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Op-Ed: Brexit Brings More Uncertainty Over What Will Change With Trade and Regulations and When

Although Big Ben is out of commission for the next four years during its refurbishment, the U.K. is ensuring commerce and trade will be running smoothly after its departure from the European Union.

A vote on the United Kingdom’s membership in the European Union in June 2016 resulted in a win for those in favor of leaving. The U.K. government since initiated the official EU withdrawal process in March this year, the U.K. is on-course to complete the withdrawal process by March 30, 2019.

Following months of speculation regarding the U.K.’s position on various aspects of global trade—positions that are now subject to serious scrutiny as the government negotiates the departure from the
EU—an official paper was just released to clarify the government’s plans. In the “Future customs arrangements: A Future Partnership Paper,” the U.K. set out a vision of how it wishes to construct a new, and deep partnership with the European Union.

The U.K. said it wants a new customs arrangement that facilitates “the freest and most frictionless trade possible in goods between the U.K. and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.”

Leaving the EU Customs Union: Two options

The paper proposes to leave the EU Customs Union but also to keep a ‘close association’ with the organization for a limited period of transition. The paper makes it clear that “as we leave the EU we will also leave the EU Customs Union.”

The Customs Union is a foundation of the European Union and an essential element in the functioning of the single market. The single market can only function properly when there is a common application of common rules. These rules are known as the Union Customs Code. Brexit means the U.K. has to design its own rules and its own External Tariff.

The U.K. government outlines two approaches to the future customs arrangements:

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1) Highly streamlined customs arrangement: Outside the EU Customs Union, the U.K. will set its domestic customs arrangements to facilitate the flow of trade across its borders, leaving as few additional requirements on U.K.-EU trade as possible. Under this model, the U.K. would aim to negotiate trade facilitations with the EU and implement unilateral improvements to our domestic regime to make trade with the EU easier. Ideas to simplify requirements to move goods across borders, including doing away with import and export declaration through the U.K.’s membership of the Common Transit Convention (CTC) including a waiver of entry and exit summary declarations. Mutual recognition of Authorized Economic Operators (AEOs) hopes to enable faster clearance of AEOs’ goods at the border and ease pressure on ports and entry points.

2) Innovative and untested — A new customs partnership with the EU: The real big goal, however, would be the completion of the second option, “a new customs partnership with the EU” aligning the U.K.’s approach to the customs border in a way that removes the need for a U.K.-EU customs border. Under this proposal, the U.K. would be mirroring the EU’s customs approach at its external EU-U.K. border, to ensure that all goods entering the EU via the U.K. have paid the correct EU duties. The U.K. government believes that this would remove the need for the U.K. and the EU to introduce customs processes between the two parties so that goods moving between the U.K. and the EU would be treated as they are now for customs purposes. At the same time, however, the U.K. could apply its own tariffs and trade policy to U.K. exports and imports from other countries destined for the U.K. market, “in line with our aspiration for an independent trade policy.” The paper mentions a robust enforcement mechanism to ensure goods which had not complied with the EU’s trade policy stayed in the U.K.

In both of these options, the U.K. would be out of the Customs Union and able to negotiate its own trade deals around the world.

Next steps

The recent proposals will be discussed with stakeholders over the summer. The U.K. plans to publish a Customs White Paper in advance of the Customs Bill in the fall. Across the water in Brussels, the European Council will meet in October to rule on whether talks on the withdrawal agreement have made sufficient progress on the main key topics of citizen’s rights and the financial settlement to proceed to the next phase—the transition and the future relationship.

Without this agreement, negotiations on the future border arrangements are unlikely to kick-off in Brussels no matter how many papers are being produced.

For companies trying to stay ahead of the impact of regulatory change, not having to make immediate changes is no consolation at all. Now there is more uncertainty over what may change and when. More rules—and more disparate rules—will inevitably mean more to manage. This includes more changes to implement and monitor for a new, larger set of rules.

Any and all of the changes to trade policy and regulations post-Brexit will impact companies trading with the U.K. Companies should consider what their next steps will be in better managing the compliance and qualification processes in the coming months. They might consider leveraging technology found in global trade management software solutions to support the process. With the right platform that includes the new trade policies as they are implemented, companies can be better prepared to manage the opportunities and uncertainties that Brexit will bring.

By Arne Mielken, senior trade specialist European Union, Amber Road