Customs Miscellaneous Non-fiscal Provisions and Amendments etc. (EU Exit) Regulations 2020

Lord Agnew of Oulton Excerpts

Tuesday 19th January 2021 Grand Committee

Moved by

[Lord Agnew of Oulton]

That the Grand Committee do consider the Customs Miscellaneous Non-fiscal Provisions and Amendments etc. (EU Exit) Regulations 2020.

Relevant document: 41st Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, we are here to discuss a further statutory instrument that is part of the Government’s package of SIs for the end of the transition period: the Customs Miscellaneous Provisions and Amendments etc. (EU Exit) Regulations 2020. This statutory instrument will be debated in the other place on Thursday. It came into force at the end of the transition period and is subject to the urgent “made affirmative” procedure. It has already taken effect, but still needs to be approved by both Houses.

Under the European Union withdrawal agreement and the Northern Ireland protocol, certain provisions of EU law continue to apply in Northern Ireland after the end of the transition period. In Great Britain, those same provisions are modified to reflect the fact that the UK has left the EU. Previous amendments to the relevant legislation applied across the whole of the UK. However, further changes were needed to address the specific arrangements for Northern Ireland. Noble Lords will be aware that the Secondary Legislation Scrutiny Committee reported the regulations as an instrument of interest in its 41st report, published on 14 January 2021.

The instrument amends and modifies three fields of legislation: legislation relating to customs safety and security procedures, including entry summary declarations and the registration of businesses for movements from Northern Ireland to Great Britain; application of the Customs and Excise Management Act 1979 and the Finance Act 1994 to movements between Northern Ireland and Great Britain for non-duty purposes; and it ensures that HMRC can continue to collect and process trade statistics data in the same way it did before the United Kingdom left the EU.

I will now turn to each topic in greater detail, starting with entry summary declarations. These declarations contain safety and security information about the movement of goods. Declarations must be submitted to HMRC, then risk-assessed before the goods arrive at the border. These assessments are used in conjunction with intelligence-led targeting by Border Force, to protect the security of the UK. This instrument removes the requirement for an entry summary declaration for the movement of “qualifying Northern Ireland goods” from Northern Ireland into Great Britain, in line with our wider commitments on unfettered access. It also retains the requirement of an entry summary declaration for the movement of “non-qualifying Northern Ireland goods” from Northern Ireland into Great Britain. Non-qualifying Northern Ireland goods include those that are not in free circulation in Northern Ireland—for example, those subject to customs procedures such as inward processing or that are in an authorised temporary storage facility—before they are moved to Great Britain. It also includes the trade of goods subject to specific obligations binding on the United Kingdom and the EU, such as endangered species or conflict diamonds.

These changes are necessary to allow safety and security declaration requirements to be maintained for non-qualifying Northern Ireland goods moving into Great Britain from Northern Ireland, while simultaneously allowing appropriate Northern Ireland traders to maintain unfettered access to the rest of the United Kingdom market. Anti-avoidance measures are also in place to deter businesses from rerouting goods via Northern Ireland if they do so in order to avoid United Kingdom duty or import formalities.

In addition, this legislation states that for goods arriving by sea from Ireland, the Channel Islands and other nearby ports, where an entry summary declaration is required, it must be submitted two hours before the vessel arrives at a port in Great Britain. Without this amendment, earlier submission would be required, which may be impractical given the duration of crossings. It also aligns the declaration time limits to those already in place for the same sea movements in the opposite direction.

This instrument also requires economic operators to obtain a UK economic operators registration and identification number—otherwise known as a UK EORI number—to move non-qualifying Northern Ireland goods from Northern Ireland to Great Britain. An economic operator is a person who, through the course of their business, is involved in customs activities covered by customs legislation. It is necessary for these operators to have a UK EORI number starting with GB to make declarations or get a customs decision in Great Britain. Registration is quick and simple and an EORI number will usually be issued straightaway. This instrument also ensures that penalties apply to failures to comply with the requirements to submit an entry summary declaration, including the need to be registered for a UK EORI number.

I turn to the second area of legislation covered by this statutory instrument: the regulations relating to the Customs and Excise Management Act 1979, otherwise known as CEMA, and the Finance Act 1994. First, CEMA provisions that relate to movements between the Republic of Ireland and Northern Ireland are revoked by this instrument. This is because EU rules concerning the movement of goods continue to apply to these movements under the Northern Ireland protocol. Secondly, this instrument allows CEMA enforcement powers—for example, the ability to seize and detain goods—to be used for enforcing prohibitions and restrictions on the movement of goods, people and vehicles between Great Britain and Northern Ireland, where there is no connection to customs duty.

This instrument also ensures that the enforcement provisions in Part I, Chapter 3 of the Finance Act 1994 can be used in relation to the export of restricted or prohibited goods, as appropriate. These include HMRC’s powers to require the production of documents, to remove documents and to enter premises. This applies in Northern Ireland for the movement of goods from Northern Ireland to Great Britain.

