The EU’s Common External Tariff, which currently applies to all imports into the UK from non-EU countries, will essentially be marked up to create the new UK Global Tariff (UKGT). Guiding principles for the UK’s forthcoming independent trade policy already are enshrined in UK law and focus on the interests of UK consumers and producers and the general promotion of free trade.

The UK proposes to simplify and tailor tariffs in the interest of UK businesses and households by:

• Eliminating “nuisance tariffs”, i.e., tariffs of less than 2.5%, to reduce administrative burden on business;
• Rounding other tariffs down to the nearest standardized 2.5%, 5% or 10% band to make the system easier for businesses to use; and
• Removing tariffs on key inputs to production or where the UK has zero or limited domestic production to reduce costs for UK manufacturers and lower prices for consumers.

• Broad Economic Categories, such as valves; pulleys and flywheels; graphite electrodes; aluminum, copper, and various iron and steel products; and parts for metal-rolling mills;
• Tariff Suspensions, such as mushrooms; valves; polyethylene terephthalate (PET); and iron, steel, and stainless steel products; and
• Inward Processing, such as PET; valves; and iron, steel, aluminum, and titanium products.

Stakeholders have until 5 March 2020 to send in their wish lists.

In the many months of negotiations since March 2017, when the UK submitted its formal notice of intent to withdraw from the EU, the EU has steadfastly refused to engage in talks about the post-Brexit period until the terms of the so-called “divorce” were agreed and ratified – a goalpost yet to be reached. The UK and EU did move forward, however, on a plan to divvy up existing preferential tariff rate quotas between the UK and the remaining bloc of 27 EU Member States. Under the proposal agreed in August 2017, the UK would take over a portion of the EU quota commensurate to its average consumption over the most recent three-year period, thereby leaving WTO trading partners “no worse off” than before Brexit. Argentina, Brazil, Canada, New Zealand, Thailand, Uruguay, and the United States (US) immediately complained that split quotas did not provide the same market opportunities as the current single EU market. The countries claimed that such changes constitute more than a technical rectification, thus requiring consultation and consent from trading partners.

At last week’s WTO Goods Council, the number of countries expressing concerns about the proposed reallocation of the EU quotas rose to fifteen. Australia, Canada, the US, and others claim that losses from Brexit uncertainty are already being felt. As recompense for current commercial loss as well as future losses resulting from trade disruption and smaller markets, they seek concessions from the UK and the EU to provide improved access to both post-Brexit markets. Calling the proposal “unjustifiable,” the US asserts that trading partners are at risk of being crowded out and would suffer market access losses in both markets. The worry is that the EU will claim a large portion of the UK quota and vice versa. The proposal could have particularly harsh results for US exports of pork and wine.

How the conflict is resolved in the near term may depend on whether an alternative dispute resolution system comes to fruition when the WTO’s Appellate Body ceases to function on December 10, 2019. On that day, the Appellate Body will no longer have the three members necessary to review a case on appeal. With the US holding fast to its position that blocking Appellate Body nominations is the only way to bring about WTO reform, something will have to give. One alternative under consideration by the EU and Canada is an interim arbitration arrangement based closely on existing WTO rules. Another possibility would entail Members agreeing to accept the Panel’s decision at the outset of a dispute. With uncertainty piled on top of uncertainty, traders’ worries are not likely be lessened this holiday season.

Election front-runners, the Conservatives and Labour Parties, which recent polls projected to have 41 and 29 percent of the votes respectively, both have been reticent to support the use of cannabis-based products. The Liberal Democrats, with less than 15 percent of the projected votes, and the Greens with even less, both support liberalization. As recently as this summer, however, a cross-party group of Members of the UK Parliament returned from a study visit in Canada prepared to vote against party lines. As the UK potentially moves toward under a revitalized Conservative government to seal a deal with the EU before 31 January 2020 predicate to embarking on a process of resetting its rules as an independent nation, there is plenty of opportunity for change. The UK re-branding undoubtedly will seek to build on its reputation for excellence in research and development in the life sciences sector, including its extensive expertise in clinical studies of potential new treatments. The future may well include a significant increase in clinical research on cannabis products.

On 11 November 2019, the UK’s National Institute for Health and Care Excellence (NICE) published guidance that clears the way for two cannabis-based medicines to be used within the UK’s National Health System (NHS). NICE reversed the position it took in draft guidance in August when it questioned the efficacy GW Pharma’s Epidiolex despite the European Medicines Agency approving it in September for the entire EU market. NICE also overcame its hesitancy concerning the pricing of Epidiolex as well as Sativex, another GW Pharma product, approved for medicinal use in the UK in 2010 but which NICE had rejected earlier this year as not cost-effective. Subsequent work between NICE and GW Pharma on economic modelling as well as public consultations paved the way for the change in position.

Medical cannabis was legalised in the UK in November 2018 under certain conditions. NICE’s guidance enables, for the first time, NHS specialists to prescribe cannabis-based products for patients across England. Epidiolex, a purified cannabidiol (CBD) solution, is used to treat seizures in children with Lennos Gastaut or Dravat syndromes while Sativex, which contains equal portions CBD and tetrahydocannabinol (THC), treats spasticity related to multiple sclerosis. Sativex will be available only when other treatments have failed and where local NHS authorities agree to cover costs for a four week period. Continuation of the treatment by prescription from a general practitioner is possible where symptoms improve by at least twenty percent during the trial period.

