Trade and Customs Policy

Lord Campbell-Savours Excerpts

Tuesday 5th December 2017 Lords Chamber

[Lord Campbell-Savours (Lab)]

My Lords, I had no intention at all of speaking in this debate until last week, when I heard that the customs Bill was a money Bill. That basically means that we can have no influence whatever on the legislation because, by the time it gets to us, the Commons will have made up its mind and any proceedings in this place after Second Reading will basically be of no consequence. Indeed, the subsequent stages of the Bill will probably be taken formally.

In the 1960s, I was in business in Lancashire and one of my tasks was to appear regularly at the Long Room at Dover Western Docks, submitting entries on the component imports needed in our manufacturing operation. That was nearly 50 years ago. As the years went by, we sent trucks for component collection overseas, particularly to Italy and often through Mont Blanc and occasionally the Brenner Pass—all before we had entered the European Union. That is the background of my experience in the matter.

Unknown to me, a cousin of mine, John Shirley, was later to establish a freight-forwarding agency in the Western Docks area in Dover, so he is on the front line in this whole discussion. Over recent weeks we have had a number of conversations about Brexit, with reminiscences from me and direct experiences from him. His primary market has been non-EU—Albania, Bosnia, Croatia, Kosovo, Macedonia, Montenegro, Slovenia and Serbia. He is multilingual, he talks to the drivers, he hears their concerns and complaints and obviously he has mixed feelings about what is happening. He does not want a cliff edge, but the route we are on troubles him.

I recently sent him the PAC and Home Affairs Select Committee reports and asked him for a memorandum setting out his concerns, which I wanted to hear on the basis of his front-line experience. In response, he immediately flagged up demurrage as an issue and said:

“The slightest error in a customs entry would mean rejection. Rejection would mean the truck standing not for hours, but for days and when it comes to lengthy periods of time which are not the fault of the driver or the haulier we are talking about late delivery to the offload point and demurrage. Currently the accepted amount … is £250 a day. This is just the bare minimum and we, as freight forwarders, broker the number of days payable by the shipper to the haulier. Trucks cost money. They are driver accompanied and have to be kept running day and night in order”,


to make an income.

“To give you some examples: in February this year we had four trucks held at an airbase in Dalmatia for a fortnight and the USAF agreed to pay”,


demurrage of,

“£14,000! Last year, Samaritan’s Purse, running their shoebox”,

Christmas,

“appeal had three trucks stuck at customs in … Serbia for three days costing them £2,250! In Kosovo 2 years ago a truck with a load of humanitarian aid ... was stuck at customs from the Thursday to the Tuesday. The haulier … sought 5 days’ demurrage from us but also … the £900 penalty they had been stung with for failing to turn up at the reload point at the agreed time and day.

In Britain there are … a number of household names who like to externalise their costs. If the driver turns up … half an hour early the haulier or shipper gets fined; if he turns up half an hour late again there is a fine”.


If a non-EU truck gets stuck in Dover the customer can say,

“‘We can’t take the truck now till Friday’, and it is only Tuesday! This is a huge cost to the haulier”.

I am sure Ministers know where I am going: with the arrangements that are in hand, we are in danger of introducing great delays into the process. Someone is going to have to pay for it, and it will not be the Revenue: it is likely to be the haulier.

I turn now to CEMT—third-country permits. He says:

“I would like to bring to your attention what may happen to British hauliers”,


if, outside the EU,

“they are put in an identical position to hauliers from”,

non-EU states,

“who have to obtain third country permits in order to load in say Italy for Holland. There are only limited numbers of the CEMT permits ... A haulier with 10 trucks will typically get only one permit and that permit … remains with the driver the whole length of the journey. If British hauliers are outside the EU they will no longer be able to load from here to Budapest for example, then reload for Paris and again reload back up to Manchester unless they have a CEMT permit. These permits are not universal for the EU. Depending on their … routes British hauliers may need a Hungarian CEMT, an Italian CEMT and or an Austrian CEMT. Britain will have to negotiate with all 28 countries individually”,

to secure those entry arrangements. I hope that officials are well abreast of this issue; otherwise, there are problems in store.

