BREXIT: ACCORD AND SATISFACTION?

16/11/2018

A month ago and in the apparent absence of progress in talks on how the UK was to exit the European Union, Simarco published a white paper (https://simarco.com/index.php/news-media/68-state-of-the-nation-the-simarco-view) offering guidance on the options under consideration and the potential implications of each.

It was compiled as a result of extensive research and consultation, both with clients and individuals in Westminster and Brussels close to the respective negotiating teams.

We had a considerable response and a significant number of enquiries from businesses wanting help in making sure that they were prepared for whatever the outcome of the Brexit discussions.

 

At that stage, of course, there was a very real concern about the prospect of Britain reaching the formal withdrawal date of the 29th of March next year without a deal in place.

So, this week’s announcements by the British Prime Minister, Theresa May, and the chief EU negotiator, Michel Barnier, that they had agreed upon a draft of the terms governing Brexit came as something of a surprise to some.

In the following 48 hours, we’ve had a chance to pore over not only the headlines but the fine print which will be of relevance to ourselves and the sort of companies with whom we work, firms which depend on speedy, simple imports and exports of goods to and from the UK.

We have also been in touch with our contacts in Brussels to ascertain some of the background to the key parts of the document and what they mean for companies who are importers or exporters.

It’s important to remember that the 585-page document is just a framework for the kind of “close future relationship” which both the UK and EU regard as  a “common objective” (Draft_Agreement_on_the_Withdrawal_of_the_United_Kingdom_of_Great_Britain_and_Northern_Ireland_from_the_European_Union.pdf).

Even so, the document does contain certain, very important points from the perspective of trade.

The first is that the rules governing cross-border shipments which are in place at the moment will remain as they are until the end of the transition period in December 2020.

Despite this week’s draft agreement, discussions will continue to determine the fine detail of the “close future relationship” with the aim of that process being completed by July 2020.

However, if no deal on all that is tied up by the time that the transition ends, something known as a ‘backstop’ will take effect on the first of January 2021.

As part of that, both the EU and UK will become part of a single customs territory.

According to Article 2 of the withdrawal agreement, “customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the parts of the single customs territory”.

Of course, the principal fears of Brexit occurring without an agreement was that the relatively seamless processes which are currently in place would be replaced by hard borders, tariffs and lengthy customs procedures.

The necessary additional negotiations to come may eventually result in an acknowledgement that some tariffs are required but that would, of course, go against what both Britain and Brussels have previously outlined.

The draft agreement does indicate that any new customs controls should be charged on a similar basis to those currently in place (“charges for the performance of customs controls..shall be considered having equivalent effect to customs duties”).

Customs may charge, though, for visits to business premises outside of office hours, for the production of expert reports, the sampling or destruction of goods and “exceptional control measures due “to the nature of the goods or to a potential risk”.

The draft framework must still clear a number of constitutional hurdles which the agreement has to clear.

Whilst the Westminster Cabinet has given its approval to the paper, it still has to be rubber-stamped by EU members, in first instance, and then by the full UK parliament, something which might happen in December.

You can rest assured that whatever happens, we will continue our efforts to keep you updated on the progress of those discussions and do our best to help your business prosper after the UK and EU go their separate ways.