NICE’s recommendation on Sativex was welcomed by the MS (multiple sclerosis) Trust. Similarly, Epilepsy Action considers the recommendation on Epidiolex to be an important step forward but calls for more research on the use of medicines containing THC for epilepsy patients. The patient advocacy group End our Pain, which last spring brought families of patients with epilepsy to the offices of more than 80 Members of the UK Parliament, has criticized the NICE guidance for not also recommending medicines with THC for NHS use in treating symptoms of epilepsy.

Whomever ends up in office to guide the UK through the coming rocky steps can expect to hear plenty more from constituents about the potential benefits of cannabis-based products and the need for regulatory reform.

Following months of emphatic statements by the EU that the agreement negotiated by predecessor Prime Minister Theresa may could be “re-opened” for negotiation, the EU did just that. The UK reversed its earlier rejection of any customs border that could “carve up” the UK and the EU rescinded its long-standing insistence that the UK, as a non-Member State, could not conduct customs checks for the EU. These concessions laid the groundwork for a unique arrangement whereby Northern Ireland would be part of the UK’s customs territory but also would be required to follow EU customs rules. Checks on goods exported from England, Wales and Scotland that present a risk of entering the EU market, i.e., not remaining in Northern Ireland, would ensure payment of EU tariffs The arrangement does not require any change on the side of the EU.

Crucial to reaching agreement was a new “consent mechanism” that gives Northern Ireland power to decide whether to continue or terminate the arrangement after four years and every four years after. It was this consent mechanism that enabled the EU to abandon its previously untouchable “backstop” that would have kept the UK permanently in the EU’s customs union if the EU and the UK were unable to conclude a trade deal by the end of a transition period scheduled under the Withdrawal Agreement to end on 31 December 2020.

The big question is whether Johnson can summit the next challenge. With a minority government, Prime Minister Boris Johnson must keep the party faithful, but also convince others to cross party lines, to obtain the 320 votes in the UK Parliament to ratify the revised Agreement. The vote will take place in an extraordinary sitting on Saturday, 19 October. Further complicating matters, opposition parties intend to push for a second referendum but are yet to agree on the best way to achieve it. Should Johnson fail to achieve a majority, the Benn Act, passed by the Parliament in September to avoid a “hard” Brexit, requires the Prime Minister to write to the EU before midnight to seek an extension until 31 January 2020. The vigil outside the UK Parliament is in full swing but with much less hope of white smoke.

On the U.S. side, there is strong political support by the Trump Administration and some Members of Congress for a U.S.-UK trading alliance. Several steps already have been taken to strengthen the Anglo-American trading relationship and mitigate negative impacts of Brexit. In February this year, a U.S.-UK Mutual Recognition Agreement (MRA) was concluded, which rolls over relevant aspects of the existing U.S.-EU MRA, covering electromagnetic compatibility, telecommunication equipment and good manufacturing practice of pharmaceuticals. U.S.-UK agreements on derivatives and insurance also have been agreed. These would take effect immediately after the UK exits the EU in an EU-UK “no deal” Brexit scenario or at the end of a transition period in a “deal” scenario. UK-U.S. preliminary talks on a bilateral free trade agreement (FTA) spanning the last two years, however, have failed to show any meaningful progress and are considered to be deadlocked. Should the UK leave the EU without a deal at the end of October, World Trade Organization (WTO) terms would govern U.S.-UK trade until such time as a trade deal is agreed.

Much hinges on the UK’s post-Brexit trading relationship with the EU, which still remains a priority for the UK. As Boris Johnson pursues hardline rhetoric on Brexit, insisting both that the current EU-UK deal needs to be renegotiated - which EU leaders reject - and that the UK will leave the EU on the scheduled date of 31 October 2019, with or without a deal, it is difficult to predict how the UK-EU trading relationship will unfold in the coming months. As of now, however, the EU is the UK’s largest trading partner: total UK trade in goods and services with EU countries in 2017 was 788 billion dollars, whereas two-way trade between the UK and the U.S. in the same year totalled about one third this amount, at 236 billion dollars. Boris Johnson, who is previously reported to have said that the “massive opportunity” of a U.S. trade deal only is possible if the UK escapes the “lunar pull of Brussels,” would be most likely to seek a loose, Canada-style trade deal with the EU, which might be limited in some respects, e.g. as is the case for services in the EU-Canada trade deal, but would eliminate most tariffs and leave the UK substantial regulatory freedom. Given the protracted nature of trade talks (i.e. seven years for the EU-Canada deal), however, Johnson will be pressured to negotiate a transition period with the EU, during which the UK will be able to negotiate, but not enter into, its own trade agreements.

If Johnson secures a withdrawal deal with the EU and a transition period is in place following Brexit, the key question will be whether an alternative arrangement has been reached on the Irish border issue, which now provides for a “temporary,” yet indefinite, EU-UK customs union. If the UK were to participate in the customs union, U.S.-UK negotiating flexibility would be restricted and trade talks limited to areas outside of the scope of the customs union, for instance, regulatory cooperation, services, public procurement, intellectual property, and digital trade. If an alternative arrangement has been reached on the Irish border issue which takes the UK out of the EU customs union, the UK would be free to negotiate trade deals and would regain full independence over its trade policy at the end of any Brexit transition period. The UK also would take back control over its national trade policy at once in a no deal Brexit scenario, in which case it would be free to negotiate and enter into FTAs with the U.S. and other countries.