I turn now to IPR and OPR—inward and outward processing relief. I will again quote from the Shirley memorandum. To illustrate the problem, let us take the rag trade, when,

“a designer sends drawings and trimmings from Manchester to a Macedonian factory … where they make up twenty types of jacket and thirty types of skirt ... When”,

the garment,

“arrives in Dover the entry clerk has to deduct from all the different types the amount of green buttons or red buttons or blue lace or red piping that went out of the factory from the cost of each and every finished garment. The entry can run to many pages and take all day to prepare”.

If that is perplexing, imagine a piece of electronic equipment with multi-sourced components, which would all have to be taken into account.

Then, there is the issue of stacking, both here and abroad. This is the nightmare scenario. There were plans for a large lorry stacking area near Dover, but there was opposition. I understand that Highways England is now considering a large site near the M20 and perhaps even holding freight on the M20 in an exercise described by the agency as,

“HGVs in the centre of the motorway rather than coast bound using steel barriers or moveable barrier systems”.

That is called stacking. Clearly, the Highways Agency is anticipating that—and of course, it also means demurrage charges.

But of course, it goes further. During the Brexit Committee evidence session last week, which I managed to see a portion of, I had the feeling that the witnesses were far more concerned about arrangements at northern European ports, including issues such as documentation clearance, stacking abroad, delay and perhaps even a more casual approach in Europe to the treatment of our trucks leaving this country—all of which we will have no responsibility for, and little influence over.

I turn now to the proposed electronic border, backed up with number plate recognition, in-country clearance and trusted trader status both here and abroad—what I regard as,

“a white van smuggler’s dream”.

The proposed vehicle number plate recognition system might work in Northern Ireland and perhaps at the Channel ports. Jon Thompson of HMRC seemed very reassuring when giving evidence. I personally had some experience of this in the early 1970s, before our entry into the Union, when we would register at the Mont Blanc tunnel entrance and clear at Cluses, 40 kilometres further up the road. You could, with trusted trader status, run a few Cluses-type operations in Northern Ireland as an alternative to destination clearance—which, I understand, is what the Government believe will happen. But there are three major problems: first, white van evasion; secondly, number plate switching on trailers, which is very easily carried out; and thirdly, of course, the DUP.

This brings me to my final point: soft border clearance procedures. Jon Thompson of HMRC seems confident that CDS, which has been referred to, will deliver. But, given the huge increase in traffic for clearance on duty, VAT compliance and animal health, should we be so confident?

I go back to the Shirley memorandum, in which he states:

“If we take the figures given to me by Paul Wells, Managing Director of Channel Ports Ltd and extrapolate them, we come up with some very interesting scenarios. Regardless of whether the actual transmission of an entry is electronic or not it still requires an entry clerk to prepare it by looking at the invoice, checking the value and currency, the weights, the number of packages, the truck number, calculating the VAT and or duty and obtaining it from the importer and sending it over to Motis … who pass it on to customs. Paul said that there are only 200 entry clerks left in East Kent but in 1992”—


before all this—

“there were 2,000. The number of trucks has gone up by 400% of which”,

we are told,

“only 1% currently need an entry, so a hard border will need 400% more entry clerks”—

in other words, nearly 8,000.

“We can also surmise that they will need their counterparts in Europe”,


so it is estimated that a further 7,800 entry clerks will be needed across Europe.

It was all best summed up by Chris Lewis, editor of the Freight Business Journal, which is an excellent publication if you want to keep abreast of Brexit transport issues. He said:

“One nettle that the UK may have to grasp in the run-up to Brexit is the shortage of trained customs officers … the Government lost no time in downsizing HM Revenue & Customs capabilities in this area, removing trained officers from many ports and putting a good proportion of those that remained at its centralised operation in Salford … France now has 35 times as many customs officers as the UK … And it’s not only frontline strength that has been reduced. Many … of HMRC’s top level managers with trade expertise have now retired”.


He writes an editorial every month on these matters and they are a very interesting read.

I really hope that we know that what we are doing and that we are taking into account these issues that I have raised today, which are the little things that could turn into mammoth problems unless they are dealt with at an early stage.

