Potential No-Deal Brexit Caused by COVID-19 Pandemic May Leave Questions Unanswered for UK Exporters, Lawyer Says
The COVID-19 pandemic may hinder the United Kingdom and the European Union from striking a deal before the Brexit transition period ends in December, potentially creating export control confusion for companies, according to a trade lawyer. The U.K. has formed sanctions regimes for its official departure from the EU, but the two sides have not made much progress on export control regulations, which could have substantial impacts on supply chains, said Ross Denton, an export control lawyer with Baker McKenzie.
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“We’re hoping that this will all be picked up in a mega agreement between the EU and the U.K. by the end of the year,” Denton said during a March 24 webinar hosted by the law firm. “Unfortunately, none of us are holding our breath that this will actually happen.” Denton said the “major economic crisis” caused by the coronavirus pandemic makes it difficult to finalize a deal by Dec. 31. “I think the chances of that happening are extremely unlikely,” he said.
While the U.K. and the EU plan to provide each other preferential treatment for exports after Brexit is finalized, there are “lots” of “problems that go right to the heart of supply chains that have not yet been settled,” Denton said. For example, neither side has provided clarity on U.K. exporters who ship their goods from inside the EU, Denton said. “If you have a U.K. established exporter, but the goods are physically moving inside the EU to outside, you'll have to come up with some other type of licensing arrangement,” Denton said. “We don't know how that process will continue, which will disrupt your supply chain.” In addition, U.K. customs and trade logistics operations may be quickly overwhelmed when the U.K. officially leaves the EU, which could lead to delays at ports and create significant shortages of customs intermediaries (see 2003180056).
Industry may have more assurances around U.K. sanctions, Denton said, because the U.K. has “already produced a whole slew of sanctions regimes” (see 2001310023). Denton said the regimes are “ostensibly the same” under the EU, but there will be significant differences. “They are extremely long, they're extremely complicated, and they do have some material differences, including some much more wide-ranging licensing provisions.”