One of the key areas for businesses in the debate on deal or no deal was what, if any, barriers (friction if you will) would be imposed on trading in goods with Member States following Brexit. The TCA secured a deal and it addressed many of the areas of concern.
Tariffs and Quotas
This was the area of most concern for many businesses (particularly those with UK-EU supply chains such as automotive) and the good news is that the TCA provides there will be no tariffs or quotas on the cross-border trade in all goods between the UK and EU.
In taking advantage of the tariff free regime businesses will still need to fall within the relevant rules of origin provisions detailed below.
Rules of Origin
It is essential that businesses remain aware that only goods which are of EU or UK origin will benefit from zero tariffs under the TCA.
Goods will attract a tariff if a certain percentage (over a “tolerance level”) of its pre-finished value or components are either not of British or EU origin. The tolerance levels depend on the product type and businesses should familiarise themselves with these tolerance levels as set out in an Annex to the TCA (ANNEX ORIG-2: PRODUCT SPECIFIC RULES OF ORIGIN).
Importantly, the UK and EU have agreed full bilateral cumulation (cumulation of both materials and processing). Critically this means that a product can be made equally from:
- UK or EU-origin material; or
- industrial processes in the UK and EU,
and if so the product will still be considered of UK origin when imported into the EU, and vice versa.
Self-Certification of Origin
In exporting products businesses are subject to new rules on their ability to self-certify origin. To enable self-certification:
- Exporters will need to make a “statement of origin” which declares the origin of the goods. The statement:
- should be contained in the invoice or some other document that describes the product in detail;
- can be valid for up to 24 months from the date it was made; and
- can apply to a single shipment of one or more products or multiple shipments of identical within the period specified in the statement of origin, which should not exceed 12 months.
- A claim of preferential tariff treatment will then be based on the importer’s knowledge and their verification that the goods in question originate in the UK or EU. The importer is responsible for the correctness of the claim.
- Exporters and importers must retain copies of the statement of origin and any other documents that demonstrate that the product satisfy the requirements for obtaining their originating status for a minimum of four years and three years, respectively.
It should be noted that under the TCA the UK and EU are required to cooperate to ensure that businesses comply with the rules of origin, and UK and EU customs authorities will have the power to verify traders’ originating statements.
Technical Barriers to Trade (TBTs)
One of the aims of the TCA is to commit the UK and EU to promote trade whilst recognising that each may regulate goods in the most appropriate way in their own markets. It tries to avoid TBTs in a number of ways.
Some examples of where the UK and EU have already agreed to promote trade are:
- in sharing information on dangerous and non-compliant products;
- considering non-regulatory alternatives to any proposed technical regulations; and
- aligning with international standards as much as possible if new technical regulations are proposed;
Specific categories of products are catered or in specific annexes to further promote trade:
- Wine: There is to be simplified certification, documentation, labelling and packaging requirements for the import.
- Motor vehicles, equipment and parts: The UK and EU will mutually recognise approvals and exchange information, for example for market surveillance.
- Chemicals: There are joint commitments to the comprehensive implementation of international classification and labelling rules.
- Medicinal products: There is mutual recognition of Good Manufacturing Practice (GMP) inspections and certificates. This is welcome as it means that manufacturing facilities do not need to undergo separate UK and EU inspections.
- Organic products: There is an equivalence agreement between the UK and EU which means that products that are certified as organic in one market will be recognised as organic in the other.
Product Standards
One of the biggest TBTs is of course in the area of product standards as upon leaving the EU the UK and EU will operate under separate regimes for both legal and regulatory purposes. Therefore goods exported from the UK to EU (and vice-versa) will need to comply with the regulations of the importing jurisdiction.
The TCA attempts to address this and the UK and EU have agreed a definition of international standards that identifies relevant international standard setting bodies. By doing so it is hoped that because both sides’ standards and technical regulations will have the same international reference point the burden of manufacturing to two different standards will be reduced.
For example:
- Food Safety: UK agri-food exporters will have to meet all EU Sanitary and Phytosanitary (SPS) import requirements and be subject to official controls carried out by Member States’ authorities at border control posts. Similarly, EU agri-food exporters will have to meet all UK SPS import requirements.
- Conformity: The UK and EU have agreed to maintain simplified access to each other’s markets through the continued use of self-certification of conformity by the manufacturer where this is currently applied in both the EU and the UK.
Customs
Each of the UK and EU will recognise each other’s customs authorities as an “Authorised Economic Operator” (AEO) which will facilitate the fast-tracking of more goods through respective customs.
For help on legal issues, please speak to our Commercial Team on 0808 166 8827 or email b.chohan@sydneymitchell.co.uk
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