--- Later in debate ---

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, I am very grateful for the insightful contributions that have been made during this evening’s debate from right across the House. I join the noble Lord, Lord Mendelsohn, and the noble Baroness, Lady Kramer, in congratulating the House on the intelligence, insightfulness and specificity of the concerns. We are very fortunate to have, in the Chamber, Members of the House who between them have decades of experience at the helm of trade policy. I am particularly pleased that we heard this evening from my noble friend Lady Verma and her co-chair on one of the EU Committees, the noble Lord, Lord Whitty, as well as from the noble Baroness, Lady Quin, and the noble Lords, Lord Kerr of Kinlochard, Lord Campbell-Savours and Lord Liddle. This considerable experience will be invaluable in helping us to ensure that our trading arrangements after we leave the EU provide the greatest continuity and certainty for businesses, employees and consumers.

The noble Lord, Lord Kerr, mentioned some of the complexities. I think the exact point of these debates is that we can flush them out and make sure that we deal with them. This will be the first of a number of debates to be held on the Floor of this House and I look forward to the continuing contribution that the House will make to helping us ensure that we have our sights on the right priority areas. A number of important and very pertinent points were raised during the debate. I will try to answer as many of these as I can, and am happy to write to noble Lords with a follow-up where I cannot.

A number of noble Lords talked about negotiations with the EU. The UK is committed to securing the most frictionless trading relationship possible and we are very supportive of an implementation period. I am glad that my noble friends Lord Price and Lord Leigh also supported the implementation period. I should have done this at the beginning, but I would like to give my own tribute to my noble friend Lord Price, while he is in the Chamber, for all his achievements in his role of Trade Minister. He did an outstanding job.

Turning back to the EU negotiations, it would be wrong of me to comment on their detail. These are sensitive matters and we do not want to prejudice the negotiations. But it was made clear in the comments of the Prime Minister, President Juncker and President Tusk yesterday that all parties remain confident of reaching a positive conclusion. Noble Lords will recognise that this is not the subject of the White Papers or the Bills. Our aim is to achieve a comprehensive trade agreement with the EU while also building our relations with third parties, so let me turn to that.

A number of noble Lords, including my noble friend Lady Verma and the noble Lord, Lord Whitty, spoke about the importance of a smooth transition. That is why we have placed emphasis on the transitional adoption of trade agreements. Countries potentially in scope of these types of agreement—around 40 of them—account for 13% of the UK’s trade. My noble friend Lord Leigh made some positive comments about the impact of leaving the EU in galvanising industry, but it is important that we maintain the effects of the agreements that we have in place. Our aim is to provide continuity and certainty, to avoid cliff edges for business.

A crucial element of ensuring effective transition is enabling any obligations that are created to be reflected in our laws. The legislation that we have brought forward will ensure that these agreements can be fully implemented and remain operable over time. But, as many of your Lordships pointed out, having the legal power is one thing; we must also have the agreement of our trading partners. This important point was raised by the noble Lord, Lord Kerr, and my noble friend Lady Verma. We are clear that this is a technical exercise to ensure continuity, but our trading partners are equally convinced. Benefits flow both ways and they have reiterated this point to Ministers and officials alike. It is clear that it makes practical sense at first to provide continuity. I am pleased that my noble friend Lord Price confirmed that they were supportive of this fact in his negotiations.

In response to a direct question from my noble friend Lady Verma, we have already had very productive engagements with all the concerned countries that she mentioned, such as Switzerland and Norway. For this reason, we continue to believe that it is a realistic ambition to transition these agreements.

My noble friend Lord Leigh raised the issue of parliamentary scrutiny of trade agreements. Let me assure noble Lords that the trade agreements that we will be transitioning have already been subject to a scrutiny process at EU level. They have also been overseen in the UK by Select Committees. In addition, many of these agreements have been ratified by Parliament through the Constitutional Reform and Governance Act process. To be absolutely clear, the Trade Bill that has been introduced in the other place does not provide for the implementation of trade agreements with countries with which the EU does not have an existing trade agreement. To be clear, it will not be used for the implementation of future free trade agreements with new countries.

In response to a question asked by the noble Lord, Lord Liddle, about which countries are a priority, we are talking to a number of countries about future trading options, including full FTAs—but, as noble Lords know, we cannot negotiate while we are a member of the EU. We are using instruments such as joint trade reviews—collaborative analysis of the mutual trading relationship —and we are exploring what may be possible with partners, but it is too early to say what it will mean in a particular country.

The noble Lord, Lord Kerr, asked about the UK being able to do a better deal with the EU than Canada, which is light on services. Services are an essential element of the economies of the UK and the EU, so we will be seeking an ambitious free trade agreement between the UK and the EU which will be of greater scope and ambition than any preceding agreement, because we realise how important it is.

