The Withdrawal Agreement and Transition Period
What is the Brexit deal?
The Government’s Brexit deal comprises the arrangements for the UK’s withdrawal from the European Union on 29 March 2019 (the Withdrawal Agreement) and the framework under which the UK and EU will agree a future relationship after the UK’s withdrawal (the Political Declaration).
What is the Withdrawal Agreement?
The Withdrawal Agreement sets out the terms of a transition period over which the EU and the UK could negotiate their future trade partnership. A position that EEF has long argued for and one which is crucial to provide stability while international trade discussions are conducted.
It means that in the immediate aftermath of March 2019 the UK’s trade relationship with the EU would not change. The transition period would conclude in December 2020 with both parties using “their best endeavours” to have a future trade agreement concluded six months before the end of that period. If that were not the case the transition period could be extended for a maximum of two years.
Read the Withdrawal Agreement in full on the Gov.uk website
What is the Political Declaration?
The political declaration gives an overview of what the UK and EU’s future relationship would be in the long term. It is non-binding, it simply sets the ambitions for future talks. Both sides make clear they want a relationship that is “as close as possible” and based on an “ambitious Free Trade area”.
The declaration mentions explicitly an “independent trade policy” for the UK in the future but future negotiations will decide how this will be achieved in a way which is “consistent with the [European] Union’s principles, in particular with respect to the integrity of the Single Market and the Customs Union and the indivisibility of the four freedoms”. Read the Political Declaration in full on the Gov.uk website
What is the transition period and how long will it last?
The draft Brexit agreement sets out a transition period starting on 29 March 2019 and ending on 31 December 2020. The draft agreement goes on to say that both parties will “use their best endeavours” to have a future trade agreement concluded six months before the end of the transition period on 31 December 2020, but that if this is not the case the EU and the UK could “jointly extend the transition period” for up to one or two years.
What is EEF’s position?
EEF believes that the Withdrawal Agreement provides the basis for a pragmatic and sensible departure. It gives business confidence and clarity about the trading environment for the immediate future. Crucially, it will ensure that the UK avoids a damaging exit without a deal.
The Political Declaration provides a framework under which EEF can continue to campaign for the needs of UK manufacturing to achieve our four key outcomes:
- Frictionless trade;
- Ability to fill the skills gap and fulfil service contracts;
- Now that we have certainty on its length, a properly planned and delivered transition and implementation period;
- Maintain close regulatory and technical alignment.
What will happen after March 2019 in the event of a no deal Brexit?
What are tariffs?
Tariffs are customs duties or taxes charged on specific products as they cross borders between countries. At present, there are no tariffs on goods as they cross the EU border from the UK as we are part of the Single Market.
Post-Brexit, in the event there is no deal, the EU will look to charge tariffs on products entering the EU. The UK will also charge tariffs on products entering the UK. In the event of a no-deal Brexit, the UK will revert to World Trade Organisation (WTO) tariffs.
How will customs administration work?
After Brexit, in the event of an eventual no deal post-transition period, there will be new customs administration forms to fill in. Until negotiations are completed, we do not know exactly what these customs procedures will look like.
However, it is likely manufacturers will need to complete new customs declarations before they are able to have their products cross the border into the EU, and on any components they import from the EU.
What do I need to know about Rules of origin (ROO)?
Rules of Origin show the economic nationality of the product. They need to be agreed between the EU and the UK. Once agreed, to prove British origin of a good, a certificate of origin (often abbreviated to C/O or CoO) is needed. In can be a printed form or an electronic document. It is completed by the exporter and certified by a recognised issuing body, showing that the goods in a particular export shipment have been produced, manufactured or processed in a particular country. You can find out more using our exclusive Brexit trade tool.
Will standards stay the same post-Brexit?
If the Withdrawal Agreement is signed, yes, standards will stay the same during the transition period. Our national standards agency the British Standards Institute (BSI) has begun the process of a fully-fledged member of the European standards setting agencies – in a position to lend its considerable knowledge to this complex issue.
The Withdrawal Agreement looks to “explore the possibility of cooperation of United Kingdom authorities with Union agencies such as the European Medicines Agency (EMA), the European Chemicals Agency (ECHA), and the European Aviation Safety Agency (EASA). This is a softening of the EU position which had been staunchly against any cooperation.
What regulation changes will there be?
Under the transition set out in the draft agreement, the UK will fully comply with EU rules and regulations until the end of the transition period in either 2020, or longer subject to an extension.
As a country we need to retain the status quo – that is high regulatory alignment with the EU to protect our current trading relationships after the transition period comes to an end in 2020. As a country we have a mass of technical expertise which we can contribute and EEF is campaigning hard to make sure the UK has a say at the decision making table – both creating new regulation and adapting what already exists.
What is happening about the Irish Border or backstop agreement?
