On March 22, 2018, Integration Point held a free webcast on “Brexit: The Volatile Phase.” We discussed what we currently know about Brexit, how we can make educated assumptions to prepare for the change, and how Brexit will affect customs and export control.

During the webcast, some questions were unanswered due to time constraints. Our speaker, John Grayston of Grayston & Company, will answer them here.

 

1. For the extended period of March 2019 to December 2020, the benefits of FTAs signed by the EU will no longer apply to the UK, correct? Example: EU-Chile, EU-Mexico.

This is a complex question, and we should at least agree that the position is not totally clear right now and that some uncertainty may remain for some time! The current position is that the current draft withdrawal agreement between the EU and the UK clearly intends that EU-UK trade will be as close to the same as possible. The intention goes further that trading relationships should remain the same between the EU and UK and all other countries. In a footnote to Article 124 of the Draft Agreement, the text confirms: "The Union will notify the other parties to these agreements that during the transition period, the United Kingdom is to be treated as a Member State for the purposes of these agreements." 

But clearly the terms of the draft withdrawal agreement cannot bind these same third parties. In simple terms, the UK will no longer be a Member State of the EU and if the benefits of third country agreements only apply to EU Member States (or EU original products), there is at the very least a potential problem.

We could take a positive approach and conclude that these third countries would not oppose such notification. But at the least there is risk involved, and most international trade experts will say that even reaching an agreement simply to maintain the status quo is not nearly as easy as it sounds. 

That leaves open the other option that, for countries that seek to reject the EU approach, the UK with EU support could seek to agree this bilaterally. But this would be a mess and would take time, longer perhaps than the transition.

So unhelpfully, the answer is – the EU and UK would want such FTAs to be available to the UK. But the reality may well be that there is no uniform position, and the position would need to be assessed on an agreement by agreement basis.

 

2. How will goods move between the UK and other EU countries? Will a customs declaration be required?

Article 37 of the Draft UK-EU Withdrawal Agreement, provides for a continued circulation of the goods placed on the EU Single Market until the end of the transition period. The conclusion is that during the transitional period, the intention is that customs declarations will not be required for trade between the EU and UK.

 

3. Is the transition period until December 31, 2020, already agreed to?

No. The draft text published by the EU on Monday, March 19 represents a significant step forward towards reaching an agreement. However, substantial issues remain to be negotiated (Ireland and the role of the EU Courts of Justice).

These negotiations will need to be concluded by the end of October/November 2018. If there are problems and no withdrawal text is agreed, the UK would leave the EU on March 29, 2019, with a hard Brexit.

 

4. At what stage (if any) are we looking at unique HTS UK customs codes instead of using existing HTS EU codes when trading with the UK?

HTS codes are generally negotiated and clarified within the World Customs Organization (WCO) and then implemented in the EU Member States.

Post March 2019, if a transitional deal is agreed in the form currently under discussion, the UK would continue to apply and adapt its customs schedules in line with the EU. 

From 2021, the UK will then need to take these decisions autonomously. The extent to which changes are made would then depend on the status of any post transition negotiations.

 

5. Will the UK need to create its own AEO program?

First point is that the EU AEO rules will be carried across into UK law as acquired law. The UK can then decide whether to make changes.

Post Brexit, the scope of UK AEO certification could become of value if the UK and EU agree on short or long term mutual recognition procedures to encourage trade. With AEO being an international creation of the WCO, there could be some value to obtaining UK AEO while the UK is part of the EU.