New rules for trade in goods with Great Britain applicable from January 2021

New rules for trade in goods with Great Britain

Following intense negotiations, on 24 December 2020 the European Commission reached an agreement with Great Britain on the conditions for future cooperation with the European Union (EU) after the ending of the post Brexit transition period, agreement that covers trade in goods.

Alin Negrescu

Partener Consultanță Fiscală, Head of Automotive & Industrial Markets

KPMG in Romania


Nevertheless, even after the application of the new agreement on commercial relations and cooperation between the EU and Great Britain, major changes have taken place with effect from 1 January 2021. On this date, Great Britain left the EU Single Market and Customs Union. EU law, as well as all trade policies and agreements signed, are no longer applicable. Consequently, the free movement of people, goods, services and capital between Great Britain and the EU has ended.

To maintain mutually advantageous commercial relations, as part of a wider economic partnership, the two sides have agreed that commercial relations between them will take place without customs duties or quotas and with regulatory and customs cooperation mechanisms, as well as provisions which will ensure equitable conditions for open and fair competition.

Main provisions of the agreement on trade in goods

On 24 December 2020, the negotiating teams from the EU and Great Britain reached an “agreement in principle” on the text of a new “Trade and Cooperation Agreement” for the purpose of regulating relations with the two sides following the ending of the transition period on 31 December 2020. Although the new agreement between the EU and Great Britain does not provide for a level of cooperation as close as that which existed when Great Britain was a member of the EU, it does offer a solid basis for maintaining future commercial relations.

The agreement between the EU and Great Britain goes beyond recent free trade agreements between the EU and third countries because of its provision of zero customs duties for all goods. To benefit from this preferential treatment, companies need to demonstrate that their products fulfill all the necessary requirements with respect to the origin of the goods, according to the regulations set out in the agreement. To facilitate compliance and reduce bureaucracy, the agreement allows traders to self-certify the origin of the goods.

Nevertheless, all the controls and customs formalities required by EU legislation (in particular the EU Customs Code) have begun to apply to all goods which enter the EU from Great Britain or which are exported to Great Britain. However, as a result of the agreement, customs procedures will be simplified, as both parties wished. Further areas on which the two sides have agreed to cooperate are the recovery of customs duties and cooperation to combat fraud in relation to VAT and other indirect taxes.

KPMG Comment

Trade with the UK under this agreement- even though it is a broad one with zero customs duties- will inevitably be very different in comparison with trade within the EU internal market, in which customs formalities are not necessary. Consequently, we recommend that companies which acquire or deliver goods from/to Great Britain should pay careful attention to an analysis of the provisions of the agreement signed in December between the EU and Great Britain.

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