Firms exhale as UK and EU agree grace period on Brexit paperwork

Suban Abdulla
·3 min read
North England
The grace period eases the burden faced by car manufacturers and aerospace firms which import large numbers of parts from many countries. Photo: Getty

UK industries, including the car sector and manufacturers, have been granted temporary relief from some of the new red tape they face post-Brexit.

Firms exporting goods between Britain and the European Union will be given a 12-month grace period on some supporting Brexit-related paperwork in efforts to ease into the new regime.

Companies will not have to produce paperwork from their suppliers proving that their goods are locally made and eligible for zero-tariff access to the EU until 2022. This eases the burden faced by car manufacturers and aerospace firms which import large numbers of parts from many countries.

The Brexit deal agreed on Christmas Eve, secures tariff-free and quota-free trading between Britain and the bloc, but it also introduces new customs checks and paperwork at the border.

The trading agreement between the pair includes a one year waiver on declarations on “rules of origin” conditions, which state how much of an item needs to be locally made in order to avoid tariffs.

Under the terms, tariffs will be charged on goods that do not meet rules of origin requirements.

“This new agreement will mean that vital industries with complex supply chains, such as automotive, supporting thousands of jobs, have more time to adapt to the new relationship and build the requirements into their working practices,” the UK government said.

But, new government guidance, published hours before the new rules came into effect stipulate that exporters must still be “confident” that their goods meet the rules of origin when applying for zero-tariff access. “Businesses must make every effort to obtain suppliers declarations retrospectively.”

Britain officially departed from the EU’s Single Market and customs union at 11pm on Thursday 31 December, more than four years following the referendum of June 2016.

READ MORE: UK parliament approves historic Brexit deal

The waiver means “that vital industries with complex supply chains, such as automotive, supporting thousands of jobs, have more time to adapt to the new relationship and build the requirements into their working practices,” a government spokesman told the Financial Times, which first reported the deal.

It comes after several industry groups called for some of the new red tape to be introduced in phases to help companies cope with the changes. The Federation of Small Businesses (FSB) called for £3,000 ($4,102) “transition vouchers.”

Previously, car manufacturers warned that vehicles are likely to become more expensive to produce in Britain due to additional bureaucracy. Almost 60% of cars made in the UK are exported to the EU.

Meanwhile Make UK, which represents the manufacturing sector, said the waiver could be useful but called on HMRC to clarify its approach to the new rules over the next 12-months to try and protect businesses in case of mistakes while getting to grips with the new regime.

According to government calculations published in July, UK businesses will need to submit 215 more customs forms a year after Brexit — which could cost £12bn.

The Confederation for British Industry (CBI) chief UK policy director, Matthew Fell, said: “As firms adjust to new processes and procedures, they will be keen to see quick progress on issues outside of the deal to support business. Greater regulatory cooperation on financial services and mutual recognition of professional qualifications, are just two business-critical issues that will make a material difference.

“Over the coming weeks and months, it’s vital that government and business work closely to shape the new relationship with the EU and ensure the UK remains a competitive, dynamic and innovative economy.”

Announcing the agreement last week, UK prime minister Boris Johnson said that it was a “jumbo Canada-style” deal that would preserve £660bn of cross-border trade while allowing Britain to strike deals elsewhere, as well as set its own rules and catch more fish in UK waters.

Watch: Why fishing was such a thorny issue in Brexit negotiations