The EU-UK agreement reached on 17 October 2019 ("Agreement") revises the Irish backstop with a new Protocol on Ireland/Northern Ireland ("NI Protocol").
The NI Protocol provides that Northern Ireland remains part of the UK customs territory and as such included in any free trade agreements that the UK will conclude with third countries, provided that those agreements do not prejudice the application of this NI Protocol. Under the NI Protocol, Northern Ireland would fully align some of its regulations with those of the EU Single Market and Customs Union to avoid regulatory and customs checks at the land border between Ireland and Northern Ireland.
The UK would remain part of the EU Customs Union and Single Market until the end of the transition period (i.e., until at least 31 December 2020). As a result, the conditions for trade between the UK and the EU Member States will remain unchanged from 1 November 2019 to 31 December 2020, the end of the transition period, unless further extended.
Goods moving from Great Britain into Northern Ireland would not be subject to customs duties unless there is a risk that the goods would be destined to be used in the EU.
Goods imported into Northern Ireland from outside of the EU would be subject to: (1) the UK tariffs if destined to Northern Ireland; and (2) the EU tariffs if there is a risk that they could be subsequently transferred to the EU either in and of themselves or as part of further processed goods ("EU Destined Goods"). This application of potentially different duty rates in the EU and UK customs territories would require controls on end-use and end-destination of the imported products, which will add a new layer of customs compliance obligations for operators in Northern Ireland.
Goods imported into Northern Ireland would be presumed to be EU Destined Goods unless they meet the two following cumulative conditions:
- They are not subject to commercial processing in Northern Ireland, such as alteration or transformation of the goods other than for the purpose of preservation, marking or any other documentation activity to ensure regulatory compliance; and
- They fulfil certain criteria to be defined jointly by the Joint Committee (comprised of EU and UK officials) prior to the end of the transition period.
The UK would retain the right to waive or repay duties paid on EU Destined Goods brought into Northern Ireland from non-EU Member States (including the UK) so long as the amounts waived/repaid remain below certain thresholds. The NI Protocol provides that customs duties charged for EU Destined Goods entering in Northern Ireland would be retained by the UK and not remitted to the EU budget.
The EU and UK would also retain the possibility to introduce safeguard measures where the aforementioned scheme results in: (1) persistent and serious economic, societal or environmental difficulties; and/or (2) trade diversion. The introduction of such safeguard measures by one of the Parties could, in turn, be met by the imposition of rebalancing measures by the other Party with a view to remedy any imbalance generated by the safeguards.
The EU and the UK would need to expeditiously negotiate their future trade relationship. It is only if the EU and the UK fail to reach a deal on such future relationship by the end of the transition period that the NI Protocol would become automatically applicable.