On the 27th February, the UK and EU announced that the new ‘Windsor Framework’ had been reached, which will effectively replace the existing Northern Ireland (NI) Protocol as it stands now.
The NI Protocol has been at the centre of acute political, economic and societal frictions since it became operational. Feedback from communities and businesses in Northern Ireland deemed the protocol as unsustainable and with high risks of leaving long-lasting economic and political damage.
Next Steps
For now, HMRC has issued a letter for traders informing them about the new agreement, which provides a new legal and UK constitutional framework, which intends to deliver free-flowing trade in goods between Great Britain and Northern Ireland through the ‘new green line’.
Immediate guidance from HMRC to traders indicates that:
Traders do not need to take any action now and should continue to move goods into and out of Northern Ireland in the same way they currently do
Relevant and further guidance will be updated in due course and traders will be given plenty of time to prepare. The Government will consult with businesses regarding timelines for implementation of the new changes.
So, what are some of the key changes brought by the new framework?
Goods Movement
The introduction of a 'green lane’
This new lane will remove the need for customs declarations for movement of goods from GB into Northern Ireland. The new UK internal trade scheme will enable businesses to move their goods by sharing commercial information instead of following international customs processes. So this will effectively help a wider range of businesses who will no longer be required to provide commodity codes for each movement as well as the removal for supplementary declarations. Goods will be effectively treated as internal UK movement for tariff purposes and will not need to comply with rules of origin requirements. Goods that are considered to be ‘At Risk’ of entering the EU (including the Republic of Ireland) will travel along the ‘red lanes’ and will continue to follow EU customs controls that currently apply for GB-EU trade.
Removal of NI-GB Export Declarations
The current protocol requires export declarations for NI Goods entering GB due to the need to have ‘equivalent information’ for NI-GB and GB-NI movements. However, this arrangement has created a significant amount of risks and friction in trade, which were also leading to many disputes between the UK and EU. The Windsor agreement will ensure that NI businesses have unrestricted access to the UK market on a permanent basis and controls will only be applied where the UK has to comply with international obligations, such as the movement of endangered species.
The New Internal Market Scheme
These new arrangements for the smooth flow of trade within the UK internal market are underpinned by data-sharing and technology. This will ensure that there is real-time data on goods movements to support risk analysis, removing the need for the extensive bureaucracy and checks that will continue to apply for goods moving on into the EU.
The new scheme also addresses a range of issues that had been causing frictions and added costs into the internal UK Trade.
Traders who are already using the UK Trader Scheme will, if they wish, be automatically enrolled in the new system and it promises to be very straightforward for new traders who wish to sign up.
Businesses in the UK will no longer need to have physical premises in Northern Ireland.
The turnover threshold will be increased for which companies involved in processing can move goods under the scheme which they can stay in NI will go from £500K limit to £2m.
Even if firms are above that threshold, they will be eligible to move goods under the scheme if those goods are for use in the animal feed, healthcare, construction and not-for-profit sectors.
All types of steel into NI have been safeguarded as tariff-free movements.
A forward process will be established to ensure NI firms can access other goods subject to Tariff Rate Quotas in the future which will address the current disadvantages of the protocol as it stands.
For traders who are uncertain of the end destination for their goods when first moving them into NI, in the coming months, there will be a new tariff reimbursement scheme for those who can show the goods ultimately did not end up in the EU
Agrifood
A new sustainable, long-term framework for agrifood retail trade into Northern Ireland has been secured. Some of the most important points include:
All traders moving agrifood goods for the final consumer in Northern Ireland can become members of the UK-run scheme - including retailers, wholesalers, caterers and those providing food to public institutions like schools and hospital. So all 1500 members of STAMNI will be automatically enrolled to the green lane, and the rest including schools and prisons will also be able to join the scheme by a simple online form.
Bans on British products such as sausages entering Northern Ireland will be scrapped permanently: with those goods available on the shelves in Great Britain again able to move smoothly to Northern Ireland
The threat of up to 500 certificates for a single truck will be replaced with a single document and process confirming that goods are staying in Northern Ireland and are moved in line with the terms of our internal market scheme
Radically reduced checks - ID checks reducing from 100% to 5% by 2025 and the requirement for physical checks for up to 100% replaced purely risk--based and intelligence led-arrangement.
Removal of the requirement for costly health certificates needed for individual food products.
That document will be electronically and remotely processed, without being physically checked. There will be no need for official veterinarians or plant inspectors on site in supermarket distribution centres or costly ‘attestation’ supporting documentation for products, with proportionate arrangements for competent authority oversight based on risk and intelligence.
The scheme will not be limited solely to goods from Great Britain or the EU. Goods from across the world can be moved in the scheme, either where they are processed in the UK, where they meet UK public health standards and pose no disease risks, or, where there are potential disease risks for products moved from the rest of the world, where the UK has chosen to take the same approach to protecting against the same pests and diseases.
The solution on physical checks will match the UK’s proposals in July 2021, with no arbitrary or set physical checks, and interventions based only on risk and intelligence decisions made by UK authorities, to deal with smuggling, criminality, abuse or specific risks to animal, plant or public health.
Secure access for important rest-of-the-world agri-food goods into NI as part of a simplified scheme.
Implementation
The NI Retail Movement Scheme will come into force in Autumn 2023.
There will be further guidance on the operational and delivery implications of the changes will be provided in advance to businesses
There will be consultations with businesses over the coming months ahead of the implementing any changes
Parcels
Under the current NI Protocol, every single consumer parcel movement requires, if not for a unilateral UK grace period, a full customs declaration, which has caused disruption and increased costs across NI. Under the new arrangements, day-to-day parcels have been safeguarded by removing the requirements under the EU’s customs code.
So for parcels sent between family and friends in NI, the process will remain the same as it is today, with no requirements on either the sender or recipient of any kind.
For B2C ecommerce movements, customs declarations, pre-notification, presentation of goods to customs authorities and the wide range of burdensome requirements that currently apply will be completely removed. The UK has agreed that authorised parcel operators will manage the process of sharing data, in batches, to monitor and manage any risks related to smuggling into the EU market.
The new approach will also apply to goods which are classified as prohibited or restricted under EU rules although domestic UK law prohibition and normal carrier terms and conditions still apply. To enable this change, the legal definition of goods classified as ‘not at risk’ of entering the EU to ensure a consumer parcel delivery are always classified as goods destined to stay within the UK.
Medicines
Under the NI Protocol, medicines sold in NI had to follow EU rules and authorisations as set out by the European Medicines Agency (EMA). The Windsor Framework will allow the UK’s Medicines and Health Products Agency (MHRA) to approve drugs for all the UK, including NI.
VAT & Excise
Under the old Protocol, EU VAT and excise rules apply in Northern Ireland, strictly in relation to goods, in order to avoid a hard border in Northern Ireland. While UK authorities have ensured that this has avoided burdens on East-West movements in practice, those rules have prevented the Government from applying VAT and excise changes UK-wide, with future EU rule changes likely to increase that divergence further. To address this, the agreement secures substantive, legally binding changes in the new arrangements, ensuring that Northern Ireland will benefit from the same VAT and alcohol taxes as apply in the rest of the United Kingdom
See further guidance below (updated as of May 2023):
Sources: UK Government, HMRC, IOE&IT
Did you missed our Chambers Trade Academy Session on the 'Windsor Framework'?
Check the recording and download the slides by click here
Updated 17th May 2023