Brexit: UK suggests “untested” customs system with EU. KC Group AEO status holds the key to a secure and efficient system.

Challenges with Brexit are becoming common place and is well documented throughout the press. Many sectors are looking toward solutions in the outcome of either ‘hard or soft’ Brexit negotiations and decisions and the shipping industry is no different. With added challenges for our own industry, moving consignments across the globe will most certainly become a feature for businesses trading around the world.

Recently the BBC and others including the Huffington Post have reported the government has stated it will propose an "innovative and untested approach" to customs checks as part of its Brexit negotiations.

The model, one of two being put forward in a newly-published paper , would mean no customs checks at UK-EU borders but with a system of paying the higher of the 2 rates of duty in the UK or EU and claiming it back depending on where the consignment is ultimately destined. The UK's alternative proposal - a more efficient system of border checks - would involve "an increase in administration", it admits.

The European Parliament’s Brexit negotiator, Guy Verhofstadt, said the idea of "invisible borders" was a "fantasy" and it is one that KC Group Systems and Process Manager Dale Minks is in qualified agreement with:

“Two years before the Brexit vote in March 2014 the government laid out the beginnings of replacing HMRC’s customs declaration system (CHIEFS) which is now nearly 25 years old and can barely cope with 50 million declarations annually as it is. It is due to be replaced in December 2018 by the successor CDS (Customs Declaration Service) but which has been given an amber/red warning label by the NAO (National Audit Office).  CDS’s scope has since been respec’d to cope with a 5 fold (buffered  up to a 7 fold) increase in the numbers of annual declarations if all trade with the EU will need some form of declaration.  

We know from experience that the complexity of upgrading customs and trading systems to cope with changes to the existing EU customs code regulations, whether prompted by simplification or security causes inevitable delays. To now try and replace the system to deal with previously unimagined heights of complexity will need the government to place HMRC and DTI almost on a ‘war footing’ with unprecedented access to resources to get the absolute minimum (i.e. hard Brexit) changes through on time. Given that trade talks won’t start for a while yet, that’s a very tall order and will otherwise be wishful thinking at best.

Customers trading imports and exports including critical supplies, freight forwarders and the supply chain as a whole need a system that is based on efficiency and security.” Dale commented.

He continued: “KC Group, prior to Brexit discussions, took the proactive approach to provide our customers with a more robust solution. As an Authorised Economic Operator, https://www.gov.uk/guidance/authorised-economic-operator-certification we simplify and navigate our customers through customs, whilst ensuring they are compliant.”

 

Below is an excerpt from the BBC feature:

The "partnership" arrangement would be an "innovative and untested approach" which would remove the need for any customs checks between the UK and the EU. This would be because the UK's regime would "align precisely" with the EU's, for goods that will be consumed in the EU.

However, the UK would continue to operate its own checks on goods coming from outside the EU - and the government said safeguards would be needed to prevent goods entering the EU that had not complied with its rules.

These could include a repayment mechanism, which would see importers to the UK pay whichever is the higher tariff, Britain's or the EU's, and then face having to claim money back if their goods were sold to a customer in the region with a lower tariff.

An alternative scenario the government is proposing would involve the UK extending customs checks to EU arrivals - but under a "highly streamlined arrangement" to minimise disruption at ports and airports.

It said it would seek to make the existing system of customs checks "even more efficient", for example using number plate recognition technology at ports, which could be linked to customs declarations for what the vehicles are carrying, meaning the vehicles do not have to be manually stopped and checked.

The UK would also allow some traders to do self assessment, calculating their own customs duties.

However, the government acknowledged this option would still involve "an increase in administration" compared with being in the existing customs union.

All of this will have to be negotiated with the EU - and the two sides have not yet even started discussing trade matters.

Other obstacles - including the size of the UK's "divorce bill" - need to be agreed first.

The government will also set up its own "standalone" system in the event of no deal being reached, which would involve charging customs duty and VAT on imports from the EU, although it says it is keen to avoid this scenario.

Previous estimates by HMRC have predicted a sudden increase in the number of customs declarations after Brexit - subject to any new arrangements agreed with the EU - from a maximum of 55 million to 255 million per year.

KC Group Managing Director David Milne added: “We agree with the Chambers of Commerce view that almost all our customers and businesses we are in discussions with are more concerned about what future customs arrangements with the EU will be, as opposed to future trade deals.”

READ OUR FOLLOW-UP ARTICLE PUBLISHED ON 15 NOVEMBER 2018 - NO DEAL BREXIT

“We are continually providing advice to our customers and wider networks that they must ensure they are aware of possible outcomes and options to address. Working with AEO accredited organisations like ourselves provides a strategic way forward, no matter what decisions the Government choose to take.”

If you have concerns over customs changes for your supply chain, our advisers are here to offer guidance and can be reached on +44 (0)141 420 1700 or email

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