Monday 15 January 2018

Preparing for a Customs Deal with the EU

It is now 8 years since the first post on this blog.  Interesting stories appear almost daily and many lie ahead including those arising from the on-going difficulties and uncertainty created by Brexit.  I hope to continue looking at some these stories.

One of the key features of the European Union is that it is also a CUSTOMS Union.   Article 28(1) of the Treaty on the Functioning of the EU states - "The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries."

Brexit will place the UK outside the EU Customs Union.  This was recognised by the Prime Minister in her Lancaster House Speech (17 January 2017) where she said -

"I know my emphasis on striking trade agreements with countries outside Europe has led to questions about whether Britain seeks to remain a member of the EU's Customs Union. And it is true that full Customs Union membership prevents us from negotiating our own comprehensive trade deals.

Now, I want Britain to be able to negotiate its own trade agreements. But I also want tariff-free trade with Europe and cross-border trade there to be as frictionless as possible.

That means I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. These are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries. But I do want us to have a customs agreement with the EU.

Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends."

A year after the Lancaster House speech we still do not know what the future customs relationship with the EU will be.  In August 2017 the Department for Exiting the EU (DExEU) published a "future partnership paper" entitled - Future Customs relationship with the EU.   A further paper (9th October 2017) looks at the government's plans to legislate for the standalone customs, VAT and excise regimes the UK will need once it leaves the EU.

This brings me to the Taxation (Cross-border Trade) Bill which is currently at Committee Stage in the House of Commons.  "A Bill to impose and regulate a duty of customs by reference to the importation of goods into the United Kingdom; to confer a power to impose and regulate a duty of customs by reference to the export of goods from the United Kingdom; to make other provision in relation to any duty of customs in connection with the withdrawal of the United Kingdom from the EU; to amend the law relating to value added tax, and the law relating to any excise duty on goods, in connection with that withdrawal; and for connected purposes."

Of particular interest is what is perhaps the hardly noticed Clause 31 - which is laying the legal groundwork for a possible customs deal with the EU.  Explanatory Notes accompany the Bill and, for Clause 31, they state - "Clause 31 would enable the UK to give effect to a Customs union arrangement with another territory or territories .....  This clause could facilitate a Customs arrangement with the Crown Dependencies and/or an interim Customs arrangement with the EU." 

Note that the word "territory" includes the EU - see Clause 37(6)(a) - references to a territory outside the United Kingdom include the European Union or any other international organisation or authority
comprising territories outside the United Kingdom.

Clause 31 is essentially an enabling power since it provides that any arrangement will be implemented by way of Regulations (to which Clause 32 applies).

Your Guide to Brexit Jargon

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