Anderson Strathern: Brexit Business Insights | Glasgow Chamber of Commerce
Neil Amner, Anderson Strathern
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Anderson Strathern: Brexit Business Insights

With the discussion surrounding Brexit coming back to the fore, Anderson Strathern has reviewed and updated the following articles.

All are insights written by Anderson Strathern's Business Resilience and Brexit Lead, Neil Amner.

Brexit Withdrawal Agreement and the Transition Period

As of 11pm (midnight central European time) on the 31st January 2020 the UK left the European Union, 47 years after it first acceded to the European Economic Community. We are now in a ‘transitional period’ in terms of our relationship with the EU. This period runs to 31 December 2020, as provided for in the Withdrawal Agreement reached between the UK and the EU in October 2019.

Since January, the UK has been able to negotiate its future trading relationship with other countries around the world. If negotiations cannot be successfully concluded, there will be a ‘no-deal’ Brexit. This insight gives a guide to the withdrawal agreement and the expiry of the transition period.

The European Union Withdrawal Agreement explained

The EU Withdrawal Agreement itself is a legally binding document. It sets out terms for the UK’s withdrawal from the EU, running to more than 500 pages, including initial agreements on citizens’ rights, the UK’s financial obligations to the EU and the Northern Ireland protocol, establishing arrangements for retaining an open border on the island of Ireland. The Withdrawal Agreement was agreed in its final form by the European Council on 19 October 2019, as confirmed in the statement that political agreement had been reached and that the United Kingdom had concluded an agreement with the European Union under Article 50(2) of the Treaty on European Union.

The Withdrawal Agreement is supplemented by the Political Declaration setting out the framework for the future relationship between the European Union and the Declaration by Her Majesty’s Government of the United Kingdom of Great Britain and Northern Ireland concerning the operation of the ‘Democratic consent in Northern Ireland’ provision of the Protocol on Ireland/Northern Ireland. The Political Declaration aims to establish “the parameters of an ambitious, broad, deep and flexible partnership across trade and economic co-operation with a comprehensive and balanced Free Trade Agreement at its core”. It sets the tone and provides the framework for the detailed and complex negotiations that have followed in which the UK and EU have been seeking to reach agreement on a free trade agreement.

European Union (Withdrawal Agreement) Act 2020

The European Union (Withdrawal Agreement) Act 2020 (the 2020 Act) gives effect to the Withdrawal Agreement. The 2020 Act, which received Royal Assent on 23 January 2020, following its passage through the UK Parliament:

  • amends the European Union (Withdrawal) Act 2018 so that, although section 1 of the 2018 Act repeals the European Communities Act 1972 with effect from ‘Exit Day’, the 2020 Act reinstates the 1972 Act through a ‘saving’ provision, so that the 1972 Act continues to have effect in UK law until the end of the transition period;
  • sets out the terms of the financial payments to be made by the UK to the EU over a number of coming years, to meet its commitments;
  • contains provisions relating to a protocol on Ireland and the operation of a customs and regulatory border between Great Britain and Northern Ireland;
  • provides for the areas where the European Court of Justice still has a role in relation to UK law and seeks to clarify the status of the Withdrawal Agreement (an international treaty) in relation to other areas of UK law;
  • establishes an arbitration procedure that is to be used to deal with disputes that arise concerning the Withdrawal Agreement, together with a reporting duty on the use of that procedure;
  • includes arrangements for dealing with the rights of citizens, with the establishment of an Independent Monitoring Authority for individuals to complain to about the way they have been treated in the context of EU withdrawal.

The transition period

This has been a period for negotiations on the future relationship between the UK and the EU. During the transition period, the UK has remained in the EU’s single market and customs union, and has still contributed to the EU budget, with free movement of citizens retained for this period, but it has no longer been represented in the EU’s decision-making bodies, including the European Parliament.

The Withdrawal Agreement included an option to extend the transitional period, to avoid a ‘no-deal’ Brexit if agreement cannot be reached between the EU and UK by 31 December 2020. Such an extension would have had to have been requested by July 2020. Following a statement by the Prime Minister Boris Johnson that he would not use this option and that 11 months was sufficient to agree a comprehensive deal, the UK Government inserted a provision in the 2020 Act to prohibit a UK Minister seeking such an extension, and an extension has not been sought.

