This Q&A does not focus on other legal, commercial and operational aspects which may be impacted by a ‘no deal’ Brexit in March 2019, such as the implications for haulage or transportation or product safety or labelling; or the impact on goods which are restricted, subject to export controls, require a licence for import or export, or are otherwise subject to specific rules. This review has been specifically written for Lexis®PSL Commercial.

Key guidance available focusing on the WTO rules in a ‘no deal’ Brexit scenario includes:

Practice Note: International trade—Brexit toolkit (in particular News Analyses: Brexit—customs implications for trade in goods and Brexit and the UK’s status in the WTO)

The UK is due to exit the EU at 11:00pm UK time on 29 March 2019. Following that date the UK/EU27 legal and commercial relationship may be subject to a Withdrawal Agreement (the draft text of which includes a transitional period, during which the UK would generally remain subject to EU law (including the EU Customs Union and Single Market) for a limited time after 29 March 2019), or if negotiations fail (no deal), no such arrangement. For guidance on Brexit generally see the Brexit toolkit and Practice Note: Brexit timeline.

As explained in News Analysis: Brexit—customs implications for trade in goods, if, by the UK’s exit date, there is a no deal situation with no Withdrawal Agreement in place and, almost inevitably in that scenario, also no other relationship agreement with the EU27, there will be an abrupt end to the UK’s participation in the EU Single Market and in the EU Customs Union. Only the WTO rules will then govern UK—EU27 trade relationships.

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WTO Rules

The WTO sets rules for international trade that apply to all WTO members. Under the WTO arrangements there is no provision for free movement of people, or the requirement of a financial contribution to be made in order for WTO members to trade. This is in stark contrast to the existing arrangements under the EU Single Market. See also Practice Note: Brexit—alternative UK trade models.

With regards to trade in goods, the main WTO obligations on member countries are contained in the General Agreement on Tariffs and Trade (GATT). These are principally the following:

  • the obligation to grant most favoured nation treatment (MFN) to all member countries without discrimination – as further explained in Practice Note: Brexit—alternative UK trade models, WTO rules only permit countries to discriminate in favour of a trade partner in a limited number of circumstances. Under WTO rules, MFN arrangements must be applied equally to all members, subject to some conditional exceptions eg free trade areas. Free trade areas (such as the EU) must demonstrate clear borders (with checks) between member and non-member countries
  • to abide by maximum tariffs as set out in the member country’s schedule of commitments – see below
  • to confer national treatment ie equivalent treatment as between national goods and imported goods
  • prohibitions (with limited exceptions) on quantitative restrictions on exports and imports


Most members of the WTO have a ‘schedule’—a list of commitments on market access that they offer to all other members (covering, for instance, the tariffs that they will charge for different types of goods). The EU has its own schedule, setting out that it will charge all WTO members particular tariffs on certain goods. The UK is a member of the WTO in its own right. But, as an EU Member State, the UK currently shares the EU’s schedule.

For further guidance on the above see News Analysis: Brexit and the UK’s status in the WTO, which explains that if the UK has a WTO-based trading relationship with a country, that means it has the same level of access as every other country, but no better:

‘For instance, in a WTO-based trading relationship with South Korea, the UK would face South Korea’s 8% tariff on cars, just like everyone else. A free trade agreement is the exception to that rule—it allows you to have preferential market access. The EU has a deal with South Korea meaning that, as an EU Member State, the UK doesn’t have to pay that 8% tariff on cars. When the UK leaves, it will no longer have access to that deal. If it wants to avoid paying the 8% tariff, it will probably need to strike its own deal with South Korea, and with the other countries where the EU currently has a deal.

In theory, the UK would need to get its new schedules approved (certified) by all members of the WTO. That could take years. In practice, however, News Analysis: Brexit and the UK’s status in the WTO explains that the WTO is a not a legalistic organisation—and its rules are not always enforced. For example, the EU last certified its schedules back when it only had 15 members—as it has expanded it has changed its schedules, however they have not been certified by other WTO participating members. Since no other participating member has complained, this hasn’t been a problem:

‘What that means for the UK is that we could set out our schedules and start trading off them immediately. If no one complains, then we might certify them over the next few years. If they do complain, then we might become involved in a protracted dispute.’

