Customs Safety, Security and Economic Operators Registration and Identification (Amendment etc.) (EU Exit) Regulations 2020

Lord Agnew of Oulton Excerpts

Thursday 19th November 2020 Lords Chamber

Moved by

[Lord Agnew of Oulton]

That the draft Regulations laid before the House on 21 October be approved.

Relevant document: 32nd Report of the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

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

My Lords, we are here to talk about a statutory instrument that is part of the Government’s package to prepare for the end of the transition period. The instrument relates to safety and security declarations as well as the process for registering for an economic operators registration and identification number, or EORI number. The instrument supports businesses’ preparations for the end of the transition period and corrects a deficiency in retained EU law. Noble Lords will be aware that the Secondary Legislation Scrutiny Committee reported the regulations as an instrument of interest in its 32nd report, published on 29 October.

First, I shall set out the context of the amendment that we wish to introduce for managing the safety and security risk of goods entering and leaving the UK. The UK subscribes to the World Customs Organization’s SAFE framework of standards, which sets out minimum requirements for participating customs administrations to regulate, monitor and secure the international supply chain. Customs authorities are required to collect and risk assess data on every consignment of imported and exported goods. The UK does this through safety and security declarations, which goods carriers are required to submit. These declarations are currently implemented through the Union customs code and are retained in law in the UK after the end of the transition period by the European Union (Withdrawal) Act 2018.

While part of the EU, the UK required safety and security declarations only for goods leaving or entering the EU. From the end of the transition period, the default position is that carriers will be required to complete safety and security declarations for goods moved into and out of Great Britain where those goods are moving to or from the EU as well as the rest of the world. This SI deals with a temporary waiver for safety and security requirements for imports. The Government are introducing additional secondary legislation—laid this Monday, 16 November—to introduce contingency powers relating to safety and security requirements for exports, should they be needed.

In June, the Government announced the “staging-in” approach to controls at the border after the end of the transition period. As part of this approach, the Government are introducing this SI to waive safety and security entry summary declarations for six months on goods from the EU from 1 January 2021. The temporary waiver is necessary to address the adverse impact of Covid on businesses’ ability to prepare for new safety and security requirements. During the waiver period, there will be no requirement for entry summary declarations for goods imported into GB from territories where the UK does not currently require such declarations. Declarations will be required only from 1 July 2021. The waiver introduced by this instrument applies only to imports on which the UK does not currently receive declarations. Border Force will continue to undertake intelligence-led risk assessments of goods movements into this country from the EU, as it does now. Entry summary declarations will continue to be required for goods imported from the rest of the world. As a result, there is no increased security risk to the UK from this approach in the short term.

Secondly, the instrument amends a list of locations currently in the retained legislation that are granted shorter timing requirements for the submission of safety and security declarations for maritime movements. Safety and security declarations are required to be submitted within certain time limits before arrival or departure. These time limits vary by mode of transport.

Within the retained legislation, drafted with the geography of the EU in mind, there is a list of territories for which safety and security declarations can be submitted within a shorter time limit for movements by sea. This is to account for the practicalities of these shorter journeys, where the default time limits are unnecessarily onerous and challenging for carriers to meet. This list currently includes places such as Morocco, with very lengthy timings for journeys to Great Britain. Given the length of journeys from these places to Great Britain, there is no need for these movements to be offered the shorter time limits.

Conversely, this list currently does not include some of our closest neighbours and trading partners. For these journeys, which include channel crossings and goods moved to and from the Atlantic coast of Spain and Portugal, the default timing requirements are impractical for these well-established trade routes. This instrument updates the territory list in the retained legislation, removing territories that border the EU and no longer need the shorter timing requirement and adding to the list those territories that now require this consideration. This change will prevent industry being unnecessarily burdened for the shortest crossings and helps to update retained legislation to reflect our new status as an independent customs regime.

Thirdly, the instrument updates the governance of the economic operators registration identification in retained law. An EORI is a unique registration number given to businesses to interact with customs authorities, so that HMRC can identify them effectively. EORIs are necessary when applying for customs simplifications or facilitations, when making customs declarations or in any other interactions with the customs authority. All existing EORIs issued by the UK, known as UK EORIs, will continue to remain valid for use in Great Britain after 31 December 2020 and will continue to be prefixed with the letters “GB”. From 1 January 2021, individuals or businesses established in Great Britain or other territories outside the EU who want to trade with the EU and do not already have a UK EORI will need to obtain one. Persons that are not established in Great Britain but wish to lodge a declaration or request a customs decision in Great Britain will also require a UK EORI.

This instrument ensures that Great Britain has a functioning EORI system by replacing references and terminology in the retained EU law that will no longer apply to Great Britain. It will also maintain a registration requirement on those where such a requirement is set down in national law. This instrument does not impose any additional requirements to those already imposed under EU law.