Countdown to 31 December 2020

It remains to be seen whether a deal can be reached in the transition period, but the possibility of a ‘no-deal’ Brexit remains, as the countdown to 31st December 2020 continues.

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Learning the ropes - leverage at The World Trade Organisation 

Benjamin Franklin, one of the Founding Fathers of the USA claimed “No nation was ever ruined by trade”.

While that may be so, during Trump’s presidency, his choice of leverage in a trade dispute over subsidies to Airbus caused financial distress to Scottish businesses in sectors unconnected to the civil aviation market.

Trump imposed a 25% tariff (tax) on imports of whisky and biscuits to the USA from the Airbus consortium nations; and threatened to raise that to 100%.

The relevance of the biscuit tariff was not as immediately obvious for us here in Scotland as the whisky tariff. By far and away the biggest biscuit import from the EU to the USA is shortbread; the biggest export market for that product. The tariff damaged profits; a fourfold increase would have threatened jobs.

Although the biscuit tariff was withdrawn in August, tariffs on malt whisky and cashmere remain.

What’s perhaps most surprising (and disappointing for us in Scotland) is that those tariffs have been sanctioned under the disputes process of the World Trade Organisation (WTO).

Established in 1995 and based in Geneva, the WTO is the only international organization dealing with the global rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.  It covers the provision of goods, agricultural produce and services and the protection of intellectual property rights. The 30,000 plus pages of treaties and associated commitments by governments which make up the WTO rules include provisions on subsidies and public procurement. It has rule making, monitoring and dispute settlement functions.

There are also emerging subsidiary agreements between groups of member countries on topics such as e-commerce, domestic regulations and investments.

Although not part of the United Nations family of bodies, WTO does have near global membership, including China (since 2001) and Russia (since 2012). Although the UK has always been a member, having left the EU block, it took its own seat at WTO on 1st February 2020.

I was a member of the Scottish Government led capacity building delegation which visited Geneva to meet WTO officials and UK diplomatic staff who engage with them, to learn first-hand about the workings of the body and how to engage with it.

The UK has been seeking to negotiate a future trading relationship with not only the EU but also with other nations. The latter will not be a simple ‘cut and paste’ replication of existing free trade agreements with the EU. How existing EU-wide quotas (allowed under WTO rules for agricultural products) are to be dealt with in the future is a tricky issue. New Zealand lamb is a case in point – what percentage of the EU total should the UK take; should the future EU and UK totals exceed the existing EU figure; does even a generous UK figure really restrict New Zealand to EU flexibility in the future?

Whatever the final UK-EU position on ‘divergence’ of law and ‘level playing field’ regulation, devolved administrations within the UK as well as the UK Government will need to be mindful of whether or not future legislation here is compliant with WTO rules.

Unlike the EU, individual citizens or companies do not have a right to bring a dispute before the WTO. That is the preserve of member states. Nonetheless, one of the key messages I took from the visit to Geneva was; there is both an opportunity and a need for individual businesses and trade organisations to engage with the WTO process with our own government and in Geneva. To do so needs professional advisors, both at home and Geneva, who understand not only the WTO rules but also how the system operates. In many ways that is no different to domestic commercial law or parliamentary work. The stakes and thus the necessary leverage, however, may not be for the faint hearted.

Neil Amner is a Director and the Brexit Lead at Anderson Strathern, which has formed an international trade support partnership with Glasgow Chamber of Commerce.

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Brexit Business Checklist

With the continuing uncertainty around the outcome of UK / EU future trade negotiations, we have updated our Brexit checklist for you to identify the aspects of your business which may be affected by the Brexit transition period expiring on 31 December 2020. We've summarised the main points below and will continue to update this article as new information emerges:

People

  • Do you currently employ EU nationals or likely to seek to recruit EU nationals in the next couple of years?
  • Have you told existing EU, EEA and Swiss citizens in your staff about the 30 June 2021 deadline for applying to the EU Settlement Scheme?
  • Have you registered as a licensed immigration sponsor?
  • Do you or your staff regularly travel to the EU on business?
  • Have you checked the visa, work permit and activity specific requirements of the EU country you intend travelling to on business?
  • Have you checked passports will have at least 6 months left and be under 10 years old?
  • Have you arranged suitable travel insurance, including health cover?
  • Does your mobile phone / laptop contract cover data roaming charges?

