The first paper explores the measures that the UK will need to introduce to regulate customs, VAT and excise duties under various Brexit scenarios while the second one discusses the UK's future trade policy more generally. In a nutshell:
- The Customs Bill paper foresees three main options for the future UK/EU customs relationship.
First, a highly streamlined customs arrangement where customs formalities would be reintroduced to UK/EU trade but kept to a minimum so as to minimise resulting disruptions for traders. This option would require that the UK/EU reach an agreement on a number of considerations (not all envisaged in the paper), including a special status for goods crossing the border between Northern Ireland and Ireland.
Second, a new customs partnership where UK/EU trade would not be subject to customs formalities but the UK would retain the possibility of concluding free trade agreements with third countries. Although this option would allow the UK to reach its objective of "frictionless trade" at the Northern Ireland-Ireland border, there are legitimate concerns about whether it could (and if so how) be implemented in practice.
Third, a contingency scenario in the event that the UK would leave the EU without a negotiated outcome on customs arrangements. In this case, the UK would implement unilateral measures to mitigate the negative impact for traders predominantly trading with the EU but would necessarily need to reach an agreement with the EU as regards, among other things, customs formalities at the Northern Ireland-Ireland border.
- The paper on the UK's future trade policy sets out concrete proposals concerning various key aspects of the UK's post-Brexit trade policy.
First, it provides that the UK intends to replicate its existing WTO commitments as set out in the EU's schedules of commitments but overlooks the fact that a number of WTO Members may well request that this be preceded by lengthy negotiations. Further, it appears to acknowledge that the European Commission will continue to act on the UK's behalf until it leaves the EU but does not address potential detrimental consequences for the UK's post-Brexit WTO litigation strategy.
Second, it indicates that the UK will "roll-over" existing EU free trade agreements but fails to address how exactly the UK will go about doing so and the potential complications of that process. Further, it notes that the UK legislation will provide concurrent powers for central government and devolved administrations to negotiate/implement certain free trade agreements, which may conflict with the stated objective that the legislative framework should allow swift negotiation, conclusion and implementation of the said agreements.
Third, it notes that the UK will likely base its trade preferences regime on – at least part of – the EU General Scheme of Preferences.
Fourth, it provides that the UK trade defence regime will likely mirror – to a large extent – the EU rules (even those whose WTO-consistency remain to be tested). It also provides that the UK will be able to continue existing EU trade defence measures by simply conducting reviews thereof, which seems highly questionable under WTO law.
Both papers address different potential options and invite comments from interested parties (by 3 November for issues raised in the Customs Bill and 6 November for those raised in the paper on the UK's future trade policy). Businesses should therefore carefully review the proposals set out in the papers in light of their own particular situation and consider how they may best defend their interests in this process.
To continue reading our full briefing click here.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2019