Brexit: The deal and what exporters should be aware of

The Trade and Cooperation Agreement

On 24 December 2020, one week before the expiry of the transition period provided for in the Withdrawal Agreement, the UK and the EU agreed on a trade and cooperation agreement to govern their future relationship (hereinafter the "Agreement"). The Agreement came into force on 1 January 2021.

The Agreement has since been ratified by the UK, but still needs to be approved and ratified by the EU Parliament. The Agreement has therefore, provisionally, been approved by the EU Council until 28 February 2021 but an extension is expected should parliamentary approval not be in place before.

The Agreement regulates in different degrees topics such as: 

• Trade in goods (including zero tariffs or quotas),
• Trade in services (including equal treatment of service suppliers and of EU investors investing in the UK and vice versa),
• Energy and climate cooperation,
• Mobility regulation for citizens and professionals,
• Aviation,
• Road transport,
• Fisheries (including a transition period of 5.5 years, within which approximately 25% of the EU fishing quotas in UK waters will gradually be transferred to the UK),
• Security and thematic cooperation covering (among other aspects) cooperation between police and judicial authorities, and
• Union programmes according to which the UK will no longer be eligible for EU funding but may continue to participate in certain programmes open to third-country participation.

As seen above, the Agreement covers many aspects other than trade alone, and much of it is, as expected, based on the parties' statements during the negotiations.

Topics of highest relevance to exporters to the UK

Below, we briefly describe the topics we deem to be of highest relevance to EU-based exporters to the UK at this point in time.

Certificate of origin requirements

After 1 January 2021, UK authorities may require documentation for the origin of goods, proving that the goods have been produced or finished in an EU country. Such documentation will typically be in the form of a certificate of origin.

The rules of origin seek to determine the 'economic nationality' of products. The rules of origin entail that goods traded must be of either UK or EU origin, which (slightly simplified) means:

1. That a good is 'wholly obtained', whereby it has been exclusively obtained or produced in the UK or the EU or from UK or EU materials that are further processed within the UK or the EU, or
2. That a good has been 'substantially transformed' into a new product within the UK or the EU (the specific requirements, however, depend on the product in question).

If the origin of a good can not be documented, the good does not qualify for the 0% tariff levels set out in the Agreement and is instead subject to WTO tariff rates.

Customs checks, controls, and other formalities

Full controls on goods being imported into the UK from the EU began on 1 January 2021. Due to the Covid crisis, however, the UK has opted to delay full customs checks and controls on goods from the EU for six months. The checks and controls will instead be implemented gradually during 2021, starting with checks on controlled substances such as alcohol and tobacco. 

Even though the implementation of checks from 1 January 2021 to date seems to have gone relatively smoothly, the UK's custom authorities still have a long way to go before full checks are implemented. There is therefore still a risk of delays during 2021, which exporters to the UK should be aware of.

EORI number

Although not directly covered in the Agreement, a prerequisite for companies to be able to export to the UK is to obtain an Economic Operators Registration and Identification number (an EORI number). 

Danish companies can apply to the Danish Tax Authority for an EORI number.

Markings, Labelling, Certificates and Authorisations

Going forward, exporters must keep a vigilant eye on changes to UK laws and regulations regarding product certification standards and packaging requirements. As of 1 January 2021, these standards and requirements are likely still largely identical to those of the EU. However, they will gradually change as the UK implements its own legislation or does not implement legislation resembling EU legislation.

We already know that the UK has implemented the UKCA (UK Conformity Assessed) marking, which replaced the EU's CE marking and took effect as of 1 January 2021. There will be a 1-year transition period, expiring on 1 January 2022, during which the CE marking (in most cases) will continue to be accepted. Exporters should therefore also stay up to date with any altered or additional requirements resulting from the UKCA marking.

Finally, exporters should be aware whether the marketing and service authorisations necessary to market and sell certain products and services within the EU will still be valid when exporting to the UK. Especially with regard to services, it is the intent that they may continue to be exported frictionlessly to the UK, or at least not on terms which are more burdensome than those applicable within the EU. Exporters should, however, be aware that over 216 professional qualifications are no longer automatically recognized within the UK. Service exporters should therefore check whether their services require them to apply and register with UK authorities.

In the next article we will focus on services which are offered to the UK, either pure services or services ancillary to performing a contract or similar. 

If you have questions regarding the above or any other risks your company may be exposed to, we are happy to elaborate further.