March and April were stressful for EU-based Trade Compliance professionals. The threat of a looming no-deal Brexit caused many of us to spend countless hours watching the news, waiting for concrete feedback on the future state of the UK-EU trading relationship.
Unfortunately, there is still no clarity on the UK-EU relationship post-Brexit, though we do have more time to prepare as the UK’s departure from the EU has been delayed until October 31st, 2019.
The delay to Brexit has alleviated some immediate concerns regarding UK business and their ability to leverage EU Free Trade Agreements (FTAs). As a member of the EU, the UK has contributed to the EU’s FTA negotiations since joining the European Community in 1973. Outside of the EU, the UK will now not only have to negotiate its own new FTA’s independently but will also have to reach agreements with existing trade partners to maintain benefits from existing EU FTAs.
Over the last two years, the UK’s Department for International Trade has been negotiating with non-EU countries that have an FTA with the EU on a number of continuity agreements to prepare for the UK leaving the EU with or without a withdrawal agreement. These continuity agreements seek to preserve the UK’s benefits in duty reductions on imported and exported qualifying goods to and from these countries. The agreements are designed to generally replicate the EU trade agreements they replace but may differ slightly.
Companies utilizing these continuity agreements will need to consider accumulation and its impact on whether or not goods qualify under the continuity agreement. For example, products manufactured in the UK and exported to Chile may no longer qualify for duty-free treatment as they do under the EU-Chile free trade agreement, as rules of origin are met using components sourced within the EU 27.
The UK has currently signed the following continuity agreements to ensure minimal disruption to trading when the UK leaves the EU.
- UK – CARIFORUM trade bloc
- UK – Chile
- UK – Eastern and Southern Africa
- UK – Faroe Islands
- UK – Iceland and Norway
- UK – Israel
- UK – Palestinian Authority
- UK – Switzerland
Other notable trade agreements such as Japan, Korea, Mexico, Canada, and Turkey will not be automatically extended, and a continuity agreement is not yet in place.
Unsure of how Brexit will impact your use of FTA’s and overall duty liability? Contact Tradewin. We’re here to help.