Brexit – Summary information for Canadian companies
Canadian companies doing business in or with the United Kingdom (UK) may be impacted by the UK’s planned departure from the European Union (EU). The planned departure is also known as Brexit.
The Government of Canada is paying close attention to the UK’s Brexit preparations and is monitoring how Canada’s trade with the UK might be affected. We will continue to update this web page as more information becomes available regarding the UK’s Brexit preparations and the potential impacts on Canadian firms, including with regard to the future trade relationship still to be determined between the UK and the EU.
The information on this web page summarizes key considerations and timelines and is not intended as legal or other professional advice. Firms should obtain any appropriate professional advice relevant to their particular circumstances.
Key information for Canadian companies:
- What is Brexit?
- What could this mean for Canada?
- How can a Canadian firm prepare?
- Contact a Trade Commissioner in the UK
- Resources for businesses
What is Brexit?
Brexit, short for “British exit,” is the word used to refer to the UK’s decision to leave the EU.
On June 23, 2016, the UK held a referendum on whether to leave or remain in the EU. The “leave” side won 52% of the vote.
On March 29, 2017, the UK invoked the exit clause (Article 50) of the Treaty on European Union, initiating a notification period for its departure in two years (i.e. on March 29, 2019).
After an initial short extension to April 12, on April 10 the UK and EU agreed to extend the deadline until October 31, 2019. However on October 28, a further extension was agreed. This extension extends to January 31, 2020, but the UK could also leave the EU sooner, if the Withdrawal Agreement is ratified and signed by both the UK and the EU before the deadline.
If the UK and the EU have an agreement:
If a Withdrawal Agreement is negotiated by the UK and EU and is ratified by both the UK and EU, there is likely to be a Brexit transition period, during which the UK will continue to be bound by virtually all of the rules and regulations of the EU while the EU and UK negotiate their future relationship.
During this transition period, when the UK would be treated largely as if it were an EU member state, the UK can also be part of the international treaties that the EU has with third countries, such as the Comprehensive Economic and Trade Agreement (CETA) with Canada. This transition period may last until the end of 2020 if the EU and UK agree. After this transition period, the UK will not be bound by EU treaties with third countries such as Canada.
If there is a “no-deal” Brexit:
If a Withdrawal Agreement is not approved when the UK leaves the EU (often referred to as a “no-deal scenario”), then there would be no transition period and the UK would cease to be an EU member on January 31, 2020. This would mean immediate changes to the trade and investment rules between the UK and the EU. For example, the EU would determine how to treat UK exports into the EU (and vice versa), consistent with international commitments.
A no-deal outcome also means that the UK’s participation in the EU’s international treaties would end and that trade preferences between the UK and the EU would disappear. Goods traded between the UK and the EU would be subject to the requirements normally imposed on goods from third countries along with checks prior to importation for compliance with these requirements, e.g. tariffs, customs, value-added tax, sanitary and phyto-sanitary measures, etc. The UK has published a proposed tariff schedule it may implement temporarily for imports from all World Trade Organization (WTO) members in a no-deal scenario, while the EU has indicated it would impose tariffs based on its current tariff schedule at the WTO. This is referred to as trading under WTO Most Favoured Nation (MFN) rules.
For Canada, in a no-deal Brexit bilateral trade with the UK will return to MFN rules. Canada-EU trade will continue to be governed by the terms of the Canada-EU Comprehensive Economic and Trade Agreement (CETA).
What is the likely outcome?
There is no certainty yet on how the UK will leave the EU or on the future of the EU-UK trading arrangements. The possibilities range from the UK and the EU maintaining a very close relationship to a no-deal outcome where the EU treats the UK as a third country without a free trade agreement.
What could this mean for Canada?
If a Withdrawal Agreement between the UK and the EU is approved, there is likely to be a transition period to December 31, 2020, and possibly beyond, during which the UK would be treated largely as if it were an EU member state. This arrangement could be extended by up to two years if the EU and UK agree. During a transition period, the UK could also be part of the international treaties that the EU has with third countries, such as the Comprehensive Economic and Trade Agreement (CETA) with Canada.
Depending on the details of the transition, Canada would consent to the UK remaining party to CETA and all other Canada-EU agreements. After the transition, the UK and Canada would need a bilateral agreement to maintain preferential trade, depending on the UK’s future relationship with the EU.
If the UK leaves the EU without an agreement, the UK would no longer be bound by the EU’s treaties with third countries, including CETA. In this scenario, Canada-UK bilateral trade would no longer benefit from any CETA preferences and would be based on WTO rules, including MFN tariffs on goods.
Canadian business should note that the UK recently released a proposed tariff schedule that would eliminate import duties on nearly 95% of its tariff lines in the event it leaves the EU without a deal. This would be offered on an MFN basis to all WTO members for up to one year. Canadian business should also refer to notifications issued by the UK concerning technical certifications that would apply in a no-deal scenario.
Once the UK departs the EU and gains jurisdiction to negotiate trade agreements – and there is more clarity on the UK’s trade arrangements – Canada intends to re-engage with the UK to discuss how our bilateral trade relationship can be strengthened. Any future trade arrangement between Canada and the UK would be influenced by the terms of withdrawal agreed between the UK and the EU, as well as any unilateral UK approaches.
How can a Canadian firm prepare?
Canadian businesses should consider how Brexit, including a no-deal outcome, could potentially affect them and take the appropriate steps to mitigate risks.
It may also be prudent to consider whether to acquire legal advice and/or engage a migration agent, customs broker, freight forwarder or logistics provider, to support preparations for all eventualities, including a no-deal outcome.
If a withdrawal agreement is in place before the UK leaves the EU, Canadian firms should see little or no change in how they trade with the UK for the duration of the transition period. There will also be little change in how the UK and EU trade.
Some important aspects to consider
- Is the trade time sensitive? How much would delays cost our business?
- How do we get our goods to the UK and the rest of the EU? Is my freight forwarder prepared?
- What are the implications of shipping goods that will arrive in the UK after the UK has left the EU, if the outcome is still unknown?
- To minimize potential disruptions, do we need to increase our inventory and obtain more storage space?
- Do we ship across UK-EU borders? If so, what method do we use, and could costs rise?
- Will our products be subject to a tariff or VAT?
- Are we ready for increased administrative burden or changes to intellectual property, licensing and regulatory authorities?
- Do we need to reconsider our labelling?
- Where are components in our products sourced? Are our partners and key third parties ready?
- What is the effect of increased volatility in exchange rates?
- Do we have contracts with the EU or the UK: that go beyond the date that the UK leaves the EU, or that refer to EU law, to the UK as a member of the EU, or that rely on the free movement of goods and services between the UK and the EU?
Contact a Trade Commissioner in the UK
Canadian companies looking for more information, including how to expand their activities in the UK, should contact the Canadian Trade Commissioner Service in the UK.
Resources for businesses should there be a no-deal outcome
Contact Export Development Canada (EDC)
Exporting to the UK? Contact Export Development Canada to learn how we can help you manage risk, secure financing or access working capital, so you can grow your business with confidence.
Should the UK leave the EU without an agreement (in English only):
- Prepare for EU exit (Gov. UK)
- How to prepare if the UK leaves the EU with no deal (Gov. UK)
- Temporary rates of customs duty (tariffs) on imports after EU Exit (Gov.UK)
- Partnership pack: preparing for changes at the UK border after a no deal EU exit (Gov. UK)
- Brexit preparedness (European Commission)
- Brexit Customs Guide for Businesses in the EU (European Commission)
- Date Modified: