At long last, Brexit is behind us. On January 1st, the transition period officially came to an end and the new trade deal secured by the UK government between the UK and the EU took effect. The UK’s ongoing relationship with the EU is now governed by the EU Withdrawal Agreement and a Trade and Cooperation Agreement (“TCA”). While businesses can expect years of ongoing discussions between the two, the agreement does represent a moment for businesses to start making longer-term decisions.
Although many companies will have prepared for the worst and implemented changes to their supply chains and growth strategies, the uncertainty that dictated the business landscape for several years inevitably means there will be gaps to fill and concerns to address. In light of this, we’re running through the key legal considerations for your business to be making to help you remain confident and compliant in a new regulatory environment.
Retained EU law in the UK after Brexit
Firstly, while the UK is no longer a member of the EU, it’s worth mentioning that some EU law has been carried over into UK law despite the passing of the transition period. The European Union Withdrawal Act 2018 provides a new framework for the continuity of retained EU law. Retained EU law are the key pieces of EU legislation that were effectively transferred into our domestic legal system, replacing EU treaties that fall under the following categories:
- Direct EU Legislation: This is defined as all EU regulations, decisions or tertiary legislation and certain parts of the EEA agreement.
- EU-Derived Domestic Legislation: This is defined as domestic law which related to former EU obligations such as those passed to implement one or more EU directives.
- EU Rights & Powers: This preserves any directly effective residual rights, powers, liabilities, obligations, restrictions, remedies and procedures in EU law, subject to several specified exceptions.
The challenge here is that, while this amounts to over 150,000 pieces of EU legislation, not all of these will have an impact in the UK. Further, no official record has been kept to officially declare which EU treaties have been converted into domestic law. As such, an assessment of each EU law is required to determine whether it has been amended or revoked post-Brexit.
The impact of the UK-EU TCA on supply chains
Agreed in principle on 24 December 2020, the UK-EU Trade and Cooperation Agreement (TCA) now applies on a provisional basis until the European Parliament consent is obtained. The TCA largely focuses on free trade, providing the long-awaited clarity as to the new trading relationship between the EU and UK. It covers the following key areas:
The TCA states that goods “originating” in the EU-UK free trade area will not be subject to customs duties. However, should goods fail to meet the relevant origin rules as specified below, they will be subject to WTO tariffs.
The TCA ensures that duty suspensions and quotas will be available in certain cases, allowing duty-free importation into the UK of certain goods used in domestic production. This will assist domestic industries that do not have sufficient local access to key materials or components. Once granted, a suspension can be used by any business in the UK, it is not specific to the company which applied. Tariff suspensions are in force for an initial period of 12 months. From here, an assessment will be carried out to determine the benefit to the UK economy.
Under the TCA, no export duties or taxes may be imposed on the other party’s goods, and any internal taxes such as VAT cannot be higher than that applicable to domestic goods. However, the Parties can impose anti-dumping, anti-subsidy or safeguard measures on each other’s products.
Rules of origin
While on qualifying goods a zero-tariff will apply, this is not the case for goods which do not meet the sufficient processing rule. Goods which are imported from the EU to the UK and which do not undergo sufficient processing while in the UK, will not be eligible for the tariff preferences if they are re-exported to the EU. In other words, you can only claim this preferential rate of duty if you move “qualifying goods” and have the relevant documents to support this.
You will be entitled to such zero tariffs if you have either:
- A statement on origin that the product is originating made out by the exporter
- The importer’s knowledge that the product is originating
Traders will be permitted to self-certify the origin of goods.
As the UK has left the EU Customs Union, all customs controls required under EU law will apply to all goods traded between the EU and the UK. These require the completion of security and safety declarations and import and export declarations.
Under the TCA, all imports must meet all the standards of the importing party and will be subject to regulatory checks for safety, health and other public policy purposes. That said, bespoke provisions have been implemented to simplify procedures such as administrative cooperation at ‘roll-on roll-off’ ports, and the parties will be exploring the possibility of sharing import and export declaration data. Similarly, both parties have agreed to cooperate on recovery of customs duties and combating VAT and indirect taxes fraud.
