Thursday 26 April 2018

UK warns EU states of potential for customs delays if trade deal can't be agreed

Theresa May. Photo: REUTERS
Theresa May. Photo: REUTERS
Colm Kelpie

Colm Kelpie

The United Kingdom has warned EU member states to make contingency plans to mitigate the risk of customs delays from the country crashing out of the bloc in March 2019.

In its first Brexit position paper published this afternoon, Britain warned that it will slap customs duty and VAT on imports from the EU, and that the EU would have to apply the same customs rules to products from the UK, unless a trading agreement can be reached by the exit deadline.

In this scenario, the UK said it would seek to recognise the "unique circumstances" of Northern Ireland and aim to protect individuals and traders by making "maximum use of the UK’s flexibility in relation to our own operation of the border".

Read more: Theresa May's plan for Border will 'drive criminal activity', says Fianna Fáil

But it said processes on the Republic’s side would be "constrained by the relevant requirements of EU law".

The position paper states that the UK will bring forward a Customs Bill in the autumn that will give the British government the necessary powers to operate standalone customs, VAT and excise systems following its EU exit.

"This is not the Government’s preferred outcome to the negotiations, but it is essential that the UK is prepared for all possible outcomes on customs arrangements," the paper states.

"In this scenario, without any further facilitations or agreements, the UK would treat trade with the EU as it currently treats trade with non-EU countries. Customs duty and import VAT would be due on EU imports.

"Traders would need to be registered. Traders exporting to the EU would have to submit an export declaration, and certain goods may require an export licence. The EU would also apply the customs rules and VAT to imports from the UK that it applies to non-EU countries. The Government is actively considering ways to mitigate the impacts of such a scenario.

"Other EU member states will also need to make contingency preparations to mitigate the risk of delays resulting from their own customs processes."

The UK says it wants a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and EU, but which also allows it to forge new trade deals with Europe and the rest of the world.

In the paper, the UK outlined plans for a future customs agreement with the EU and an interim deal to ease companies' Brexit concerns. The plans were described as "fantasy" by one EU figure.

London wants an interim deal with the EU post Brexit in which it retains "close association" with the customs union to smooth the way for a new trading arrangement.

That new arrangement could either be a "highly streamlined" customs agreement in which the UK would manage a new customs border with the EU and tariffs would be reduced or removed. Or it could be a new customs partnership that would avoid the need for a customs border.

Under that partnership, the UK proposes "mirroring" the EU’s requirements for imports from the rest of the world where their final destination is the EU.

This would involve having a complex regime for imports that would align precisely with the EU’s external customs border, for goods that will be consumed in the EU.

"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 paper states.

"By mirroring the EU’s customs approach at its external border, we could ensure that all goods entering the EU via the UK have paid the correct EU duties. This would remove the need for the UK and the EU to introduce customs processes between us, so that goods moving between the UK and the EU would be treated as they are now for customs purposes."

It said the UK would be able to apply its own tariffs and duties in relation to exports and imports from other countries destined for the UK market.

It also said there would need to be a robust enforcement mechanism to ensure that goods which had not complied with the EU’s trade policy stayed in the UK. This, it said, could involve a  tracking mechanism, where imports to the UK were tracked until they reached an end user.

"We acknowledge this is an innovative and untested approach that would take time to develop and implement," the paper states.

The paper reiterates the need to avoid a hard border between Northern Ireland and the Republic, but also states that a hard border between Northern Ireland and Britain must also be avoided.

Guy Verhofstadt, the European Parliament's Brexit lead, underlined the distance between the two sides.

"To be in and out of the customs union and 'invisible borders' is a fantasy," he said on Twitter. "First need to secure citizens rights and a financial settlement"

EU Brexit negotiator Michel Barnier tweeted: "The quicker the UK and EU27 agree on citizens, settling accounts and Ireland, the quicker we can discuss customs and future relationship".

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