In October 2017, the UK government and the European Commission (Commission) wrote a joint letter to the WTO membership setting out a number of proposals for future global trading arrangements. The proposals include apportioning the EU’s existing commitments on the amount of imported goods on which a lower duty is charged through tariff-rate quotas (TRQs) and the allowable amount of certain agricultural subsidies. See: LNB News 11/10/2017 47.

The UK’s draft goods schedule was submitted to the WTO on 24 July 2018 and after the 3 month certification period finished, Liam Fox announced some trading partners had expressed reservations about the UK proposed treatment of TRQs and that the UK would therefore enter negotiations with relevant partners under Article XXVIII of the GATT. On 3 December 2018, the Department for International Trade noted that:

‘Whilst some members still have reservations about some of our proposals, this will not affect businesses’ ability to trade and it will not stop the UK from striking new trade agreements.’

House of Commons Briefing Paper, 18 December 2018

A House of Commons Library Briefing Paper published on 18 December 2018 gives a more nuanced summary:

‘Upon leaving the EU on 29 March 2019, the UK will retake full control of its representation at the WTO. It will be a member that may not have approved schedules, and there are indications that there will be challenges to the intended UK approach to rolling over existing EU trade agreements to the UK and the UK’s allocation of EU tariff-rate quotas – but in principle the UK will be able to participate in WTO proceedings and benefit from WTO commitments from 30 March 2019 onward.’

WTO Guidance

The WTO has produced further guidance on goods schedules.

The goods schedule submitted by the UK can be found here: UK goods and services schedules at the WTO.

In October 2018, EU ambassadors agreed on the draft schedule of TRQs for the EU post-Brexit. See: LNB News 31/10/2018 117.

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Challenges for the UK in enforcing WTO rules

As further explained in News Analysis: Post-Brexit trade-off—playing by the WTO rules:

  • the WTO has a mechanism to resolve disputes regarding the application of the WTO agreements or commitments
  • only WTO member countries can bring a claim under the WTO Dispute Settlement Procedure – so if a UK company considers that a third country’s trade practices breach WTO law, it would need first to approach the UK government and lobby it to bring a claim against the other WTO member
  • if the UK government were to agree that the WTO member is in breach of its obligations under the WTO, the government could seek relief under the WTO rules. This involves a two-stage procedure and there is also an appeals process. If after the panel decision and any appeal decision, the offending member continues to violate WTO law then the harmed country may seek permission to take retaliatory trade action
  • the WTO enforcement procedure is slow and cumbersome and, in so far as UK trade with the rest of the EU is concerned, far less effective than the remedies available under EU law

A House of Common’s Library Briefing Paper published on 18 December 2018 made the following observations:

the UK’s WTO rights may be more difficult to enforce at the WTO in practice in the absence of a fully functioning dispute settlement system

  • reform is both urgent and very difficult to achieve urgently; the Doha Round is an extreme example of slow progress, but disagreement between key members on how to ‘fix’ the WTO means that even more limited reform (intended to keep the US in the WTO) will be a challenge
  • the areas in which the WTO is seen as needing reform the most include those that are key components of the UK economy; this is particularly true for services liberalisation and e-commerce, which is much more limited under the WTO regime than it is under EU rules
  • regardless of progress at the WTO, bilateral trade agreements are the primary basis on which most countries are currently advancing their policy, and the UK (under the terms of the EU’s Common Commercial Policy) cannot conclude any new ones until after it has left the EU
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Impact of trading under WTO Rules

As explained in News Analysis: Brexit—customs implications for trade in goods and Practice Note: Brexit—alternative UK trade models if the UK trades with the EU27 under WTO rules implications will include (but not be limited to) those set out below.

Customs and excise duties

While the UK remains a member of the EU Customs Union, goods can be transported between the UK and the EU27 free of customs duty. If the UK leaves the EU without a deal, customs tariffs will apply between the UK and the EU27 on the same terms as would apply between any members of the WTO who do not have a bilateral free trade agreement.

In the event of a no-deal Brexit, for goods exported from the UK to the EU27, customs duty will be payable to the relevant EU27 state at a rate determined by the EU’s Common Customs Tariff (CCT). For goods imported to the UK from the EU27, the customs duty tariff may be different from the EU’s CCT, and depends in part on the outcome of the UK’s negotiations over its WTO goods schedule, as referred to above. The current tariffs applied by the UK (as a member of the EU) can be found here: UK Trade Tariff.

