The United Kingdom (UK) and European Union (EU) negotiated a new free trade agreement that came into effect on January 1, 2021.
FedEx is ready to help your business navigate through Brexit and beyond with its international shipping and customs expertise. Learn more at the UK FedEx website.
Canada and the UK strike an interim post-Brexit trade deal
On November 21, 2020, Global Affairs Canada (GAC) announced that Canada (CA) and the UK have successfully come to an agreement on an interim trade deal: The Canada-United Kingdom Trade Continuity Agreement (CUKTCA). CUKTCA is a transitional agreement that will enable the continuity of key benefits currently covered under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), including 98% tariff-free trade between the two countries. Additionally, it will allow extra time for both governments to negotiate a long-term comprehensive bilateral agreement. The CUKTCA will take effect once both governments ratify it.
In the interim, the Canadian government has issued the UK Trade Continuity Remission Order, 2021 #20-1135. This remission order will permit the aforementioned tariff benefits to continue for eligible UK imports under the CUKTCA until the interim trade deal comes into force.
Please see the Canada Border Services Agency (CBSA) Customs Notice 20-39 for more information.
Summary of Key Changes
Here’s what the changes will mean for Canadian businesses and shippers, starting January 1, 2021:
|Imports to Canada (CA)||Exports to UK||Exports to EU|
|Economic Operator Registration and Identification (EORI)||—||Exporters with EU EORI numbers will need to register for a UK EORI number to be the importer of record for shipments destined to the UK.
Register for a UK EORI number here.
|Canada-European Union Comprehensive Economic and Trade Agreement (CETA)||Preferential duty free treatment under CETA will no longer apply to UK origin goods.||Preferential duty free treatment under CETA will no longer apply to Canadian origin goods.||Preferential duty free treatment under CETA will continue to be applicable.|
|New Duty Rates and Tariff Rate Quotas||Under the terms of the World Trade Organization (WTO), the Most Favored Nation (MFN) tariff treatment will replace CETA and approximately 30% of all commodities entering Canada from the UK, will now be dutiable. However, the new UK Trade Continuity Remission Order can be claimed for eligible UK imports, for the remission of duties. Current duty rates and tariff quotas under MFN are available in the CA Customs tariff on the CBSA website.||CETA will no longer apply to goods imported from CA. The UK Global Tariff (UKGT) will come into effect and replace the current EU Common External Tariff, as the new UK-specific tariff system. Under the terms of the World Trade Organization (WTO), the UKGT will apply the Most Favored Nation (MFN) tariff treatment, for all goods imported into the UK unless the country from which the goods are imported has a trade agreement with the UK. (click on the UKGT link above for a list of all exceptions).
Approximately 47% of all commodities into the UK will remain duty free.
The average tariff rate will be reduced from 7.2% to 5.7%.
|Current duty rates and tariff quotas into the EU will remain status quo.|
|De Minimis||No change to current value of CAD $20.||De minimis of £15 will be eliminated.||No change to current values (country specific).|
|Changes to UK Value-Added-Tax (VAT) Treatment for Goods Valued at 135 GBP or less||—||VAT for goods sold to UK consumers valued at 135 GBP or less will be collected at point of sale and no longer at time of import. Additionally, VAT references will be changed to ‘supply VAT’ from ‘import VAT’ except when goods are sold to Northern Ireland consumers. In order to properly collect and account to HM Revenue & Customs (HMRC), exporters who sell these goods will be required to register for VAT. The new measure will not apply to the following types of goods:
|The Canada-United Kingdom Trade Continuity Agreement (CUKTCA)||The CUKTCA is a transitional agreement between CA and the UK that will enable the continuity of key benefits currently covered under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).
The CUKTCA has been ratified and both countries are working towards implementing the new agreement by April 1, 2021.
- Identify the potential duty/VAT impacts to your company and customers (buyers).
Determine the duties that will apply to your goods using the UK Global Tariff tool. Get detailed information on the UK VAT for overseas goods sold directly to UK customers here.
- Register for VAT when selling goods valued at 135 GBP or less to UK consumers, when applicable. Register for VAT here.
- Register for a UK EORI number to be the importer of record for shipments destined to the UK if you only have an EU EORI number. Register for a UK EORI number here.
All information is subject to change and updates will be provided as more information becomes available.