For Johnson, embarking on U.S.-UK trade negotiations from a position of strength will be key from a political standpoint, but raises the question of both sides’ negotiating flexibility. Faced with significant pressures at home not to concede to U.S. trade demands, as laid down this February in the U.S. Trade Representative’s U.S.-UK FTA negotiating objectives, Johnson may be persuaded to exempt certain areas from trade talks - prompting Washington to come back to the negotiating table with more limited trade concessions. A major sticking point for the UK is the U.S.’ bid to incorporate into any bilateral FTA market access for U.S. agricultural goods. Boris Johnson already has stated: “I don’t want us to do any deal with the U.S. which in any way jeopardizes our animal welfare standards or our food hygiene standards.” Conversely, it is in the U.S.’ interest for the UK to accept its food and farming standards, and to shift away from the EU’s interpretation of sanitary and phytosanitary standards and technical barriers to trade. With the EU system criticized strongly in the U.S. as being inconsistent with WTO rules and unfairly distorting agricultural markets to the detriment of U.S. farmers, UK regulatory harmonization with the EU in this area could substantially curtail prospects for an ambitious U.S.-UK FTA. At the same time, the opposite would risk frictionless UK-EU trade post-Brexit, including with respect to regulatory checks between the Northern Ireland and the Republic of Ireland. The question as to whether service contracts with the UK’s National Health Service should be included in U.S. trade talks further promises to be thorny. Johnson also supports the implementation of a new UK tax on digital services, which has sparked stiff opposition from U.S. authorities and might create some challenges.

A quick post-Brexit U.S.-UK trade deal moreover is complicated by the fact that the U.S. federal government shares competence to regulate over specific trade-related areas with state and local authorities, making certain sectors such as financial services and public procurement difficult to negotiate. As highlighted by UK Trade Secretary Liam Fox, Brexit also falls “very close to the American pre-election year, where it’s quite hard to get things through Congress.” On the UK side, the UK Department for International Trade will continue to have many overlapping priorities, including to negotiate its WTO schedule of commitments on goods, services and agriculture, and taking steps to pursue new trade deals and roll over existing EU trade deals with third countries. The UK trade department may also soon be facing U.S. retaliatory tariffs on up to 25 billion dollars of EU products over a long-running transatlantic subsidy dispute between airliners Boeing Co. and Airbus SE.

Political and other developments further could impact both sides’ plans for an ambitious trade deal. London may pursue trade talks with China as part of plans for a “Global Britain,” which could be a deal-breaker for the U.S. for several reasons. On other international foreign policy issues, such as climate change and sanctions on Iran, Johnson will need to make decisions early on regarding whether to maintain the UK’s current policy, which is closer to Brussels than to Washington, or deepen U.S.-UK political ties by edging closer to the U.S. On this point, Johnson’s choice for a new UK Ambassador to the U.S. will likely be a strong indicator of his political agenda, including on Brexit. In sum, a quick post-Brexit U.S.-UK trade deal is improbable; however, a Johnson premiership may yet inject new momentum into the process depending on how he will position himself on the above issues. Furthermore, if a single comprehensive U.S.-UK trade deal proves challenging, the UK’s new leader could opt for a less ambitious target of a series of sector-specific deals.

In an attempt to create a majority in the UK Parliament to ratify the withdrawal agreement she negotiated with the EU, Prime Minister May intended to made certain concessions. Among them was the idea of negotiating a new and separate customs union with the EU that would take effect when the UK is no longer part of the EU internal market. The Brexit Party rejects this proposal and it may not be tenable for the next Conservative Party leader. Nevertheless, pressure to avoid a hemorrhaging hard Brexit, may yet result in further consideration of a separate customs union with the EU. It is useful then to consider what a customs union without single market access and EU membership might look like and how it could affect business.

The main arguments for an EU-UK customs union are that it guarantees reciprocal tariff- and quota-free access for goods, as well as avoids customs and rules of origin checks and costs. This would significantly reduce red tape for companies and helps to keep supply chains intact. Whether this would be possible from a position outside the EU internal market is questionable. The EU would most likely require single market membership to ensure regulatory alignment to rule out border checks between the UK and the EU.

Even if possible to negotiate a separate EU-UK customs union as a third country outside the internal market, there are potential drawbacks. First, an EU-UK post-Brexit customs union is unlikely to be as far-reaching as the internal EU customs union, which covers all goods. The EU-Turkey customs union, for instance, covers trade in industrial goods but not most agricultural products, steel and coal products, public procurement, and services. Thus, depending on the nature of any future EU-UK customs union, some goods might not be covered and would be traded between the EU and the UK on WTO terms, which involve higher tariffs. The EU and UK could negotiate separate bilateral preferential agreements in those areas not covered by a customs union, e.g. services, but this could take several years of negotiation and businesses in the meantime would lack visibility on what might be agreed at the political level. Additionally, a customs union does not guarantee frictionless trade as it is the UK’s current membership of the single market which ensures harmonization of safety and quality standards and avoids delays due to border checks. Businesses should therefore be prepared for some trade disruption even in an EU-UK customs union scenario.

Second, as the UK leaves the EU, it will no longer be able to participate as a Member State in free trade agreements (FTAs) between the EU and third countries. This is significant as the EU has in place, or is negotiating, trade agreements with several global economic heavyweights, including Japan, Canada, Singapore, MERCOSUR, Mexico, and Australia. Benefits granted through EU-third country FTAs, including duty-free access to EU partner markets, will not automatically apply to the UK. The UK would need to negotiate its own trade agreements with third countries to gain preferential access to their respective markets post-Brexit. Depending on the terms of any EU-UK customs union, states may lack incentive to strike wide-ranging individual trade deals with the UK. Businesses may accordingly need to consider disruptions to their market access and supply chains even if a post-Brexit EU-UK customs union is agreed.

