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'Technological' Brexit customs solution unrealistic, say manufacturers

Out-Law News | 30 May 2018 | 11:21 am | 2 min. read

The UK government will not be able to introduce a technology-based 'fast track' customs system in time for its departure from the EU, UK manufacturers have warned.

Stephen Phipson, chief executive of manufacturers' organisation EEF, has called on the government to abandon further examination of what has been referred to as the 'maximum facilitation', or 'max fac', option, in a letter to Greg Clark, the business secretary. Phipson said that the plans were "unrealistic", pointing out that the vast majority of goods imported and exported between the US and Canada remain subject to normal customs checks despite the introduction of a similar system.

"Much of the debate on max fac is misguided," Phipson said. "No one doubts the technology exists: it is in place in many locations around the world. The issue is whether it is good enough to provide a frictionless border and can be implemented quickly enough to be ready for December 2020. I think that the answer to this is an overwhelming no."

"I have been to the US and Canada border and the reality is that most Canadian SME businesses can't easily access the max fac arrangements. Whilst some do qualify for a streamlined process, the majority are still subject to the full customs check. The Canadian process is particularly efficient and well-managed, but the reality is that this is time consuming and at busy times often has long delays. Apply that to [the port to at] Dover and the consequences are horrendous," he said.

'Max fac' is one of two options for a potential future customs partnership between the UK and EU that is reportedly under consideration by the UK government, and is based on the 'highly streamlined customs arrangement' set out in a discussion paper published by the government back in August. As proposed, the scheme would rely on technology and trusted trader schemes to minimise the need for customs checks, but would not remove the need for them altogether.

The other option set out in the August paper is a new customs partnership, which would remove the need for customs checks at the border. Under this model, the UK would collect customs tariffs on goods from the EU customs union at the point of entry to the UK. Companies would be able to claim back any difference between the EU and UK tariffs if the goods did not then leave the UK.

The precise nature of the UK's future customs relationship with the EU will depend on the outcome of negotiations between the UK and EU. A draft Customs Bill, which is currently before the UK parliament, has been criticised by tax experts as it has been designed to allow the government to implement the outcome of those negotiations by way of secondary legislation.

Jon Thompson, chief executive of HM Revenue and Customs (HMRC), told MPs on the House of Commons Treasury Select Committee last week that the 'max fac' proposal could cost UK businesses up to £20 billion annually. Thompson estimated that the scheme would require businesses to make around 400 million declarations annually, at a cost of around £32.50 each, plus additional administrative costs, according to the BBC. Others have said that the figure will be lower.

Thompson also told the MPs that either solution would take between three and five years to implement, according to the BBC report. The UK and EU's proposed transitional period following the UK's formal exit from the EU is due to end on 31 December 2020, according to the latest draft withdrawal agreement.