With less than 90 days until the end of the transition period on 31 December 2020, the possibility of a no deal Brexit is increasing by the day.
Without a free trade agreement (FTA) with the EU, trade between the UK and the EU will be conducted on World Trade Organisation (WTO) terms. The UK will become a “third country” in the EU’s eyes, which means that the import and export of goods and services between the UK to the EU will face new customs and regulatory barriers for the first time in over 40 years. In addition, the UK would lose the benefits of FTAs between the EU and third countries which have not been ‘rolled over’ (which currently includes Mexico and Canada).
With exports of food and drink (F&D) from the UK to the EU worth GBP14.2 billion in 2019 and the EU making up approximately 60% of all UK F&D exports, it is particularly important that businesses in the F&D sector prepare for trading on WTO terms from the beginning of next year.
What does the export of goods from the UK to the EU looks like under WTO terms?
Whereas goods may currently be imported and exported between the UK to the EU with minimal or no customs requirements, under WTO terms, there will be a customs border between the UK and EU. Goods traded between the UK and EU member states will be subject to tariffs. The UK will also leave the EU’s Single Market, with the consequence that free movement of goods and harmonised regulatory standards come to an end. The benchmark for these tariffs between the UK and EU will be determined based on their relative tariff commitments to the WTO.
In practice, reverting to WTO terms will have the following effects on F&D businesses exporting their products from the UK to the EU:
Exporting goods from the UK to an EU member state
- From 1 January 2021, F&D exporters from the UK to the EU will need to make export declarations, as well as needing to register for an Economic Operator Registration and Identification (EORI) number with HM Revenue and Customs in the UK.
- Exporters will also have to pay customs duties on all exports, but these will be at the same rates as currently applicable on exports from countries outside the EU (third countries) into the EU and pre-Brexit UK. In practical terms, this is likely to impact upon the timelines for delivery to customers in the EU as well as the costs of shipping given the additional administrative burdens involved.
- F&D businesses may want to consider the use of a customs broker, agent, freight forwarder or logistics provider to estimate the time and cost of additional procedures, support them in the export of goods and help make customs declarations for them.
Labelling and other regulatory standards
- As UK businesses exporting to the EU have already been complying with EU licenses, regulatory standards and labelling when exporting to the EU from the UK, in order to continue doing so, UK businesses will need to comply with these same requirements.
- However, there will likely be other changes with respect to some required licenses, regulatory standards and labelling. In particular, exporters will need to make sure any goods they are exporting to the UK comply with EU regulatory standards in respect of third countries such as:
- F&D products must be labelled correctly to reflect the UK’s status as a third country. UK products cannot use EU emblems or markings on their labels or country of origin labelling.
- Additionally, the address of an EU importer or Food Business Operator will be required on labels of pre-packaged food.
- Organic food products may also face export restrictions and other labelling requirements until the EU approves of the UK’s organic food regulatory regime – through what is called an equivalence regime. If the UK does not achieve recognition from the EU, exporters of organic food will not be able to export organic food or feed to the EU from 1 January 2021.
Products of animal origin
- Products of animal origin, for example, meat, eggs and egg products, milk and milk products etc. will likely require more extensive requirements such as:
- The obtaining of an export health certificate – an official document that confirms your export meets the health requirements of the destination country.
- Getting goods checked at a border control post (BCP) in the first EU country the goods enter to certify the goods.
- The use of a new UK health and ID mark.
- In respect of fish and fish products, in addition to the export health certificate, exporters will require a catch certificate through the Fish Export Service (due to become available in late 2020) as well as storage and processing documentation (as applicable).