In November 2017, the UK Government took its first legislative steps in preparation for its post-Brexit trade regime. On November 7, the Trade Bill was introduced for a first reading in the House of Commons. Separate from the imminent trade deal it must strike with the EU (once progress on Brexit withdrawal negotiations are deemed satisfactory by all parties concerned), the UK is now sketching out its own international trade powers that will allow it to shape its relationships with partners worldwide.
Subsequently, on November 20, the Taxation (Cross-Border Trade) Bill (the “Customs Bill”) was introduced for a first reading in the House of Commons. The core elements of these two bills are described below.
There are three key components to the Trade Bill:
Part 1 – Joining the Government Procurement Agreement and Transitioning FTAs. Part 1 explicitly grants the UK Government power to join the Agreement on Government Procurement (“GPA”) as an independent member, rather than participating by virtue of its membership in the EU. The GPA is a “plurilateral” agreement – although it is hosted under the auspices of the WTO, membership is optional. This agreement allows members to benefit from access to each other’s government procurement markets. Such access to public contracts are reportedly worth around €1.3 trillion globally.
The powers under Part 1 will also enable the UK Government to effect a transition of the over 40 free trade agreements that that the EU is currently party to.
Part 2 – Creating a UK Trade Remedies Authority (“TRA”). Part 2 establishes the TRA, an independent public body that will be responsible for investigating, monitoring, and taking decisions concerning trade remedies (e.g. anti-dumping, countervailing measures, and safeguards) and unfair trade practices. The TRA is intended to replicate functions relating to trade remedies that are presently carried out by the European Commission on behalf of all EU member states. The TRA’s powers are set out in the Customs Bill (see below). However, both these Bills do not explicitly address the status of EU anti-dumping duties that only expire post-Brexit. As such, it is still unclear whether these duties will be automatically implemented (or if they will expire), or if the UK will be required to commence new anti-dumping investigations.
Part 3 – Gathering and Sharing Trade Information. Part 3 confers data collecting powers to the UK’s tax and customs authority, Her Majesty’s Revenue and Customs (“HMRC”), for the purpose of monitoring imports and exports. It also allows HMRC to disclose this information to other authorities in order to facilitate trade.
Following the first reading, the Trade Bill will now move to a second reading in the House of Commons. The date for this has not yet been set.
Currently, most of the rules governing UK customs and cross-border taxation activities are provided by EU law under the Union Customs Code and related legislation. The Customs Bill intends to set the groundwork for a contingency scenario where the UK exits without any customs agreement in place with the EU, and is not intended to preclude possible negotiated outcomes. In essence, the Customs Bill will enable the UK Government to set up a standalone customs regime post-Brexit and to amend laws relating to value added tax and excise duty.
This bill consists of four main parts:
Part 1 – Import Duty. Part 1 sets out the scope of import duties including: a description of chargeable goods, circumstances engendering liability for duties, amount of duty (as determined by the prospective customs tariff, taking into consideration adjustments such as preferential rates under FTAs, quotas, dumping, etc). Provisions for duties relating to anti-dumping, subsidies, and import surges are also included.
These provisions also reference the role of the (prospective) TRA. The powers of the TRA including those related to dumping and subsidization investigations and determining anti-dumping or countervailing amounts are set out in Schedule 4.
Part 2 – Export Duty. Part 2 allows the UK Government to charge export tariffs, and sets out the circumstances that must be considered in deciding whether to impose this, including consumer interest and the promotion of trade and UK productivity.
Part 3 – Value Added Tax (“VAT”). Part 3 amends current UK VAT legislation by replacing the current reference to “acquisition VAT” (for goods from other EU Member States) to an extension of “import VAT”. It also abolishes EU regulations related to VAT in accordance with the EU (Withdrawal) Act 2018, but maintains the relevance of the Implementing VAT Regulation (2011), and the Council Directive on VAT (2006), for “determining the meaning and effect of the law relating to value added tax” while ignoring other provisions superseded by new UK legislation.
Part 4 – Excise Duties. Part 4 provides authority for the UK Government to impose excise duties and related penalties. It also generally abolishes existing EU legislation on excise duty in accordance with the EU (Withdrawal) Act 2018.
Following the first reading, the Customs Bill will move to a second reading in the House of Commons. However, the date for this has not yet been set.