How will Brexit affect businesses?
While key elements around the future of trade between the UK and EU remain uncertain, there are now several steps that businesses should take in light of the TCA.
Commercial & Contracts
As the name suggests, most commercial contracts are based on the specific commercial agreement between the parties, so are less heavily regulated than other areas of law. However, we recommend an in-depth assessment on the impact that Brexit has on your contractual obligations – for example, if the agreement is in itself significantly affected by the UK’s membership of the EU or the extent to which EU applies in the UK
Ideally, a commercial contract audit should be undertaken to identify which of your contracts are the most vulnerable to post-Brexit changes.
An example of this could be contracts entered into with parties in EU member states, or those that rely on frictionless trade between the UK and EU. From here, a specialist lawyer should assist in reviewing the particular terms, focusing on elements such as which legislation governs the contract, currency, force majeure clauses, price adjustment, export/import licences, data privacy and the territorial scope of the contract.
An expert will analyse and be able to advise on the impact of Brexit on your key commercial contracts or present opportunity.
Employment & Immigration
Until June 30th, 2021, you must continue to perform Right to Work checks on any EU/EEA/Swiss job applicants. However, as of January 1st, 2021, EU citizens moving to the UK for work will require a visa, which they will be able to acquire through a job offer from an approved employee sponsor. If you are intending to recruit from the EU, you will need to apply to become an approved sponsor. This can take eight weeks from the date of application.
According to new requirements, the job offer must be for a position deemed under the Regulated Qualifications Framework (RQF) as a level 3 and above, roughly equivalent to A-levels or Scottish Highers.
In addition to this, the candidate must speak English to an “acceptable standard” and the job offer must meet the minimum salary threshold. This is the higher of either:
- the general salary threshold set by Her Majesty’s Government on advice of the independent Migration Advisory Committee at £25,600, or
- the specific salary requirement for their occupation, known as the “going rate”.
Employers seeking to hire talent to the UK branch of a global business from overseas branches will be able to do so via an Intra-Company Transfer visa route. They must also issue the applicant with a Certificate of Sponsorship.
GDPR & Data protection
The UK Government adopted the GDPR into national law as part of the Data Protection Act 2018, so the same requirements will apply that are currently in place. If you currently have a GDPR-compliant framework by which your business registered, handles and stores personal data of EU citizens, this should continue to be implemented for UK citizens.
Moving forward, the UK is seeking to become a ‘favoured nation’ via an ‘adequacy decision’ on behalf of the EU, which would facilitate the free transfer of personal data between member states and the UK. There is not, as some had hoped, an adequacy decision for transfers of personal data from the EU to the UK built into the TCA, but it does contain interim measures to ensure the flow of data for a period of up to six months.
Regardless, it’s a good idea to assess what data flows are currently taking place under your contracts and have a specialist lawyer assess the framework for data protection in your business to ensure compliance with the legislation.
National intellectual property rights covering the UK remain intact. This applies to UK patents and European patents covering the UK; supplementary protection certificates; UK trademarks; UK registered and unregistered design rights; copyright and neighbouring rights; trade secrets and co.uk domain registrations.
EU Trademarks no longer protect trademarks in the UK, but the IPO has created a comparable UK trademark for all right holders with an existing EU mark. This allows trademark holders to retain the same filing and registration details as well as priority and seniority claims. For more information, head on over to 360Trademarks, our trademark registration service, where you will find details on the impact of Brexit.
On January 25th, we’ll be holding a webinar aimed at employers in the UK to answer your questions around hiring skilled talent from the EU. Sign up to reserve your place today.
If you would like to discuss specific challenges or you require dedicated support from our lawyers, you can use our quick contact form or online chat function to make an appointment for a free consultation.