Draft Cash Controls (Amendment) (EU Exit) Regulations 2019 Draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019

Mel Stride Excerpts

Monday 25th March 2019 General Committees

[The Financial Secretary to the Treasury (Mel Stride)]

I beg to move,

That the Committee has considered the draft Cash Controls (Amendment) (EU Exit) Regulations 2019.

[The Chair]

With this it will be convenient to consider the draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019.

[Mel Stride]

It is a pleasure to serve under your chairmanship, Mr McCabe, and I reassure the Committee that we are now in safe hands—it is business as usual. I welcome our Clerk. When the Clerks are here, they are of course so seamlessly efficient that we do not notice them, but when they are not here, apparently we do notice that they are not. There was a slight delay, but I have none the less moved the first of the draft statutory instruments and I will speak to both the SIs before us.

The Government’s priority is to leave the European Union with a deal that works for citizens and businesses, as is set out in the withdrawal agreement and political declaration. That would avoid a no-deal outcome. As a responsible Government, however, we have a duty to plan for all scenarios to minimise disruption for businesses and individuals. We are in Committee to consider two statutory instruments that are part of the Government’s package to prepare for the possibility of the UK leaving the EU without a deal.

The first set of draft regulations relates to cash controls. The European Union monitors the international movement of cash by requiring individuals who enter or leave the EU carrying more than €10,000 in cash to make a declaration. That cash control declaration must be made to the customs authority of the member state into which they are arriving or from which they are departing. The UK is committed to continuing that practice. The declaration is one measure that assists the fight against money laundering, organised crime and the funding of terrorism.

If the UK leaves the EU without a deal, the draft instrument will require cash control declarations at the UK border, including the borders between the UK and the EU. That does not apply to the border between Northern Ireland and Ireland. The current practice, which requires those declarations between the UK and non-EU countries, will continue. The draft regulations extend those requirements to movements between the UK and the EU. The instrument makes a small change in so far as we will require declarations on amounts of £10,000 or more, rather than €10,000.

The second draft statutory instrument under consideration relates to economic operator registration and identification, or EORI. An EORI is a unique registration number given to businesses that are involved in matters covered by customs legislation, so that Her Majesty’s Revenue and Customs can identify them effectively. Registering for an EORI is a requirement under EU law. As those registration numbers allow HMRC to identify traders effectively, it is necessary for traders to use them when applying for customs simplifications or facilitations, making declarations or exchanging information with the customs authority.

The Union customs code, as it exists immediately before exit day, will form part of domestic law on exit day and continue to apply to the UK as retained EU law, by virtue of the provisions of the European Union (Withdrawal) Act 2018. The code was drafted to apply to EU member states and will therefore not work as effective legislation for the UK without amendment. The second set of draft regulations amends those retained provisions to ensure that they are suitable for an independent UK customs regime. The instrument mirrors current EU provisions to ensure that traders and systems are faced with as little change as possible.

All existing EORIs issued by the UK, known as UK EORIs, will continue to remain valid for use in UK customs processes in the event of a no-deal EU exit. Following the UK’s departure from the EU, UK individuals and businesses that want to trade with the EU and do not already have a UK EORI will need to obtain one. In addition, persons who are not established in the UK but are entitled to lodge a UK declaration will first require a UK EORI.

I will now comment on the effect of the two draft SIs at the border between Northern Ireland and Ireland. The UK Government have committed to avoiding a hard border and will do everything in their power to ensure that no new physical infrastructure or related checks and controls are introduced at the border in the event of no deal. As such, the two SIs will not apply to movements between Northern Ireland and Ireland, but they will apply for movements between Northern Ireland and other territories. Cash control declarations will not be required for movements of cash between Northern Ireland and Ireland, but will be required for movements of cash between Northern Ireland and other territories.

Likewise, traders whose only international trade is between Northern Ireland and Ireland will not be required to register for a UK EORI, but a UK EORI will be required by Northern Ireland traders trading with other territories. Finally, an EORI is not needed by UK traders with only domestic trade. The instruments are important in helping to ensure that our trade and cash controls continue to function in a day one no-deal scenario. I commend the first set of regulations to the House.