The noble Baroness, Lady Henig, talked about the scrutiny process for free trade agreements. We have been very clear that we are involved in engagement. One of the elements will be the substance of the free trade agreement and the other will be the exact scrutiny process. We are welcoming views to make sure that we get it right.

As outlined in the trade White Paper, the UK remains committed to a transparent, fair and rules-based approach to international trade and we are inviting views on that. We are committed to developing it in a transparent and inclusive manner, consistent with the need not to damage our negotiating position. We will be involving Parliament, the devolved Administrations and the devolved legislatures, as well as local government, business, trade unions, civil society and the public from every part of the UK, because they must have an opportunity to engage. Since the publication of the White Paper, we have been engaging with a range of stakeholders around these issues and will be looking to benefit from best practice across the world. We understand that we do not hold all the answers and we are committed to taking into account all views.

The noble Baroness, Lady Henig, also asked about the devolved Administrations. Continuity in trade must be for the whole of the UK. The Trade Bill creates powers designed to be held concurrently by the devolved Administrations and the UK Government for existing trade agreements. This will ensure that, where it makes practical sense for regulations to be made once for the whole of the UK, it is possible for this to happen. This gives greater certainty for business, minimises legal risk and reduces the volume of legislation. I assure noble Lords that the UK Government will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administrations, and not without first consulting them. Under the Bill, every decision that the devolved Administrations can make before exit they will be able to make after exit. Decisions have not been taken on the legislative framework, and we will be working closely with the devolved Administrations on our future policy in this regard. On engagement, the Secretary of State has met his counterparts in Scotland and Wales and is planning to meet them regularly, and our officials are engaging with their counterparts in Northern Ireland.

My noble friend Lady Verma spoke about the Trade Remedies Authority. The UK Trade Remedies Authority is to be a new, non-departmental public body, independent of government. We have carried out an extensive assessment of other countries’ trade remedies systems, structures and case loads, including those of Australia, Canada, the EU and the United States. Our proposed model is designed to ensure that industries and consumers have confidence in an independent and objective investigative process. The Trade Remedies Authority will apply a framework, set out in legislation, which will provide UK industry with a safety net against unfair trade practices and unforeseen surges in imports but which will also ensure that unnecessary costs are not imposed on consumers or downstream.

The strong support of the noble Baroness, Lady Golding, in favour of Staffordshire ceramics was noted. We will aim to provide transparent thresholds for the application of measures, including a market threshold providing a de minimis rule, to avoid costly investigations into cases destined to fail. The economic interest test will provide a balance between regions, primary producers, downstream industries and consumers. The lesser duty rule will ensure that effective remedies are in place without imposing unnecessary costs. The evidence that we have shows, for example, that imports of certain steel products that were subject to EU trade remedy measures with the lesser duty rule in August 2017 were down over 90%. We think that gets the balance right, which is why we are doing it.

The noble Baroness, Lady Golding, also asked how we intend to manage trade remedies with China under the UK system. On leaving, we will operate our own WTO-compliant trade remedy system. There is provision in the Taxation (Cross-border Trade) Bill to define alternative dumping methodologies that will enable the UK system to account for particular market situations. For businesses with existing measures in place, the continuity of those measures is a valid concern. We launched a call for evidence on that on 28 November as a first step to identifying what matters to UK businesses. That is a vital start to the way that the UK responds.

Turning to the customs union, I set out in my opening remarks the strategic objectives that will guide our assessment of the options for the future outside the EU customs union. The noble Baroness, Lady Murphy, asked what the Government’s preferred option is. The customs White Paper, and the future partnership paper before that, set out the two options—the highly streamlined customs arrangement and a new partnership —that most closely meet those objectives. The Government look forward to continuing to discuss these two models with businesses and with our partners in the EU.

We have also been clear that, in order to avoid unnecessary disruption for businesses in both the UK and the EU, there is a strong case for an implementation period, which I think has received quite a lot of support in this House. We are keen to ensure that affected parties will have to adapt only once to any new arrangements.

The noble Lord, Lord Whitty, asked about arrangements for overseas territories, and Gibraltar in particular. As he will know, they are not part of the EU customs union, and set their own tariffs on goods entering the territories. The new legislation will allow the Government to continue to provide tariff-free trade between the UK and the overseas territories. The Government will continue to work with them to ensure that their priorities are taken into account.

