6 September 2017

Brexit: A glossary of the terms

From the Customs Union to the Single Market, we define some of the main terminology used in Brexit discussions.

Confused about the terminology used in Brexit discussions? We’ve put together a handy guide to help you navigate the choppy waters and understand some of the potential impacts on your business.

Customs Union

The Customs Union is a group of countries and territories who have agreed that goods may move between them without customs duties being applied. It includes all EU countries but also a few other areas, including, for some goods only, Turkey.

Goods arriving from third party countries into any Customs Union country are charged the same rate of duty. As such, there is no advantage gained in importing them into a specific EU country as the import duty incurred will be the same.

Members of the Customs Union are not able to negotiate their own trade agreements with third countries. All trade agreements must be negotiated by the European Commission on behalf of the whole bloc.

If the UK were to remain in the Customs Union after Brexit, it would mean that the trade of goods between Ireland and Northern Ireland would remain duty free.

There are a few states that participate in the European Union but are not members of the Customs Union, such as Gibraltar.

Single Market

Being a member of the Single Market (also sometimes referred to as the Common Market) enables goods, services, capital and people to move freely between member countries.

Norway, Iceland, Switzerland and Liechtenstein are members of the Single Market but not of the EU. As such, it is a possibility that the UK could remain a member of the Single Market after Brexit. If this happens, however, the UK would not, in theory, be able to control the movement of goods, services, capital or people between itself and other Single Market members.

World Trade Organisation’s conditions of trade

If the UK were to leave the EU completely, as well as the Single Market and Customs Union, goods moving between the UK and any other country would, in principle, be treated in accordance with the World Trade Organisation’s conditions of trade. It would then be up to the UK to negotiate any special trade deals with other countries itself.

European Free Trade Association (EFTA)

The European Free Trade Association relates to a free trade area comprising of Switzerland, Liechtenstein, Norway and Iceland. It was established in 1960 as an alternative trading block for countries not able or willing to join the EU, but who nevertheless wished to make trade easier between these countries.

The UK was a member of this trading bloc before joining the EU and it could possibly seek to re-join following Brexit. The EFTA is not a full customs union and members are free to negotiate their own trade agreements with other countries. If we were to re-join, goods moving between the UK and the EU would still be classed as imports and exports (rather than intra-EU supplies of goods).

Imports and exports

Goods moving between EU countries and non-EU countries are classed as imports and exports. Declarations must be completed and goods are generally not permitted into a country unless either (i) any taxes and duties are paid or (ii) a suitable deferment arrangement or other facilitation for any taxes can be used.

Paperwork for imports and exports is more onerous than for goods moving between EU member states.

Intra-EU movements of goods

Goods can move freely between EU member states. No customs duties are payable and VAT is generally due in the country of the customer. Goods movements are tracked via intrastat returns and European sales listings returns.

If the terms of Brexit still have you feeling a little confused, please do not hesitate to give Scott Craig or Tanya Mcilwain a call.

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