Sarah Halsted

Written by: Sarah Halsted and Brad Ashton

Sarah Halsted

Technical Associate Director

Northern Ireland: Government denies it is about to renege on its customs agreement with the EU

As the government prepares to publish its Internal Market Bill on Wednesday 9 September, reports have emerged suggesting that this new UK law may be at odds with the terms of the Northern Ireland Protocol, which was agreed with the EU in October 2019 as part of the Withdrawal Agreement.

The areas of tension are understood to include the application of customs rules to goods moving between Great Britain and Northern Ireland after the Brexit transition period ends on 31 December 2020. 

The Northern Ireland Protocol was created as a compromise with the EU to avoid a hard border between Northern Ireland and Ireland, whilst ensuring the integrity of the EU’s customs border, and allowing the whole of the UK, including Northern Ireland, to leave the EU and benefit from future UK free-trade agreements with non-EU countries.

The UK and EU had agreed in the protocol that customs duty and VAT would be applicable to goods from Great Britain arriving in Northern Ireland which were deemed to be ‘at risk’ of being shipped into the Republic of Ireland (and/or into other EU member states), and that the UK and EU would agree a practical method to identify such goods. The Protocol also stated that the UK will have the power to reimburse duties, waive customs debts, or repay the duty where it can be shown that the goods did not ultimately enter the EU.

However, press reports now suggest the Internal Market Bill has been drafted to give UK ministers the power to unilaterally decide whether particular goods arriving in Northern Ireland from Great Britain are ‘at risk’ of entering the EU, and also to scrap export declarations on goods moving from Northern Ireland to Great Britain.

One of the EU’s highest priorities in drawing up the protocol is to avoid the creation of any gaps in the EU’s customs border through which goods could pass without customs checks or payment of customs duty and VAT, so it is unlikely to accept any material changes to what has already been agreed. The UK government has since responded to the latest reports by saying that its Bill will ‘merely introduce limited and reasonable steps to clarify’ the trading position of Northern Ireland but has yet to provide specific details.

While the immediate consequences of any non-compliance with the Northern Ireland Protocol would be for politicians, rather than importers and customs brokers/advisers to deal with, this development could put a late spanner in the works of what was the hardest-won agreement of the Brexit process. It could also leave Northern Ireland businesses at the mercy of a major dispute between the UK and EU, creating further uncertainty just weeks before the Brexit transition period ends. It is not yet known exactly when clarity will come from the joint committee process. Businesses which trade in or with Northern Ireland should therefore watch closely for further developments this week once the draft legislation is published.  

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