Third, under any EU-UK customs union, the UK would be required to apply the bloc’s external tariffs and, so, would not be able to formulate independent trade policy. This is significant because goods from EU trading partners would be able to flow freely into the UK via an EU-UK customs union after entering the EU at reduced or zero tariff rates under EU trade deals. Reciprocal rights would not automatically apply for UK exports to the same countries, however, putting UK businesses at a disadvantage in relation to EU and EU partner country companies. If the UK also has little to offer potential trade partners on the goods side in terms of trade concessions, bilateral UK-third country trade deals may be limited in scope and the UK likely would have reduced bargaining power in negotiations even if it is an attractive market, i.e. with a highly developed and regulated economy. Additionally, an EU-UK customs union for the UK likely would involve significant regulatory alignment with the EU without direct participation in its decision-making mechanisms on trade policy, which again could undermine the UK’s bargaining power in any future trade negotiations. It nevertheless could be argued that the UK remains a prized market and that it has sufficient economic clout to negotiate lucrative trade deals with third countries e.g. on services, regulatory barriers to trade in goods, public procurement, data, and intellectual property.

Should the UK decide that it is in its interest to have a separate custom union with the EU, this would be done as part of future negotiations with the EU. The EU has been crystal clear that the withdrawal agreement already negotiated with May’s Government is not open for re-consideration. Whether or not it wishes to pursue a UK-EU customs union in future, the UK will crash out of the EU on WTO terms on 31 October 2019 unless the UK Parliament ratifies the withdrawal agreement or the EU grants it more time to do so. At this stage, each of these contingencies could not be more uncertain.

The so-called “cliff edge” Brexit remains a real possibility considering that the Deal has been rejected by Members of the UK Parliament three times already, and successful cross-party negotiations is not by any means a foregone conclusion. The UK certainly will continue its no deal preparations, including efforts to strike post-Brexit trade agreements with third countries; to date, the agreements it has secured cover only about 11 per cent of UK trade by value. The UK also could use this time to reconsider its Brexit strategy, which ranges from holding a second referendum to attempting to amend the Political Declaration attached to the Deal which delineates mutual commitments concerning the future UK-EU relationship to abandoning Brexit altogether.

During the flextension, the UK will continue to have full EU membership rights and obligations. It will remain part of the internal EU Single Market and external trade will continue to take place pursuant to EU free trade agreements with third countries. EU law will continue to be fully applicable, which also means that the UK must participate in European elections in May 2019. Should it fail to do so without having ratified the Deal, the UK would find itself ejected from the EU as of 1 June 2019.

The flextentions avoids disruption for the moment, but the serious regulatory and legal uncertainty remains, including the possibility for abrupt changes to tariff and trade requirements, and negative impacts on investments, supply chains, the labour market and the value of the GBP. While both the EU and the UK announced legal concessions to address the most hard-hitting impacts of a no deal departure in the weeks leading up to the original end March Brexit date, most measures are limited in scope and time and, further, could be subject to further change in the coming weeks and months.

Monitoring developments to enable contingency planning is second nature for many companies at this point in time. Statistics and surveys from multiple sources, however, indicate that a majority of companies that will be affected have yet to assess implications for their business, including customs procedures, currency changes, operating under new trade agreements; implications for data transfers, work forces and legal contracts; and the production, cost, availability and provenance of essential business goods. In addition to contingency planning, businesses continue to be well advised to follow the UK’s progress in implementing new legislation to replace EU law and to take advantage of the opportunity to address potential business issues by contributing to public consultations and engaging with regulators.

Should the UK leave the EU without a deal, the UK will impose, update and lift sanctions as of 30 March pursuant to regulations issued under the Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act). Sanctions regimes that are not covered would continue to apply, as retained EU law under the EU (Withdrawal) Act. Sanctions laws apply to actions taken by UK persons, which includes companies and individuals, in the UK or anywhere else.

The intent of the slate of new legislation generally is to ensure legal authority and mechanisms to carry on, rather than to diverge from existing EU law. On the 1^st of February, however, the UK Government issued no deal Brexit guidance warning UK persons that they should not assume UK sanctions legislation will be identical to that of the EU. Instead, it will be incumbent upon companies and individuals to review the new legislative instrument and regulations to ensure that actions remain in compliance with UK law. In particular, the UK Government urges those conducting activities under exemptions provided in EU law to ensure that such exemptions are recognized by the UK.

At present, regulations adopted under the Sanctions Act address Burma, human rights in Iran, and Venezuela. These regulations will come into force only when the UK leaves the EU.

The Withdrawal Agreement has been subject to various modifications since its first publication in February 2018. During the negotiations, the EU and the UK jointly released several versions of the Agreement to illustrate the developments, namely the parts where unanimity was reached. Consequently, the novelty of this recent agreement stems from the consensus on the Irish border, which risks keeping the UK in the customs union indefinitely, and clearer drafting to prevent potential regulatory issues, such as the UK’s status vis-à-vis the EU in relation to the transfer of personal data. In other words, the UK will be treated as a Member State of the EU under the General Data Protection Regulation. As a matter of fact, the UK will be treated as a Member State for most EU laws, except for its participation in the EU institutions, bodies, offices and agencies.

Furthermore the text is accompanied by a political declaration on the future relationship between the divorcing parties. This document holds no legal value, and the full text has not been published yet.

The agreement still needs to be approved by the EU Council, and the UK and EU Parliaments. There currently is sufficient time for this process to take place before Brexit day.

Agri-food business operators should roll out their contingency measures. Contingency planning for a “hard” Brexit includes making possible revisions to supply chains, buying-ahead, stockpiling, warehousing, relocating food production, transferring import function, re-labelling, obtaining relevant authorizations and certifications, and taking other practical measures to avoid business disruptions. Companies need to ensure proper controls are in place with regard to import and export regulations.

