Issue link: https://maltatoday.uberflip.com/i/1325383
7 maltatoday | WEDNESDAY • 6 JANUARY 2021 NEWS ANALYSIS PAUL COCKS THE free trade deal between the UK and EU, announced on Christmas Eve, took effect from 1 January. But what does the agreement mean to people in Malta wanting to import goods from the UK? The biggest change to note is that customs controls will apply when purchasing goods from the UK. Once Brexit happened, the UK and EU needed to decide the rules for their future trading relationship. This was impor- tant because the EU is the UK's largest and closest trading partner. Under the deal, no tariffs or quotas will be introduced. But not everything stays the same. Trade in goods will become a lot more burdensome, since the UK will formally have left the EU customs union and single market. Although there will not be any tariffs levied or restric- tive quotas imposed, there will be a whole series of new customs and regulatory checks, including rules of origin and stringent local content requirements. This will add red tape, slowing down the overall process, and just-in-time supply chains will take a while to adjust to the new reality. Customs officers will examine packages ar- riving from the UK in order to check for pro- hibited or restricted goods, confirm that the description and value stated on the Customs Declaration is correct and check the Customs Declaration to determine if Customs Duty, Excise Duty and/or Import VAT are charge- able. For this reason, as of 1 January, all goods purchased from online portals will need to be declared. The same for goods purchased from the UK through MaltaPost's SendOn service. The UK's withdrawal from the EU will affect companies that sell goods or supply services to the UK, buy goods or receive services from the UK, move goods through the UK or use UK materials and goods to trade under pref- erential schemes with EU partner countries. In the area of tax and customs, this means, that companies may: • need to file customs declarations when importing or exporting any goods to/ from Great Britain (the UK excluding Northern Ireland) or when moving goods through Great Britain. • need to provide security and safety data, in addition to the customs declaration. • need a special licence to import or ex- port certain goods (e.g. waste, certain hazardous chemicals, GMOs). Compa- nies will need to comply with addition- al formalities if importing or exporting excise goods (alcohol, tobacco, or fuel) to/from Great Britain. • have to comply with different VAT rules and procedures for transactions with Great Britain than for transactions within the EU and with Northern Ire- land. The deal also doesn't completely eliminate the possibility of tariffs in the future. Both sides will need to stay close to shared rules in areas like workers' rights and environ- mental protection. If either the UK or the EU shift their rules too far, the other side could introduce tariffs. What is a free trade deal? A free trade deal aims to encourage trade - usually in goods but occasionally in services - by making it cheaper. This is often achieved by reducing or eliminating tariffs - taxes or charges by governments for trading goods across borders. Trade agreements also aim to remove quotas - limits on the amount of goods which can be traded. Trade can also be made simpler if countries have the same rules, such as the colour of wires in plugs. The closer the rules are, the less likely that goods need to be checked. Why have tariffs and quotas at all? While free trade agreements aim to boost trade, too many cheap imports could threaten a country's manufacturers. This could affect jobs. For that reason a country might choose to put tariffs on car imports, for example, in order to protect local car makers. The EU-UK deal The EU-UK Trade and Cooperation Agreement was negotiated in nine months— much faster than the typical trade deal—and respects the major red lines of both parties. The EU avoids a hard border on the island of Ireland and preserves the "four freedoms" of its cherished single market: free movement of goods, services, capital, and people. The UK achieves "zero tariff, zero quota" goods trade with its main trading partner and avoids any role for the European Court of Justice in settling trade disputes. On fisheries, the EU agreed to give up 25 percent of its existing quotas in UK waters over a transition period of five and a half years, after which there will be annual renegotiations. The main sticking point — how to guarantee a level playing field in future trade relations — was resolved by the principle of "managed divergence." That means both sides reserve the right to retaliate, after a judicial review process, if they believe the other side has gained an unfair competitive advantage. Brexit and what it means to Maltese consumers and buinesses As the free trade deal between the UK and EU came into force on 1 January, it triggered new customs and regulatory checks that are bound to make trade in goods from and to the UK a lot more burdensome