On March 29th, UK Prime Minister Theresa May sent a letter to European Council President Donald Tusk invoking Article 50 and providing formal notification that the UK will leave the European Union. The formal countdown clock is underway, and the UK and EU have two years to finalize the terms of the UK’s departure.
In reading the letter, there are a few statements that provide guidance on the potential future for customs legislation, as well as the trading relationship between the UK and EU.
Notably, Theresa May states, “…the Government will bring forward legislation that will repeal the Act of Parliament – the European Communities Act 1972 – that gives effect to EU law in our country. This legislation will wherever practical and appropriate, in effect convert the body of existing European Union law (the "acquis") into UK law. This means there will be a certainty for UK citizens and for anybody from the European Union who does business in the United Kingdom.” This provides clarity to the fact that the Union Customs Code will govern trade in the UK upon the separation.
On the concept of free trade, the letter states, “…we propose a bold and ambitious Free Trade Agreement between the United Kingdom and the European Union. This should be of greater scope and ambition than any such agreement before it so that it covers sectors crucial to our linked economies such as financial services and network industries. This will require detailed technical talks, but as the UK is an existing EU member state, both sides have regulatory frameworks and standards that already match. We should, therefore, prioritise how we manage the evolution of our regulatory frameworks to maintain a fair and open trading environment, and how we resolve disputes.” This will serve to provide certainty to businesses to fear external tariff barriers on goods traded between the UK and EU, although there is an acknowledgment that this agreement may take longer than two years to negotiate.
The European Council now has 30 days to formally acknowledge the letter and for negotiations to continue. We will continue to keep the trade updated as this process unfolds and policy decisions are made that impact trade regulations and practices.