Newington's Tiffany Burrows summarises the Customs Bill which legislates for the UK’s future customs, VAT and excise regimes.

Overview

The Department for Exiting the European Union and HM Treasury published a White Paper explaining the Government’s approach to the Customs Bill it plans to introduce later this year. The Government is welcoming written submissions on the proposals they set out in the policy paper and have encouraged submissions to be sent to them by 3 November 2017.

The Government’s White Paper sets out the approach to “to legislating for a future customs regime, and to creating a framework that supports intra-European trade”. The Customs Bill will also provide for a range of possible outcomes, including if the UK leaves the EU with no deal being reached. The document makes clear that as UK customs legislation is “insufficient to create a standalone customs regime” the UK will require new domestic legislation when leaving the EU.

Key provisions

• “It takes time to negotiate trade deals, and even more time to build new trading relationships”
  • The Government is seeking an implementation period, in order to: leave the EU as smoothly as possible, ensure certainty and clarity for UK businesses, and that business and citizens will only need to adjust once to a new customs relationship.
  • The length of this implementation is not specified but will be determined by the length of time needed to prepare and implement the new processes and systems.
  • The document asserts that UK law will be as consistent with EU law as possible to provide continuity for business, but will consult in the future on potential changes that would benefit business in the long term.

• The future UK/EU customs relationship will be based on three strategic objectives: “ensuring that UK-EU trade is as frictionless as possible, avoiding a hard border between Ireland and Northern Ireland, and establishing an independent international trade policy”.
  • The paper sets out that primary legislation will be used to set out a framework, and secondary legislation will be used to “set out rules concerning administration, collection and enforcement”.

The Customs Bill will allow the creation of a regime to ensure that:

• The UK can charge customs duty on goods (including on goods imported from the EU).
• The UK can define how goods will be classified to establish the amount of customs duty due (known as the nomenclature).
• The UK can set and vary rates of customs duty, specify where goods are subject to quotas and where goods are relieved from duty.
• The UK can determine the additional territories forming part of a customs union with the UK.
• The UK can vary or suspend duty at import in certain circumstances.
• HMRC can request and collect tax-related information from declarants and store and share it as appropriate.
• The UK can establish a new UK tariff and set out additional tariff-related provisions, for example the tariff applicable to developing countries (unilateral preferences), and will have a new arm’s length body to conduct trade remedies investigations.

The Government sees three possible proposals for future customs relationships with the EU:  a ‘highly streamlined customs arrangement’, a ‘new customs partnership’ and a ‘contingency scenario’.

• A ‘highly streamlined customs arrangement’
  • This arrangement would seek to minimise additional requirements as much as possible. Government would look at specific measures to simplify requirements for moving goods across borders; options to reduce the risk of delays at ports and airports and look to reduce the time and costs of complying with administrative customs requirements by exploring the feasibility of unilateral measures.
• A ‘new customs partnership’
  • Joint innovative approaches should be considered by both the UK and the EU to support trade outside of a customs union arrangement (but still removing the need for customs border processes).
• One suggestion from the paper is that the UK mirrors the EU’s customs regime at its external border, ensuring that the correct EU duties have been paid whilst ensuring the UK is also able to apply its own tariffs.
• A ‘no deal’ scenario would mean the UK would “establish a standalone customs regime from day one…in line with the government’s WTO obligations”
  • The same customs duty would be applied to every country which does not have a trade deal with or preferential access to the UK. This duty would be decided by government and set out in secondary legislation before Brexit.

Analysis

This paper will be seen to be helpful to the Chancellor Philip Hammond MP (Con, Runnymede and Weybridge) amidst rumours of a Cabinet reshuffle, with his being one of the names being floated for the chop. Despite attacks in the press from Brexiteers calling for him to resign, this paper, whilst not specifying the amount contingency planning would cost the Treasury, does clearly set out that ‘no deal’ remains a possible outcome. This is further emphasised by the Government confirming DExEU Minister Steve Baker MP’s (Con, Wycombe) responsibility for ‘contingency planning’ in his remit.

Despite this, the White Paper alludes to the fact that secondary legislation will be the method for setting the rules over “administration, collection and enforcement” of the UK’s international trade policy. This would also be the case if the UK left the EU with no deal in place, as the government would decide the customs duty in secondary legislation.

On the paper itself, the tone is centred entirely around reassuring businesses and providing clarity and certainty as best as they can about what the future will look like. The final section of the paper provides an overview of what a ‘no deal’ situation might look like, and the desire to consult on the suggestions in the paper.

The message is that the Government wants to make the transition, following the UK’s exit from the EU, as smooth as possible, particularly for businesses that cross borders.

Whilst the UK Government may be prepared for a ‘no deal’ scenario, hidden in the paper is the admission that “the precise form of this agreement will be the subject of negotiation”.  

The paper discusses the Northern Irish border as one of the key areas the UK and the EU have to make sufficient progress on in negotiating talks at an early stage. It will therefore be read carefully by EU counterparts ahead of the European Council summit next week. 

Next steps

The Government is now embarking on a programme of consultation in order to gather intelligence from the business community on the proposed Customs Bill. If you would like to speak to Newington about how your business could best outline its position to the Government please get in touch with our dedicated Brexit team at [email protected] or call Lizzy Roberts on 020 7234 3332.

The fifth next round of negotiations concluded yesterday (12 October). Progress will be reviewed at the European Council summit taking place next week on the 19 and 20 October.