Brexit: Agreement ‘in principle’ on the Northern Ireland Protocol
What are the implications for trade between GB and NI?
18 December 2020
The Northern Ireland Protocol, agreed as part of the Withdrawal Treaty, seeks to avoid a hard border on the island of Ireland, protect the EU single market and maintain Northern Ireland’s place in the UK internal market when the UK leaves the EU single market and customs union on 31 December 2021 (“Protocol”). The UK government’s Command Paper sets out the details of what has been agreed in principle with the EU for implementation of the Protocol. In this article, we consider the key points for GB: NI trade, being:
- Tariff Free Internal UK Trade / Trusted Trader Scheme
- Grace Periods
- State Aid
- Unfettered Access.
1. Tariff Free UK Trade: Trusted Trader Scheme
Goods entering NI from GB that are not considered to be “at risk of onward movement into the EU”, will not be subject to EU tariffs. This is irrespective of whether a wider free trade is reached with the EU. An authorised trusted trader scheme (“UKTS”) will be developed to allow authorised businesses established in NI (or businesses who meet certainly closely linked criteria), to self-certify that their goods are being sold to consumers in NI, or that they are destined for final use in NI or the rest of the UK. Importantly, goods entering NI from GB via the EU (i.e. Irish Ports) will also be able to avail of UKTS, under transit procedures and customs supervision.
The UKTS will be open to businesses moving goods into NI from GB irrespective of where those goods have originated. It will also apply to movements of goods from the rest of the world directly into Belfast, which will benefit from the scheme where the UK Tariffs are higher than the EU equivalent, where the UK and EU tariffs are identical, or where the UK tariffs up to 3% less than the EU tariff. There will be a rebate applied to any goods to which an EU tariff was applied where it can be shown that the goods have remained in UK customs territory.
Additionally, the UKTS includes a series of certain safeguards designed to prevent abuse, including an “emergency brake mechanism” in 2024 in the event of significant diversion of trade, fraud or other illegal activities.
The agreement in principle has also clarified that certain sectors are exempt from being automatically considered “at risk”, including:
- Food for sale to end consumers in the UK;
- Construction, where such goods will become part of a structure in NI;
- Direct health and care provision;
- Not for profit activities in NI; and
- Processing carried out by importers of animal feed for final use at their premises in NI.
2. Grace Periods
The UK and EU have agreed some “grace periods” to address concerns in the Protocol regarding the requirement for new paperwork and checks for certain products which were due to come into effect the end of the transition period.
Agri-food / SPS
A 3 month (non-renewable) grace period (ie until 1 April 2021) will apply for authorised traders, such as supermarkets and their trusted suppliers, from official certification for:
- Products of animal origin;
- Composite products;
- Food and feed of non-animal origin and plants and plant products.
Sanitary and phytosanitary (“SPS”) paperwork will not be required during the Grace Period for authorised traders when moving goods from GB-NI.
The UK Government and the NI Department for Agriculture, Environment and Rural Affairs will participate in a “rapid exercise” to identify these authorised traders.
A 6 month grace period is available for certain products for which trade is restricted under EU law, including, chilled and frozen minced poultry meat and chilled minced meat from animals other than poultry.
Additionally, a new movement assistance scheme will begin in the middle of December for agri-foods traders, to deal with “reasonable cost” of the new SPS paperwork such as Export Health certificates.
To ensure that there is no disruption to the flow of medicine supply in NI, businesses will be allowed a 12 month grace period (until 31 December 2021) to prepare for the regulatory measures required by the Protocol. These measures specifically apply to batch testing, regulatory importation requirements and the Falsified Medicines Directive. The agreement assures that support will be provided, assisting with things such as the delivery of additional warehousing capacity in NI, if required.
3. State Aid
The agreement has confirmed that EU state aid rules will only apply to measures where trade is affected between NI and the EU. Specifically, it will be limited in scope to the movement of goods and wholesale electricity markets. For an aid measure to have an affect between NI and EU, there must be (i) a “genuine and direct link” to Northern Ireland and (ii) the potential effects of an aid measure on trade between NI and the EU must be real and foreseeable.
NI agricultural support will be exempt from EU state aid rules up to an initial overall maximum cap of £380m.
4. Unfettered Access for NI Businesses to the GB Market
From 1 January 2021, “Qualifying Goods” moving from NI to GB will be exempt from exit summary declarations and import export declarations of any kind, and will be entitled to unfettered access to GB. “Qualifying Goods” are goods present in free circulation in NI or are NI processed products. Non-Qualifying Goods” will be subject to full controls. It is understood that such measures on “qualifying status are temporary, and a more long-term structure will follow in 2021. Allowing the UK Government to deliver on their promise, this decision is beneficial for business in NI, as it will avoid the need for paperwork and rigorous checks on NI goods.
If you have any queries the Corporate team at Carson McDowell would be happy to help.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.