Agri-food businesses should be particularly attentive to several aspects of a hard Brexit. First, be mindful of the added costs of customs clearance and regulatory checks. Goods customs-cleared in the UK would no longer be able to circulate freely within the EU and would be subject to the EU common tariffs, processes and conformity assessment procedures upon exportation from the UK. The cost of new tariffs imposed on agri-food trade between the UK and the EU can be high, especially for some types of products. Fully processed food and drink products, for instance, attract higher tariff rates than semi-processed food and drink and primary products and raw materials. Certain agri-food products also are subject to “specific duties,” which are tariffs levied on the basis of a unit of measure, e.g. by weight or volume of the imported good. Products that attract both a category tariff and a specific duty tariff can have particularly steep duties. Regard need also be had to further costs resulting from customs declarations, compliance with EU Sanitary and Phytosanitary (SPS) requirements and food labelling regulations.

Second, delays at the EU-UK border. Delays are to be expected in a no-deal Brexit scenario due to customs formalities, physical and documentation inspections of food consignments, and a range of possible Brexit effects on cross-border transport systems e.g. air transport designation/traffic rights, since the UK would automatically cease to be covered by EU transport agreements. Agri-food companies should consider how these factors affect not only their operations, but also those of suppliers and/or distributors and related business risks.

Third, a hard Brexit has implications for access to talent, contractual and taxes. EU workers in the UK are not expected to receive any preferential treatment in a hard Brexit scenario, with a limited exception for temporary agricultural workers. Under the UK’s proposed post-Brexit immigration rules, it also will be very difficult for low-skilled workers to obtain visas. Similar rules would likely apply for UK migrants in the EU countries. Existing contracts also will need to be scrutinized with respect to customs considerations, continuity and performance. Regarding tax implications, the EU has several directives in place that reduce tax burdens within the single market, and while the UK has a number of double tax agreements to fall back on, these do not cover all types of taxes between taxpayers in the UK and the EU27.

Fourth, be mindful of the “WTO terms” the EU and the UK may fall back on in the event of a no-deal Brexit. The EU and the UK are currently in the process of disentangling their trade rules at the WTO to allow the UK to act independently on international trade. While the UK is a WTO member in its own right, its membership rights have not been set out distinctly from the EU, which also represents the UK at the WTO. On 24 July 2018, the UK submitted to WTO Members its draft schedule outlining the UK’s post-Brexit WTO market access commitments for goods, which largely replicates EU concessions and commitments. The draft schedule of commitments is considered approved under WTO rules if there are no objections from other WTO Members within three months. WTO Members - including the U.S., Canada, Australia, New Zealand - have already indicated that they disapprove of the terms of the divorce, however. WTO tariff-rate quotas (TRQs), which are proposed to be apportioned between the EU and the UK based on their respective market shares, are particularly controversial as agricultural suppliers have indicated that they would lose flexibility to switch agricultural exports between the UK and the rest of the EU. Their objections are likely to force the EU and the UK into wider negotiations. While the EU has agreed to negotiations on TRQs, this is not the case for the UK. In any event, to negotiate legally binding market access is a somewhat arbitrary exercise where there is uncertainty remaining about the shape of the future EU-UK trading relationship. Agri-food businesses should monitor developments at the WTO to understand what WTO terms will apply in case of a hard Brexit and in the meantime put contingency measures in place.

In negotiating a free-trade deal, Washington will want to eliminate non-tariff measures restricting trade and push the UK toward U.S. regulatory standards. This could involve deregulation in several areas typically covered by EU legislation, particularly on agri-food. The U.S. might seek to cut restrictions on, among others, U.S. exports of hormone beef, chlorine washed poultry, pork containing feed additive, and genetically modified organisms. The UK would likely be hesitant to cave in to such U.S. demands given the dominance of EU trade for UK agricultural business and the necessity to avoid a hard border in Northern Ireland. Indeed, the UK government’s expressed intention is to not reduce food and animal welfare standards after Brexit. May’s Brexit plan clearly states that the UK will continue to align itself with EU standards for goods, including on technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures. It follows that, regardless of the outcome of Brexit, and even in the case of a no-deal with the EU, the existing hurdles to a U.S.-UK trade agreement would remain.

While this does not eliminate the prospect of a U.S.-UK free-trade deal after Brexit, any such agreement would likely be limited in scope. As a result, it might cover reduction or elimination of tariffs in the automotive or agricultural sectors, protection of foreign direct investments, cross-border data flows and digital trade, intellectual property rights, and rules on small- and medium-sized enterprises. The UK would push for trade deals covering the service sector, as this accounts for 70 percent of UK trade with the U.S. EU-U.S. trade negotiations (TTIP), which made progress on reducing regulatory divergence in several areas including pharmaceutical goods, cosmetics and telecommunications before being put on hold in 2017, may form the basis for U.S.-UK negotiations. Actual U.S.-UK trade deal negotiations are not expected to begin until the UK’s future relationship with the EU has been clarified. U.S. and UK businesses are well-advised to start considering the terms of a free-trade agreement that would best serve their interests.

Trade between the UK and Africa already is worth 31 billion GBP annually. By 2050, a quarter of the world’s consumers will be African. According to the Prime Minister, “With a shared passion for entrepreneurship, technology and innovation, now is the time for UK companies to strengthen their partnerships with Africa to boost jobs and prosperity both at home and overseas.”

