Brexit: the customs challenge report published
20 Sep 2018 01:52 PM
The EU External Affairs Sub-Committee yesterday published a report on the Government's Chequers proposal for a Facilitated Customs Arrangement (FCA) and the customs challenges under 'no deal'. The report finds that under the FCA, UK importers would face an administration cost of £700 million per year – a fraction of the annual £18 billion 'no deal' cost to UK traders. However, the FCA raises a number of significant questions that need to be resolved for it to be workable and acceptable to the EU.
Key findings in the report include:
- The Government has not yet made clear how goods under the FCA could be reliably tracked and who would carry liability for keeping EU and UK-destined goods separate. The UK's proposal to collect revenue on behalf of the EU makes agreement difficult as the EU’s chief Brexit negotiator has stressed that the EU will not delegate duty collection to a non-Member State.
- The FCA's repayment mechanism is untested and will take several years to be developed and implemented.
- Part of the implementation of the FCA relies on the establishment of new trusted trader schemes and maximising their take-up. The Committee recommends simplifying the application process to facilitate access for small and medium-sized enterprises and newly established businesses.
- In the case of 'no deal', trading with the EU under WTO rules would be disruptive and costly. Up to 245,000 businesses currently trade exclusively with the EU and would have to gain expertise in complex customs procedures, which they do not yet have. They could choose to outsource part of the customs procedure, but at a cost.
- Checks to the customs paperwork and time-consuming regulatory checks on some goods would cause delays at roll-on/roll-off ports and disrupt highly integrated supply chains.
- The Government’s position that, in the event of 'no deal', customs checks of EU goods could be unilaterally suspended to keep goods moving, may be in breach of WTO rules.
Chair of the EU External Affairs Sub-Committee, Baroness Verma, yesterday said:
"The Government must, as a matter of urgency, provide answers to questions on the Facilitated Customs Arrangement, such as how goods would be tracked, how revenue would be collected and how the repayment mechanism would work.
"With only six months to go until Brexit the clock really is ticking on a mutually acceptable customs agreement.
"A 'no deal' Brexit will cause disruption – mitigation options are limited and no technology currently exists, which would eliminate border checks completely. Even if the UK waived customs checks on goods arriving from the EU, the EU has said that it will not reciprocate."