Goods that are subject to excise duty (in particular alcohol, tobacco and oils) can move within the EU with excise duty suspended under the EU’s Excise Movement and Control System (EMCS). Once the UK leaves the EU, ECMS will cease to apply to movements between the UK and the EU27 (although it will still apply to movements within the UK). This means that upon importation to the UK, these goods will either need to be placed in a customs and excise suspension arrangement, or excise duty will need to be paid at that point.

The Taxation (Cross-border Trade) Act 2018 sets up a new customs, excise and value added tax (VAT) regime to apply once the UK is no longer a member of the EU, either in the event of no deal, or at the end of any negotiated transition period. See News Analysis: Post-Brexit customs regime—the Taxation (Cross-border Trade) Act 2018. For further guidance on the tax implications of Brexit, see Practice Note: Brexit—potential impact on UK tax.

Value added tax (VAT)

Goods moving within the EU are subject to different VAT rules from goods moving between the EU and countries that are outside the EU (third countries). In particular, a business receiving a cross-border supply of goods within the EU accounts for VAT that is known as acquisition tax. Acquisition tax is subject to different rules from import VAT (import VAT is payable when goods are imported to an EU state from a third country).

Once the UK leaves the EU, the concept of acquisition VAT will cease to exist as a matter of UK law. An import of goods to the UK from a third country incurs a charge to import VAT on arrival of the goods at the UK port of entry. This contrasts with acquisition tax, which does not have to be accounted for until the next periodic VAT return.

If these third country rules were to be applied to imports to the UK from the EU27, there would be a significant cashflow cost in comparison with the rules on acquisition tax. The UK government intends to introduce postponed VAT accounting to address this issue (see the Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019, SI 2019/60).

For a summary of the VAT rules that apply to movements of goods within the EU, see Practice Notes:

For a summary of the VAT rules that apply to movements of goods between the UK and third countries (and that will therefore apply between the UK and EU27 in the event of a no deal Brexit, subject to any rules that the UK can put in place unilaterally, such as the postponed VAT accounting mentioned above), see Practice Notes:

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Guidance from the UK government and the EU Commission on tax in the event of a no deal Brexit

HM Revenue and Customs (HMRC) has created:

You may also wish to refer to: Classifying your goods in the UK Trade Tariff if there’s no Brexit deal.

The European Commission has issued a number of Preparedness notices addressing a no deal Brexit, including guidance on customs and indirect taxation.

Customs checks and controls and the need to prove the origin of goods

Commission’s Notice to Stakeholders: Withdrawal of the United Kingdom and EU Rules in the field of customs and external trade—preferential origin of goods

Currently the EU Customs Union provides not only for zero tariffs within the EU but also a relatively benign regime for demonstrating the EU or UK origin of goods to qualify for the zero tariff. Imports from outside the EU Customs Union face burdensome customs checks and administrative procedures to prove the nature of the product, its origin, value and duties paid. After a no deal Brexit, UK businesses would likewise have to deal with the administrative burden of demonstrating the UK origin of goods for purposes of benefitting from any preferential trade rules and complying with other customs controls. See, for example, the Commission’s Notice to Stakeholders: Withdrawal of the United Kingdom and EU Rules in the field of customs and external trade—preferential origin of goods.

HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit

HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit explains that in a no deal (WTO rules) scenario UK customs controls on goods will increase.

‘From 11pm on 29 March 2019, for businesses trading with the EU, the impacts would include:

  • businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as are currently applied in cases where goods move between the UK and a country outside of the EU. This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration). For imports into the UK a separate safety and security declaration needs to be made by the carrier of the goods (this is usually the haulier, airline, freight train operator or shipping line, depending on the mode of transport used to import goods). For exports from the UK, the export declaration includes the safety and security declaration
  • the EU applying customs and excise rules to goods it receives from the UK, in the same way it does for goods it receives from outside of the EU. This means that the EU would require customs declarations on goods coming from, or going to, the UK, as well as requiring separate safety and security declarations for imports into the EU
  • for movements of excise goods, the Excise Movement and Control System (EMCS) would no longer be used to control duty-suspended movements between the EU and the UK. However, EMCS would continue to be used to control the movement of duty-suspended excise goods within the UK, including movements to and from UK ports, airports and the Channel Tunnel. This will mean that, immediately on importation to the UK, businesses moving excise goods from the EU, including those in duty suspension, will have to make a customs declaration and the goods placed either into a customs or excise suspensive arrangement or the duty must be paid at that point.’

HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit

HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit contains further guidance on the customs controls that the UK government expects would apply in both the EU and UK.

These changes will involve not insignificant administrative burdens, particularly for small and medium-sized businesses. Trading with the EU if there’s no Brexit deal gives suggestions as to how the burdens may be mitigated in some cases. In October 2017 the CBI published a report which analysed two types of barriers UK companies would face in a no deal scenario. That report warned that non-tariff barriers, such as increased paperwork and trade restrictions, could cost UK companies more than import and export tariffs—see: LNB News 18/10/2017 92.

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Goods exported between the UK and the EU27 (or other countries) in a no deal scenario would have to meet the standards, including technical specifications, consumer protection, environmental standards and product safety requirements mandated by the import destination (eg EU rules).

HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit

Further guidance is given in HMRC’s Partnership pack: preparing for changes at the UK border after a ‘no deal’ EU exit contains further guidance on the customs controls that the UK government expects would apply in both the EU and UK. For example, that notes that the results of conformity assessment carried out by UK-notified bodies will no longer be recognised in the EU for the purposes of ‘CE’ marking. This means that products tested by a UK-notified body will no longer be able to be placed on the EU market without retesting and re-marking by an EU-recognised conformity assessment body (see pages 11–13).

For more on how a no deal Brexit would affect the production and labelling of food products, see News Analysis: No-deal Brexit—what this means for the manufacture and supply of food products, and for further information on how a no deal would affect trade in harmonised goods, see News Analysis: No-deal Brexit implications for the manufacture and supply of harmonised goods.

Trade outside the EU

Although this response does not focus on the impact of trade between the UK and the rest of the world outside the EU, we have set out some high level points and links to further analysis of that topic below. This also highlights some of the indirect implications arrangements with the rest of the world may have on flows of goods between the EU and UK in a no deal outcome.

As explained further in News Analysis: Brexit—customs implications for trade in goods, in a no deal scenario, the UK would be free to enter into new free trade agreements with other countries irrespective of agreements already concluded by the EU. Trade between the UK and countries with whom the EU has a free trade agreement but the UK does not, would then be governed by the WTO rules.

As a member of the EU, the UK currently participates in around 40 EU free trade agreements with over 70 countries; data shows that trade with third countries with EU free trade agreements accounted for around 12% of the UK’s total trade. Existing free trade agreements if there’s no Brexit deal explains:

  • in a ‘no deal’ scenario the government will seek to bring into force replacement bilateral UK-third country agreements from exit day, or as soon as possible thereafter
  • should arrangements to maintain particular preferences in a no deal scenario not be in place on exit day, trade would then take place on WTO/MFN terms

On 24 January 2019 the Minister of State for Trade Policy George Hollingbery announced, in response to a question, that there are ‘very wide range of reasons’ why signing new free trade agreements is challenging. The Minister also promised that the majority of the 40 agreements planned to be signed in the event of a no deal Brexit would be in place by exit day. See: LNB News 25/01/2019 116.

In a no deal scenario the UK would no longer be able to take advantage of agreements between the EU and such third countries. Implications would include:

On 29 January 2019, the House of Lords EU Select Committee published correspondence from Secretary of State for Exiting the European Union, Stephen Barclay, providing an update on government’s plans for laying Brexit-related international agreements before Parliament. The correspondence includes a list of international agreements which the government says have been finalised or will be finalised in coming weeks. See: LNB News 30/01/2019 101.

For further guidance on trade deals, see News Analyses: The fundamentals of trade deals and The practicalities of negotiating trade deals, and LNB News 30/01/2019 101.

Other LexisNexis® materials on the WTO

For further guidance on the WTO, in addition to the materials referred to above, see News Analyses: Brexit and the UK’s status in the WTO, Brexit and the WTO Trade Facilitation Agreement , Brexit and public procurement—examining the WTO Government Procurement Agreement and Explaining the UK’s WTO commitments after Brexit.

Other materials on ‘no deal’ Brexit published by the EU and UK

The UK government and Commission have respectively produced extensive guidance, see: How to prepare if the UK leaves the EU with no deal and Preparedness notices.

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