On 2 October 2019 Boris Johnson set out his vision for a Brexit deal with the EU. The plan does not touch on the vast majority of the Withdrawal Agreement that was negotiated under Theresa May’s leadership but seeks to address only the most controversial aspect of it – the “backstop”. It deals primarily with trade between Northern Ireland and the Republic of Ireland if a formal trade deal is not reached by the end of the transition period (31 December 2020). So what would the new proposals mean for UK businesses if they are agreed?
The first point to make is that, other than in relation to the backstop, the position set out in the Withdrawal Agreement would not change – for more details please read our earlier article on the original form of the Withdrawal Agreement.
The proposal set out in Boris’s letter of 2 October 2019 does not explicitly address the question of tariffs between the UK and the EU following the transition period (during which tariffs would not apply between the UK and EU). No tariffs would be levied either by the UK or EU during the transition period. Under the backstop in the Withdrawal Agreement, following the transition period the UK was to remain aligned with the EU’s common external tariff and there would not have been any tariffs between the UK and the EU (in the absence of a trade deal). However, under the new proposal it is implicit that the UK would have control of its own customs and excise. One possible interpretation of this (although the position has not been made clear) is that the UK’s customs would not be aligned with the EU. If this is the case then it is likely that the UK would be outside of the common external tariff, which would apply to goods being exported from the UK to the EU from the end of the transition period.
The new proposal envisages that Northern Ireland would remain aligned with EU standards in relation to goods and create a “zone of regulatory compliance” on the island of Ireland. This means that businesses manufacturing goods within Northern Ireland or for sale within Northern Ireland (even if produced within the rest of the UK) would need to be manufactured in accordance with EU standards. Goods would be able to move within the regulatory zone without regulatory checks, but goods coming from the rest of the UK into Northern Ireland would need to be subject to regulatory checks. It is envisaged that there would need to be regulatory checks at the point of entry into the regulatory zone. Additionally, any movement of goods from the rest of the UK into Northern Ireland would require notification to the authorities before entry into Northern Ireland.
Any businesses that move goods between the rest of the UK and Northern Ireland would need to ensure that they have appropriate systems in place before the end of the transitional period to ensure that notifications will be made and that regulatory checks are taken into account within their logistics arrangements.
Under the new proposal Northern Ireland would leave the EU’s customs union and would stay within the UK’s customs territory. This means that there will be a customs border at the border between Northern Ireland and Ireland. The proposal envisages that customs checks can take place away from the border, so no physical infrastructure will be needed at the border. There would be a notification system under which movements of goods will be declared and physical checks would take place at traders’ premises or at checkpoints situated away from the border. There may be a simpler system in place for small traders and it is proposed that a trusted trader scheme to facilitate easier movement of goods will be implemented.
If the proposal is accepted then affected businesses should monitor the potential trusted trader scheme and small trader scheme so that they can apply in good time before the proposals come into effect. As more details of the notification and checks systems come into effect it will be important to ensure that the correct infrastructure and resources are in place to enable businesses to continue to carry on cross border trade.
One important aspect of the new proposal is that it would be subject to the ongoing consent of the Northern Ireland Assembly and Executive, which would need to be given before the end of the transition period and then again every four years. If it is not given then the arrangements would lapse and it is likely that a hard border would come into place between Northern Ireland and the Republic of Ireland – there would be no regulatory alignment or special customs measures. Businesses would therefore need to be prepared at each point where the consent is required to be given for the possibility of a hard border and customs and regulatory checks coming into effect.
There is no guarantee that the new proposal will be acceptable to the EU or will be approved by the UK parliament and, if it is, it may be in a different form following a period of negotiation. There are several barriers to it being put into place, including the short timeframes and the resistance from the EU. If it is not implemented then it is possible that the Brexit date may be postponed or that the UK may leave the EU without a deal on 31 October 2019. If it is put in place then it will be important for businesses to maintain awareness of the measures that are implemented so that they are best prepared for the new realities of trade within the UK and with the Republic of Ireland and the rest of the EU.
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