union (EU). The story is well-known by everyone in the trade industry; the United Kingdom-European Union membership referendum vote held on 23 June 2016 resulted in 51.9% of voters voting in favor of leaving the EU. The government initiated the official EU withdrawal process on 29 March 2017, putting the UK on-course to complete the withdrawal process by 30 March 2019.
Amber Road has regularly kept our customers and trade professionals in the know about Brexit’s impact on trade. The blog post on 15 June 2016 and a full corporate press release. We also held a special webinar on the “The British Vote Brexit: How Will This Impact Global Trade in EU and US Companies?” which is available on-demand and issued a Q&A paper.
Following months of speculation regarding the UK’s position on various aspects of global trade – positions that are now subject to serious scrutiny as the government negotiates the departure from the EU - an official paper was just released to clarify the government’s plans...
In the paper, “Future customs arrangements: A FUTURE PARTNERSHIP PAPER”, the United Kingdom set out a vision on how the United Kingdom wishes to construct a new, deep and special partnership with the European Union. The UK says it seeks a new customs arrangement that facilitates “the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world”.
So far so good, but what is in the paper?
The paper in essence proposes to leave the EU Customs Union but also to keep a ‘close association’ with the organization for a limited period of transition.
Leaving the EU Customs Union: Two Options
The paper makes it clear that “as we leave the EU we will also leave the EU Customs Union”. The Customs Union is a foundation of the European Union and an essential element in the functioning of the single market. The single market can only function properly when there is a common application of common rules. These rules are known as the Union Customs Code. Brexit means the UK has to design its own rules and its own External Tariff.
The UK government outlines two approaches to the future customs arrangements:
1) A highly streamlined customs arrangement
Outside the EU Customs Union, the UK will set its domestic customs arrangements to facilitate the flow of trade across its border, leaving as few additional requirements on UK-EU trade as possible. Under this model, the UK would aim to negotiate trade facilitations with the EU and implement unilateral improvements to our domestic regime to make trade with the EU easier. Ideas to simplify requirements to move goods across borders, including doing away with import and export declaration through the UK’s membership of the Common Transit Convention (CTC) including a waiver of entry and exit summary declarations. Mutual recognition of Authorised Economic Operators (AEOs) hopes to enable faster clearance of AEOs’ goods at the border and ease pressure on ports and entry points.2) Innovative and Untested: “a new customs partnership with the EU”
The real big goal, however, would be the completion of the second option, “a new customs partnership with the EU” aligning the UK’s approach to the customs border in a way that removes the need for a UK-EU customs border. Under this proposal, the UK would be mirroring the EU’s customs approach at its external EU-UK border, to ensure that all goods entering the EU via the UK have paid the correct EU duties. The UK government believes that this would remove the need for the UK and the EU to introduce customs processes between the two parties, so that goods moving between the UK and the EU would be treated as they are now for customs purposes. At the same time however, the UK could apply its own tariffs and trade policy to UK exports and imports from other countries destined for the UK market, “in line with our aspiration for an independent trade policy”. The paper mentions a robust enforcement mechanism to that ensured goods which had not complied with the EU’s trade policy stayed in the UK.
To reiterate, in both of these options, the UK would be out of the Customs Union and able to negotiate its own trade deals around the world.
Today’s proposals will be discussed with stakeholders over the summer and the UK plans to publish a Customs White Paper in advance of the Customs Bill in the autumn.
Across the water in Brussels, the European Council will meet in October to rule on whether talks on the withdrawal agreement have made sufficient progress on the main key topics of citizen’s rights and the financial settlement (+ UK-IE Border issue) to proceed to the next phase — the transition and the future relationship.
Without this agreement, negotiations on the future border arrangements are unlikely to kick-off in Brussels no matter how many papers are being produced.
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Global Knowledge® covers 147 countries, or roughly 95% of world trade, making our trade content and content management process the best in the industry. We maintain a staff of in-house trade experts around the world who gather, translate, interpret and update country-specific trade regulations.
For companies trying to manage the impact of regulatory change, not having to make immediate changes is no consolation at all. Here we see uncertainty again — over what may change and when. More rules — and more disparate rules — will inevitably mean more to manage. This includes more changes to implement and monitor of a new, larger set of rules. Any and all of the changes to trade policy and regulations post-Brexit will impact companies trading with the UK. Our knowledgeable trade specialists are committed to supporting businesses around the world understand the issues, and manage the opportunities and uncertainties that Brexit will bring.
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This post was published on August 15, 2017 and updated on August 16, 2017.