The Extension Deadline has passed. What's Next?
The July 1st deadline for extending the transition period has officially ended. From this date, nothing blocks the United Kingdom from leaving the European Union on December 31st of this year. Whatever the outcome of the negotiations: the UK will leave the EU. The big question that remains is: how will they leave?
A Deal or Not a Deal, That is the Question
The negotiations on a trade deal between the United Kingdom and the European Union are still in full effect. It has been four years since the United Kingdom decided to leave the European Union, but a trade deal is still not in sight.
The biggest issues on the table are still: Fishing rights, dispute resolution and provisions for a level playing field when it comes to social and environmental standards.
Negotiations will intensify in the months to come, and speed is becoming of the essence.
Time is Running Out
While the date of the United Kingdom leaving the European Union is December 31st, the date that both parties should have agreed on a trade deal comes much sooner. That deadline, which has not been agreed as such, lies around mid-October.
The remaining two and a half months are needed for both sides to get the trade deal ratified. This means that all 27 EU member countries need to approve the deal that the EU and UK negotiators will agree on. In most cases, this can be done by member state governments, but on some issues, countries may need approval from their parliament, and that will take time as well.
If There is No Deal
If no deal is reached before December 31st the United Kingdom will leave the European Union on World Trade Organization tariffs. This means that there will be a lot of tariffs and trade barriers between the UK and EU.
The BBC recently explained the implications of the WTO terms:
The WTO is the place where countries negotiate the rules of international trade - there are 164 members and, if they don't have free trade agreements with each other, they trade under "WTO rules".
Every WTO member has a list of tariffs (taxes on imports of goods) and quotas (limits on the number of goods) that they apply to other countries with which they don't have a deal. These are known as their WTO schedules.
The average EU tariff is pretty low (about 2.8% for non-agricultural products) - but, in some sectors, tariffs can be quite high. Under WTO rules, cars would be taxed at 10% when they crossed the UK-EU border after the end of the transition period. And agricultural tariffs would be even higher, rising to an average of more than 35% for dairy products.
What the United Kingdom is Planning
The BBC continues with an explanation of what tariffs the United Kingdom is installing for countries it has no trade agreement with:
The UK has released details of the tariffs it will charge from January 2021 to countries with which it does not have a free trade deal (which could of course include the EU).
But the government is removing all tariffs below 2.5%, which it refers to as "nuisance tariffs". It is also cutting back on the number of different tariffs applied. So, some of the tariffs the UK has been charging as part of the EU will disappear - in areas, for example, where there isn't that much domestic UK production that needs protecting.
It means that 47% of all products will have zero tariffs, compared with 27% when in the EU. Among the biggest tariff cuts will be types of preserved mushrooms, which will have their tariffs cut from 18.4% to zero and yeast, which will have its tariff cut from up to 14.7% to zero.
Read the full article by the BBC here.
Crossing the Border? Check!
The biggest issue with the European Union and the United Kingdom not reaching an agreement will be the large number of customs checks at the border. This will be very time consuming and costly for businesses.
The United Kingdom has indicated that it intends to implement checks at the border over the course of the next five years, to give companies the time to get used to it. There will be checks at the border, even with a trade deal, but without a deal, there will be much more checks in place.
It is of the utmost importance not to wait until the last moment to prepare yourself for what is coming. Follow this checklist:
Registration: Register your business with your national customs authority, to trade with non-EU countries. Get an EORI number.
Training: Make sure your staff is aware of the upcoming situation and is well prepared
IT Systems: Make sure your IT systems are up to date
Authorisations: Check if you have authorizations in place for special procedures, like storage or processing products under “specific use” rules
AEO: Getting AEO certified makes trading with third countries easier
Talk to an expert: make sure you are in the know on all aspects of Brexit and how it may impact your business
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