--- Later in debate ---

[Mel Stride]

I thank the hon. Lady for her questions, which, as usual, were very thorough and detailed. I will do my best to answer them all. The first related to the whole issue of why we are using secondary legislation. In general terms, I hope the hon. Lady recognises that, given the kind of detail involved in some of this secondary legislation, the sheer practicalities of setting all that out in advance in primary legislation would have been prohibitive, not least because the relevant Bill went through some time ago and we are now considering these matters nearer to the event of our potential departure from the EU without a deal—although that is certainly not our desired departure. She will also have noticed that both instruments were considered by the European Statutory Instruments Committee and, on its recommendation, turned from negative instruments into affirmative instruments.

The hon. Lady asked very specifically whether these instruments relate to a no-deal scenario. Indeed they do. Of course, if we have a deal—the current deal, which has been negotiated with the European Union—we will go into an implementation period until the end of 2020. Under those terms, we would continue to trade with the EU27 on broadly the same basis as we do today.

The hon. Lady asked specifically why £10,000 was used, rather than the sterling equivalent of €10,000, that being—I will take her figure at face value—about £8,500. She suggested that it might be because it is a nice round number, and I guess perhaps it is. It certainly maintains the figure 10,000, albeit there is a relatively marginal change in value at today’s exchange rate; as we know, that may change over time.

The hon. Lady made some very important points about the Northern Ireland border and, with regard to the cash controls instrument, the level of security that may or may not be in place as a result of no deal. In the case of the border between Northern Ireland and Ireland, the instrument really would maintain the status quo. Of course, as a member of the European Union at the moment, we do not have cash controls between ourselves and other member states, including between Northern Ireland and the Republic of Ireland. We have a variety of intelligence-based arrangements in place to track down those who may be moving cash for the wrong reasons across any of our borders with any member state, and we have always had very close co-operation with the Irish Government and the Garda in respect of such matters.

I turn to EORI. The hon. Lady asked how many operators trade only across the Northern Ireland-Republic of Ireland border and, because they do not already trade with a country outside the EU27, have not already been registered for an EORI number. I do not have a precise figure, but we estimate that about 245,000 businesses in the UK as a whole—145,000 that we can identify as being above the £85,000 VAT registration threshold, and an estimated 100,000 further that are below that threshold—trade solely intra-EU, so it will be a fraction of that number.

The hon. Lady touched on whether the arrangements relating to Northern Ireland in both statutory instruments would be compliant under WTO arrangements. Our belief is that they would be, albeit that they would be exceptional arrangements. In the case of both instruments, we would hope to be in constructive discussions with the Irish Government about how to move forward if we end up in a no-deal situation.

The hon. Lady asked some specific questions about EORI registration and referred to her letter. I am grateful to her for having raised that with me before this Committee. The answer to her question is that approximately 60,000 EORI registrations have now been made in the group we are targeting. That is 24.8% of those that we believe are in the scope of requiring an EORI. She asked what happens if a business turns up in the UK without the relevant EORI registration, and I point her to the transitional simplified procedures that we have set out.

The hon. Lady’s final point was about businesses that might provide a service to facilitate EORI registration. Quite rightly, she pointed out that is a free-of-charge service that can be completed very quickly, and it is not that complicated to do it online. If she has any specific examples that she would like to bring to my attention, where she believes that anybody is in any way misrepresenting the complexity of this process simply in order to profit from the interaction with the business concerned, I will look at them very closely.

[Anneliese Dodds]

I am grateful to the Minister for those clarifications, which are enormously helpful. I mentioned in my letter the name of one outfit that operates in that direction, but I will have another look and send it on. On his penultimate point about how companies would cope with not having an EORI, it was my understanding that, in order to participate in the new transitional simplified procedures scheme, businesses had to have signed up for that, and we do not know how many have. They could be in a double bind if they are not in either scheme. I know that the Government say they will completely suspend many of the normal reporting requirements, which opens up many concerning questions, but unless I am misunderstanding the transitional simplified procedures scheme, it is not clear that those who do not have an EORI would drop into that other scheme. Perhaps he can explain that further.

[Mel Stride]

The hon. Lady poses a fair question. Although what happens going the other way will be in the control of the EU27, in the event that a business came into the United Kingdom, arrived without an EORI number, was not in the TSP arrangements and was not in transit with the various suspensions that go with that, we would take a proportioned, flexible approach at the border under those circumstances. We would make sure, as we have always said, that we prioritise flow over other aspects, while in no way compromising on security.

Question put and agreed to.

Draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019.—(Mel Stride.)