Finally, I turn to trade statistics. This instrument makes minor amendments to the law on statistical data collected on the trade of goods between the United Kingdom and members of the EU, to take account of the Northern Ireland protocol. This is important in order to meet international reporting requirements. This instrument ensures that the legislation works properly in Northern Ireland, where EU statistical rules will continue to apply as a result of the Northern Ireland protocol, and in Great Britain, where they will not. As a result, HMRC will be able to continue to collect and process trade statistics in the same way that it did before the United Kingdom left the EU.

These technical but important customs regulations are already in place. They will help ensure that goods continue to move smoothly and safely between Northern Ireland and Great Britain and that matters related to their movement can continue as anticipated. I hope noble Lords will join me in supporting these regulations. I beg to move.

--- Later in debate ---

[Lord Agnew of Oulton (Con)]

I thank noble Lords for their well-considered and insightful comments during this debate. As I said earlier, these measures are necessary to address specific arrangements pertaining to Northern Ireland now that the transition period has ended. I will try to address the questions put forward by noble Lords.

The noble Lord, Lord Liddle, was modest in saying that he did not understand these trade regulations in detail. He displayed enormous knowledge, to my mind, so I will try to answer his questions. The joint committee agreement protects unfettered access, by ensuring that there is no requirement for export checks or declarations for Northern Ireland businesses moving goods in free circulation directly from Northern Ireland to GB. There are some limited exceptions when businesses need to submit an export declaration for the movement of goods from Northern Ireland to GB. The Government have published comprehensive guidance on these exceptions online to ensure that businesses have a thorough understanding of when to submit the export declaration.

As outlined in the Government’s Command Paper, there are no plans for any new bespoke customs infrastructure in Northern Ireland. Agri-food movements from GB to NI will be carried out at existing facilities and designations at NI ports. Expanded infrastructure will be needed at some of these sites for agri-food checks and assurance. The Government have collaborated with Northern Irish ports to agree on the utilisation of existing space and capacity, until infrastructure expansion has been completed. A full impact assessment has not been produced for this instrument, as an assessment was made of the impact of the then European Union (Withdrawal Agreement) Bill in 2019 and the Northern Ireland protocol.

The Government recognise that the priority remains to have a regime in place that strongly focuses on the benefits of unfettered access for Northern Irish businesses, and ensures that they have a competitive advantage over traders elsewhere in Ireland. That is what the second phase of unfettered access will provide, in the second half of 2021. Once delivered, it will ensure that benefits are conferred to genuine Northern Irish traders only. Goods coming from the EU or outside the EU to Great Britain via Northern Ireland will be regarded as imports and subject to controls.

The noble Lord, Lord Dodds, asked about timing and what has happened since leaving—post the transition period. On timings, Royal Assent to the Taxation (Post-transition Period) Act 2020 was required before this instrument could be laid. Section 2 of that Act inserted Section 30C into the Taxation (Cross-border Trade) Act 2018. This imposes a customs duty charge on the movement of goods from NI to GB if the goods are not qualifying Northern Ireland goods. It ensures that unfettered access is available only to appropriate NI traders and deters businesses from rerouting goods via Northern Ireland to avoid import formalities. The Taxation (Post-transition Period) Act received Royal Assent on 17 December last year; this instrument was then made on 21 December and laid on 22 December. The instrument came into force at the end of the transition period and has already taken effect, but still needs to be approved by both Houses.

No formal consultation on this specific instrument has taken place. However, the instrument, together with the Taxation (Post-transition Period) Act 2020, makes provisions in relation to the application of certain provisions in the protocol. Consultation on the practical implications of the protocol has taken place with businesses. Throughout the transition period, the NI stakeholder engagement team consulted a wide range of businesses and representative bodies who would be impacted. Consultation with businesses will continue.

Defining qualifying Northern Ireland goods is a matter for the UK, not for the joint committee. To this end, the Government laid a statutory instrument setting out the definition of qualifying Northern Ireland goods—statutory instrument 2020/1454. A qualifying Northern Ireland good is one that is eligible for unfettered access to Great Britain. Goods will be qualifying Northern Ireland goods from 1 January 2021 if they are in free circulation in Northern Ireland—that means not under a customs procedure or in an authorised temporary storage facility before they are moved from Northern Ireland to Great Britain. The Government will focus the benefits of unfettered access on Northern Irish businesses and ensure that we have a competitive advantage over traders elsewhere.

The Government have been unequivocal in our commitment to unfettered access for Northern Ireland goods moving to the rest of the UK market, and there will be only very limited exceptions to this. This instrument simply ensures that the requirement for entry summary declarations for non-qualifying goods moving from Northern Ireland to Great Britain is retained. This is in line with the requirement for goods imported into Great Britain from the EU and outside the EU.

I was asked about paperwork and costs. In practice, safety and security declarations are made into the same system used for other goods arriving into GB that attract a safety and security requirement. The data required for an entry summary declaration includes fields such as mode of transport, description of the goods and routing information. Traders may use an intermediary to complete safety and security declarations for them. To avoid disruption and facilitate continuity, the Government have introduced a waiver for ENS requirements where such requirements would not have existed before the end of the transition period. This means that there is no requirement for entry summary declarations to be submitted for the movement of non-qualifying EU goods from Northern Ireland to Great Britain until 1 July 2021. This SI does not affect that waiver.