According to the African Agricultural Technology Foundation, 233 million Africans are either suffering from hunger or are malnourished; 32 million of these are under the age of five. While Africa’s economy is driven by agriculture, farming continues to be largely at a subsistence level: 80 percent of the 51 million farmers are small holder farmers. Further, 95 percent of all farming in Africa is entirely dependent on rainfall. The challenge under these conditions is to increase food production by 50 to 70 percent by 2050 without destroying the environment. What will be required is a combination of increasingly sophisticated farming techniques (e.g. precision farming), precision breeding; improved stewardship; access to advancements achieved by modern biotechnology to increase drought tolerance, increase yield, and combat plant pests and diseases; and enabling regulatory policies and frameworks. Critical is the fact that more efficient agriculture directly translates into freeing women and children to pursue other economic activities and/or education.

On the eve of May’s state visits, her government released the first set of notices to businesses and citizens to prepare for the possibility of the UK exiting the EU at the end of March 2019 without a deal in place. Consistent with the approach taken for medicines and other sectors, the notice on developing genetically modified organisms (GMOs) confirms that existing UK laws implementing the key EU regulations on environmental release and marketing of GMOs, with limited revisions to reflect the new reality of the UK as a third country vis-à-vis the EU, will continue to apply post-Brexit. The notice also clarifies that current EU market approvals for cultivation of GM crops, which today are limited to an insect-resistant maize and five varieties of carnations that may be sold as cut flowers, will continue to be recognized until their expirations. The notice states that the approved insect-resistant maize is not being grown in the UK and that this is not expected to change. The basis for this prediction is not clear. Going forward, GMO products could be exported from the UK to the EU only if approved by the EU; and from the EU to the UK only if approved by the UK.

If the UK leaves the EU without an agreement in place, decisions on marketing applications would necessarily be taken within the UK rather than by the EU. Discussions are ongoing as to whether decisions would be made jointly at the UK level or by each devolved nation separately. The UK has clarified that “the same [EU] risk assessment process will be applied” and, as is the case now, GMO approvals both for trials and for marketing would be granted only if “a risk assessment shows human health and the environment will not be compromised.”

What is interesting to consider in a post-Brexit world, is the potential for the UK and the EU to reach contrary decisions on GMO applications despite using the same risk assessment process. Put another way, would the UK’s traditional insistence on science and risk-based decision-making result in positive decisions on the same dossiers that continue to be blocked in the EU by the precautionary principle and politics?

Traditionally, Africa has followed closely the EU’s GM policies to preserve its possibility to sell to the EU market. Increasingly, however, there are signals that Africa is charting its own course based on science, evidence and its longer term interests. Already a decade ago, the AU High-Level African Panel on Modern Biotechnology concluded in its “Freedom to Innovate” (2008) report that “agricultural biotechnology holds the promise of improving food security, and better nutrition. AU member states must invest in agricultural biotechnology to address long-term issues such as nutrient deficiency, and needed improvements to overall agricultural productivity”. Similar recommendations were made with regard to the use of biotechnology related to animals, fisheries, forests, health care, the environmental, and biofuels. The AU High-Level African Panel on Emerging Technologies continues to explore how new solutions and technologies might be deployed for even greater gains.

While Africa will take its own decisions, the question is whether independent decision-making on GMOs by the UK might benefit Africa and support advancement toward realization of its sustainable agriculture goals. In effect, a divergence in decisions on GMOs between the UK and the EU could reinforce and embolden those who already have concluded that every tool – including modern biotechnology – will be necessary to rise to the formidable challenges facing the continent.

Increased competition for trade with the African bloc could bring more benefits. In his annual State of the European Union speech to the European Parliament on 12 September, European Commission President Jean-Claude Juncker called for creating a single EU-African trade and investment framework to bring up to 10 million jobs to Africa in the next five years. While the EU is still Africa’s main trading partner at 36 percent, trade with China has risen to 16 percent and, in future, a chunk of the EU trade will be trade with the UK.

Whether it occurs due to a hard Brexit in March 2019, in December 2021 following an agreed transition period, or at some later date, the UK almost certainly will be a third country vis-à-vis the EU in the near future. While there likely will be short term pain for the UK, the future could be quite interesting for Africa.

Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume. In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls. Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU. Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed.

While the export of military items, firearms and goods that may be usable for torture or capital punishment from the UK have been and will continue to be subject to specific licensing requirements, the movement of most dual use items between the 28 Member States of the European Union is possible today without any license. If the UK and EU fail to reach agreement on the UK’s exit from the EU or if either the UK or European Parliament rejects the proposed EU-UK deal, the UK will no longer be part of the EU as of 11.00 GMT on 29 March 2019 or midnight on 30 March 2019 on the continent (GMT+1), and a license would be needed to export many dual use items from the UK to the EU. In addition, existing licenses for exports issued by the UK or issued by the EU27 would no longer be valid for exports from the others’ territories.

In a series of technical notices released on 23 August 2018 by the UK, exporters are advised to determine what licenses may be needed should the talks fail. Exporters were advised to put programmes and procedures in place to ensure compliance. Importantly, the UK has announced that it will issue a new Open General Export License (OGEL) in advance of leaving the UK that will cover many dual use items, thus reducing the need for individual export licenses. Businesses seeking to use the new OGEL will need to register at a later stage. The UK further advises that exporters will be able to apply for and obtain any individual licenses that may be needed prior to the end of March 2019. Unfortunately, however, it is unknown how many additional businesses will be affected and whether regulators will be able to keep pace with the demand. Further information will be forthcoming but action can and should be taken by businesses now to examine their potential exposure and prepare contingency plans to avoid business disruption.

