Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


Memorandum submitted by the Northern Ireland Office


  Thank you for your letter of 14 June, in which you requested information on behalf of the Committee about the circumstances in which Republic of Ireland registered vehicles may conduct business in Northern Ireland. Clarification was sought following the oral evidence provided by representatives of the Road Haulage Association and the Freight Transport Association.

  As requested, the attached note summarises the Community law framework applicable to cross-border road haulage operations within the Community, and an explanation of the circumstances in which a Republic of Ireland registgered operator can work within Northern Ireland, and when a Northern Ireland operator can use a vehicle registered in the Republic of Ireland.

  An assessment is also provided of the practicality of Northern Ireland road haulage operators relocating their businesses to the Republic of Ireland in order to undertake work in Northern Ireland and the rest of the UK while taking advantage of perceived lower operating costs in ROI including rates of Vehicle Excise Duty for certain large heavy goods vehicles—a practice commonly referred to as "flagging out".

  The attached response, provided by the Department of the Environment for Northern Ireland, has been agreed by DETR and Treasury officials, and cleared by Lord Dubs.


  1.  The European framework for licensing international hauliers is set by EC Directives which establish minimum requirements of professional competence, financial standing and repute aimed at securing safety for the public and road users, and at ensuring fair competition within Europe.

  2.  EC Directives 74/561/EC, 77/796/EC and 96/26/EC set the standards for admission to the occupation of road haulage operator. The Road Transport (Qualification of Operators) (Regulations) 1977, 1981 and 1991 amend Part III of the Transport Act (NI) 1967 to apply the EU standards in Northern Ireland. EC Directive 881/92 establishing the system of Community Authorisation to enable international hauliers to operate across European national boundaries was enacted in Northern Ireland by means of the Goods Vehicles (Community Authorisations) Regulations 1992 which gave the effect to this directive in the United Kingdom.


  3.  A haulier from any member state of the European Union is permitted under European law to undertake haulage of goods to, from or across other Member States and cabotage within another Member State on a temporary basis provided he holds:

    (i)   an international operator's licence; and

    (ii)  a Community Authorisation;

From the member state in which he is licensed. Cabotage is defined as domestic or national work and involves a journey which starts and finishes within another member state.

  4.  It follows that a Northern Ireland haulier with an international operator's licence, and a Community Authorisation, issued by the Department of the Environment for Northern Ireland can undertake international work between the United Kingdom and any other member state and cabotage within another Member State on a temporary basis. Similarly a haulier from the Republic of Ireland with an equivalent international operator's licence and Community Authorisation from the competent authorities in the Republic of Ireland can legally engage in international haulage within Europe and cabotage within other Member States (including the United Kingdom) on a temporary basis.


  5.  In addition, the Department of the Environment, Transport and the Regions and the Department of the Environment for Northern Ireland permit Great Britain and Northern Ireland operators respectively to place goods vehicles which have been registered in other Member States on their national operator's licences.

  6.  Any such vehicle, properly registered in another member state, would not be liable for Vehicle Excise Duty (VED) in the United Kingdom provided it is used solely for international journeys. It must not be used for domestic journeys within the United Kingdom otherwise liability for VED in the United Kingdom would arise. By accepting a vehicle registered in another Member State on a Great Britain or Northern Ireland operator's licence the intention is to facilitate UK operators who wish to undertake international haulage work without their having to establish a subsidiary in or relocate their business to another Member State. It must be emphasised that exemption from VED in the United Kingdom is dependent on a vehicle being brought temporarily into the United Kingdom by a person resident abroad. This gives limited scope for use by Great Britain and Northern Ireland operators of this facility and then only for international operations.


  7.  "Flagging out" is the term used to describe the relocation of a road haulage business from one Member State to another, or the establishment of a subsidiary in another member state to take advantage of perceived lower operating costs there. In reaching a decision to "flag out" an operator must assess the relative overall advantage for his business and should take into account many factors including the likely operating cost and wage rates in the country to which he proposes to relocate, relevant business and personal taxes, the requirements for, and availability of, international haulage permits, as well as operator licensing and registration costs and vehicle excise duties. In addition, any decision will be affected by the nature and structure of the operator's current business and the likely impact of relocation on the growth and future development of his business.

  8.  Furthermore, likely future adjustments in relative exchange rates and the potential for legislative changes may have a bearing on the decision. There will also be one-off costs associated with setting up a business in another Member State which will need to be taken into account, including the cost of establishing an operating centre. This is a complex decision and whether or not it makes good business sense will depend to a large degree on the particular circumstances of each individual operator.

Department of the Environment

for Northern Ireland

1 July 1999

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