The safety and security aspects of this instrument do not apply to movements of goods between Northern Ireland and Great Britain, or Northern Ireland and the rest of the world. Under the Northern Ireland protocol, goods moved between Northern Ireland and the EU will not be subject to safety and security requirements. Goods moved between Northern Ireland and the rest of the world will be subject to safety and security requirements. The EORI aspects of this instrument will not apply to traders in Northern Ireland, who will continue to register under the UCC.

By introducing a temporary entry summary declarations waiver and amending the declaration submission deadlines, this instrument strikes the right balance between giving traders time to prepare for new arrangements with the EU while still maintaining the safety and security of the UK. It also makes technical amendments to allow businesses that will require an EORI to continue to register as they currently do. I beg to move.

--- Later in debate ---

[Lord Agnew of Oulton (Con)]

My Lords, I thank the House for this debate. I will seek to address the questions that have been asked. If I do not give enough detail, I ask noble Lords to feel free to write to me because this is an extremely complicated area and I certainly do not pretend to be across every detail.

I shall start with my noble friend Lady Altmann, who asked about the number of stages of requirements. There are simply two stages, one from 1 January and one from 1 July. It may be that my noble friend has something else in mind, so if she wants to seek clarification, I ask her to write to me. HMRC is standing up approximately 7,000 new customs officers for this process, around 6,000 of whom are already in place. The bulk of the others are either in training or under offer, so I am reasonably confident that we will have enough. I get a weekly report on that information.

A number of noble Lords asked about the Northern Ireland protocol. It is a very complicated international agreement, made more so by the fact that we do not have everything nailed down yet. I share the frustration of many noble Lords who wish to see certainty. However, the Trader Support Service has been established to support traders in Northern Ireland and has already started sending out bulletins to traders in Northern Ireland who have registered. As of last week, 2,800 Northern Ireland businesses had registered and at least 2,000 GB businesses are looking to trade with Northern Ireland. That figure is changing daily and going up quite quickly. They will link into the computer system that will operate in Northern Ireland, the Customs Declaration Service, which will operate only in Northern Ireland initially because it is capable of managing a dual-tariff system. I will talk more about systems later on.

My noble friend Lady Wheatcroft asked about delays on the other side of the channel. She is right that it is not something we can have a great deal of control of, but we are engaging substantially with all the EU countries that trade with us and we see from surveys that awareness is going up weekly. However, this is of course made more complicated by Covid.

The noble Baroness asked why we could not provide longer-term waivers in this SI. The practical limit is that under the international customs rules one cannot make these things permanent, but we believe that the six-month delay will give businesses a chance to adjust. The noble Baroness also asked about the number of businesses that have registered for an EORI number: it is a bit over 260,000 and they are still coming in.

The noble Baroness expressed concern about complexity. It is absolutely our intention and aspiration to operate the most efficient border in the world by 2025, as we have stated. We are not able to do that straightaway, and I fully accept that there will be complexity and arcane rules that we would like to remove now but cannot necessarily remove in the next few weeks or months. However, we are absolutely committed to improving the system.

My noble friend Lady McIntosh also asked about the Trader Support Service. I assure her that it is standing up at a rapid rate. It is led by Fujitsu, a large computer company that has been working with HMRC on other systems for a number of years. One of its consortium members is the software company Descartes, which is going to link to CDS. I am in very regular contact with the HMRC teams on the implementation of that work.

Businesses have been able to sign up since 28 September and, as I mentioned, those that sign up now receive bulletins. However, we are concerned that not enough Northern Irish traders have registered. We continue to communicate as assertively as we can with trade bodies and hauliers in Northern Ireland. The noble Baroness asked about one-off costs. We expect that importers will face some increase in costs as a result of the declaration requirements, but they are very variable. We do not know how importers will choose to manage the declaration, which is often just one part of a wider customs process. Because of this uncertainty, the estimate on the admin burden is not currently available. As noble Lords will know, the negotiations with the EU on an FTA are ongoing. That is why we cannot be crystal clear for traders. As I have said, it is frustrating, but I have personally pushed HMRC to get out all the decisions that it can as quickly as possible, to remove the uncertainty that traders face.

My noble friend Lord Naseby asks whether trade associations and hauliers were consulted on the changes to the timing of the notification of the ENSs. It is worth clarifying that this change was requested by stakeholders. It gives flexibility to hauliers and carriers to pick the route nearer to the time of departure. They do not have to submit the information on that timescale; they can put it in earlier if they know what route they are taking. We consulted with 40 trade associations and business representatives on this, and that is why we have made these changes. My noble friend also asked about communication with hauliers, referring to his old constituency. We have created 40 advice and information pop-up sites across GB. In the last week or two, 7,000 hauliers have visited them, as they collect information and increase their level of familiarisation.