Data flows play an increasingly important part in international trade and are estimated to contribute up to 2.8 trillion USD to the world economy. In 2016 alone, EU services reliant on data exported to the UK, such as finance, telecoms and entertainment, were worth approximately 36 billion EUR. Data flows from the UK to the EU constitute as much as three-quarters of all data from the UK. Under the EU’s General Data Protection Regulation (GDPR), however, personal data included in such data flows must be protected. For companies, this can include employee data (e.g. payroll information, biographical information, etc.) and customer data (e.g., contact information, transaction information, biographical information, social media profiles, etc.). Data flows from the EU to a third country are permitted if there is an adequacy decision by the European Commission that the third country’s data protection laws are adequate to meet the objectives of the GDPR or through another adequacy mechanism approved by the European Commission (e.g., EU-approved Binding Corporate Rules, use of Standard Contractual Clauses, etc.).

The UK, however, is of the view that its historic relationship with the bloc and current regulatory alignment places it in a different position than other third countries vis-à-vis the EU. The UK recently published a position paper outlining its proposal for a data agreement that goes beyond the unilateral EU adequacy decision. Instead, the UK seeks a legally binding agreement to allow for EU-UK data flows that cannot be changed unilaterally by the EU. According to the UK, such an agreement would provide greater legal certainty, stability and transparency, as well as reduced costs and more efficient processes, for both UK and EU businesses.

While the UK strives for special treatment, time may be too short to achieve a bespoke agreement, even if the EU was willing to treat the UK differently than other third countries. Further, even a standard adequacy decision may be difficult to obtain by the time the UK exits the EU. Once it is no longer part of the EU, Brussels can demand higher protection of personal data held by government agencies, including intelligence agencies, which are excluded from EU data protection requirements while the UK is part of the bloc. The same issues arising from a conflict between expectations for the protection of personal data and security interests as were seen during the negotiation of the EU - U.S. Privacy Shield (adequacy mechanism) may surface once data protection negotiations or the procedure to determine the adequacy of UK data protection laws begins. In the absence of an agreement or adequacy decision, companies trading in the EU27 (the EU minus the UK) that rely on personal data being stored, managed or processed in the UK will have to provide appropriate legal safeguards to continue those operations. For example, a German based-business using a UK Cloud provider for accounting information would have to implement an appropriate data transfer mechanism for the data-sharing to satisfy the adequacy requirement under GDPR. Even the flows of personal data within the same company (or group of companies) from the EU to the UK would be subject to this requirement for an appropriate data transfer mechanism. Given the current uncertainties in the Brexit negotiations, companies urgently need to ensure they have legal mechanisms in place to allow for continuing data flow necessary to support their international trade and business operations.

A transition period is foreseen from Brexit day in March 2019 until the end of 2020 during which customs arrangements would remain the same. The existence of any such transitional period, however, depends on a final political agreement between the UK and the EU, supported by the UK Parliament and the European Parliament, on the entire withdrawal agreement package. Furthermore, the European Commission has been clear that only when an agreement is in place will it notify trading partners that the UK should be treated as a Member States for purposes of EU-third country free trade agreements during the transition period. The outcome may not be known until first quarter next year and, while undesirable for most concerned, a “hard exit” without an agreement on 29 March 2019 is a real possibility.

For companies trading in goods with UK originating inputs, this implies the need for identification of impacts and contingency planning for trade with the UK under WTO rules and for trade between the EU and its trading partners of goods affected by this preferential origin issue. Kelley Drye can assist with establishing economic baselines and scenarios to aid companies with their business planning.

According to the British Retailers Consortium, with Brexit more than 180,000 companies could be required to make customs declarations for the first time and the UK is expecting more than 200 million additional customs declarations annually. The most significant impact is feared for goods that are transported by road between the UK and the EU27 due to the lack of infrastructure at port facilities to handle queues of trucks on both sides of the Channel. The Republic of Ireland faces significant obstacles given its use of the UK as a land-bridge to the EU single market. While it is unimaginable that a solution will not be found, without an open skies agreement between the UK and the EU27, airplanes carrying everything from people to post, packages and time-sensitive goods will not be able to fly.

With the certainty of a trade deal with the EU27 very much up in the air, the UK is preparing for every eventuality and intends to have new customs arrangements in place on Day One. The Government has allocated approximately 7.5 million GBP to upgrade customs technologies and an additional 300 to 450 million GBP will be spent on hiring up to 4,000 new staff. UK Chancellor of the Exchequer Phillip Hammond included an extra 3 billion GBP in the budget laid before the UK Parliament last week should additional measures be necessary in a “no deal” scenario. And, following the publication of a white paper on customs in late October on which it sought public comment, the Government has now introduced in Parliament its Taxation (Cross-Border Trade) Bill.

The Bill is a broad legal framework that enables the UK Government to determine applicable customs duties for different goods. It empowers the Government to set preferential or additional duties in certain circumstances, rule on tariff classifications and origin of goods, and impose trade remedy measures. It also imposes value-added taxes and excise duties once the UK leaves the EU. Preparing for all possible outcomes, the Bill includes a clause that enables the Government to give effect to a customs union with one or more territories and/or facilitate a permanent or temporary customs union with the EU. A separate Trade Bill introduced earlier in November establishes the Trade Remedies Authority to investigate suspected dumping, etc. Various components of both bills will be given legal effect on different dates in accordance with developments in the negotiations with the EU27.

While the UK will leave the EU Customs Union in order to pursue free trade agreements with other nations, it seeks to maintain a “special and deep” relationship with the EU and to ensure the most “frictionless” trade possible between the UK and the EU27. The UK will remain a member of the Common Transit Convention and intends to maintain other mechanisms to simplify and facilitate trade with the EU. The UK proposes, for example, to continue to allow imports to the EU via the UK by agreeing to apply EU rules on duties and VAT on goods intended for the EU market – thus ensuring compliance with EU requirements - and UK rules for goods destined only for the UK market.

