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09.04.2019

UK temporary tariff and customs arrangements in case of a no-deal Brexit

Dear Members,

Following a meeting with the UK Permanent Representation on the UK’s temporary tariff and customs arrangements in case of a no-deal Brexit, we would like to share with you a summary of the main measures the UK would take in this area in case it leaves the EU without a deal:

Tariff Regime:

In case of a no deal Brexit, the UK will keep the current EU tariff schedule. Regarding applied tariffs, however, it will temporarily reduce most tariffs to zero to avoid sudden price hikes for consumers and businesses. These tariffs set out in a document published on 13 March will remain in force for a 12-month period. A review will take place after six months to help prepare a more permanent regime for the period after.

Exceptions can be grouped in four categories:

1. Sensitive agricultural products: TRQs will grant tariff-free imports for a limited amount of goods. Beyond these TRQs, tariffs matching current EU levels will apply to protect UK agricultural producers from sudden price decreases that might put them out of business. In particularly sensitive areas (e.g. lamb meat), no TRQs will apply.

2. Trade remedy measures: The UK will maintain all EU trade remedy measures with relevance to UK business. This is the case for 45 out of 110 EU measures.

3. Tariff lines important to certain developing countries (e.g. under GSP, EPAs): to prevent shocks in sensitive sectors in fragile developing countries, changes in the tariffs applying to these countries will be avoided.

4. Some classes of finished automobiles: as this is a sensitive sector, tariffs will apply in some cases; car parts from the EU and possibly other markets will continue to benefit from tariff-free access to the UK.

In case of unforeseen injury to specific sectors or subsectors of the UK economy, there will be an adjustment mechanism in place during the 12-months period.

As this high level of liberalisation may be problematic in the medium term and especially for the UK’s future trade negotiations, it can be expected that the UK’s applied tariffs move closer to the EU’S applied rate after the initial 12-months period. In low tariff areas, the UK may remain more liberal than the EU, however.

Northern Ireland:

The aim here is to avoid any new checks at the Irish border. For this purpose, checks will not apply to goods moving from the Republic of Ireland to Northern Ireland. Products rerouted through Ireland would need to be checked, however, although enforcement is difficult here, in practice. High risk food and feed from Third countries entering Northern Ireland through the Republic of Ireland that have not been cleared in the EU yet, will need to enter through the Belfast airport checkpoint to undergo the necessary checks. British officials believe that the exceptions for Northern Ireland are in line with WTO rules as they are strictly temporary and apply to an exceptional case as without them, a long-term peace project would be put at risk.

Value-Added Tax (VAT):

In case of a no-deal Brexit, the UK will leave the EU VAT regime without any transition. Businesses exporting to the UK will need to pay VAT. This includes exporters from the Republic of Ireland as Norther Irish businesses would otherwise face an undue competitive disadvantage towards their Southern neighbours – tariffs and VAT will apply on their exports to the Republic, after all. To keep the burden as low as possible and allow businesses to adapt, registered companies will temporarily be able to pay VAT online on a quarterly basis.

Temporary import-facilitating measures (Transitional Simplified Procedures – TSP):

These would be in place for at least the first six months after a no-deal Brexit. They will be reviewed on an ongoing basis and can be prolonged if necessary. The UK is willing to consider all kinds of possible facilitations and remains open to suggestions.

Agriculture Tariff-Rate Quotas (TRQs) at WTO:

The EU and the UK are still in agreement on the way to proceed with TRQ splitting (apportionment according to recent historical averages). 22 countries have sent letters of interest to the proposal of EU and UK on splitting the EU TRQs. The EU and UK want to process these objections as soon as possible. It is unlikely that negotiations can be finalised by Brexit day but they can be applied anyway.

State of play on legislative process:

1) Customs bill: has been passed into law. Secondary legislation is now awaiting entry into force. As regards concerns linked to the use of different language between the EU’s Union Customs Code and the UK Customs Bill, the UK has checked the draft language with several of its major trading partners to avoid confusion.

2) Trade bill: The draft trade bill is still subject to approval, and is currently awaiting a possible ‘customs union’ amendment. It also includes provisions on setting up a trade remedy authority (for trade defence).

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