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BREXIT: what it means for SMEs

The United Kingdom left the European Union on 1st February 2020. Between February and December 2020 the UK was in a transition period under the terms of the Withdrawal Agreement. This transition period ended on 1st January 2021 and the future relationship between the United Kingdom and the European Union will be conducted under the terms of a new deal –The Trade and Cooperation Agreement. This is your overview of what is in the deal.

Trade in Goods

Summary
  • Zero-for-zero tariff argument. This means if you buy or sell goods to the EU, there won’t be a new, additional charge added in January.
  • A number of situations in the agreement to turn off zero tariffs and a few clues which will see them progressively introduced. 
  • The UK and EU will become two separate regulatory and legal areas. This means that all there will be different regulations and rules on products.
  • Be prepared for paperwork when exporting to the EU which may ask for details of the origins on all of the components used in a product.
  • All goods imported into the EU from the UK will be subject to regulatory checks. 
  • Prepare for delays on goods being shipped when the system is first introduced.
  • If you already export to the EU, you may be eligible for “trusted trader” status. 
  • Product standards and technical regulations based on the same international references. This includes the continued use of self-certification of conformity by the manufacturer where it is currently applied in both the EU and the UK.
  • IMPORTANT * New ‘Rules of Origin’ for exporters on the components and/or materials in products – could be an extra charge if a component is made outside the UK or EU – see below.

The Trade and Cooperation Agreement sets out that the UK and the EU will be in a free trade agreement with a zero-for-zero tariff argument. This means if you buy or sell goods into the EU, there won’t be a new, additional charge added in January.

However, be warned, this agreement is not a straightforward wholesale end of tariffs. It is important to know there are a number of situations in the agreement to turn off zero tariffs and a few clues which will see them progressively introduced.

 

What could this mean to UK businesses?

Rules of origin

If you sell goods to the EU, you will have to understand this ‘Rules of Origin’ of all the components or materials in your products, as there could be an extra charge if a component is made outside the UK or EU. Importantly, this doesn’t just mean the origin of materials used but also which country the processing of the components took place.

Many BHETA members who “manufacturer” do so overseas, mainly in the Far East. Please note that finished goods imported into the UK from third countries and then repacked into orders destined for customers in the EU will not be able to claim the tariff free status of goods made in the UK, unless they keep the goods under bond, therefore they could face paying duty twice.

The government document (linked below) provides detailed guidance on the rules of origin requirements under the UK’s deal with the EU (the Trade and Cooperation Agreement).

It explains the most important provisions which businesses need to understand and comply with, in order to ensure that they pay zero tariffs when trading with the EU. This applies to both businesses that wish to export goods to the EU at zero tariffs, as well as businesses who wish to import goods from EU at zero tariffs.

CLICK FOR GOVERNMENT NEW RULES OF ORIGIN WEBSITE 

 

Paperwork checks

Be prepared for paperwork when exporting to the EU which may ask for details of the origins on all of the components used in a product.

From January, all goods imported into the EU from the UK will be subject to regulatory checks.

So even with zero-tariffs and customs and regulatory cooperation, all products traded between the UK and the EU will be subject to regulatory compliance checks from the 1st of January. Remember, the UK and EU will become two separate regulatory and legal areas. This means that all there will be different regulations and rules on products.

Simply put, this could mean delays on goods as the system is first introduced.

If you already export to the EU, you may be eligible for “trusted trader” status. In the treaty, they have agreed to recognise each other’s ‘Authorised Economic Operators’ programmes, enabling trusted traders that benefit from this status to enjoy certain simplifications with customs authorities.

Both sides have agreed a definition of international standards that identifies the relevant international standard-setting bodies. This included the continued use of self-certification of conformity by the manufacturer where it is currently applied in both the EU and the UK. This will ensure that product standards and technical regulations are based on the same international references and will make compliance rules easier and less costly.

Digital Trade

Summary
  • Agreement to stop any unjustified barriers to trade.
  • Commitment to continue an open, secure and trustworthy online environment for businesses.
  • Maintain high standards of personal data protection.
  • No requirement for UK data to be stored or processed within the EU.
  • UK/EU will continue to cooperate alongside other nations at multiple levels to ensure the highest possible protection.

Trade in services

Summary
  • There is a deal for services in the agreement including for financial services. The agreement provides a significant level of cooperation on the trade in services, going far beyond the baseline of the WTO’s rules.
  • As of 1st January, UK service suppliers will lose their automatic right to offer services across the EU. 
  • Service businesses that operate in the EU may need to establish an entity in the EU to continue to operate. 
  • Firms will no longer be able to operate the ‘passporting’ concept. 
  • In the deal, a non-discrimination clause was agreed in order to ensure that service suppliers or investors from the UK will be treated no less favourably than EU firms within the EU. 
  • There is a review clause encouraging the EU and UK to consider whether there are possibilities to improve trade of non-financial  services in the future.
  • The actual level of market access for UK firms will depend on the way the service is supplied and whether it is supplied on a cross-border basis. 
  • United Kingdom professionals will need to have their qualifications recognised by the relevant Member State to supply those services in the relevant Nations. 
  • The agreement foresees a mechanism whereby the UK and the EU may later agree on specific professions to have mutual recognition of certain professional qualifications.
  • Negotiations continue for financial services, with the aim to be finalised by March 2021. They will mainly cover the question over equivalence on financial services.
  • Until the new agreement, the UK’s equivalence decisions will be adopted in the UK’s interest and the EU will consider equivalence when they are in the EU’s interest.

Public sector contracts

Summary
  • UK & EU companies will be able to participate on an equal footing in bids for procurement tenders covered by the agreement. 
  • The Agreement further provides for non-discrimination of UK/EU companies for small-value procurement. 

 

Intellectual property rights

Summary
  • The agreement enhanced standards in copyright. 
  • Collective management of rights and rights such as the resale right for visual works, which are not covered by international conventions, are covered.
  • Trade marks, design rights, patents, the protection of trade secrets, plant variety rights and the enforcement of intellectual property rights have enhanced standards.
  • All EU geographical indications already registered in the EU by the end of December 2020 will be protected in the United Kingdom. 
  • Future geographical indications the EU may want to protect will have to be agreed with the UK at the time and won’t be automatically applied.

 

New rules for travelling to the EU

Summary
  • EU/UK nationals will still have short-term visa-free access of up to 90 days within a 180-day period.
  • For longer stays in the EU, you have to follow individual nations’ immigration rules. 
  • The UK created the EU Settlement Scheme to continue living in the UK after 30 June 2021. The deadline for applying is 30th June 2021. You must have started living in the UK by 31 December 2020.
  • Intra-corporate transferees who need to work in the EU can continue to do so but the maximum duration of such transfers is now capped at three years.

 

Source: Rangewell

 

 


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