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UK Reveals Ambitious ‘Customs Union’ Plan in Newly Published Paper

On 15 August 2017, the UK Government published a paper which sets out options for new customs arrangements between the UK and the EU as part of a “future partnership”, post-March 2019. The UK will be leaving the EU Customs Union by default, at the same time as Brexit, unless arrangements are put into place beforehand.

As a result, the UK is seeking a new customs arrangement, first a temporary one and thereafter a permanent one, which would allow as free trade as possible in goods coming into and exported from a Brexited UK.

The 15 August paper is supposed to be the first in a setting out the UK Government’s views on its future relationship with the EU. Hong Kong traders channeling their goods to the UK through a variety of other Member States should know that the UK Government’s aspirations are that any new customs system should facilitate growth in trade with the EU and the rest of the world. It obviously wishes to reduce, as much as realistically possible, any additional administrative burdens or delays.

The Government has set out two broad approaches which the UK could adopt to meet its objectives:

  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on EU trade as possible. This would aim to continue some existing arrangements; reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures.
  • A new customs partnership with the EU, aligning its approach to the customs border in a way that removes the need for a UK-EU customs border. The UK is considering mirroring the EU’s requirements for imports from the rest of the world (e.g., Hong Kong) where the imports’ final destination is the EU.

Hong Kong businesses will appreciate that the second option above is unprecedented as an approach, and will undoubtedly throw up novel challenges to implement. If implemented, however, it would mean no customs checks between the UK and EU borders, a position that would be highly positive for imports from Hong Kong and elsewhere, in effect maintaining (mirroring) the pre-Brexit procedures that are already in place for trade between the UK and all other EU Member States.

The UK would, nonetheless, establish and operate its own checks on goods that enter its borders from outside the EU. Moreover, the Government would have to install safeguards to prevent goods entering the EU that do not comply with the applicable rules.

Whatever option is chosen for finalising customs arrangements, it is unlikely to be decided without negotiations with the EU. The UK is also keen to have a temporary arrangement in place, before a permanent one is installed. It is felt that both the UK and EU Member States would benefit from temporary customs arrangements, harnessing more time for then fully implementing the new customs arrangements. This would, according to the Government, avoid a “cliff-edge” for businesses and individuals exporting to and importing into the UK.

The paper’s proposals respond to points raised in discussion with business representatives, and are intended to be the start of a wider dialogue with both businesses and other stakeholders, ahead of negotiations in the autumn. Please click on the following to view the UK Government’s paper titled “Future customs arrangements: a future partnership paper”.

In Brexit trade-related news, the United Kingdom has inadvertently revealed parts of its post-Brexit trade policy through a job advertisement published on a government website. The advertisement brings to light the UK’s plan to set up a new body called the “UK Trade Remedies Organisation”. This body will tackle allegations of unfair trade practices and handle the anti-dumping, anti-subsidy and safeguard investigations which are currently within the remit of the European Commission. The creation of this body has not yet been announced officially.

According to the job advertisement for a “digital design lead” for the new team, the UK “need[s] to prepare for the point at which the UK leaves the EU and becomes responsible for its own independent trade policy”. The UK Government is expected to propose legislation to the UK Parliament to establish the UK Trade Remedies Organisation in September 2017 as part of the Trade Bill. The Organisation will be created as a new arm’s length body of the Department for International Trade.

The UK’s goal is to establish the new body with 180 staff by October 2018. As of that date, the advertisement states that the body should be in a position “to take on new investigations from UK producers (which would otherwise be concluded by the EU authorities after the UK has left the EU)”.

The intention to create the UK Trade Remedies Organisation does not come as a surprise. For the UK, a major manufacturing economy, a WTO-compliant trade defence regime is indeed of vital importance.

While the need for the UK to develop its own trade defence policy is clear, questions regarding the content of the UK’s approach to such policy remain. The UK could see the development of a new trade defence policy as an opportunity to design a regime that better supports its domestic producers. It has, for example, been argued that the UK should abolish the Union interest clause (which would become entirely superfluous) without replacing such a clause by a user interest rule in the UK. In addition, it has been argued that the UK should not apply a “lesser duty rule”, which is not mandated by the WTO agreements.

Uncertainty also remains regarding the existing EU trade defence measures currently imposed by the European Commission, and whether the UK will be able to adopt these measures as its own upon Brexit. On the one hand, the UK might continue to apply these measures after Brexit, progressively reviewing them along the way in order to ensure their WTO compliance. On the other hand, countries targeted by the existing EU trade defence measures (such as mainland China) might demand that the UK carry out its own independent investigations in order to meet its WTO obligations, such as demonstrating injury to the UK’s domestic industry.

Content provided by Picture: HKTDC Research
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