On the Northern Ireland backstop, the document says “The Parties recall their determination to replace the backstop solution on Northern Ireland by a subsequent agreement that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing.”
This is set out in the protocol on Northern Ireland which would come into force after the transition period should the UK and EU fail to find an agreement which ensures an open border and protects north-south cooperation.
It ends, partially or entirely, after agreement is reached between EU and UK which supersedes some or all elements of the protocol. The protocol envisages a single customs territory will be established between the UK and the EU, with a level playing field for regulation between the UK and the EU, with Northern Ireland remaining directly subject to a range of EU legislation.
Will there be new trade deals for the UK?
The first priority of the Government must be to ensure the status of our current trade relationship with whom the EU has an existing trade agreement. In parallel to this, Government is currently working to seek out new trade opportunities for the UK outside the EU. Ministers and officials from the Department of International Trade are speaking to governments around the globe, and have already been to Saudi Arabia, Australia, India and USA. Will not will not be able to bring into force any of these until any transition period is at an end.
Will I still be able to employ people from the EU during the transition period?
During the transition period the ability to move workers into and out of the UK remains the same as it is now. For many years, our sector has been using EU labour to fill those gaps. Couple this with record low unemployment and we are left with areas in the UK with little – or no – flex in the labour market. This access to the EU talent pool remains vital.
What can I do to prepare my business now?
1. Acquire Authorised Economic Operator (AEO) status
AEO status can provide the right to ‘fast-track’ shipments through the customs process. Some 13,000 vehicles carrying goods pass through British ports each day – with an excess of 10,000 coming either to or from other EU member states. Stringent new checks at borders will mean that there will be a rush of applications for AEO status. Many traders will have to make customs declarations for the first time post Brexit, and AEO status could be useful in mitigating this complex process.
There is a complex application process with around 270 questions on legal, HR, IT and financial issues. It can take six months to properly prepare an application, so start now. You can get support through this process from our exclusive Brexit trade tool.
2. Research the Single Administrative Document (SAD), also known as Form C88 in the UK
This is the main customs form used in international trade to or from the European Union Customs Union. It helps traders with declaring import, export, transit and community status declarations for countries outside the EU. It also covers the movement of non-EU goods within the EU.
Following EU exit, this may be a tool which will be used for all imports and exports between the UK and the EU.
3. Map out your supply chain
Make sure your company knows where you are sourcing your materials as well as where the companies in your supply chain are sourcing theirs. This will be essential when it comes to proving Rules of Origin.
Has the UK reached an agreement with the EU on the rights of EU citizens already in the UK?
The UK has reached an agreement in principle with the EU on the rights of citizens already in the UK, but with some details left to be decided. The deal is not yet binding, however we expect the rights of EU citizens in the UK before Brexit will remain largely unchanged.
Will my EU employees who are already working in my business be able to stay and work in the UK after Brexit?
Yes, the agreement will allow EU citizens already in the UK to stay after the UK leaves the EU on 29 March 2019 and in due course gain permanent settlement here, known as ‘settled status’. They will be able to continue to live and work in the UK permanently. Their rights to healthcare and access to benefits will also continue. This part of the deal applies to EU citizens, their families and dependents also in the UK and will be subject to a formal application process made under the new EU Settlement Scheme which includes the payment of a fee as well as some eligibility criteria.
Does the same deal cover EU citizens, their families and dependents arriving in the implementation period (the time between March 2019 and December 2020)?
Yes it does. The agreement extends the same protections to EU citizens and their family members arriving in the UK, whether that is before the date the UK leaves the EU (29 March 2019), or during the implementation period (which starts immediately after 29 March 2019 and runs until 31 December 2020). This is subject to the approval of the withdrawal agreement. In the event of no-deal there may be different rules for those arriving after Brexit (29 March).
Does the agreement cover all EU citizens?
Yes it does, however, citizens of the Republic of Ireland are already covered by a separate agreement with the UK. This agreement treats Irish citizens for most purposes the same as UK citizens, and the UK has signalled its intention to carry this agreement forward after BREXIT. EU citizens with a British passport will not need to do anything differently post-Brexit.
Whilst the agreement with the EU does not cover the citizens of the non-EU European Economic Area states (Iceland, Liechtenstein and Norway) and Switzerland, the Government has recently announced that the UK has reached an agreement with Iceland, Liechtenstein and Norway which protects the rights of our citizens who have chosen to call each other’s countries home. This agreement largely mirrors the Withdrawal Agreement agreed with the EU.
Who is eligible to apply for settled status immediately?
EU citizens and their family members who, by 31 December 2020, have been continuously resident in the UK for five years will be eligible to apply under the EU Settlement Scheme for ‘settled status’, enabling them to stay in the UK indefinitely.
What about those EU citizens who arrive by 31 December 2020 but haven’t been continuously resident in the UK for five years?
