The government has indicated two proposed approaches that could be adopted to shape the future customs landscape with the EU. One is a ‘highly streamlined customs arrangement’ and the other is a ‘new customs partnership with the EU’. The white paper also indicates its favoured position on the Irish land border.
Both solutions closely mirror the existing EU customs position, effectively seeking the overall benefits of the single market and customs union under a different guise. This will be welcomed by importers and exporters alike.
At the heart of each proposal are plans and simplifications that, if agreed, will inevitably require some form of registration for businesses, but to qualify companies will have to have the right infrastructure in place to effectively manage their customs affairs. Certainly, should any form of facilitation become a reality, UK businesses would be expected to achieve Authorised Economic Operator (AEO) status to leverage any new streamlined customs structure, which can be a lengthy process – highlighting extra burdens for UK businesses.
Achieving AEO status may also be a requirement for businesses to benefit from any exemption from customs formalities for goods traded across the Irish land border. At the very least, the proposals to retain the UK’s membership of the EU’s transit arrangements post-Brexit will allow the UK to maintain a ‘land bridge’ for Ireland’s EU trade routes.
The papers also confirm the worst-case scenario that if agreement is unsuccessful, businesses will face import and export declarations for goods moving to and from the EU and incur duty and import VAT on those imports. This applies not just to goods imported into the UK post Brexit but also UK goods moving into the EU, introducing administrative and cost burdens currently not associated with intra-EU trade. But this may not happen if the EU agree to either proposal.
We expect to have an early indication of the EU’s reaction to the UK’s proposals as the issue of the Irish land border is likely to be debated before any substantive talks commence on customs and trade agreements with the EU. All eyes will then turn to the publication of the Government’s Customs Bill in the Autumn which is expected to lay out the substantive approach to customs VAT and excise systems. Watch this space.