Thirty-Sixth Report - EU Exit: UK Border post transition

The new controls in place over the movement of goods from the UK to the EU have created additional costs for businesses and affected international trade flows. It is not yet clear to what extent the declines in UK trade … Read more The new controls in place over the movement of goods from the UK to the EU have created additional costs for businesses and affected international trade flows. It is not yet clear to what extent the declines in UK trade with the EU since the end of the transition period have been caused by EU exit, or by the COVID-19 pandemic. What is clear is that UK businesses face additional administration and cost when trading with the EU. For example, traders may have to pay an intermediary to help them complete customs declarations and traders in sanitary and phyto-sanitary (SPS) goods selected for physical inspections will have to pay fees to both government and the port. Traders may also need to pay tariffs if their goods do not meet “rules of origin” requirements and there are internal costs associated with complying with the additional requirements. In 2019, HMRC estimated that complying just with new customs rules could cost UK and EU businesses £15 billion per year. HMRC told us in November that it has not updated its 2019 estimate, but that there are indications that the costs to businesses will be less than that estimate. Recommendation: To minimise the costs to business as far as possible, government should: i) undertake a comprehensive exercise to identify and quantify the additional costs the business community and border stakeholders face as a result of new border requirements; and ii) identify opportunities to reduce costs and administrative burden to traders. Government should set out what progress it has made on these points in its Treasury Minute Response. Show less

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There is more to be done to ensure that traders and hauliers across the 27 EU countries are prepared for UK import controls. Departments have consistently rated a lack of trader and haulier readiness for new border controls as a … Read more There is more to be done to ensure that traders and hauliers across the 27 EU countries are prepared for UK import controls. Departments have consistently rated a lack of trader and haulier readiness for new border controls as a high risk to the operation of the UK border after the end of the transition period. UK traders have been dealing with EU import controls since January 2021 and the Cabinet Office was very positive about the extent to which UK hauliers, logistics companies and EU Exit: UK Border post transition 7 traders had adapted to them. The focus now is on EU trader and haulier readiness for UK import controls when they are imposed throughout 2022. HMRC told us that 85% of the value of UK imports from the EU are made by large traders who also trade with the rest of the world and it was therefore focusing on ensuring the remaining 15%—around 90,000 traders—that are less familiar with international customs procedures are aware of what they need to do. HMRC has a high level of confidence that traders will be ready for 1 January 2022, but said EU hauliers were at a lower level of readiness. Improving readiness in 27 countries is significantly more challenging than improving it in one, and we share others’ nervousness about the state of EU trader readiness for the controls to be introduced throughout 2022 and the lack of visibility and metrics on this. Recommendation: In its Treasury Minute response, Government should set out departments’ assessment of EU trader and haulier readiness, to determine whether any intervention by either itself or the EU may be required; and set out any plans for additional support. Show less

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More could be done by Government to ensure small and medium sized enterprises (SMEs) are prepared to face the additional costs and administration required by new border requirements. In preparing for the end of the transition period government provided a range of support to help UK businesses prepare for new …

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Government intends to introduce full import controls in phases from January 2022, but much work remains to be done. The UK originally intended to introduce import controls on goods entering Great Britain from the EU when the transition period ended in January 2021. The government has delayed introducing these controls …

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Government’s arrangements for goods arriving from the EU is untested and could be exploited, increasing regulatory and fiscal risks. Governments operate import controls for several reasons including: to ensure goods meet relevant standards; to prevent smuggling and illicit activity; and to comply with international obligations. Defra is introducing pre-notification in …

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Government’s ambition for the UK to have the “world’s most effective border by 2025” relies on cross-government digital programmes, in which it does not have a good track record. In December 2020 the government published its strategy to put in place the “world’s most effective border” by 2025, this set …

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Businesses have faced challenges operating under the Northern Ireland Protocol which need to be resolved. Both the UK and EU have recognised that there are issues with the implementation of the Northern Ireland Protocol. The Cabinet Office told us that the results of its monitoring of the impact of the …

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On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office, the Department for Environment, Food and Rural Affairs (Defra), the Department for Transport (DfT), and HM Revenue & Customs (HMRC).1 We also took evidence from the British Ports Association, Dr Jerzewska …

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There is clearer evidence available of the impact of the UK’s new trading arrangements on UK businesses, which now face additional administration and costs when trading with the EU. For example, Dr Jerzewska told us that even though full import controls have not yet been introduced into the UK, the …

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In addition to the new customs requirements, some industries can find themselves subject to extra controls depending on the company’s individual supply chain and the industry they are in – some goods will find themselves much more regulated than others.23 Examples include: • Exports to the EU of live animals, …

