Customs and excise duties in the context of Brexit

by Adam Biedrzycki

16 July 2020

The United Kingdom withdrew from the European Union on 1 February 2020 and officially become a third country.

We have thus entered the transition period provided for in the withdrawal agreement made between the UK and the EU, which will last until 31 December 2020. Nothing will change in respect of the application of customs and excise rules to trade between the UK and the European Union until 1 January 2021. What's next? The EU guidelines for investors allow us to draw first conclusions on trade with the UK from 1 January 2021.

Special status

The first issue worth noting is the status of Northern Ireland, which, according to the protocol on it, is to have a special status within the United Kingdom. Northern Ireland is to apply separate rules for trade with the EU and the rest of the United Kingdom from 1 January 2021. This is to ensure free movement of goods and services and free movement of people between Northern Ireland and the Republic of Ireland. Most of the tax rules covering this area and the customs union rules therefore remain in force.

All other territories in the UK will be treated as third countries. Existing tax warehouses will no longer be able to initiate excise duty suspension arrangements for the movement of excise goods within the EU and will no longer be able to use EMCS (except for movements commenced before 1 January 2021). Excise goods will be dispatched and delivered from the UK under similar arrangements as goods from non-EU countries.

Imports of goods from the EU under strict control?

We do not know yet whether the EU and the UK government agree on procedures for incoming EU goods. However, the UK has declared that if no agreement with Brussels is reached, it will gradually impose increasingly strict controls on imports of goods from the EU.

From 1 January 2021, traders importing standard goods (such as clothing or electronic equipment) into the UK will be required to keep records of these goods and will have to complete and submit an import customs declaration within 6 months of each import. Customs duties will not be paid until this declaration is made. However, full customs control will be applied to excise goods or hazardous products and high-risk animals and plants will be controlled at destination or other designated places.

Animal products and all plants and plant products will be subject to prior notification and appropriate documentation from April 2021.

Customs duties will be paid and goods will be declared at the place of import from July 2021. Full security declarations will be required and goods subject to sanitary and phytosanitary checks will be more strictly controlled at border control posts adapted to it.

The customs duty rate for EU goods is not yet known. What we do know from the UK government is that in the absence of an EU-UK free trade agreement EU goods will be subject to the UK Global Tariff rates from 1 January 2021. These rates have been set ad valorem in British pounds. They have been reduced and simplified compared to those of the EU tariff.

Trade relations with the UK will be shaped depending on the results of negotiations on a cooperation agreement with the EU. It is worth starting to prepare for the new circumstances already today, i.e. start training your employees on customs and excise procedures, obtain relevant certificates to speed up future customs clearance or reconfigure your supply chain.

Rödl & Partner experts will be happy to assist you in this matter.