Many noble Lords asked about IT readiness. There are a lot of systems, so I will not go through each one in detail. The main one, CHIEF, the existing system, is tried and tested, and has been upgraded to take the higher volume of transactions. Regarding congestion, particularly around the short straits, we have created a facility, “Check an HGV”, which will enable hauliers to answer a simple questionnaire before they go into Kent, to ensure that their paperwork is in order. That has been in beta testing with a number of hauliers over the last few weeks. Noble Lords have mentioned costs. We have provided support of £80 million to the intermediaries sector—customs intermediaries, freight co-ordinators and so on—to uprate their businesses. That money is still going out. Not all of it has been claimed by grants, and this week we widened the criteria to give more flexibility. Noble Lords will also be aware of the port infrastructure fund which closed on 31 October, and which again was well received by the port sector. It will probably be oversubscribed, but it will provide substantial capital to enhance the sector’s facilities.

The noble Baroness, Lady Kramer, asked a number of questions, some of which I hope I have answered. She asked particularly about small business support. We have made efforts to support the small business sector. HMRC has introduced a number of support mechanisms around such things as duty handling, where we have provided an accelerated system for the deferral of duty. That process is under way, but I absolutely accept that this is going to be a period of change and a lot of learning for all parts of the sector.

The noble Lord, Lord Tunnicliffe, asked thoughtful questions, as normal. He asked whether this is a response to Covid or a matter of lack of readiness on the part of the Government. We have listened very carefully to carriers, who have been emphatic that the challenges raised by Covid have required that we make this particular easement. Businesses specialising in cross-border trade have been significantly impacted by the pandemic. This disruption has prevented them preparing the introduction of customs controls at the end of the transition period, and it is really in response to those challenges that we announced the staging in. The introduction of a temporary waiver for entry summary declarations was a necessary measure to address the adverse impact of Covid while balancing the safety and security needs of the country.

The noble Lord asked about the employment of 50,000 customs agents. There may be a misunderstanding of terminology on my part, but I think the number he refers to relates to the customs intermediaries industry, not to civil servants, Border Force or suchlike. That figure was a bit of a finger in the air, to be honest: one simply extrapolated the number of customs forms from the volume increase. The reality is that the grants we have given to the sector—a moment ago I mentioned around £80 million—have been available to increase capacity, not just through hiring more people but covering IT training and innovation, basically. Our intelligence suggests that the sector is ready for the big increase in transaction numbers from January. As I mentioned a moment ago, we have just widened the criteria of the grants facility to give a wider range of eligibility.

The sector is varied, as I mentioned. It includes customs brokers, freight forwarders and fast-parcel operators, and the increase in capacity goes beyond simple increases in the numbers of staff. The Government continue to work closely with industry stakeholders to ensure that they have the capacity required. We will continue carefully to monitor preparations, bearing in mind that there will be a big jump in January and then another jump in July. Therefore, we will keep a careful eye on capacity.

The noble Lord asked about the timing requirements. I hope I dealt with that in an earlier answer, but there is a basic requirement, because Border Force needs time to collect and risk-assess data, with the practical considerations about what information the industry is able to provide and when without being overly burdensome. Of course, this varies by mode of transport, and the shorter timing requirement that this SI extends to the territories list reflects the reality for short sea movements, such as those from Calais to Dover. The change offers a more practical requirement for the submission of these declarations for businesses involved in maritime trade on historic, busy and significant trading routes. We will continue to assess feedback from the industry on how the customs system works for them and keep the requirements under review.

The noble Lord asked about the cost of the impact of the S&S requirements. As I mentioned earlier, we expect there to be some additional costs, but we have not been able to quantify them.

The noble Lord asked whether we can reassure the House that trade requirements are being considered more widely beyond the question of imports. My noble friend Lord Naseby asked a similar question. We continue to work closely with industry to ensure that it is engaging with the new requirements and can take the necessary steps to prepare. We are using a public information campaign. I accept that for some people that might sound irritating but, to a certain extent, it needs to be irritating for people to take notice of it. My right honourable friend the Chancellor of the Duchy of Lancaster is having regular Zoom conferences with stakeholders to hear their issues at first hand, as indeed, am I. I hope that addresses the questions. I think I will be back here again on future SIs and I am sure will be subjected to ongoing scrutiny. If noble Lords want to write to me on any particular issues, they should feel free to do so.

To sum up, the Government are introducing this SI as an important part of the process of updating retained legislation to support our status as an independent customs regime. By providing extra time for businesses affected by Covid to prepare to meet their safety and security requirements, we are listening to businesses and supporting them at this challenging time.

Motion agreed.