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In the run up to the end of the transition period, the government provided a range of support to help traders prepare. This included: running a communications campaign across multiple channels; writing directly to businesses to encourage them to get ready; and offering one-to-one support to the 10,000 GB businesses …

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We heard from witnesses; in written submissions; and from cases in our own constituencies about some of the particular issues that smaller businesses have faced as they try to get to grips with new requirements. For example, ADS, which represents the UK’s aerospace, defence, security, and space industries, 95% of …

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Smaller traders now also need to prepare for full import controls. HMRC told us that it put a lot of effort into reaching smaller businesses.37 However, it also told us that customs is a highly intermediated process which usually only larger businesses try to do 27 Q 45; C&AG’s report, …

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The EU introduced import controls on goods entering the EU from the UK at the end of the transition period from 1 January 2021. The UK government originally planned to introduce full import controls on the same date but has subsequently delayed introducing these controls three times.40 It now intends …

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Although government told us about the good progress that it has made in putting in place the systems, infrastructure and staff required for the introduction of import controls, we note that government still needs to deliver further changes.43 For example, Defra still needs to ensure that the Import of Products, …

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The British Ports Association, who represent the UK ports, told us about areas in which ports need new information from government to inform the business decisions they need to make as private commercial entities.49 It wanted government to outline the charging regime that will be in place at the government-run …

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The most significant risk to the operation of the border from 1 January 2021 was that traders and hauliers would not be ready. Despite carrying out a significant programme of work to encourage traders and other border users to get ready, in December 2020 the Border Protocol and Delivery Group …

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Concerns over readiness have led to the government delaying the implementation of import controls three times and departments’ focus is now on improving UK and EU readiness for the implementation of UK import controls.56 Logistics UK told us that improving readiness across 27 member states is significantly more challenging than …

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HMRC told us that its main trader concerns related to small businesses. It had a high level of confidence that large traders, which are responsible for about 85% of the value of imports from the EU to the UK, would be ready for January 2022.60 Its focus was therefore on …

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Rather than trader or port readiness, HMRC told us that the readiness of EU hauliers was now the main risk ahead of the implementation of UK import controls. HMRC told us that while EU haulier readiness is improving, it is coming from a lower base and accordingly it is writing …

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The government needs to introduce import controls for several reasons, including: to ensure imported goods meet the relevant standards in areas such as food and product safety and disease control; to prevent smuggling and illicit activity; and to comply with international obligations.64 We heard that traders will need to notify …

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Defra told us that it had learned from experience of checks being introduced by the EU and that starting with pre-notification before introducing checks means that people would have to get used to using the IPAFFS system.66 It told us that in the early days there would be the option …

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The NAO report notes that, since the end of the transition period, the UK government has chosen to prioritise the flow of goods over compliance, but that, after the introduction of import controls, departments will no longer be able to prioritise flow to the same extent and will need to …

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We were interested in the potential implications for compliance of the requirement for departments to undertake some checks away from the ports at which goods arrive. HMRC acknowledged that it is ideal to have infrastructure at a port and the goods controlled at that port but that it was just …

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In December 2020, the government published its 2025 UK Border Strategy, which set out the government’s vision to have the “world’s most effective border” by 2025.77 This set out how the government would improve coordination between government departments and agencies at the border; reduce duplicative asks for data; and make …

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Ahead of the end of the transition period departments focused on putting in place an initial operating capability at the UK border. The new IT systems, or changes to existing systems, required to provide this capability were all delivered as planned for the end of the transition period. The NAO …

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Departments’ track record delivering IT projects is particularly relevant given that HMRC is still working on replacing its CHIEF customs system with a new Customs Declaration Service (CDS). CDS was originally supposed to be in use by all UK traders in January 2019, but the project has been delayed and …

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The Northern Ireland Protocol came into operation from 1 January 2021, with grace periods delaying the requirements for some checks and preparations.87 Government told us that the requirements of the Protocol had had a significant impact on Northern Ireland trade including causing considerable diversion of trade.88 For example, trade between …

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HMRC told us that it had introduced the Trader Support Service as a free to use service to make customs declarations on behalf of affected businesses and is planning to spend £360 million on this over two years. HMRC stated that the majority of businesses moving goods from Great Britain …

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The Cabinet Office told us that, having seen considerable diversion of trade and, due to the lack of support for the Protocol among parts of the community in Northern Ireland, the government had proposed changes to the European Commission to how the Protocol operates. It also told us that it …

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The UK government set out its proposals in a July 2021 Command Paper.96 The Cabinet Office told us that it wants to apply a risk-based approach whereby for most goods only those which are at risk of crossing from Northern Ireland into the EU customs area in Ireland are subject …

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