As announced on the 24th December 2020, the UK and EU have signed a Free Trade Agreement, defining their future relationship now that the transition period has ended and the UK has left the EU and, consequently, the Single Market and Customs Union. While the agreement affirms an ongoing commitment to tariff-free trade, there are still a number of new trade barriers and regulatory considerations that were not applicable under pre-existing arrangements when the UK was a member of the European Union. Given this, UK businesses that trade with EU Member States, and vice versa, should familiarise themselves with the agreement and the impact this will have on ongoing trade.
Despite the Free Trade Deal being stated as ‘Tariff Free’ this is heavily caveated and both importers and exporters should be aware of the rules around the origin of goods, the extent to which they are ‘processed’ prior to import/export and the implications this has in relation to the application of customs duties. Furthermore, in the event customs duties arise, businesses will need to consider any potential measures they can take to limit the financial impact on the business.
It is crucial that businesses consider these new rules of origin as set out in the trade deal which, when satisfied, would eliminate the application of customs duties in relation to these goods. The key points to consider in relations to the rules of origin are as follows;
- There will be no customs duty on goods imported into the UK that originate in the EU and, likewise, there will be no customs duty on goods imported into the EU that originate in the UK. When determining whether goods originate in the UK/EU, business must consider if the relevant goods have been ‘wholly obtained’ or sufficiently processed and as such, whether they qualify for preferential treatment;
- Crucially, there are provisions for full bilateral cumulation of origin allowing EU materials, as well as processing carried out in the EU, to be considered as originating/carried out in the UK when applicable to UK products, thus increasing the likelihood goods will meet the thresholds outlined in the rules of origin, meeting the criteria for preference;
- Finished items imported into the UK from the EU before being re-exported to EU customers are not subject to the Free Trade Agreement and double duties may apply.
These key points are a brief and simplified summation of the complex rules applicable under the Free Trade Agreement and businesses will be presented with a host of new challenges, both in classifying goods in relation to the newly applicable rules of origin and the additional requirements with respect to documentation. If you or your client make supplies of goods that fall under the scope of the Free Trade Agreement and subsequently the new regulatory requirements, please call our free helpline at the earliest opportunity to clarify your new responsibilities, ensuring a smooth transition and minimum disruption to business operations.
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