The UK Government has released a position paper stating its desire for a future customs arrangement with the EU27. The release of this paper before an agreement on the EU’s priority areas is a statement from the UK that it is determined to start talks on the issue. This is despite the EU’s requirement that priority areas of citizens’ rights, the Irish border and the Brexit bill be settled first. This summary and analysis sets out the UK’s envisaged transitional and post-Brexit customs arrangements with the EU.
The UK position
The UK proposes a transition period after Brexit, which would maintain a ‘close association’ with the EU Customs Union, ahead of a new customs arrangement after the transition. This would mean a time-limited shared external tariff, without customs processes and duties between the UK and EU and would allow business to adjust to a new regime only once. The UK also wants the ability to strike new trade deals, but only put them into place after this time-limited customs union expires.
Following the envisaged transitional period, the UK sets out two options for a lasting new customs arrangement with the EU:
1) A highly streamlined customs arrangement
The UK will no longer be a part of the EU’s Customs Union, but will instead seek to find a new arrangement. This approach would see the UK maintain some of the existing customs arrangements with the EU, albeit with additional unilateral efforts to remove barriers to trade. The UK has set out four factors needed to achieve this.
- Simplify the requirements for moving goods across borders. This could be done by implementing a waiver of entry and exit declarations for goods being moved between the UK and EU. Furthermore, by continuing membership of the Common Transit Convention (CTC), this could maintain that goods do not need import and export declarations each time they cross a new border. This would allow goods travelling between the UK and the rest of the world, via the EU, to do so without paying EU duties.
- Reduce delays at ports and airports with the mutual recognition of Authorised Economic Operators (AEOs), allowing for faster clearance of goods at borders. Additionally, using technology at roll-on, roll-off ports to give pre-arrival notifications on a port-IT system and linking customs declarations to vehicle registrations, would mean vehicles would not need to stop at the border.
- Cooperate with data-sharing and mutual assistance to reduce revenue and security risks for customs processes.
- Reduce the time and costs associated with complying with customs administration, by allowing traders to carry out self-assessments to determine customs duties, speeding up authorisation processes at borders via automation, and making domestic procedures easy to access whilst complying with international obligations.
2) A new customs partnership with the EU
This approach is more to do with creating a trade framework outside of a customs union arrangement. This would be novel in its approach, given that it would entail a degree of access and customs equivalence, but without the formalities of a customs arrangement.
- The UK could mirror exactly the regime the EU employs for imports entering via the EU’s external customs border. The UK would need to apply the same tariffs as the EU and follow the apply the same rules of origin to goods. By doing so the UK hopes to ensure that all goods entering the EU via the UK will have paid the correct EU duties, and there would be no need for customs processes between the EU and the UK.
- The UK could use technology to track a separate categorisation of goods destined for non-EU markets, and would be able to apply its own trade and tariff policies on these goods.
VAT is within EU law, meaning that following Brexit the Government will need new legislation which will appear in the Customs Bill this Autumn. The UK has said it hopes that UK law will remain as close to EU law as it can, but suggests that if a negotiated settlement is not reached, that the UK would treat EU imports as third country imports, and as such impose customs duty and import VAT. Under this scenario, traders would need to be registered and submit an export declaration and may require an export licence.
The EU position
The EU’s position on what the future relationship with the UK has not yet formally been made public, because their negotiating strategy is based on making sure that their priority areas are finalised before proceeding with any trade negotiations.
The opportunity for business
The Government has asked businesses for views on:
1) Its vision of a highly streamlined customs partnership, asking whether this would address concerns of business and if there were alternative proposals or and technological solutions.
2) If the UK’s approach to an interim agreement could allow for adjustment to a new customs arrangement.
The notion that the UK wants to maintain the positive aspects of EU membership without having to comply with the obligations that come with being a full member, has left many in Brussels wondering why the U.K. wants to leave the Customs Union. The main appeal of doing so remains the ability to strike trade deals which the UK is currently prevented from doing. However, observers have noted that the proposed ability to conclude deals and implement them later is a big ask of the EU.
Analysts looking at the current options for the UK believe no post-Brexit scenario will be pain-free, simply on the premise that there can be no model of future relationship that can offer traders the exact same benefits as EU membership. The options put forward by the UK Government should, therefore, be viewed as an initial negotiating pitch that will eventually be watered down as the negotiations progress. This is especially in light of the fact that the technological solutions offered would be unprecedented in their ambition and incredibly complex to implement.
- 28th August 2017- The next round of negotiations begin.
- 9th October 2017- A further round of negotiations, where Mr. Barnier will decide if enough progress has been made to allow talks on trade.
- 19th October 2017-European Council meeting where heads of government will decide, after hearing Mr. Barnier’s report on talks, where Brexit talks will turn to next.
- Autumn 2017- The UK will introduce its White paper and subsequent Customs Bill.
Rory Coutts is a Policy Analyst at Inline Policy.
Photo / Creative Commons