Starting position
Great Britain left the EU on January 31, 2020. A country leaving the EU, however, is not a simple business transaction that can be carried out with a “closing”. On October 17, 2019, the United Kingdom and the EU therefore agreed a Withdrawal Agreement. The aim of this agreement is to define the process and circumstances of Brexit.
The withdrawal agreement came into force on February 1, 2020. As a result, the UK left the EU at midnight on January 31, 2020. From a trade policy perspective, however, not much changed on February 1, 2020 as the UK and the EU agreed on a transition period until the end of 2020. The transition period ensured the continued application of EU law in and for the UK, but without the UK’s participation in EU institutions and government structures. During the transition period, the UK remained in the EU internal market, remained a party to the EU customs union and applied the EU sanctions regime to British exports. The exit agreement contains a clause which provides for the transition period to be extended by up to one or two years. However, such an extension should have been agreed between the EU and the UK before July 1, 2020, which did not happen.
Current status
As of January 1, 2021, the UK will therefore be considered a non-EU country from a trade policy perspective. The Withdrawal Agreement did not contain any bilateral conditions to be applied between the parties, only an obligation on both sides to negotiate and conclude bilateral agreements, including a trade agreement. The UK and EU are still negotiating as of December 10, 2020. A “hard Brexit”, that is, a state of affairs without a contract between the EU and the United Kingdom, is becoming more and more likely. The United Kingdom is not only in a tense situation with the EU, but also has to conclude new trade agreements with all countries that were previously covered by trade agreements between the EU and the respective countries. As of 2019, there were around 44 agreements with 72 countries.
As possibly one of the first countries after the Brexit decision, Switzerland signed a bilateral trade agreement with Great Britain on February 11, 2019. This trade agreement was approved by the Swiss Parliament in March 2020 and will come into force at the end of the transition period on January 1, 2021.
Trade agreement between Switzerland and the United Kingdom
If one looks at the existing agreements between Switzerland and the EU, insofar as they are relevant for trade, one can come to the conclusion that eight agreements would have to be transferred to the relationship between Switzerland and the United Kingdom in order to leave as few gaps as possible in the trade area . This was the intention of the British-Swiss trade agreement. It should replicate most of the existing economic and trade agreements between Switzerland and the EU.
The trade agreement between the United Kingdom and Switzerland covers the following existing agreements:
- the 1972 Free Trade Agreement,
- the 1972 Agreement on Certain Agricultural and Fishery Products,
- the 1999 Agreement on Certain Aspects of Government Procurement,
- the General System of Preferences Agreement of 2000 and
- the 2004 Anti-Fraud Agreement.
However, the British-Swiss trade agreement does not cover agreements and rules that require harmonization or recognition of the equivalence of the rules with the EU. These are mainly agreements on agricultural and industrial goods, in which Switzerland implements or adopts the EU rules and regulations:
- the 1999 Agreement on the Mutual Recognition of Technical Barriers to Trade (MRA),
- the 1999 Agreement on Agriculture,
- the Agreement on Processed Agricultural Products of 2005 and
- the 2009 Agreement on Customs Facilitation and Security
As these four agreements require harmonization or mutual recognition of rules between the EU and the UK, they cannot be replicated in their entirety with the UK until the EU-UK relationship is clarified.
Effects for Swiss companies from January 1, 2021
Switzerland has a border with the EU, so every exporting Swiss company is familiar with customs and uses appropriate procedures. These have to be adapted to the new situation of Great Britain as a non-EU country. This is not necessarily the case for EU companies. There are a considerable number of companies in the EU that operate exclusively within the EU internal market. These companies will have to set up internal customs processes by January 1, 2021 if they intend to continue doing business with UK partners.
What needs to be considered from a Swiss point of view from January 1, 2021:
- The export software has to be adapted to separate the country code GB from the EU and define this country code as a non-EU country.
- The UK will not belong to either the Joint Security Area or the ICS2, so security-related information about dangerous goods, war material or dual-use must be reported prior to importation.
- Export invoices must contain the UK EORI number (Export Operators Registration and Identification Number) of the British importer and – if applicable – the Deferment Account Number (corresponds to the Swiss ZAZ account).
- There will be no mutual recognition of the authorized economic operators of Switzerland and the United Kingdom, as the AEO agreement between the EU and Switzerland will no longer be applicable – therefore no AEO procedures are possible for the time being.
What must be taken into account with a preferential treatment perspective?
- The preferential rules of origin are defined in the trade agreement between the United Kingdom and Switzerland.
- The list rules (processing rules; “list rules”) correspond to the rules defined in Appendix I, Appendix II of the PEM Convention.
- No declarations of origin on a customs invoice will be accepted (lack of AEO recognition).
- Cumulation with primary material with preferential origin in the United Kingdom or in Switzerland is possible.
- EU materials cannot (for the time being) be included in the preferential origin calculation.
- Goods with EU origin do not qualify for preferential treatment in Swiss EU trade.
- The rules on proof of origin remain unchanged. However, the EU origin is no longer relevant here either.
The trade and customs law team at MME Legal | Tax | Compliance is at your disposal for all questions related to Brexit and customs procedures as well as export controls.
December 2020 | Authors: Raphael Brunner, Peter Henschel, Karl Fässler, Christine Gschwend
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