Government shares vision for future customs arrangements

The government has set out its ‘aspirations’ for future customs arrangements in the first of a series of papers intended to share its thinking on the UK’s relationship with the EU after Brexit. This includes effective continuation of the customs union for a ‘time-limited interim period’. Detailed plans remain elusive, as the paper reminds us that the ‘ultimate customs arrangement will depend on our negotiations with the EU’. Two broad approaches are set out, involving:

·         a ‘highly streamlined’ customs arrangement, continuing some existing arrangements between the UK and the EU, while implementing technology-based solutions including the new UK customs declaration service (CDS); and

·         a new customs partnership with the EU, removing the need for a UK-EU customs border, possibly involving the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU.

In either case, the government proposes ‘a model of close association with the EU customs union for a time-limited interim period’. No new arrangements would be brought into effect with third countries which were not consistent with the terms of this interim agreement. The paper does not offer any suggestions on the length of this interim period, which needs ‘further consideration’ as part of the negotiations. John Cullinane, CIOT tax policy director, warned that: ‘a prolonged transition period allied to the scale of the task of designing and implementing a new customs duties system is likely to absorb a huge swathe of Treasury and HMRC resources’. Hoping that protracted political discussions can be avoided, Cullinane said: ‘businesses need far longer to implement changes to systems or supply chains and both sides need to arrive at a settlement as quickly as possible’.

The ‘highly streamlined’ customs arrangement would look to:

·         simplify movements between the UK and the EU by negotiating a continued waiver from the requirement to submit entry and exit summary declarations and through membership of the Common Transit Convention;

·         reduce delays at ports and airports by negotiating mutual recognition of Authorised Economic Operators and implement bilateral technology-based solutions for roll-on, roll-off ports;

·         negotiate customs co-operation, mutual assistance and data-sharing arrangements which replicate existing levels of UK co-operation with other member states;

·         reduce the burden of customs administrative requirements by exploring unilateral measures for imports, such as self-assessment of customs duties, speeding up authorisation processes and easing access to existing domestic simplified procedures.

The second option, for a new customs partnership with the EU, would operate a regime for imports that aligns precisely with the EU’s external customs border, for goods that will be consumed in the EU market. The UK would need to apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU. The UK would also be able to apply its own tariffs and trade policy to UK exports and imports from other countries destined for the UK market. This approach, the paper acknowledges, is ‘unprecedented’ and could be ‘challenging to implement’.

The paper repeats the government’s commitment to making trade across the land border between Northern Ireland and Ireland ‘as seamless and frictionless as possible’, which will be dealt with in a separate paper.

The government has announced its intention to publish a customs white paper in advance of the Customs Bill in the autumn. The Bill will give the government powers to operate standalone customs, VAT and excise systems, if necessary.

‘Future customs arrangements: a future partnership paper’, is available at http://bit.ly/2vEIAyd.