Brexit, extensions, and the Customs Union

Experts say that EU traders will benefit from extended union membership talks

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David Johnson, managing director of Tudor International Freight, based at Horsforth, Leeds, said the present arrangements meant trade with the bloc “could hardly be easier, quicker, or cheaper for the industry’s companies.”

Mr Johnson was reacting to the potential extension of the UK’s transition period. This is due to take effect when the country leaves the EU next March, provided it can conclude a withdrawal agreement - covering items such as payments due, citizens’ rights and the Irish border - with its partners first. 

You might be interested in our recent article on the impact of Brexit.

The UK’s transition period is currently set to run until the end of 2020 but there were suggestions at the recent EU heads of government summit in Brussels that this could be extended by several months, a change British Prime Minister Theresa May agreed was a possibility.

Customs Union benefits

Mr Johnson said: “During the transition period, the UK will effectively remain within the Customs Union, which includes all EU states, plus some other countries. To continue to operate within the Customs Union would allow oil and gas companies trading with the EU to avoid tariffs on goods shipped between members, as well as burdensome border checks.

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“The UK’s membership of the Customs Union has helped hugely to create the current situation whereby the only documentation we need is a copy of the packing list or commercial invoice, and the travel document, when we import goods from the EU on a client’s behalf.

“This is a waybill for air freight, a bill of lading for sea consignments and a CMR note for road haulage. No customs clearance processes or duties apply, and no VAT is payable before goods can be moved from receiving ports or airports.”

Prolonging the Brexit transition

Mr Johnson said extending the transition period would not only extend this advantageous system for oil and gas industry businesses but also provide more time for the longer-term arrangements between the UK and EU - by far the UK's largest trading partner - to be negotiated and ratified.

See also: Oil & Gas IQ's special Brexit report.

“Agreeing on the trading system to follow the transition period is a complex issue, given factors such as the almost universal agreement about the desirability of avoiding the return of a physical border in Ireland. Such a system could include the Prime Minister’s favoured plan of a Customs Partnership with the EU replacing UK Customs Union membership. Importantly, this would mean the continued absence of customs checks on goods shipped between the EU and UK.

“But if the so-called backstop, designed to address the Irish border issue, has to be implemented in the absence of other agreed arrangements, there’s still a chance the whole UK could effectively remain in the Customs Union indefinitely.

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“The EU has proposed that Northern Ireland should retain alignment with Customs Union rules without an end date being set, but the Prime Minister is reportedly more sympathetic to such an arrangement applying to the whole UK, though only for a specified period.”   

A post-Brexit future

Mr Johnson said that the post-transition period, and whether or not the UK remains a Customs Union member, or if this arrangement was replaced with some other system, was still shrouded in uncertainty. But, for now, many businesses would welcome the fact that the UK might at least retain its place within the Customs Union for longer than previously envisaged.

He said: “Our membership means conducting trade with firms in EU countries could hardly be easier, quicker, or cheaper for oil and gas sector businesses or the forwarders like ourselves that they employ.”

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