Back in 2016, a majority of British voters opted to leave the EU. Around four years and two heads of government in the House of Commons later, on January 31, 2020, the UK officially left the European Union. The consequences were already clear to all involved. This article will explain the actual impact of Brexit on the EU's preferential trade agreement.
One thing you have to give politicians credit for: as a rule, nothing happens so quickly and abruptly that there isn't a way to manage the transition. This was also the case with Brexit, where a so-called withdrawal agreement was negotiated. This is particularly important because the UK remains part of the EU single market and the associated EU customs union for a transition period. During this transition period, which ends on December 31, 2020, the United Kingdom has the opportunity to regulate its future economic relations with the other 27 EU member states. However, there is also the possibility of an extension: specifically, one extension of up to two years, which in turn sets December 21, 2022, as the final possible date.
Trading will continue without problems for now
The good news first: Initially, nothing changes. All standards of the European Single Market remain applicable to trade between Great Britain and the rest of the EU, and no customs declarations or checks are required. This simplifies trade and logistics, at least for the first few months after leaving the EU. However, it is understandable that this has created considerable uncertainty for both trading partners.
Preferential trade agreements: Uncertainties accompany trade
Concerns are being raised, particularly regarding the rules of origin and preferential treatment under the free trade agreements of other EU member states. The withdrawal agreement does not address global trade between the EU-27 countries and their partner states , even when products of British origin are traded or used in manufacturing processes within the EU. This is because preferential trade agreements are based on treaties between the EU and third countries (preferential trade agreements), which are concluded solely by the EU, without consideration of the opinions of individual member states.
United Kingdom remains an “unofficial” member of the EU
However, the legal framework surrounding Brexit regarding preferential rules of origin is not entirely uniform. With a Brexit and a withdrawal agreement , the United Kingdom will no longer be a member of the EU and therefore no longer a trade agreement partner. The European Union intends to ask its trading partners to continue treating the UK as an EU member during the transition period. Should the other EU member states accept and comply with this request, nothing will initially change during the transition period. Supplier declarations would remain valid, and declarations of origin could continue to be issued to partner countries without major problems. However, it is of course possible that individual trading partners will not agree to the EU's request. How this will be handled in practice will become clear in the initial period starting in February 2020.
This has further serious implications for Brexit after the transition period. It will then be a fact that goods originating in the United Kingdom will no longer be considered EU goods after the end of the transition period and consequently will no longer be eligible for preferential treatment. The dilemma: according to the European Union, this also applies to British goods that were already within the EU27 before Brexit, which in turn affects the calculation of preferential treatment. Materials from Great Britain will therefore be considered non-originating materials, and any processing or working carried out in the United Kingdom will no longer confer origin.
Continued concerns about the recognition of preferential certificates
The aforementioned concerns mean that, particularly during the transition period, preferential certificates of origin will be issued by customs authorities or the exporter based on these supplier declarations. However, one condition must be met: the other member states or partner countries must also accept these certificates if they were issued in the United Kingdom. There is a risk that they might not do so – but at least there is an initial arrangement for the period following Brexit. Our team is happy to answer any further questions you may have.