A number of noble Lords focused on the state of preparedness. The noble Lord, Lord Whitty, and the noble Baroness, Lady Verma, both committee chairs, and my noble friend Lord Cope talked about the need for certainty. The noble Baroness, Lady Kramer, talked knowledgeably about “just in time”. The noble Viscount, Lord Waverley, asked how the Government will continue to facilitate trade. The White Paper made clear that the Government are committed to exploring the scope for streamlining the movement of goods across the UK’s borders, including through seeking to negotiate mutual recognition of authorised economic operators, greater use of technology at the border and other simplifications for business, including self-assessment and other procedures.

I have spoken with people at HMRC on the systems point that a number of noble Lords raised, in terms of making sure that we can cope with customs. HMRC is replacing its old system, CHIEF, with a new system called CDS—if any noble Lords are aware of that. CDS is on target to meet its planned delivery date of January 2019. This was the conclusion of an NAO report into CDS in July 2017.

I believe that the CEO of HMRC has also talked about the need to staff-up on exit and hiring 3,000 to 5,000 people. We are also very aware of the particular issues about roll-on roll-off, and realise that it is about space and timing. We are trying to do what we can both unilaterally and on a bilateral basis, targeting the areas where there are the most particular issues.

The noble Viscount, Lord Waverley, made a number of suggestions that we might use to help speed the process, and I shall certainly pass them on to my officials, because we need to take any examples and suggestions forward.

On Northern Ireland, the noble Lord, Lord Empey, who has extraordinary expertise in this area, reiterated the importance of not going back. The Government have been clear that we seek to avoid a hard border in Northern Ireland. This is one of our key strategic objectives for any customs arrangements. We know that the movement of goods across the land border is key to the economies of Northern Ireland and Ireland, and both the UK and the EU recognise the unique circumstances on the island, so we welcome the European Commission’s call for flexible and imaginative solutions. We remain committed to the Belfast agreement and the common travel area, and I know that there are ideas on small businesses, when 80% of their trade goes across border.

The noble Lord, Lord Empey, also talked about our approach to trade and the importance of education. Coming from an education background with Pearson, I support that. I hope that he has seen the creation of a new department, DIT, whose role is to support companies to export more, open new markets and promote our business, supported by finance, as an important step. He asked why we do not use the tax system to incentivise trade and investment. The Government are trying to create the right environment. For example, the recent Budget acted on business rates, increased levels of infrastructure investment, boosted R&D spending and laid the foundations for the UK to become a world leader in new technologies.

Continuity is at the heart of our approach, so it follows that the Bills introduced in the other place are designed to provide maximum continuity for UK businesses, workers and consumers. A cliff edge in our trading arrangements is in no one’s interest.

[Lord Campbell-Savours]

Are discussions now taking place with the French, Belgian and Dutch authorities about what will happen with trucks being held in stacks going into Ostend, Dunkirk, Calais and the Hook of Holland?

[Baroness Fairhead]

I thank the noble Lord for his question. The answer is yes. The roll-on roll-off situation has been highlighted as an issue, because when companies have been exporting to the rest of the world, they are used to all the compliance, but we have roll-on roll-off, which is all about space, availability and time to get through and make sure that it is through. We are looking at both unilateral and bilateral aspects, focusing on the ports with the most significant issues. Through that, we are entering into conversations to see what can be done, because we realise that there is real complexity and there are practical issues.

I hope that noble Lords will see that the steps that we are starting to take are practical and that we are trying responsibly to create powers so that we do not have a cliff edge and can cope with any outcome.

It has been abundantly clear in today’s debate that there is huge depth of understanding of the complexities in this House. My colleagues in the Government and I are committed to involving all those in this House with this expertise. My right honourable friend the Minister of State for Trade Policy, Greg Hands, and I have already held one open-door meeting for noble Lords. I assure Members of this House that we want to provide regular forums where we can discuss our future trading arrangements. We need to have those sorts of honest discussions and will take on board some of your Lordships’ suggestions as we work that through. I shall do all that I can to involve noble Lords across all the Benches so that we can work together in what your Lordships have yourselves described as a spirit of honest, intelligent co-operation, with the shared aim of providing UK businesses, workers and consumers with maximum continuity in their trading relationships as we leave the EU.