In a “Future Partnership Paper” released on August 15, the UK presented two options for a customs regime upon its exit from the EU.

A “streamlined customs arrangement”

This option anticipates additional processes for businesses involved in cross-border trade. It acknowledges that there will be increased administration and aspires for “unilateral improvements” to the UK’s domestic regime in order to facilitate trade with the EU and the rest of the world. This means that the UK would independently negotiate customs arrangements with other parties. In this option, numerous customs procedures that businesses could expect are highlighted: (i) businesses will have to undergo import/export declarations, including the provision of documents such as licenses and proof of origin of goods; and, (ii) payment of customs duties and import VAT.

As this option will most likely increase the burden of importing and exporting goods for UK and European businesses, the UK has advanced several preliminary ideas for simplification. For example, it hopes to negotiate with the EU a continued waiver from the requirement to submit entry and exit summary declarations, and also refers to membership of the Common Transit Convention to avoid export declarations. The UK would also negotiate for mutual recognition of “Authorised Economic Operators” in order to enable faster clearance of goods at the border and suggests technological solutions for avoiding border stops.

A “new customs partnership with the EU”

This option anticipates the removal of customs processes at the border, without any customs union arrangement. Described as the “have cake and eat it” position, the proposal has met with disapproval from some EU member states and negotiators.

The UK advances an import regime that “aligns precisely with the EU’s external customs border” for goods that will be consumed in the EU market. This regime would allow goods moving between the EU and UK to be treated “as they are now for customs purposes”. However, enforcement mechanisms, such as a tracking process or repayment mechanism, could be required.

EU negotiators are less than enthusiastic about these proposals, emphasizing the need to first settle various conditions of exit. Although welcoming the paper as a “positive step”, the European Commission stated that the UK’s request will only be addressed “once we have made sufficient progress on the terms of the orderly withdrawal”. Guy Verhofstadt stated, “To be in and out of the Customs Union and “invisible borders” is a fantasy”. The Labour party has been equally unsupportive, noting that both options are “contradictory” and that they provide “no guidance for negotiators or certainty for businesses”.

The proposals as set out are notably succinct. At this stage, it is unclear how they will lead to a smooth transition and avoid the “cliff-edge” on trading arrangements. The UK is currently seeking responses and suggestions from businesses to explore further options and inform its negotiating position with the EU. It notes that regardless of negotiation outcomes, “the Government will legislate for a new customs regime to be in place by March 2019, and make changes to the VAT and excise regime.” To that end, it expects to advance a Customs Bill in the autumn.

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