My noble friend Lady McIntosh asked similar questions about ENS: can they be made electronically? These declarations can and are being submitted digitally. They will be made into the safety and security GB system, the same system used for other goods. This instrument retains the requirement of an entry summary declaration for the movement of non-qualifying goods. She asked about training. HMRC and other departments have undertaken a significant programme of ongoing communication and engagement to inform traders of new requirements and to support preparedness. The two-hour time limit requires traders to submit their entry summary declaration a minimum of two hours before arrival to GB, but this two-hour period includes time taken on the journey, so, in practice, will not come about much before traders arrive at ports.

My noble friend is worried that this might provide a backdoor entry into GB for non-qualifying goods. To prevent traders seeking to abuse unfettered access in the first place, it is accompanied by anti-avoidance provisions which deter businesses rerouting goods via Northern Ireland if they do so in order to avoid UK import formalities. HMRC will be able to undertake spot checks when there is evidence that the qualifying goods regime is being abused. HMRC also has the power to prosecute anyone who tries wrongly to claim unfettered access for their goods. This will ensure that only businesses with a legitimate reason to route goods via NI can benefit from unfettered access.

My noble friend Lady McIntosh asked whether there will be two regimes: NI to GB and GB to NI. The Government recognise that the priority remains to have a regime in place that strongly focuses the benefits of unfettered access on Northern Ireland business and ensures that it has a competitive advantage over traders elsewhere in Ireland.

The noble Baroness, Lady Ludford, had similar questions, but I will deal with her particular emphasis on the preparations for the end of the grace period. A dedicated team in government is already working with supermarkets, the food industry and the Northern Ireland Executive to develop ways to streamline the movement of goods in accordance with the protocol, backed by significant UK funding. The Government will provide a major injection of new funding to support preparations for the end of the grace period for supermarkets and suppliers. Further details will be announced in due course.

The noble Baroness asked about the trade and co-operation agreement. The TCA governance requirements were set out clearly in the agreement and will be set up in due course. The agreement builds on multiple avenues of business representation and input and clear independent systems of dispute resolution outside the jurisdiction of the European Court of Justice. The TCA provides a role for domestic advisory groups which will include business and employers organisations. They will be able to submit views and recommendations for consideration by the UK and the EU and may be consulted during consultations as part of the dispute resolution mechanism for the agreement. Businesses may also take part in the civil society forum provided in the TCA. It will meet at least once a year and provide a forum for independent civil society organisations from the UK and the EU to meet and discuss the implementation of the agreement. On the actual governance arrangements, the governance arrangements agreed under the withdrawal agreement will continue through the joint committee supported by the specialised committee on Ireland and Northern Ireland and, in due course, the joint consultative working group. Once established, the joint consultative working group will provide further opportunities for detailed engagement.

I would like to continue for a couple more minutes if the Deputy Chairman will allow it.

[The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)]

We have time.

[Lord Agnew of Oulton (Con)]

In addition to the questions asked by other noble Lords, the noble Lord, Lord Tunnicliffe, asked about penalties. They will be used where a person is found contravening a customs rule, such as failing to complete an entry summary declaration or not providing an EORI number. There is a maximum penalty of £1,000. HMRC may take mitigating factors into consideration, which could lead to a lower or nil penalty depending on the circumstances. While HMRC will penalise non-compliance, it will seek to support those who make genuine errors while trying to get it right. HMRC is planning a package of activities to support and educate traders on their obligations during this period. This includes promoting keeping good records, which will be crucial in minimising errors once supplementary declarations are made. Further tweaks of the regulations will be required, but the changes currently envisaged are improvements rather than corrections.

The noble Lord asked about a general update on the situation regarding trade between GB and NI. I think I can report on a good position over the last two and a half weeks. That has been largely supported by the Trader Support Service, which was set up just before the end of the transition. Some 29,500 businesses have now registered with the TSS and over 25,000 of those are marked as ready to trade. The TSS has handled over 75,000 declarations so far, and 99% of those have been processed within 15 minutes. The contact centre has over 700 staff to assist with trader queries. It handled some 7,000 inbound calls between 1 January and 17 January. Some 97% of those calls were answered within 30 seconds, and they have spare capacity which they have been using to do outbound dialling to other traders who have not yet reached ready-to-trade status. As of 18 January, HMRC had received 1,518 UK trader service applications.

The Government are committed to maintaining unfettered access to the rest of the UK market for Northern Ireland businesses, protecting Northern Ireland’s place in the UK customs territory and ensuring that Great Britain to Northern Ireland trade flows as smoothly as possible. I sum up by saying that these regulations, which are already in place, will help to ensure that goods can continue to move safely and effectively between Northern Ireland and Great Britain. I commend the regulations to the Committee.

Motion agreed.