Whether or not the UK is successful in securing a trade and customs arrangement that extends beyond the free trade agreements between the EU and its other trading partners, facilitating trade post-Brexit is a critical economic interest for the UK. The Bill reflects the focus on streamlined and efficient customs procedures to ensure the UK’s place as a major trading nation. Among other things, the Bill provides for recognition of Authorised Economic Operators (AEO) status to allow access to simplified procedures and/or “fast track” shipments. As is currently the case under EU law, the possibility of total or partial relief of import duties for goods based on the nature or origin of goods or their purpose also is enshrined in the Bill. The explanatory note indicates that this provision may be used, inter alia, to provide relief for items imported on a temporary basis or for education, scientific, cultural or research purposes, trade samples or test items.

The Bill also includes numerous other provisions for expedited and simplified procedures. In general, declarations must be filed within ninety days of presentation of the goods to customs on import except if re-exported within a ninety day period. Provision also is made for declarations to be filed prior to importation with the import following within thirty days.

Despite the 56 clauses and 9 schedules, accompanied by 70 pages of explanation, however, details relevant to businesses remain largely unknown. The Bill creates a legal framework empowering the Government to promulgate – depending on the deal struck with the EU or a no deal withdrawal - myriad secondary regulations that will dictate the duties, excise and value-added taxes charged for business to business and business to consumer shipments.

Which goods can or must be imported with declarations must be made in advance will be determined by regulation. What goods will qualify for relief, which requirements and procedures will apply to AEOs, and which operators and goods will benefit from simplified procedures will only be known when secondary legislation is published. Further, provision will be made by public notice for goods that can be aggregated and imported with a single declaration. Rules for other simplified procedures also will be announced. In addition, regulations will indicate which end uses will qualify for reduced duties under the “authorised use procedure”.

The fact that the details are yet to be worked out creates an opportunity to identify and advocate simplifications and practical solutions to facilitate trade involving the UK. Like the UK, businesses must also prepare themselves for all possible scenarios including the worst-case Brexit without a deal with the EU27. March 2019 is coming; importers and exporters should analyze impacts on their businesses, secure their supply chains, adjust operations to ensure compliance with both the UK and EU VAT systems, and, most importantly, engage with the UK Government to achieve appropriate trade and customs facilitations.

Agricultural would almost certainly be included in a comprehensive trade deal, as increased access to UK markets will be among the top U.S. objectives. Key to the success of future negotiations will be agreement on food standards. The EU, and thus the UK (for the time being), has different – and sometimes stricter – rules on food production and consumption than the U.S. and bans imports that do not conform to EU rules. Reportedly, the U.S. wants to create a joint agricultural science committee to decide on standards for goods traded between the UK and the U.S. as part of an agreement.

At the same time confidence-building was taking place in Washington, however, a political row developed back in the UK over the safety of potential food imports from the U.S. under a new trade agreement. Civil society organizations are raising concerns about food safety for UK citizens and the increased difficulty of exporting UK products to the EU if lower standards were to be adopted by the UK. UK producers also are balking at the prospect of competing with products they claim are processed or developed using unsafe methods. Lower standards, they argue, will lead to lower prices and increased competition, both at the expense of UK consumer safety. While so-called “chlorinated chicken” and hormone-treated beef are the headline-grabbing issues, different U.S. and EU rules on a range of issues including animal transport, minimum space requirements for farm livestock, food labeling, genetically modified foods, and the use of pesticides are likely to challenge negotiators on both sides of the Atlantic. Others see an opportunity for the UK to align its standards with science-based – as opposed to precautionary – principles, in the hopes of avoiding the problems that were faced during negotiations on standards in the now sidelined U.S.-EU Transatlantic Trade and Investment Partnership talks.

Trade Secretary Fox dismissed the outcry on chicken and beef as an obsession of the media and a mere detail in what would be lengthy potential trade negotiations. On the other hand, UK Environment Secretary Michael Gove responded that the UK would not enter into a trade agreement with the U.S. if it means lowering the UK’s environmental standards. As with many Brexit-related issues, how far the UK can and will go in a prospective free trade deal with the U.S. and other potential trading partners could depend on the nature of the future UK-EU relationship. Despite clear EU resistance, the UK will attempt to force a discussion of components of that future relationship as early as the end of August when Brexit negotiations resume in Brussels.

Noise from the UK suggests a strong belief that the UK can leave the EU but maintain trading privileges, including tariff-free and frictionless trade. Not so, says EU Chief Brexit Negotiator Michel Barnier. Barnier has made clear that the UK cannot have its desired legal autonomy without the free movement of EU citizens and the jurisdiction of the European Court of Justice and at the same time continue to enjoy access to the EU market and customs union privileges. Without access to the market and customs union, the UK faces tariffs and customs formalities that mean time and money for UK businesses and exporters. With access to the market and customs privileges, the UK cannot negotiate trade deals with other countries.

Only so many options exist for the future relationship of the UK with the EU. The so-called “Norway” option would mean continuing access to the EU market but without any say by the UK in the applicable rules and would entail customs procedures. The alternative “Turkey” option would mean a customs agreement but with controls to ensure compliance of goods and services with EU rules. In both cases, the UK would get less than it enjoys today and would not achieve its desired regulatory autonomy; moreover, the UK would remain blocked from negotiating free trade arrangements with other countries.

If initial negotiations on the rights of EU citizens, the UK’s financial obligations, and the complex Irish border issue go well, the EU and UK could be discussing the terms of their future relationship as early as the fall of this year. That may be a big “if”.