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End of UK/EU transition period trade issues - be prepared

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The UK government has ruled out an extension to the current time limited “transition period” with the EU that is due to run until 31 December 2020.

We will therefore be leaving the EU’s Single Market and Customs Union at that point. This means there will be changes to the way in which we trade with the EU and how the EU trades with us.

The extent of the change is subject to ongoing negotiations, but it is inevitable some things will be different and businesses should prepare.

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Specific sector concerns:


Context

  • The UK government has ruled out an extension to the current time limited “transition period” with the EU that is due to run until 31 December 2020. We will therefore be leaving the EU’s Single Market and Customs Union at that point. This means there will be changes to the way in which we trade with the EU and how the EU trades with us. The extent of the change is subject to ongoing negotiations, but it is inevitable some things will be different and businesses should prepare.
  • The government is aiming for an agreement that would mean no tariffs or quotas on products traded between the UK and EU (as well as between the EU and the UK). This is welcome, but such a deal has not yet been struck. Leaving the transition period without a future Free Trade Agreement in place would mean that our terms of trade with the EU would default to the hugely unsatisfactory “WTO” basis, which would mean the application of tariffs on UK exports to the EU and (subject to further UK government confirmation - see UKGT below) UK tariffs charged on EU imports to the UK.
  • Even if a comprehensive trade agreement is signed between the EU and the UK before 1 January 2021 which eliminates tariffs on our trade, it is inevitable that there will be increased friction in the form of new bureaucracy and costs as a consequence of leaving the EU Single Market and the Customs Union. The aim of negotiators is to simplify and streamline administrative burdens as much as possible, but it is unrealistic to expect that the UK will continue to have the same degree of unfettered access to the EU Single Market as it did when it was a member state. The government is preparing for the default position, which is that UK exports will face full third country checks by the EU from 1 January 2021.

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General Issues

  • Applied tariffs – UKGT. The government has now published its tariff schedule applicable from 1 January 2021. The NFU believes that if a negotiated agreement between the EU and UK is not agreed by the end of the year, the UK should implement the published UKGT as of 1st January 2021. The NFU disagreed profoundly with the approach of the Temporary Tariff Regime (TTR) proposed last year that would have created an uneven playing field with regard to the tariffs to be applied on trade between the UK and the EU.
  • Trade Continuity – roll over of existing agreements – The UK has secured agreements from 22 international partners to roll on existing market access conditions arising as a result of EU membership, in the event of a no deal. These 22 agreements represent around 50% of the value of UK Food, Feed and Drink export trade which currently occurs through the existing EU FTAs. Leaving £1.4 billion worth of UK agri-food business facing less favourable conditions across the markets we currently access by virtue of EU trade agreements.
     
  • Northern Ireland Protocol - The UK Government has published a “command paper” setting out its approach to implementing the Northern Ireland Protocol. There will be unfettered access and no additional paperwork for “qualifying” trade going from Northern Ireland to the rest of the UK. Implementing legislation will come by the end of the year.

    The UK government has produced legislation defining what is “qualifying Northern Ireland good”. A qualifying Northern Ireland good is defined as any good that falls within one of two categories: (1) the goods are lawfully present in Northern Ireland and are not subject to customs control (other than customs procedures arising on export), or (2) the goods are Northern Ireland processed products. The second category of goods seeks to ensure that goods that have undergone processing in Northern Ireland can qualify for the definition even where they have been moved under customs control.

    The government recognises that this is an initial broad definition. But argues that it best ensures continuity and avoids any disruption from the end of the transition period, in line with the broader approach being taken for goods arriving into Great Britain from the EU for the first half of next year. This is part of a phased approach and will be followed by further proposals from the UK government, developed with Northern Ireland business, for qualifying status for the longer-term.
  • Trade in the other direction (GB to NI) will be subject to full EU checks and customs controls. New infrastructure will be needed for the purpose of agri-food checks and assurance. For instance, the government expects at a minimum to request additional categories of commodities at Belfast Port, and to designate Larne Port for live animal imports. Further designations may also be required at other existing sites. No indication regarding the process and frequency of checks has been given yet, this will have to be discussed and agreed with the EU in the Withdrawal Agreement Joint Committee.
  • The government has introduced a new Trader Support Service, which will provide an end-to- end service guiding traders through the customs import processes for GB to Northern Ireland. The Trader Support Service is backed by £200m in government funding. Defra is developing a similar Support Service to cover agri-food controls between GB and NI. The NFU supports this and has called on the government to move forward with the service as quickly as possible .
  • The government is also developing a “Retailer Movement Scheme” (RMS) which is seeks to negotiate with the EU through the Joint Committee. If agreed, NI retailers (supermarkets) would be able to avoid border checks on good moving from GB to NI. The full details of the RAMS is under development and is subject to negotiations. The NFU is calling for a similar assurance scheme to be developed for agri-food traders beyond the current scope of supermarkets.
  • Rules of Origin- While it is generally expected that the UK and EU will ultimately trade with each other on a largely or completely tariff free basis via a preferential “free” trade agreement, accessing preferential terms of such an agreement will require that

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