The Impact on Export-controlled Goods and Customs Movements in the Event of a 'no Deal Brexit'

• Publication year: 2020
• Author: Andrew Skinner

THE IMPACT ON EXPORT-CONTROLLED GOODS AND CUSTOMS MOVEMENTS IN THE EVENT OF A 'NO DEAL BREXIT'

Andrew Skinner^*

I. INTRODUCTION

This article explores the United Kingdom's decision to leave the European Union and the impact that this will have on the movement of goods. In particular, this article reviews the possible impact of this decision on the trade of export-controlled goods within both the United Kingdom (UK) and European Union (EU).

II. THE FORMATION OF THE EUROPEAN ECONOMIC COMMUNITY

In March, 1957, the Treaty of Rome (Treaty) was signed by France, West Germany, Italy, the Netherlands, Belgium, and Luxembourg, thereby establishing the European Economic Community (EEC) of member states. Still today the Treaty is considered to be the foundation of the current EU.¹

The signing of the Treaty and creation of the EEC enabled, amongst other things, the free movement of goods, services, people, and capital within member states, as well as the abolition of tariffs and customs duties on trade between member states.² The Treaty aimed to develop the economies of its members through uniform trade policies and practices, thereby raising the living and working standards of its population. The Treaty also aimed to create closer ties amongst member states as a way to ensure peace and stability throughout the region.³ The Treaty created an operational framework of four main institutions, namely, the Commission, the Council of Ministers, the Parliamentary Assembly (subsequently to become the European Parliament), and the court of justice.⁴

The UK and Denmark joined the EEC in 1973, with Greece joining in 1981, followed by Spain and Portugal in 1986. Austria, Finland, and Sweden joined in 1995. Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined in 2004, followed by Romania and Bulgaria in 2007. In 2013, Croatia joined as the twenty-eighth member.⁵ Further treaties have subsequently been signed, and today the EEC has become the EU. The EU was officially established when the Maastricht Treaty came into force on November 1, 1993. The Maastricht Treaty is of particular significance because it not only brought about the formation of a single currency—the Euro—but also created European citizenship, a common EU foreign policy, a common EU security policy, and closer judicial cooperation.

It should be noted that when a country joins the EU it agrees to be bound by multiple EU laws and legal authorities in addition to its domestic laws which are not derived from EU law. EU treaties and regulations are directly applicable to all member states and this is particularly true when it comes to external trade law.

III. THE UK'S DECISION TO LEAVE THE EUROPEAN UNION

In a public vote (referendum) held on June 23, 2016, the UK chose to leave the EU by a margin of 51.9% to 48.1%.⁶ This decision has come to be referred to as "Brexit." After much political turmoil in the UK in the aftermath of Brexit, the Conservative government of Boris Johnson managed to pass domestic legislation which translated the results of Brexit (i.e., a departure from the EU) into UK law. Specifically, the European Union Withdrawal Agreement Act of 2020 (Withdrawal Agreement) passed both Houses of Parliament—the House of Commons and the House of Lords—and received royal assent on January 23, 2020, thereby becoming UK law.

The Withdrawal Agreement took effect on January 31, 2020, and it repeals the European Communities Act which brought the UK into the EEC in 1973, as well as sets out certain other limited terms relating to the UK's withdrawal from the EU. Under these terms, the UK has now entered into a period of transition whereby it remains bound by EU law until December 31, 2020, with the exception of those EU treaties, regulations, directives, and acts that were not legally binding on the UK prior to the Withdrawal Agreement coming into force. In particular, the Withdrawal Agreement will keep the UK in the EU Customs Union and the Single Market through December 31, 2020.

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The Customs Union considers all member states as one customs territory. The EU imposes a customs tariff on imports from all countries outside the customs territory, and the tariff rate is common across all EU member states. Goods may be customs-cleared in any EU member state upon entry at any EU border, and can then move freely throughout the EU without further customs checks.

The Single Market allows the free movement of goods and services throughout the EU without any internal borders or regulatory barriers. For example, EU countries cannot impose their own national laws which prevent or limit the sale of goods between member states. Also, the free movement of services allows EU workers to move without restriction throughout the EU.

During this transitional phase, the UK and the EU will look to carve out a future relationship which establishes, amongst other things, the basis upon which the UK and the EU will trade once the transition period ends at midnight on December 31, 2020. The ultimate UK negotiating objective is a future free trade deal whereby manufactured and agricultural goods can still move between the UK and the EU without any tariffs, fees, charges, or quantitative restrictions where those goods meet the relevant rules of origin⁷ At the same time, the UK will not want to be bound by existing EU regulations. Other areas for discussion include law enforcement, data sharing and security, aviation standards and safety, product safety, and EU access to UK fishing waters.

In the event that there is no trade deal between the UK and the EU at the end of the transition period (the so-called No Deal Brexit), the UK will no longer have free access to EU markets. The trading relationship between the UK and the EU will then be governed by terms agreed to by both parties under the auspices of the World Trade Organisation. The UK would also...