On 24 December 2020 the EU-UK Trade and Cooperation Agreement (EU-UK TCA) was agreed and became operational from 1 January 2021. This followed the EU-UK Joint Committee’s formal endorsement on 17 December 2020 of all decisions and other practical solutions related to the Protocol and the implementation of the Withdrawal Agreement which also became operational from 1 January 2021. Johnny Hanna and Frankie Devlin of our Belfast office explain.
Notwithstanding the wider EU-UK TCA on 24 December 2020, the Protocol is the international legal agreement that will govern trade in goods in relation to Northern Ireland (NI) for at least the next 4 years. The legal text included in the December decisions and the guidelines in the December Command Paper set out the main operational aspects of the Protocol, for example, whether goods are “at risk” of moving into the EU and subject to EU tariffs. Whilst the EU-UK TCA provides the potential for zero tariffs and zero quotas on trade in goods between the EU and the UK, including on goods moving into NI from Great Britain (GB) and Rest of World (ROW), this will depend on a number of criteria, including complex rules of origin requirements in some cases.
The Protocol which was agreed as part of the Withdrawal Agreement seeks to avoid a hard border in Ireland, protect the EU Single Market and maintain NI’s place in the UK internal market. It provides that whilst NI remains part of the UK VAT area and Customs territory, it also has access to the EU’s Single Market. To achieve this NI is required to continue to apply EU Customs rules, Single Market rules on goods coming in and out of NI, as well as applying EU VAT rules on goods traded in NI.
A number of late derogations were agreed between the EU and the UK in December 2020, as the UK was not fully ready for the end of the Transition Period, in particular, regarding the import of food products from GB into NI. For this reason, the EU and the UK agreed a number of time limited derogations (i.e. grace periods) in a number of areas, such as Export Health Certificates, import of meat products, medicines and a number of other areas. Although there will be a period of time required for businesses and Government agencies to fully adjust to the new trading rules and a number of grace periods have been agreed to ease this transition, the Protocol is now legally effective and fully operational. In this document we have focused on the main (but not all) areas affecting trade in goods for NI. This includes:
We have also included some comments around the new rules of origin conditions set out in the EU-UK TCA and how we see these interacting with the "at risk" rules.
The agreement endorsed by the EU and UK on 17 December 2020 in respect of “at risk” goods was reached to support tariff free internal UK trade, where certain criteria can be met. This agreement contained provisions for both elements of the two-stage test, i.e. the commercial processing element and the at risk of subsequently moving into the EU element. We cover the main "at risk" issues and also the rules of origin implications for finished goods that are not subject to commercial processing under section a) below. For goods subject to commercial processing in NI see section b) as further "at risk" criteria needs to be considered.
a) A good will not be considered to be "at risk" of entering the EU Single Market if:
The above "at risk" tests are complicated and the rules of origin rules under the EU-UK TCA, applicable to GB goods entering NI, will add further complexities for certain products and industries. However, it should be noted that where goods moving from GB to NI can qualify for a zero tariff under the EU CCT, or for a zero tariff preference under the EU-UK TCA, they can enter NI tariff free without the business needing to use the trusted trader scheme to declare the goods not "at risk". The test of whether goods are "at risk" is determined at the point at which the goods move into NI into free circulation. Whether those goods are able to claim a zero tariff under either the EU CCT, or under the EU-UK TCA at the time of import is the key issue for businesses. We discuss further in a later section below the EU-UK TCA rules of origin criteria and the interaction with the at risk test.
The UK Trader Scheme
How does the TCA (including rules of origin criteria) impact on the "at risk" test for goods that fall into the above category (i.e., finished goods not subject to commercial processing in NI)?
b) What about goods subject to “Commercial Processing” in NI?
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