Lords EU Committee: Chequers customs plan raises more questions than it answers

This is one of the key conclusions of the House of Lords EU External Affairs Sub-Committee's Brexit: the customs challenge report, published today.

Other report findings and recommendations include:

• The Government has not yet made clear how goods under the FCA could be reliably tracked and who would carry liability for keeping EU and UK-destined goods separate. The UK's proposal to collect revenue on behalf of the EU makes agreement difficult as the EU's chief Brexit negotiator has stressed that the EU will not delegate duty collection to a non-Member State.
• The FCA's repayment mechanism is untested and will take several years to be developed and implemented.
• Part of the implementation of the FCA relies on the establishment of new trusted trader schemes and maximising their take-up. The Committee recommends simplifying the application process to facilitate access for small and medium-sized enterprises and newly established businesses. It welcomes the Government's intention to negotiate mutual recognition of any new schemes with the EU.
• In the case of 'no deal', trading with the EU under WTO rules would be disruptive and costly. Tariffs would apply and the agricultural and automotive sectors would be disproportionately affected.
• An estimated 145,000 VAT-registered UK businesses, and potentially a further 100,000 under the VAT threshold, currently trade exclusively with the EU and would have to gain expertise in complex customs procedures, which they do not yet have. They could choose to outsource part of the customs procedure, but at a cost.
• Roll-on/roll-off ports process the majority of trade in goods between the UK and the EU. In the case of 'no deal', customs paperwork would need to be checked and some goods would be subject to additional time-consuming regulatory checks. This would cause delays and disrupt highly integrated supply chains.
• The Government would face a ‘trilemma' between keeping trade moving, ensuring security of the border, and the collection of revenue. Its position that, in the event of ‘no deal', customs checks of EU goods could be unilaterally suspended may be in breach of WTO rules. The Committee calls on the Government to set out its plans to ensure fair and equal treatment of all imported goods coming in on most-favoured nation terms.
• Technological solutions will not wholly remove the need for checks on some goods at the border, which is of particular relevance to the Northern Ireland/Ireland border, where ‘no deal' risks re-introducing a hard border.

Commenting on the report, Baroness Verma, Chair of the EU External Affairs Sub-Committee, said:

“The Government must, as a matter of urgency, provide answers to questions on the Facilitated Customs Arrangement, such as how goods would be tracked, how revenue would be collected and how the repayment mechanism would work.

“With only six months to go until Brexit the clock really is ticking on a mutually acceptable customs agreement.

“A ‘no deal' Brexit will cause disruption – mitigation options are limited and no technology currently exists, which would eliminate border checks completely. Even if the UK waived customs checks on goods arriving from the EU, the EU has said that it will not reciprocate.”