Brexit and Future Customs Arrangements

Thank you to Barbara Scott from Customs Associates for sharing this article with us.

While we all welcome the paper on Future Customs Arrangements which, finally, tells us something about the Government’s thinking on how we might trade with EU member states once we have left the European Union, there are some major concerns and plenty of unanswered questions about the potential solutions. Many of these have been covered in the press recently but here are my own thoughts.

A highly streamlined customs arrangement between the UK and the EU is, of course, a must for trade to continue to flow unhindered between us and the mainland but, of course, more importantly, between Eire and Northern Ireland. It is that latter arrangement that is going to drive the processes for the rest of UK/EU trade. IT solutions, based on vehicle number plate recognition or supply chain information supplied by sender/recipient to customs authorities can be developed over time and should be available for trade with all countries not just the EU.

But, even if there is the political will and finance available to do this, it will take many years of planning and implementation. It is the interim solution that we need to be working on now and, hopefully, that will be the main thrust of discussions in Brussels once the two sides get talking on how the future might look. However, the paper does not give any indication of how long this time-limited interim period might be and that is a worry when we speak about EU systems – an interim solution often becomes the final solution when there are difficult political or financial decisions to be made. And there are some very difficult decisions for the EU to make.

No matter what the UK Government wishes, the other member states and the Commission must agree on their position on trade with the UK. They are unlikely to want to develop “new innovative facilitations” for trade with the UK, especially when they are still introducing all the new requirements of the Union Customs Code which will continue to be implemented through to 2020 at least. Interestingly, it is listed as one of the UK’s priorities to negotiate an outcome with the objective of ensuring continuity, where possible, with current rules and processes that align with the Union Customs Code. Yet, while the backbone of processes should remain as presently operated, I certainly hope that there will be a number of changes we will make, not least the reintroduction of a duty drawback system for the recovery of duty on goods imported and subsequently re-exported.

But it is the second option for a new customs partnership with the EU that intrigues me. Having a two stream system for imports into the UK depending on whether the “final” destination of the goods is the EU or somewhere else is a model that has not, as far as I am aware, been considered by any customs administration before. The paper states that this would be challenging to implement with the UK mirroring the EU requirements for imports going into the EU and having our own requirements for goods coming into the UK. Would this mean that a UK company buying a shipment of goods from the US will have to determine, at import, which of those goods are to be used in the UK and which are to be used in the EU – with different customs rules (duty rates, origin rules, etc) being applied? I can only see that working if the UK was some large customs warehouse or Freeport. However, the paper talks about the tracking of goods along supply chains and robust enforcement mechanisms (oh dear).

I am looking forward to discussing these ideas with HMRC. Finally, there are some nice snippets in the paper about customs compliance and facilitation measures that the Government will look to introduce for UK importers generally. These include a system of self-assessment to enable traders to calculate their own duties and aggregate their customs declarations, which will split the security/safety and the fiscal responsibilities of importing; this is something that many UK businesses have been wanting for many years but which has been held up while an EU wide system is agreed.

The paper also mentions making simplified procedures easier for traders to access and speeding up authorisations for duty relief systems; both of which will be simple to accommodate provided there is investment in our UK customs administration – the current poor levels of service are nothing to do with our membership of the EU/ the constraints of the Union Customs Code.

Barbara Scott