Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2019
Lord Bethell
That the Regulations laid before the House on 5 September be approved.
Relevant document: 61st Report from the Secondary Legislation Scrutiny Committee
Lord Bethell (Con)
My Lords, this statutory instrument is part of the Government’s package to prepare for the possibility of the UK leaving the EU without a deal. The instrument relates to safety and security declarations on goods imported and exported between the UK and the EU. The Government’s aim is to leave the European Union on 31 October 2019 with a deal that works for citizens and for businesses. Until that final deadline, we will do everything in our power to reach an agreement with the EU. However, as a responsible Government, we have a duty to plan for all scenarios and to prepare comprehensively for Brexit. I note that the Secondary Legislation Scrutiny Committee has included this instrument in its report of 3 October 2019 as an instrument of interest.
I will set out the context of the provision we wish to introduce for managing the safety and security risk of goods entering and leaving the UK. These measures maintain many of the aspects of the current safety and security regime. They help facilitate the flow of trade while ensuring the continued safety and security of our borders.
In 2005, the World Customs Organization adopted the SAFE Framework of Standards as a deterrent to international terrorism, to secure revenue collections and to promote trade facilitation. As a result, safety and security declarations became a requirement when goods moved across borders. The UK as part of the EU has previously required safety and security declarations only for goods leaving or entering the EU. If the UK leaves the EU without a deal, UK importers and exporters will be required to complete safety and security declarations for goods moving to and from the EU as well as the rest of the world.
This instrument has four key purposes. First, HMRC has listened to industry concerns about the readiness of business to comply with safety and security requirements on UK-EU trade from day one. Therefore, the instrument gives businesses more time to prepare to start to submit declarations to HMRC for movements to and from the EU. It introduces a 12-month transitional period until 1 November 2020, during which there will be no requirement for entry summary declarations for goods imported from territories where the UK does not currently require them. This means that entry summary declarations will not be required for imports from the EU.
Entry summary declarations will continue to be required for goods imported from the rest of the world. Therefore, the UK will receive the same safety and security import declarations in no deal as it does today. The transitional period introduced by the instrument applies to declarations that the UK does not currently receive. As a result, there is no increased security risk to the UK from this approach.
Secondly, the instrument gives HMRC a discretionary power until 1 November 2020 to allow businesses to submit safety and security declarations for certain exports after the goods have left the UK. This is a contingency power subject to HMRC’s discretion, and the specifics will be set out in a public notice. The power would be used if required in combination with a similar power granted in a previous statutory instrument to extend the time to provide the export customs declaration. Together, they could allow an extended time, if needed, to provide the combined export customs declaration and the export safety and security declarations. HMRC would use the power if needed to facilitate movement of goods to assist in the continued free flow of trade.
Thirdly, the instrument removes until 1 May 2020 the requirement for exit summary declarations for empty containers, empty pallets and empty vehicles moving from the UK to the EU. They are not also required for any spare parts, accessories, equipment, pallets, containers and means of transport. Such declarations are not required at present, so we are giving businesses a longer time to prepare.
Fourthly and finally, the instrument also clarifies that a combined export safety and security declaration can be accepted when exporting goods. This ensures that exporters are not required to submit separate exit summary declarations.
The instrument does not apply to movements of goods between Northern Ireland and Ireland. A previous statutory instrument set out that, in no deal, there would be no safety and security declarations between Northern Ireland and Ireland. The Government are committed to supporting the all-Ireland economy by avoiding checks and infrastructure at the border between Northern Ireland and Ireland. Under no circumstances will the Government put in place infrastructure checks or controls at or near the border between Northern Ireland and Ireland.
This instrument strikes the right balance between giving traders time to prepare for new arrangements with the EU and maintaining the safety and security of the UK. I beg to move.
Lord Purvis of Tweed (LD)
My Lords, to give a degree of context about the scale of smuggling into the United Kingdom, the Government’s most recent figures, from August 2019, suggest that there was lost revenue to the United Kingdom of £2.5 billion in smuggled tobacco alone. To put it into further context, HMRC estimates that lost duty on smuggled tobacco represents 14% of all duties. For alcohol, HMRC considers 8% of all duty revenues being lost through smuggling and crime.
