The United Kingdom's exit from the Single Market: a soft agreement
The United Kingdom's exit from the Single Market: a soft agreement
17 February 2021 - by: Silvia Pedrotti

The United Kingdom's exit from the Single Market: a soft agreement

Christmas provided us with an understanding on Brexit, but what does it change in practice for business operators? And for ordinary citizens, are there any implications? With this analysis we aim to answer in detail the most common questions regarding the exit of the United Kingdom from the European Community.

The United Kingdom's exit from the Single Market: a soft agreement

The confirmation of a Soft-Brexit was a real Christmas present for companies operating in or exporting to the British territory and for many categories of goods and services. For example, the automotive sector and the whole Made in Italy agro-food sector, which strongly feared a no deal and its economic repercussions, celebrated. The trade agreement, reached on the 24th of December, does not provide for tariffs on trade between the United Kingdom and continental Europe and does not place limits on the quantity of goods that can be traded. More broadly, the Brexit deal is supportive of the free movement of goods. 

Despite this strong favoritism towards trade, since the 1st of January, exporting to the British market has become more complicated in terms of documentation and controls. Logistics companies, as well as suffering from delays due to controls, are also suffering from high customs costs in terms of charges imposed by British customs. All this has led to an increase in tariffs for companies trading with the United Kingdom. 

The implications for business partners  

Although duties and tariffs have been suppressed, for commercial operators who intend to continue to have relations with the UK, it will be necessary to formally and correctly issue a series of documents in order to be able to clear the goods for exchange.  

  1. Origin of goods and rules for trade  

  • Origin will be determined under the rules of the agreement; we will therefore be in the sphere of preferential origin. The rules of origin make it possible to self-declare the origin of goods and consider not only the originating materials used, but also whether substantial processing took place in the UK or the EU.  

  • For the statement of origin, the agreement states that it is possible to use a self-certification completed by the exporter, who then becomes responsible for the correctness of the document.  

  • Certification may be rendered on an invoice or any other document describing the imported product in sufficient detail to enable its identification and may be applied either to a single shipment of one or more imported products or to multiple shipments of identical imported products within a maximum period of 12 months.  

  • In the event that the production process of goods also involves the use of materials that do not originate from either party, for the purposes of applying the cumulation rule, the agreement requires that the exporter, in order to make a declaration of preferential origin, must obtain a supplier's declaration, in accordance with the template provided for under ANNEX ORIG-3, which contains the specific origin of the materials used. This declaration may also be in the form of a long-term declaration in the case of recurring supplies from the same supplier.  

  • To simplify, there is no need to use non-preferential certificates of origin issued by the Chambers for export to the UK, unless the goods originate in a third country.  

  • The Agreement also establishes the mutual recognition of the status of AEO and Authorized Exporter, which will greatly simplify customs procedures by allowing self-certification to declare regulatory compliance for low-risk products and simplifications for other specific products.  

  • In addition to the declaration of preferential origin and the relevant proofs of origin, EU exporters will also have to be registered to the REX system and wait for the activation of the New Union Portal. Operators who are still without a REX code will be able to make their origin declaration by indicating their EORI code.   

  1. EORI code 

This is the identification code for economic entities in the EU customs territory. It is used to carry out customs operations in import and export and to obtain it one must register with the competent customs authority. The EORI in Italy is composed of the ISO alpha-2 code of Italy "IT", followed by the VAT number (partita IVA) or tax number (codice fiscale).  

  1. Import and export documents  

As already identified in the check-list available on our website, in order to present your product to customs you need the following documents:  

  • Commercial invoice or pro-forma that must indicate the quantity, type and description of the goods, the customs heading (HS code), the delivery terms (Incoterms), the value of the goods, the reference VAT code, the sender's and receiver's EORI.  

