EU Exit

Thursday 25th October 2018 Written Statements

[The Secretary of State for Exiting the European Union (Dominic Raab)]

Section 18 of the European Union (Withdrawal) Act 2018 conferred a legal obligation for a Minister of the Crown to lay before both Houses of Parliament a statement in writing outlining the steps taken by Her Majesty’s Government to seek to negotiate an agreement, as part of the framework for the United Kingdom’s future relationship with the EU, for the United Kingdom to participate in a customs arrangement with the EU, before 31 October 2018.

The Government published a White Paper earlier this year setting out their proposal for the UK’s future relationship with the EU, including a new customs arrangement. The UK proposed the establishment of a free trade area for goods that would avoid friction at the border, protect jobs and livelihoods, and ensure that the UK and the EU could meet their commitments to Northern Ireland and Ireland through the overall future relationship. The new customs arrangement would support this by removing the need for customs checks and controls at the border between the UK and the EU, while allowing the UK to forge new trading relationships with partners around the world.

The UK would apply the EU’s tariffs and trade policy for goods intended for the EU, and the UK’s tariffs and trade policy for goods intended for the UK. Mirroring the EU’s customs approach at its external border would ensure that goods entering the EU via the UK have complied with EU customs processes and the correct EU duties have been paid. This would include the UK maintaining a common customs rulebook with the EU. It would remove the need for customs declarations, routine requirements for rules of origin, and entry and exit summary declarations. Together with the wider free trade area, the new customs arrangement would preserve frictionless trade for the majority of UK goods trade, and reduce frictions for UK trade with the rest of the world through a range of unilateral and bilateral facilitations. The UK’s goal is to facilitate the greatest possible trade, whether with the EU or the rest of the world. There would need to be a phased approach to implementation of the model.

The UK recognises that this approach would need to be consistent with the integrity of the EU’s customs union and that the EU would need to be confident that goods cannot enter its customs territory without the correct tariff and trade policy being applied. To that end, the UK proposed that where a good reached the UK border and the destination could not be robustly demonstrated at the point of import, it would pay the higher of the UK or EU tariff. Where the goods destination was later identified to be in the lower tariff jurisdiction, it would be eligible for a repayment from the UK Government equal to the difference between the two tariffs. The UK proposed agreeing with the EU a new trusted trader scheme to allow firms to pay the correct tariff at the UK border without needing to engage with the repayment mechanism. Both sides would need to agree the circumstances in which repayments could be granted, which is most likely to be relevant to intermediate goods. The UK also proposed agreeing a mechanism with the EU for the remittance of relevant tariff revenue, such as a tariff revenue formula, taking account of goods destined for the UK entering via the EU and goods destined for the EU entering via the UK.

To ensure that new declarations and border checks between the UK and the EU do not need to be introduced for VAT and excise purposes, the UK also proposed the application of common cross-border processes and procedures for VAT and excise, as well as some administrative co-operation and information exchange to underpin risk-based enforcement. These common processes and procedures would apply to the trade in goods, small parcels and to individuals travelling with goods (including alcohol and tobacco) for personal use.

The UK’s proposal is designed to make the arrangements as simple as possible for those who need to use them, and the UK would continue to explore options to use future advancements in technology to streamline the process.

As the Prime Minister set out in her update to the House of Commons on 22 October 2018, Official Report, column 46, we have made good progress in negotiations with the EU on both the withdrawal agreement and the political declaration on our future relationship. On the political declaration on our future relationship, the UK and the EU have discussed each element of the UK’s proposals, including the future customs arrangement. The UK will continue to work with the European Union on finalising the withdrawal agreement and the political declaration on our future relationship and, as set out in the European Union (Withdrawal) Act 2018, the House of Commons must vote to approve that deal before the withdrawal agreement can be ratified.

[HCWS1031]