The long awaited Trade and Cooperation Agreement between the UK and the EU will impact key areas of the retail sector. We explore the main changes and key considerations to ensure an effective reaction to Brexit.
On 30 December 2020 and after four years of negotiations, the UK and the EU signed the Trade and Cooperation Agreement (the Agreement). The Agreement represents the first and fundamental step towards a new chapter for the relationship between the UK and the EU.
As all in the industry are acutely aware, whilst it is too early to establish with certainty the longer term effects of Brexit and the Agreement, those looking to protect their brand and intellectual property rights in the EU and ensure compliance should be aware of the new framework and consider how to best respond to the new changes.
Significant Impact post Brexit
- Freedom of movement has been at the heart of the Brexit negotiations and is dealt with extensively in the Agreement. For more information about immigration controls and how to react to Brexit please see our Immigration webpage.
- The new rules set out in the Agreement pose a significant challenge to immigration, making the attracting and retaining of great European talents more difficult and more costly.
Import and Export Tariffs
- The Agreement forbids the imposition of tariffs, quotas, and import/export taxes at the UK-EU border, subject to meeting certain rules of origin. Although these are set at quite a liberal level, attention should be given in determining whether the goods in fact originated in the UK and are therefore exempt to export tariffs when entering the EU.
- Exporters are allowed to self-certify the origin of the goods through a statement, rendering it easier for importers to prove the origin of the products.
- It is important that businesses relying on international supply chain assess the impact for them of the rules of origin, seeking legal advice where needed. We would be very happy to assist with any rules of origin queries given it is a new and complicated area.
- Under the Agreement, exports are zero-rated for UK VAT, subject to proof of export and inclusion of those exports as part of a company’s VAT accounting.
- UK retailers are required to pay EU import VAT for selling into the EU. The VAT rate varies and is specific to the Member State into which they are exporting. Retailers can comply with the new rules by either registering for VAT in each country they sell into or by passing those costs on to wholesalers and consumers.
- UK retailers should consider applying for the “Authorised Economic Operator” certification to benefit from simplified customs procedures and waivers of certain obligations.
E-Commerce and Online Retailers
- The EU eCommerce Directive framework no longer applies to UK providers. Businesses should evaluate whether their services previously fell in the scope of the Directive and if they do, ensure they comply with relevant requirements in the EEA countries they operate in.
- Businesses should also note that the Agreement includes online consumer protection provisions, giving consumers strong protections when engaging in e-commerce transactions. These include measures against unsolicited direct marketing communications.
Moderate Impact post Brexit
Product Standards Regulation
- Businesses now need to comply with two different regulatory systems in the UK and the EU, including conformity assessments if they are trading in both.
- UK manufacturers and retailers trading in the EU must ensure they meet the quality expectations and the range of safety requirements required by the two systems, to reduce risks and improve business efficiency.
- As of 1 January 2021, only domestic competition law provisions apply to both pre and post Brexit UK conduct. The UK maintains its own operationally independent authorities for the effective enforcement of its own domestic competition law.
- EU competition rules still apply to agreements and transactions of UK businesses which also have an impact within the European territory, but the European Commission’s powers of investigation are reduced.
- Businesses that are subject to ongoing investigations should seek legal advice on compliance with parallel investigations.
- The main change in this area has occurred in the area of merger control. The “one stop shop” principle is no longer applicable and mergers or acquisitions may now require clearance from both the CMA in London and the EU Commission in Brussels. Businesses involved in merger activities with a cross-border EU and UK dimension should consult with us or seek guidance from the CMA and EU Commission to check whether they need to file parallel notifications.
- The Agreement largely maintains the current EU levels of IP protection as a base line to which both the UK and EU remain committed.
- The main areas of change concern Trade Marks and Designs. The territorial coverage of EU trade marks (EUTMs) no longer includes the UK and the UK Intellectual Property Office has automatically created a comparable UK trade mark for every registered EUTM. All Registered Community Designs (RCDs) have similarly had a comparable UK design registration created.
- For more information about Intellectual Property and more details on the new regime for Trade Marks and Designs, please see our Intellectual Property page.
- The Agreement does not cover the flows of personal data between the EU and the UK. The EU is currently undertaking an assessment of the UK’s data law to decide the future of the parties’ relationship in this area. Data transfers are authorised during a six-month grace period pending the EU’s adequacy assessment.
- Retailers are advised to assess how they treat the data of their customers as soon as practicable to identify any personal data transfer between the EU and the UK, or from the UK to any third country. A reminder should be set to reassess data transfers in April 2021 when there should be a clearer view of the UK’s adequacy position. Read more here.