  • Packing List (PL) that as a minimum must indicate the total number of packages, the gross weight (GW), the net weight (NW)  

  • Transport document (CMR, B/L, AWB)  

  • Declaration of free export  

  • Veterinary/Health certificates (if applicable)  

  • Export authorization for DUAL USE goods (if required)  

  1. Transportation 

  • The carriage of goods by road between the European Union and the United Kingdom and vice versa continues to be possible for Italian transport companies holding a European Community license, with the normal certified copy on board.  

  • Unrestricted access is provided for end-to-end transport for hauliers carrying out transport between the EU and the UK and vice versa, as well as guaranteeing the right of transit in the respective territories of the parties.  

  • Transport to and from the United Kingdom may also be carried out with multilateral ECMT (European Conference of Ministers of Transport) authorization.  

  • The Agreement also permits the performance of up to 2 cabotage operations (domestic transport of goods granted to a foreign carrier) within 7 days of the unloading of the goods subject to international transport destined for the UK.  

  • One of the customs simplifications is that carriers are allowed to use the so-called "TIR Carnet".  

  1. ATA Carnet  

As a partial amendment to the communication issued last December the 15th, it has been confirmed that ATA Carnets issued in 2020 and still valid in 2021 can be used for the temporary import of goods into Great Britain starting from the 1st of January 2021.  

The implications for EU citizens 

There is no doubt that the separation of the EU and the UK also has repercussions on the free movement of persons, which until recently was regulated by the Schengen Agreement. On the 1st of January 2021, in fact, the new British immigration system comes into force. In order to move to Great Britain, a visa will be necessary and will be granted only if one already has a job offer and an expected salary of at least 25,600 pounds (around 28 thousand euros) with a few exceptions in this regard. 

European citizens living in the United Kingdom can obtain permanent resident status (settled status) or temporary resident status (pre-settled status), depending on whether they have lived in the country for more or less than 5 years. Pre-settled status is valid for 5 years, after which you can apply for settled status. To obtain provisional or permanent residence it is necessary to register to the "EU Settlement Scheme", attaching to the application the documents that prove identity and residence in the British territory. 

In terms of education, the United Kingdom has withdrawn from the Erasmus program: not only will British students not be able to access it, but from next year their European peers will also have to apply for a visa to study in Britain and pay university fees as non-British students. Even for young students who want to go on a study vacation it will be more complicated as they will need a "short" visa, passport, and health insurance. 

Tourists will also be subject to restrictions: they will have to have a passport and will be able to stay for a maximum of three months in the United Kingdom. A short transitional period will allow people to travel to the UK with just a valid identity card until the 1st of October 2021. 

The case of Northern Ireland 

The Irish case was one of the thorniest points in the negotiations and was resolved with a special protocol. The agreements concluded in December 2020 between the United Kingdom and the European Community excluded Northern Ireland from Customs Controls and Border Procedures. In fact, trade in goods between the European Union and Northern Ireland was unchanged as of the 1st of January 2021. In order to avoid the return of the hard border in Ireland that was eliminated by the Good Friday Agreement of 1998, Northern Ireland continues to be part of the European Common Market. The return to the Customs Regime therefore applies to Great Britain only. In order to reach Northern Ireland, like the Republic of Ireland, with the implementation of Brexit it is necessary to escort outbound goods from Northern European ports with a T2L transit document. This is necessary as the ferry transits international waters and it will therefore be essential to produce a commercial invoice to certify the value of the goods.  

It is recent news that 51% of Irish citizens polled want to hold a referendum offering the choice to join the Republic of Ireland and thus switch from the government in London to that in Dublin. Should this proposal materialize with a majority, Belfast would be checkmating the Queen by abandoning her and re-entering the EU's circle of benefits for good. A few months before the exit, Brexiteers are facing not only a problem in the management of communication with those outside the United Kingdom, but also a problem of internal communication within the country that in fact marks a deep rift. It should be remembered that if Irish unity still seems an extremely distant issue for the electorate, the desire of the Scots to leave London is decidedly more pronounced and closer to home.