Countdown to Brexit: 80 days – EU moves to define UK’s status under WTO rules if there is a no-deal Brexit

EU ‘contingency planning’ preparations continue to ramp up for a no-deal Brexit on 29 March.

Regarding post-Brexit trade between UK and EU, the European Commission has drafted a “Regulation on the apportionment of tariff rate quotas in the World Trade Organisation (WTO) schedule of the Union following the withdrawal of the United Kingdom from the Union.”

This will require UK exporters to declare all goods movements - including the product code - and for the appropriate tariff to be paid.  There are over 100,000 product codes in the online catalogue.  You can lookup the code here.

These EU codes are to be used in Box 44 of the “Single Administrative Document” (SAD) along with required documents, certificates and authorisations – where this is called for in the product listing.

All UK companies exporting goods or services to the European Union need to prepare for a no-deal Brexit by adding EU product code to the product record within the next 80 days.

Background: Brexit and tariff rate quotas under WTO rules

The United Kingdom is currently a member of the EU by virtue of being a member of the EU – with it’s integrated customs union.  

As with other EU counties, the UK applies the “common external tariff set” applied by the EU to the rest of the world.  This is in line with the EU schedule of commitments - which sets the bound rates i.e. the ceiling rates that the EU has committed to - within the World Trade Organisation (WTO).

Once the UK leaves the customs union, it will set and apply its own tariffs to its imports.

The UK now needs to create its own schedule of commitments in the WTO.  For some goods, the UK may simply replicate the tariffs included in the EU schedule.  However, this is not possible for goods subject to tariff rate quotas (TRQs).  A TRQ applies to a certain quantity of the good a certain tariff (in-quota tariff), while for quantities of imports exceeding that quota level it applies a higher tariff.  The TRQs were set in the framework of the WTO to account for the demand of an EU made up of 28 Member States.  The quota levels, currently foreseen in the EU schedules, will therefore be disproportionately large for the UK alone.

The EU will need to adapt its TRQs to account for the reduced demand in the EU-27 member states post-Brexit.

The proposal for a regulation submitted by the Commission implements into EU law an agreement that was reached with the UK in 2017.   This addresses apportioning the quotas in the EU schedule of commitments between the EU and the UK post-Brexit.

The EU-UK 2017 agreement and ongoing negotiations with other WTO Members

An EU-UK agreement on splitting the quotas was reached and submitted to the WTO partners in October 2017.  Some of the major exporters of agricultural products in the WTO wrote a joint letter to the EU and UK raising concerns about the EU-UK agreement.  These countries considered that the changes proposed by the EU and the UK were more than a “simple rectification” of the schedules, and involved less flexibility and market access for their exporters.

In order to obtain an agreement on the splitting, the EU and the UK started talks with the various countries in the WTO that are considered to have a stake in the renegotiation of tariff schedules under WTO law.  However, at a meeting of the WTO market access committee in October 2018, several countries expressed concern over the methodology and the accuracy of the import data that had been provided by the EU to justify its proposal to modify its current WTO commitments as a consequence of Brexit.

Proposal of the Commission for unilateral apportionment

Negotiations within the WTO are continuing.  The European Commission has submitted a proposal to modify Council Regulation (EC) No 32/2000 - which implements the EU’s tariff quotas bound in the GATT internally.  In doing so, the Commission is preparing for a scenario in which agreement in the WTO will not be reached in time Brexit in march 2019.

The proposal follows the method that was agreed with the UK:

  • The EU share of the apportioned quota was computed by subtracting the UK share of a given quota from the entire scheduled tariff rate quota in question.  

  • The UK share of a given quota was worked out by determining the UK’s usage share (expressed in percentage) and applying it to the scheduled tariff rate quota volume.

In this context, the UK usage share was obtained by calculating the UK share of imports per quota over a recent representative period of three years (in this case 2013-2015).

The European Council agreed on the proposal on 29 October 2018.  The proposal:

  • lists TRQs and the respective EU apportionment;

  • gives the Commission delegated powers to change the annexes to the Regulation in order to account for any agreement reached in the WTO.

On 14 November 2018, the European Parliament decided to enter into inter-institutional negotiations based on its report on the proposal.  The report to the Parliament proposes modifying the annexes taking care not to extend the current level of market access.

On 10 December 2018, the European Parliament’s INTA Committee approved the provisional agreement that came out from inter-institutional negotiations. The first reading of the regulation is provisionally scheduled for January 2019.

The new quotas would only apply from the day after UK’s withdrawal from the EU.

John ShuttleworthComment