The UK-EU trade deal: What you need to know

On Christmas Eve, the United Kingdom and European Union finally agreed a trade deal – the Trade and Cooperation Agreement (TCA) – which will define the post-Brexit trading relationship between the European Union and United Kingdom from 1 January 2021. We have set out key elements of the framework that businesses trading between the European Union and United Kingdom need to be aware of.

The TCA will be directly relevant to all businesses that export and import goods across the UK-EU border. Although EU and UK businesses will notice more burdens and restrictions than they have been accustomed to, the TCA goes some way to preserving the flow of trade in goods; perhaps most significantly, trade between the United Kingdom and European Union will be duty free and quota free provided the goods originate in the United Kingdom or European Union.

The key elements of the agreement are:

  1. Tariffs 

  • Goods "originating" in the EU-UK free trade area will not be subject to import tariffs or other customs duties or quotas.

  • Goods that fail to satisfy the relevant preferential origin rules will be subject to normal World Trade Organization (WTO) import tariffs (i.e., the EU Common Customs Tariff or the Global UK Tariff).

  • Movements of goods (of whatever origin) solely for the purpose of repair will not be subject to customs duties.

  1. Rules of origin

  • To benefit from the no-tariffs provision, a product must originate in the United Kingdom or European Union. This means that EU materials used in UK production, and UK materials used in EU production, will help satisfy the preferential origin rules under the TCA.

  • The TCA provides for a number of ways in which a product's origins can be determined, revolving around where a certain proportion of a product's components are made and where it is assembled. Goods wholly obtained in the European Union and/or United Kingdom will benefit from tariff-free trade. Goods produced using components originating from outside the EU and/or UK will need to meet product-specific origin requirements, which are allocated by tariff custom code in the TCA.

  • Certain products, such as electric cars, will benefit from a phase-in period for rules of origin requirements to apply.

  • Proof of origin can be provided through self-declarations of origin, so there is no need to obtain origin certificates from customs authorities.

  1. Customs formalities

  • Although import tariffs will not apply in most cases, customs formalities will apply and declarations will be required for imports and exports.

  • The TCA provides for mutual recognition of Authorised Economic Operator (AEO) status, which means certain simplified procedures will be available for AEOs.

  • Businesses may use a third party, such as freight forwarders or customs agents, to act as their representatives. 

  • The TCA includes a protocol for UK-EU cooperation in relation to combatting value added tax, customs, and excise fraud.

  1. Product standards regulation

  • There is no cross-recognition of conformity standards. This means that, with a few exceptions, products will have to undergo two separate conformity assessment processes so that they can be placed on both the EU and UK markets.

  • However, the TCA will allow self-declaration of conformity with EU product rules for low-risk products.

  1. Trade in services

  • The TCA largely reproduces WTO rules, and the provisions in relation to services are similar to those seen in other recent EU free trade agreements, and falls short of the freedoms of movement and establishment and provision of services that UK businesses previously enjoyed within the European Union.

  • The TCA sets out rules to facilitate cross-border provision of services in certain fields, such as digital services and public procurement. UK service providers operating in the European Union will need to verify if their service is subject to one of the exceptions.

  1. Digital trade

  • The TCA includes provisions to facilitate cross-border digital trade, for example it includes a ban on data localization. The United Kingdom and the European Union agree not to discriminate against electronic signatures or electronic documents on the basis that they are in digital form. The United Kingdom and the European Union will cooperate on digital trade issues in future, including emerging technologies.

  • The United Kingdom recognizes EU data protection standards as equivalent for data transfers from the United Kingdom to the European Union but the European Union has not yet issued an adequacy decision in respect of data transfers from the European Union to the United Kingdom. In order to provide time to reach an adequacy decision, the United Kingdom and European Union have separately agreed a further bridge period of up to six months to allow for the completion of a UK adequacy decision.

  1. Movement of people

  • Visa-free entry from the United Kingdom to European Union (and vice versa) for tourism and certain work purposes is to be allowed for up to 90 days in a 180-day period, although there are restrictions on the scope of this (e.g., those planning any work other than routine business meetings and conferences need an appropriate visa).

  • UK and EU citizens who established EU free movement rights before 31 December 2020 retain them under the UK-EU Withdrawal Agreement concluded in November 2019, if they have registered their settled status under the schemes set up by the United Kingdom or European Union by 30 June 2021.

  1. Mutual recognition of qualifications

  • There is no mutual recognition of professional qualifications.

  • The TCA provides for the possibility of such recognition in the future on a profession-by-profession basis through the Partnership Council, but there is no guarantee of any such agreements. Professionals will therefore need to meet separately the requirements of each EU Member State in which they wish to provide services.

  1. Northern Ireland

  • While the TCA is an agreement between the United Kingdom and European Union, the TCA provisions on trade in goods do not cover trade between the European Union and Northern Ireland, which is governed by the Northern Ireland Protocol to the Withdrawal Agreement.

  • The protocol on Northern Ireland effectively creates a customs and regulatory border between Great Britain and Northern Ireland.

  • The TCA will not govern trade in goods between the European Union and Northern Ireland and goods entering Northern Ireland from Great Britain will count as imports.

 

Authored by Aline Doussin, Imogen Brooks, and Iris Karaman.

Contacts
Aline Doussin
Partner
London
Lourdes Catrain
Partner
Brussels
Imogen Brooks
Associate
London
Iris C. Z. Karaman
Associate
London
Stephanie Seeuws
Associate
Brussels
Eleni Theodoropoulou
Associate
Brussels

 

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