Has the Brexit transition been delayed by the Coronavirus?

July 24, 2020

Brexit Update - The latest news on the Brexit timeline

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With six months of the transition period remaining, it has been re-affirmed jointly by Boris Johnson and Ursula von der Leyen that there will not be an extension beyond December 31st, 2020. This indicates that a deal needs to be reached within the remaining time period in order to avoid the United Kingdom and the European Union trading with each other under WTO’s MFN (Most Favorable Nation tariff) terms.

If the transition was to be extended, it would need to be agreed by both parties by the end of June 2020.

Current Key discussion points between the two parties

• Fishing Rights in UK waters - the European Union is requesting continued access to United Kingdom waters but the UK wants to limit access given the fact that they are an independent state. However, at the same time, the United Kingdom wants full market access to sell their fish onto the European Union market.
• A level playing field – The European Union have cited this as the reason for not offering a Canada style trade agreement to the United Kingdom, however, in order to level the playing field, the United Kingdom would be required to adhere to many of the European Union’s regulations, for example, worker’s rights, environmental regulations, and subsidies for business. An example of a deal accepting such rules is something similar to the Norway Free Trade Agreement whereby they accept European Union rules and regulations are adhered to. The Prime Minister of the United Kingdom, Boris Johnson, rejected the Norway model on the grounds that becoming a rule-taker with no formal vote would be politically 'unsaleable'.
• Governance – In the event of a deal being agreed upon, there will be rules that must be followed by both parties. The European Union state that those rules should be enforced by the European Court of Justice (ECJ), the United Kingdom is not in agreement. 
• United Kingdom & Ireland Land Border – This being the hot topic of the Brexit debate, is how the UK proposes to keep the land border open and free from regularity checks but at the same time avoiding the annexation of Northern Ireland from the UK. This is an area of concern for the European Union.
• Shared Information – Databases that share information such as police and security is something that the United Kingdom say that they require access to beyond the transition period, the European Union state that this would only be open to member states.
• Both sides believe a deal can be achieved. An extra complication to the negotiations has been the COVID-19 crisis which has forced talks to proceed over video links. The European Union has set a deadline of October 31st to agree on a deal in order that it can be ratified by the end of the year. Some would consider this as optimistic. 

Phasing in of frontier checks

Full regularity controls must be implemented from January 1st 2021 when the UK becomes fully independent from the European Union. This position was reiterated by cabinet minister Michael Gove from the United Kingdom in February of this year. Since then, the COVID-19 pandemic struck Europe, and attention was drawn away from the exit preparations to redirect resources into tackling the virus.

The government has acknowledged that businesses were forced to put preparations to one side as they switched to respond to the Coronavirus spread. With this in mind, it has now been announced that border checks will now be brought in over three phases, even in the event of no deal, to assist international traders to prepare for the increase in customs checks.

PHASE 1 - 1 January - checks will begin on controlled substances, such as alcohol and tobacco. Standard goods, such as clothes and electronics, will be subject to basic customs procedures but companies will have up to six months to complete customs declarations and pay relevant tariffs.
PHASE 2 - 1 April – imports of products of animal origin, including meat, milk or egg products, will have to pre-notified to officials and provide the relevant health paperwork.
PHASE 3 - 1 July - all goods will be liable for relevant tariffs and customs declarations as well as full "safety and security" declarations. From this moment, there will be an increase in physical checks on livestock, plants and other sanitary and phytosanitary products at ports and other entry points.

The United Kingdom customs tariff

The United Kingdom recently published its own customs tariff, which is designed to simplify some tariffs and reduce the duty rate of commodities critical to the United Kingdom economy. The list of tariffs available here, outlines the current duty percentage per the European Union's Common External Tariff and the new rate that will be applied to imports from third countries into the United Kingdom from next year.

Details of additional duties, such as retaliatory, anti-dumping and countervailing duties will follow later in the year along with preferential duty rates that have been agreed before 1st January 2021.

Questions:

If you are concerned about how Brexit will affect your business, we can address any questions you may have, please don't hesitate to reach out!

What is the latest on the Brexit negotiations?

UPDATE APRIL 2020

There are eight months to go before the transitional period between the United Kingdom and the European comes to an end. The United Kingdom officially left the European Union on January 31, 2020. So what is the status of negotiations? 

Evidently, the current Coronavirus pandemic has been the major focus for Boris Johnson and the United Kingdom's government, led by the Conservative party, however, Brexit discussions have been on-going albeit via video link as opposed to face to face meetings. The United Kingdom is hoping to sign a free trade agreement with the European Union similar to the deal the country has with Canada. The European Union, on the other hand, are requesting that the United Kingdom adheres to European Union regulations which the United Kingdom has rejected as a possibility. 

The transitional period ends December 31st, 2020.

In order to ensure that a deal is in place before the 31st December 2020, the agreement would need to be completed by July 1st 2020, however, there is a provision to extend the transitional period by up to 2 years if both sides agree. Boris Johnson is reluctant to agree to any further extensions.

Below is the 2020 Brexit timeline published on the House of Commons library:

Current issues being discussed between the EU and UK:

•    United Kingdom are looking for a Free Trade Agreement similar to Canada
•    European Union want full fishing rights in UK waters
•    The European Union want the United Kingdom to adhere to EU regulations. 
•    The United Kingdom do not have the intention to be subject to EU regulations after 31st December. However, some regulations currently in place will be written into British legislation.

What if there is no deal?

Assuming that a deal is not agreed between the two parties by December 31st, 2020, the United Kingdom will not gain any benefit from the numerous trade deals in force with the European Union.

However, the British government has a number of deals that are expected to be in force from the 1st January 2021. Here are the trade agreements that have been signed already:
•    Kosovo 
•    Jordan
•    Morocco 
•    Georgia 
•    Southern African nations 
•    Tunisia 
•    Lebanon 
•    South Korea
•    Central America
•    Andean countries
•    Caribbean countries
•    Pacific Islands 
•    Liechtenstein 
•    Israel 
•    Palestinian Authority 
•    Switzerland 
•    The Faroe Islands 
•    Eastern and Southern Africa 
•    Chile

Negotiations are ongoing with a further 16 countries, including Canada and Mexico.

Questions:

If you are concerned about how Brexit will affect your business, we can address any questions you may have, please don't hesitate to reach out!

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