This article is the second in a series looking at the impact of Brexit on the construction industry. In the first – The impact of Brexit on the construction industry – we noted the existence of measures agreed between the EU and the UK to ensure a flow of goods is maintained between the two territories following Brexit. This is to ensure benefits are maintained for both through the continuance of trade.
That said, there will inevitably be an impact as a result of the UK’s separation and exit from the single market; and despite the initial attempts to minimise these, all members within the supply chain are likely to feel the effects.
Maintaining flow of goods through the TCA
The post-Brexit trade deal, the Trade and Cooperation Agreement (TCA) came into effect on 1 January 2021. TCA is open in its intention to maintain the goods trade; it aims to “facilitate” a “liberalised trade in goods” – a very welcome approach.
To achieve this, neither the UK nor the EU may (among other things):
- Impose an internal charge where the same charge would not apply to domestic goods
- Impose fees and charges out of proportion to the costs of services rendered in relation to the import or export of goods
- Generally prohibit or restrict the import of goods from the other (there are exceptions)
- Adopt import or export price requirements, including performance licensing conditions.
All the above seek to maintain a flow of imports and exports. So far so good, and the theme continues as the movement of those goods by road can continue freely between the UK and the EU, but also through the UK and EU to other countries. However, there are measures implemented to govern that operation. Companies operating as hauliers must obtain a licence and each driver must hold competency certification. There are also restrictions on the number of laden journeys an operator may undertake prior to returning to its territory.
As an aside, and while it is not expressly covered within the TCA, a Joint Declaration has been issued to permit the temporary stay of drivers within the other territory for the purposes of haulage.
While operators are free to move, this movement is not unlimited and these limitations may reduce the frequency of movements of goods and materials, potentially increasing the cost to offset the lost efficiencies.
These efficiencies may be further eroded by the administrative burden placed on parties. There is a need for export declarations, declarations of origin, importing declaration, declarations of conformity and additional customs checks (particularly in relation to the origin of the products for the purposes of preferential treatment for the purposes of tariffs imposed on the goods). These are all matters, and costs, which businesses will have to account for.
While the TCA seeks to incentivise the UK and EU to develop more streamlined processes and singular declaration documents, the framework currently set out within the TCA leans more towards being an administrative burden and potential practical restriction.
And what of the standard of the materials that are transported? Is there a clear direction on how the standard and certification of goods is to be uniformly and seamlessly maintained between the UK and EU? In short, no. There is an encouragement for the standardising bodies within each to participate in the development of international standards and then to use those standards as a basis of arriving at their own, but no hard and fast rule that the two must collaborate and adopt the same.
What this means is a risk of goods and materials being of differing specifications if produced domestically or internationally. When producing specification documents within your works information or employer’s requirements, greater care will need to be taken not only to ensure desired products are clearly identified, but checks may need to be made to ensure that there is a supply available of that material; a point contracting parties should also be particularly wary of where the contract is prescriptive rather than performance-based.
Simply because something may do the same thing does not necessarily mean that is how the contract will view it. There may also be commercial reasons for specifying a particular product. For example, it may benefit from the maintained Rules of Origin, whereby goods and materials produced solely from others originating within either the UK or EU benefit from preferential tariff treatment. Should a supplier elect not to import the specified product, and depending on the contractual terms, it may end up bearing the loss of the preferential tariff.
Are the TCA and the terms and measures it sets out perfect? No, but it is a start. Will there be impacts on goods and materials, and therefore projects? Yes. For each party and business it will be necessary to not only plan and price as best they can for each project, but also allocate (or accept) the risk within their contracting structures. The movement of goods may continue but it is yet to be seen whether that movement will be liberal.
Contributed by Claire Mayo and Josh Roberts, associates in the global projects and construction group at Clyde & Co