Read our articles Immigration – are we Brexit ready and Brexit and Employment Law for further information.

Place

  • Do you operate in (as opposed to export to) other EU countries?
  • Do you have business premises in the EU? 

Data

  • Do you transfer personal data to or from the EU?
  • Do you have a .eu domain name?
  • If you provide online services to EEA countries, do you fall within the scope of the eCommerce Directive? If so, are you compliant with the requirements of each country you operate in?
  • If a UK based digital service provider to the EU or EEA, have you appointed a representative in one of the EU member states where you offer services?

Supply Chain

  • Do you import or otherwise rely upon materials, components or consumables (including packaging and labelling) sourced from other EU countries?
  • Have you made contingency arrangements (e.g. creating a buffer stock)?

Read our article Just-in-time to prepare for Brexit.

Trading: Customs etc

  • Have you traded outside the EU before?
  • Have you and your staff been trained on trading internationally?
  • Who will attend to your customs declarations and information compliance?
  • Are you aware of the commodity code of each of the types of goods you trade in and the corresponding duties payable for import into the UK under the UK Global Tariff Schedule, or the destination country / block tariff schedule for exports?
  • Are you aware of any applicable trade preferences or negotiated trade agreement terms?
  • Are you aware of the customs declaration requirements for any “controlled” goods you deal with?
  • Have you applied for an export license for controlled and dual-use items?
  • Are your non-controlled goods eligible for deferred import declarations?
  • Have you decided how you will account for import VAT?
  • Are you an Authorised Economic Operator?

Read our article Is Authorised Economic Operator Status key to a smooth Brexit?

Trading: Ability to trade

  • Do you deal with goods or materials (e.g. plants, timber, GM food or animal products) the movement of which from outside into the EU is subject to restriction? 
  • Do you need to register for the UK’s Import of Products, Animals, Foods and Feed System or register for the Export Health Certificate online system?
  •  Are you aware of the new processes for import and export of plants and plant products, in addition to the need for phytosanitary certificates?  
  • If importing or exporting timber, can you meet the due diligence rules on source and legality of the timber?
  • Are you aware of the need for prior regulatory approvals from despatch, receipt and transit regulators under the EU Waste Shipment Regulations?
  • Will you be able to comply with UK REACH and EU REACH rules if selling chemicals in the UK and the EU after 1 January 2021?
  • Will you need to register chemical to be sold on the UK market with the Health & Safety Executive?
  • If trading drug precursor chemicals, will you need an import or export licence?  
  • Have you reviewed the packaging and labelling requirements for your products post-Brexit?
  • Do you understand what rules of origin apply to your exports?
  • Do you need to appoint a new authorised representative for EU / UK establishment purposes?

Intellectual Property / Brand protection

  • Do you rely on EU-registered trademarks and designs in the UK?
  • Have you considered whether you may need to submit additional trademark or design filings in the EEA to secure protection?
  • Have you reviewed the territorial scope of your IP Licences and future assignations of rights?

Regulatory framework

  • Are the regulatory regimes which govern your business derived from EU law?
  • Are you regulated by an EU regulator?
  • Does your product need new third party approval from 1 January 2021?

Finance

  • Do your existing financing arrangements impose any conditions which could be impacted, directly or indirectly by Brexit?
  • Have you reviewed your financial model and cash flow with Brexit (and associated contingency planning) in mind – do you need additional funding?

Read our article Brexit – what’s on the horizon for the rural sector?

Contracts

  • Have you considered how Brexit may impact on your or your suppliers’ ability to timeously meet contractual obligations?
  • Have you reviewed both your supply chain and customer contracts for Brexit issues?
  • Are you clear about what will be a Brexit risk?
  • Are you and your suppliers / distributors clear on your respective legal duties?

Disputes

  • Are you engaged in any form of contractual or regulatory dispute with a European dimension?
  • Do you understand the UK’s new trade remedies system for complaints regarding unfair imports?

Northern Ireland

  • Have you familiarised yourself with the implications for your business of the Northern Ireland Protocol in respect of the movement of goods from, to or through Northern Ireland?

If you would like to speak to one of our Brexit experts about your business plans please call Neil Amner our Brexit Lead on 0141 242 7984 or fill in our enquiry form.

To keep up to date with our Business Resilience articles, subscribe to our Business Hub updates here.

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