Series 10 - Back to Brexit Basics – the customs options

Jul 03, 2018

Last week, in Series 9 of Back to Brexit Basics, we looked at equivalence and what this process entails.  This week we look in more detail at the three customs options that are currently on the table in the Brexit debate. 

The customs options 

The UK government outlined two potential options to solving the customs problem in a policy paper prepared last year.  These options were debated by the UK government this week and a third option has now emerged as a possibility. All three options need to be considered by the EU and limited detail is available on the mechanics of each.

A customs partnership

This option would involve the UK acting on behalf of the EU when imports arrive into the UK from the rest of the world and are then transported on to the EU.

In practice, this means that the UK would potentially have to apply the EU’s tariffs that arise on imports that arrive into the UK that are ultimately destined for the EU.

For example if electrical parts or machinery arrive at a UK port from the US and are then shipped on to Rotterdam, customs officials in the UK would collect the customs duty due and pay it over to the EU.

Some suggestions put forward by the UK government on how to manage this system include using an IT system to track goods to see where they ultimately end up and working out the correct tariffs.  Alternatively importers could pay the higher EU or UK tariff and then claim a refund if necessary once the goods reached their final destination.

This system is unprecedented and untested and the EU has been reported as being sceptical of it.  One advantage of the system is that it could still allow the UK to negotiate its own trade deals around the world. 

The max-fac option

A second proposal known as maximum facilitation or “max-fac” seeks to create as frictionless a border as possible rather than remove the border entirely.

The UK has said that this type of border would use new technologies that could remove the need for physical customs checks.   Schemes which can fast-track customs procedures (such as the authorised economic operators scheme) could also be used to make trade with the UK and the EU easier.  This type of border could require the EU to implement equivalent arrangements on its borders.

Special arrangements may also need to be made for Northern Ireland if this option was to be considered in order to avoid a hard border.

The EU has said that it is open to examine any option that would facilitate freer trade but some of the technology needed to operate such a border has not been developed yet.

The third proposal

A further option put forward by Theresa May in recent days looks at the possibility of the UK in its entirety remaining in line with the EU Customs Union for several years.

Paragraph 49 of the draft Withdrawal Agreement reached in December 2017 between the EU and the UK states that in the absence of any other way of avoiding a hard border, the UK would, "maintain full alignment with those rules of the internal market and customs union which support north-south cooperation, the all-island economy and the Good Friday Agreement".

While the EU have said that this provision could see Northern Ireland still remain within the EU Single Market and Customs Union, the UK is understood to be examining the possibility of the entire UK remaining aligned with the EU Custom Union and not just Northern Ireland.

If this worked, it could mean no customs checks on the Irish Sea, or on the border between Northern Ireland and Ireland.  This temporary solution could solve the issue of the hard border for now.

Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.