How does this happen? It is because of the context that the Minister described—this is my first opportunity to interact with him, so I welcome him to his position. As he said, these measures and security checks have been there for a purpose. Yes, we have seen progress in the form of a reduction, but the figures are still stark. Any one of us during the short debate on this statutory instrument could do a quick news check: “HMRC”, “crime”, “smuggling”. With the checks, mechanisms and security procedures uniform and in place across the European Union, the Government take credit for the reduction in organised crime. Parts of our national security strategy are contingent on eradicating organised crime from the Balkans and thereby smuggling into the United Kingdom. I sit on the International Relations Select Committee. During our inquiry last year on the Balkans, we were told by the Government that their top priority in respect of the Balkans was smuggling into the United Kingdom from organised crime. It was therefore no surprise that when this issue was debated in March there was considerable disquiet that a waiver for a year would, in effect, put in place a new regime. That was debated in March and those concerns were highlighted, so it is almost breathtaking that this is considered an urgent matter. As the noble Lord, Lord Tunnicliffe, said in the previous debates on statutory instruments, it is urgent only because the Government have not acted earlier, and we may be in a position of crashing out of the European Union. The terminology of urgency in relation to bringing forward this measure is not a result of our not being unaware of these issues, it is just that the Government and HMRC do not have mechanisms in place.
The Minister said that there would be a transition period for businesses which were not prepared, but what have the Government been doing over the past seven months in order that there is heightened preparedness? In all our debates in this House since March on what the Government claimed was no-deal planning, they have spoken of heightened preparedness. We saw most recently that HMRC had to auto-enrol businesses to have an economic operator registration number; now there is a waiver for security procedures. What proportion of trade in goods into the United Kingdom will this measure cover? Have the Government prepared an impact assessment with regard to law and order and our strategies for reducing organised crime? If the Minister were able to highlight where that is, it would be helpful. I was not able to find it, so it would be helpful to know whether the Government have prepared such an assessment. The Government’s own Explanatory Memorandum states:
“This instrument will be covered by an overarching HMRC impact assessment”.
It then gives a link. I looked at the link, but I could not see anything relating to this instrument, so it would be helpful if the Minister were able to state what the position is.
The Minister’s terminology was interesting. He referred to the measure being “transitional”, but if you have a transition you start from the status quo until a new mechanism is in place. This is the new mechanism; a waiver is a new mechanism. It is not a case of the status quo carrying on until there was some form of agreement with the European Union as to what the procedures would be for imports from the European Union, because that would be covered if we had a withdrawal agreement. If we do not have one, this is not a transition—it is a new system that may well last for 12 months, as the Minister said. Can the Minister give clarity on that? He said that this is for 12 months, but Regulation 3(3) suggests that there could be,
“different extensions for different exporters, goods, places or means of transport, or any combination of these”,
if a further public notice is provided. I may have misread the measure, but it would be helpful to know where the restriction of it being only for a year is: that is a genuine question.
The Minister referred to one element of the declarations being waived for empty containers. How will we know if they are empty? If no declarations are required, what is the distinction between an empty container and a full one? How will our authorities be able to know? The Minister is suggesting that there would be no checks, on any grounds whatever, on any containers coming across the Northern Ireland border. I remind the Minister that, according to Northern Ireland government figures, there were 46 million transport crossings at 15 points on the Northern Ireland-Ireland border last year. What mechanisms are in place to ensure that none of the containers that cross the border will have any kind of determination for their security, at destination or source? Not only would there be no checks, there would be a waiver at source and on receipt at the destination. What will that mechanism look like? Nothing that the Minister said today gives clarity on what that would be and how it would cover many elements of 46 million vehicle crossings. There is also little in the revised Northern Ireland protocol. It is of concern that the Government did not do specific impact assessments.
One element raised by the business community in March, in relation to the other measure to which the Minister referred, was the reciprocal nature of this. Can the Minister confirm that this is indeed part of a reciprocal agreement with the European Union? If there are to be no mechanisms and if this is a unilateral waiver—which would, I suspect, have to be applied to all other countries under WTO rules—it opens up the European Union market via Northern Ireland. If the Minister can clarify that this is part of a reciprocal arrangement, some in the business community may be slightly eased. If not, there are considerable difficulties in having a unilateral system and none of the benefits referred to by the Minister will apply. Presumably, they will apply only to those wishing to export to the United Kingdom—our economic competitors—rather than the British businesses which wish to export from the United Kingdom. Given that the Government have been very coy in giving information about how many British businesses have registered with their destination countries for an EORI number, it would be helpful to know about the reciprocity of this too.
Finally, 40% by value of UK imports and exports are from air freight. How will this mechanism apply to the European aviation single market, which we are also leaving, and the interaction between the security procedures and checks that many businesses have had to comply with? Given that, as the Minister indicated, this should be in place if there is no deal, what response have the Government had from the air freight industry?
In many respects, these are very concerning measures. As the Government say, they could last 12 months but potentially longer and are, potentially, unilateral rather than reciprocal. They potentially open up many areas of abuse, especially on the United Kingdom’s land border with the European Union. As the Minister indicated at the outset, this mechanism does not apply to goods between the Republic of Ireland and Northern Ireland. What mechanisms will? I hope that the Minister is able to respond to these points.
Baroness Neville-Rolfe (Con)
My Lords, I echo the comments that have been made welcoming my noble friend to the Front Bench. I support the regulations that we are discussing today but I have some questions; I hope my noble friend can reassure me.
If we have a no deal, the culture at the ports and on the border in Ireland could change. Other member states may be less concerned about what is sent to us in the UK than they have been in the past. I note that there will be a 12-month period when no safety and security declarations will be required. That is probably sensible, to keep the lorries rolling, but, to put it simply, we in this House need to understand what will happen with the enforcement of important laws at the ports and on the border. How will we stop the import of illegal migrants, dangerous knives, machine guns and cocaine—all the things that the Home Office, very sensibly, tries to keep out—let alone illegal cultural works, exotic plants and animals that are prohibited from coming into the UK? What will happen at the ports and on the Irish border? Can the House have some reassurance about how these laws will be enforced in the transitional period and in the longer term?
Lord Tunnicliffe (Lab)
My Lords, I congratulate the Minister on his new role. It will be interesting to see if he will be the permanent Treasury representative; it is an onerous task that has worn out many a noble Lord.
I am generally unhappy with Explanatory Memorandums and the Minister has gone out of his way to make my point for me. His speech illustrated how an Explanatory Memorandum should be. It is about imports, exports, empty bits and combined declarations. That I can understand but not much more because I do not understand the export and import business. I hope the Minister forgives my somewhat naive questions. It seems that these regulations are designed to create frictionless trade. Unlike the other instruments, there is no problem with deal or no deal because the powers are discretionary in all cases; if there is a deal HMRC can withdraw its discretion.
Taking imports first, the regulations say that there will be no requirement for declarations on any imports from EU countries for 12 months. That is simple and straightforward. What I do not understand is whether EU countries—I was about to say the French—will require the declarations to be generated, even if we do not want them. I do not understand what WTO rules say on things like that. Is there a worldwide agreement that these declarations should be flying about unless there is an equivalent mechanism, which the EU has internally? I hope the Minister will be able to answer the question of whether the French will feel the need to require declarations to be made. The reverse of that is the key question the noble Lord, Lord Purvis, asked. We may not want to make declarations for 12 months for our exports, but how will EU countries react to that? Are these declarations pieces of paper? I do not really understand. When you get to Calais do you say, “Here is my declaration; the British have said this is good”? Will lorries without these declarations, having avoided a friction problem on this side of the Channel, end up in a big lorry park while they somehow or another overcome this process?
Finally, I did go through all the paragraphs and paragraph 3.2 talks about public notices being issued when these discretionary factors come into effect. I have trouble with the fact that it is being done by the made affirmative process; clearly, had the Government started earlier it would not be urgent. If there is a need for a public notice for these things to happen, should that public notice not already have been published?
