Richard North, 10/07/2020  
 


Way down the list of news stories last night have been the reports that, once again, "Brexit" (meaning TransEnd) talks have broken early, after just a day and a half. Putting groundhog day to shame, we also learn that there are still "significant divergences".

This time held in London, to make a change from Brussels, Mr Barnier and his officials arrived by train in time for dinner with our chief negotiator David Frost on Tuesday. The UK and EU teams were expected to devote two full days to talks, but they pulled the plug just after lunchtime yesterday.

There was some excited talk earlier about a possible deal on fishing, but nothing more has been heard in a period when there were supposed to be "intensified" discussions. No one had said what "relaxed" talks look like.

The lack of media interest rather reflects the fact that you can only say "nothing to report" so many times before your readers walk away. There will be plenty of time between now and the end of December to report on the impending doom so it's a question of not making hay while the rain falls – and we've seen a lot of rain lately.

Meanwhile, to coincide with the end of the current round of talks, the Commission has published an entertaining document headed: "Getting ready for changes - Communication on readiness at the end of the transition period between the European Union and the United Kingdom".

There's actually nothing particularly new here, but the Commission is reminding its readers that there has been "little progress" in the talks. It also repeats that which our own government seems reluctant to say, that once the transition period is over, the UK will no longer participate in Union policies and this will create barriers to trade in goods and services and to cross-border mobility and exchanges that do not exist today.

This will happen in both directions, the Commission also says, as if we needed reminding, although a lot of people obviously do – even if many of them won't actually be reading this latest document.

But the Commission is also putting two and two together for us, saying that the choices made by the UK government mean that there will be "inevitable disruptions" as of 1 January 2021 "and risk compounding the pressure that businesses are already under due to the Covid-19 outbreak".

The Communication, the Commission adds, in no way seeks to prejudge the outcome of negotiations, nor to examine the possible implications of a failure to reach an agreement on a future partnership, but it advises businesses to consider revisiting their existing preparedness plans.

In the rest of the 35 pages, it then rehearses a certain amount of detail, starting with the effects of TransEnd on trade in goods. As of 1 January 2021, it says, the United Kingdom will no longer be part of the EU Customs Union. Therefore, customs formalities required under Union law will apply to all goods entering the customs territory of the Union from the United Kingdom, or leaving that customs territory to the United Kingdom.

This, we are advised, will happen even if an ambitious free trade area is established with the United Kingdom, providing for zero tariffs and zero quotas on goods, with customs and regulatory cooperation.

Offering more detail than usual, the Commission then tells us that, on the EU side, customs authorities will carry out controls on the basis of the Union Customs Code, according to the common risk-based system applied to any other external border of the Union with regard to the movement of goods in relations to third countries.

That reference to the "risk-based system" is interesting because if the UK is unable to administer its own customs checks (which looks likely) then it drops into a high-risk category and we can expect a relative high level of controls.

Even at a low level, we are helpfully informed that these controls are likely to lead to increased administrative burdens for businesses and longer delivery times in logistical supply chains.

Additionally, EU businesses wishing to import from or export to the United Kingdom will need to ensure they have an Economic Operators Registration and Identification (EORI) number in order to go through customs formalities.

In addition, EORI numbers issued by the United Kingdom will no longer be valid in the Union. Businesses based in the United Kingdom wishing to import into the Union will need to receive an EU EORI number, or appoint a Union customs representative where applicable.

That is going to be seriously entertaining for some businesses as they get mixed up in half-understood bureaucracy and try to work out how these unfamiliar systems work.

But that's not the end of it. Authorised Economic Operators authorisations or other authorisations issued by the United Kingdom will cease to be valid in the Union. Where the economic operators wish to obtain EU authorisations, they will need to apply for them in an EU Member State. And good luck with that.

Piling on the agony, the Commission almost lovingly tells us that the originating status of goods traded will have to be demonstrated in order for them to be entitled to preferential treatment under a possible future EU-UK agreement. Goods not meeting origin requirements, it says, will be liable to customs duties even if a zero-tariff, zero-quota EU-UK trade agreement is in place.

Trade between the EU and its preferential partners will also be affected, as UK content (in terms of both material and processing operations) will become "non-originating" under Union preferential trade arrangements for the determination of the preferential origin of the goods that incorporate such UK content.

In practice, this entails a need for EU exporters to reassess their supply chains. They may have to relocate production or change suppliers for certain inputs in order to continue to benefit from Union preferential trade arrangements with current Union preferential partners. Now that is going to be fun.

And there is real fun to be had with VAT. Furthermore, any goods imported into the VAT territory of the European Union from the United Kingdom will become due for VAT at the rate that applies to supplies of the same goods within the Union. To avoid double charging, some firms will have to organise VAT refunds from HMRC, as their goods leave the UK.

But, in the exporting game, it seems that there is endless joy to be had. All products exported from the Union to the United Kingdom will have to comply with UK rules and standards and will be subject to any applicable regulatory compliance checks and controls on imports.

Similarly, all products imported from the United Kingdom to the Union will need to comply with Union rules and standards and will be subject to all applicable regulatory compliance checks and controls on imports for safety, health and other public policy purposes.

Certificates or authorisations issued by UK authorities or by bodies based in the United Kingdom will no longer be valid for placing products on the Union market. This means, for instance, that a motor vehicle with a type approval issued by the United Kingdom can no longer be placed on the Union market.

Where Union legislation requires certification by an EU Notified Body – e.g. for some medical devices, machinery, personal protective equipment or construction products – products certified by UK-based bodies will no longer be allowed to be placed on the Union market.

We have written extensively about such matters on this blog, but I wonder just how many firms fully realise what's going to hit them on 1 January 2021. No doubt the media will keep us entertained with a stream of "exclusives" outlining the travails of companies trying to export to the EU, experiencing things we've been warning about for ages.

And if there is going to be fun and games on exporting goods, don't even think about services. The "colleagues" have endless ways of making it almost impossible for you to trade.

Reading through this Communication, though, one almost gets the impression that the authors really enjoyed writing it. There is almost a tinge of glee to it. But, I have to say, it didn't have to be like this. This is not Brexit we're suffering from – it's Johnson. What we actually need is Borex.

Also published on Turbulent Times.






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