EU citizens and their family members who arrive by 31 December 2020, but will not yet have been continuously resident in the UK for five years, will be eligible under the EU Settlement Scheme for ‘pre- settled status’.
Pre-settled status means that the person will be granted five years’ limited leave to remain in the UK and they will be eligible to apply for settled status as soon as they reach the five-year threshold.
What does ‘continuously resident’ mean?
Continuously resident in the UK generally means that the individual must not have been absent from the UK for more than six months in total within any 12-month period. There is no restriction on the number of absences permitted, provided that the total period of absence does not exceed six months in any 12-month period. There are some limited exemptions for absences up to 12 months for illness, training, pregnancy or an overseas posting. Only one such period is permissible over a five-year period.
Will family members be able to apply for settled status?
Yes, although there may be some difference in the position of family members depending on when they entered the UK.
Whilst every individual person needs to satisfy the new requirements of the EU Settlement Scheme, applications made at the same time by families will be considered together. In some circumstances, where an EU parent is entitled to settled status, other family members will also be similarly entitled, even if they have not lived in the UK for 5 years.
After 31 December 2020, only close family members with a pre-existing relationship are likely to be able to join an EU citizen in the UK. Close family members are parents, grandparents and dependent children.
How long will an EU citizen have to apply for settled status?
The UK government is continuing to roll-out the pilot EU Settlement Scheme and it will be fully operational by 29 March 2019. Applications can be made from the time of opening until the end of June 2021 to submit their application for settled status or pre-settled status. They do not need to have acquired five years’ residence in the UK by June 2021, merely submit an application for either settled status or pre-settled status.
How much will it cost to apply under the Settlement Scheme?
The application fee will be £65 for an adult and £32.50 for a child (under the age of 16). There will be no application fee for settled status if the person already has pre-settled status granted under the Scheme. Also, if the applicant already has a permanent residence document then the application is free.
What is involved in the EU Settlement Scheme Process?
The EU Settlement Scheme will be a digital application process. There are a number of core criteria which applicants will need to meet:
- Proof of Identity – verifying their identity and nationality, generally through their passport, national identity card or biometric residence permit (we understand that there are very few of these and in most cases a passport will be needed).
- Eligibility – establishing that the applicant is resident in the UK and, if appropriate, is a family member of an eligible EU citizen. Where possible, establishing continuous residency will be carried out on an automated basis using data from HMRC.
- Payment of the fee - £65 for an adult application and £32.50 for a child (under the age of 16).
- Suitability (criminality) –a criminality and security check will be carried out on applicants.
- Identity verification – the applicant will need to provide a facial image which will be checked against the photograph on their passport or ID card.
How is the length of residency in the UK established?
The most straightforward applications will have the length of UK residence confirmed by automated checks of HMRC, showing tax paid in the UK. However, the applicant will also be able to upload documentary evidence to prove their residency. The UK Government will publish a list of the forms of documentary evidence which the applicant will be able to provide.
The documents that are likely to be acceptable include: a signed and dated letter from an employer confirming the period of UK-based employment, payslips and addressed council tax bills.
When will the application process go live?
The EU Settlement Scheme is currently being piloted with certain groups and will be fully operation by 29 March 2019.
What’s the position of UK citizens and their families in the EU?
The same agreement which allows EU citizens to remain in the UK between 29 March 2019 and 31 December 2020, covers UK citizens in the EU, where there will be equivalent arrangements put in place. This will allow UK nationals resident in the EU to settle permanently and continue to live/work/study in the EU member state where they reside after the UK leaves the EU but not generally throughout the EU.
What is the Customs Union and the Single Market?
What is the Customs Union?
This is an area with a common set of rules for trading goods. These rules are applied at the border of the Customs Union. The Customs Union is made up of all Member states of the European Union together with certain others. No customs duties are levied on goods travelling within the Customs Union and—unlike a free trade area—members of the Customs Union impose a common external tariff on all goods entering the union from further afield.
EEF is working closely with our members and lobbying government to avoid any slide back to hard borders, tariffs and complex customs arrangements. These would have tremendous impact on productivity, thousands of jobs and the UK economy as a whole.
We are asking that government delivers:
- A low administrative threshold for manufacturers
- Tariff free and quota free movement of goods
- Common rules of origin with the EU and the rest of the world
What is the Single Market?
The European Single Market, or Common Market, is a single area where goods, services and capital can move freely and people can travel without barriers. Within this area, EU businesses and people can trade as easily with another member state as they can in their own member state.
The government has set a red line on movement of people and the jurisdiction of the Court of Justice, which will therefore leave the UK firmly outside the Single Market.
EEF is actively campaigning for a system that:
- Allows flexible movement of people
- Has closely aligned regulation between the EU and UK and
- A system of arbitration that works for both