Lord Bethell
My Lords, I thank noble Lords very much for a really intense debate on a key Brexit measure that has been brought to the House. A lot of expertise has been brought to it, and it is my intention to try to reassure the House that this important statutory instrument has been carefully thought through, that it is very much a product of consultation with the haulage industry and that it works as part of the Government’s Brexit programme in a thoughtful way.
The noble Lord, Lord Purvis, spoke about the very large amount of smuggling that there already is and asked what proportion of trade is affected by the waiver. Goods moving to the UK from the EU are not currently subject to safety and security declarations: that is a key point of this debate. This is a new measure that will introduce new requirements on imports to the UK. It is difficult to measure exactly, right now, what proportion is involved, but I undertake to write to the noble Lord about the exact proportion of trade affected by this transitional period in which entry summary declarations will be required. I will get back to him with a precise figure, since he asked such a specific question.
The noble Lord, Lord Purvis, asked about the impact on air freight. Interaction with air freight is exactly the same as it is with land ports. Entry and exit summary declarations apply to air freight in exactly the same way, and these easements will also apply in exactly the same way. Declarations will still be required for the rest of the world. On whether these waivers are something new, the waiver is not currently a requirement for hauliers. Declarations are not required by importers in any case so deferring them for a year is not thought to have a big impact on either smuggling or crime.
Baroness Neville-Rolfe
Can I could seek further reassurance? Will the rules that are currently applied to keep these heinous crimes at bay continue, or will that actually be a problem because of the sheer scale of no-deal activity? That is my concern. Obviously, the security notice, once introduced, will help as well, because there will be a further item that can be checked, but is there going to be a problem in the interim? If the Home Office and its people at the borders are going to continue to do all they are doing at the moment, that would be good to know.
Lord Bethell
The sheer scale is enormous, but the feedback from the haulage industry and HMRC is that they are putting in place the measures necessary for the highest level of declarations. Most of the measures put in place to tackle crime and smuggling are intelligence and data-led; they do not involve inspection of vehicles on a mass scale. The noble Lord, Lord Purvis, referred to 46 million crossings of the Northern Irish border. Quite clearly, only a very tiny proportion of those could possibly involve any kind of inspection. So, in answer to my noble friend’s question, the same intelligence and data-led measures will be in place, even during this deferment.
The noble Lord, Lord Purvis, asked whether the 12-month waiver could be extended by Regulation 3(3). I reassure him that Regulation 3 is for exit summary declarations only. A 12-month waiver for any entry summary declaration is in Regulation 4 and I reassure the noble Lord that this cannot be extended under the SI. Let me clear up some confusion about the impact assessment. The HMRC impact assessment was republished this morning. I would be happy to share a link to it and a copy of it. It was widely distributed and makes important reading.
Lord Purvis of Tweed
Does the Minister think, in all honesty, that for a measure laid before Parliament on 5 September the publication of an impact assessment only on the morning that it is debated in this House is in any way appropriate, whether or not it is urgent? Is it not really rather an abuse?
Lord Bethell
The noble Lord makes a very fair point, but I reassure him that this impact assessment is not solely on this SI and is not an effort to try to mislead the Chamber. It is the overall HMRC impact assessment that covers, I believe, duties and the impact of all these measures. Its publication today is an effort to get it out as quickly as possible, and it is coincidental to the fact that we are discussing this specific SI. It is the updating of a previous impact assessment which is, I believe, more than six months old and has been available on the website for some time. If I can provide some clarification on where it can be found, I would be happy to share it. It refers to all the measures contained in this SI.
Lastly, the noble Lord, Lord Purvis, asked why we are using the urgent procedure under the EU withdrawal Act after giving assurances that we would not do so. The truth is that the number of times we have used the urgent procedure is very low indeed—minimal, even. I pay tribute to officials at HMRC and the Treasury for getting through a huge amount of work to get the legislative frameworks in place to prepare for a potential no-deal Brexit. On the eve of prorogation, when certain clocks on SIs that were laid before the House are ticking down, it made sense to use the urgent procedure to make sure that the request of industry and HMRC could be reassuringly executed so in this instance we decided to do that. This has been a really valuable debate—
Lord Tunnicliffe
I hate to be picky, but I asked only one substantive question, which is whether the French have to agree to any of this.
