The UK left the EU on 31 January 2020, but the real changes were felt from 1 January 2021 when the transitional period came to an end and EU rules on VAT, customs and the single market ceased to apply to transactions between the EU and the UK.
The end of the free movement of goods determined that customs controls apply to all goods travelling between these territories, although a Trade and Cooperation Agreement (“Agreement”) was negotiated and adopted by the parties, which has been provisionally applied since 1 January 2021 and came into force on 1 May 2021.
In a nutshell, the Agreement provides for zero tariffs on all goods traded between the EU and the UK provided the goods are originating in the other party and importers prove that their products fulfil all the rules of origin requirements.
However, customs origins must not be mistaken for the provenance or customs status of the goods, and this key distinction may create constraints which could be easily overlooked. As the relevant criteria is the customs origins of the goods and not where they were shipped from, it cannot be stated that all goods traded between the EU and the UK will be duty free.
For instance, EU goods which are imported into the UK and originating from the EU will benefit from zero tariffs. However, if those same goods are later exported from the UK and imported back into the EU, since they have originated from the EU and not the UK – i.e. the same party and not the other party – the duty-free regime will not apply (although another special regime may be considered, such as the one applicable to returned goods). Similarly, goods shipped from the UK to the EU but not originating from the UK will not benefit from zero tariffs. The Agreement provides for full bilateral cumulation between the UK and the EU, allowing EU inputs and processing to be counted as UK input in UK products exported to the EU and vice versa. However, inputs from other countries or territories may cost goods their UK/EU origin. For instance, meat processed in facilities in Portugal but obtained from animals raised in a third country will not be deemed as originated in the EU as the rule for meat products requires that the animals are wholly obtained. This is especially impactful since a relevant portion of EU exports into the UK are food products and these are generally subject to high rates of customs duties. On the other hand, and even where the zero tariffs are applicable, economic operators are not released from complying with all customs require-ments, which has been creating delays in transportation and are a significant change from the days when goods could be unloaded freely directly at the economic operators’ facilities.
Also, due to the short span between the negotiation of the Agreement and its application, many Portuguese importers have not been able to request the proof of origin for their exporters or these have not been able to provide them in due time. This means that imports were subject to customs duties which may be refunded if the preference is adequately requested after importation, thus creating an additional burden on operators and workload on customs authorities.
In Portugal, both companies and tax administrations are still adapting to this new reality, and although at first glance it may seem the Agreement has come to solve all problems and re-instate a pre-Brexit scenario, the above rules have a limited scope which does not wholly cover all the scenarios with which economic operators are faced with on a daily basis.
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