Lord Bethell
The noble Lord asked a very good question. I apologise for not putting it at the top of the list because it is absolutely right. No. This is a matter for the UK. France and other EU member states will have their own requirements for safety and security which UK businesses will have to comply with if entering or leaving those countries. No waiver from them is necessary as this is purely domestic law. I hope that that answers the question clearly.
Lord Purvis of Tweed
That is very illuminating and I am glad that the noble Lord, Lord Tunnicliffe, reminded the Minister of that point. I hope that this information on the impact on British business will be considered in any form of impact assessment. If the wavier is not part of a reciprocal agreement, what is the benefit of export for British exporters? Clearly, the waiver will be a benefit for those who are receiving the goods and for exporters to the United Kingdom. What is the benefit of no waiver from our European export markets?
Lord Bethell
The noble Lord puts it very well. The truth is that, in order to execute the SI before us, we do not require EU permission, which I think was the substance of the noble Lord’s initial question.
Lord Tunnicliffe
My question is on very much the same point. We are creating this SI, and I entirely accept that it is within domestic law to create a frictionless border, but if at the other side of the border there is a piece of EU bureaucracy—I must call it that rather than French bureaucracy—then the exercise becomes a bit pointless.
Lord Bethell
My Lords, in this Chamber we can execute only what is within the realms of our legislative ability. These are the measures that the industry and HMRC have sought from us. Negotiations with the EU to create the right kind of border will take place in the future. What we are trying to do here is to put in place whatever we can do as a country to have the best possible framework for our importers and exporters.
Lord Tunnicliffe
Perhaps the Minister might like to reflect on this conversation and see whether any of his colleagues could add some colour to that answer. There are quite a lot of deals relating to no-deal situations—I believe the EU calls them bonus deals—and I would be grateful, if there is further information, if he could write to us both.
Lord Purvis of Tweed
This will be the last time I jump to my feet. If the Minister is coming back to the very sensible suggestion by the noble Lord, Lord Tunnicliffe, might he expand a little on our discussions with the Irish Government? The European Union is land-bordered with the United Kingdom, and if this is applying only to those who are importing goods from the European Union, which would cover the Northern Ireland border, but there is no reciprocal mechanism for those exporting, then this would apply to the Irish Government, who are the European Union. What discussions have there been and where would we, in Parliament, be able to understand the position of the Irish Government where this 12-month period could be completely intolerable? Of course, it can be solved by not leaving without a deal, but if we do leave without a deal—which is prohibited by law, but if the Government are determined to get around it—what is the position of the Irish Government and how do we know?
Baroness Neville-Rolfe
I see the point of passing this order, even if we do not have a reciprocal situation. Business has asked for it. We rightly have done what is necessary. HMRC has done that. I also think that if we behave in a good way, the other member states will be able to see that we have done this, which helps, as it were, to keep the lorries rolling. That could be helpful in forward discussions in a difficult situation of no deal, which I do not think any of us want to see.
Lord Bethell
My noble friend puts it very well. I note the obvious disquiet in the Chamber, and I am very glad to undertake to write, as requested by the noble Lords, Lord Tunnicliffe and Lord Purvis, to try to clarify this. However, I can only present to the House what is before me. I cannot bring to noble Lords a trade agreement with the EU and I cannot resolve our future trading arrangement with Ireland because those two things are massively out of the scope of this statutory instrument and well beyond my pay grade or my ability to answer in the debate this evening. As my noble friend put it, all I can do is to present to noble Lords a statutory instrument that has been asked for by the industry and HMRC. I hope that it will provide some kind of example and format for our trading partners to lock into and set an example on energy and oomph and on technical jigsaw-making that they can connect with. The Treasury thinks that this is the kind of format that we should aspire to in the future to create the right kind of statutory framework for a successful trading future for the country. It is in that spirit that I commend these regulations to the House.
Motion agreed.