10.Customs involves more than the collection of tariffs on traded goods: customs policy determines which goods can be traded and how these goods are dealt with by the responsible authorities; and customs operations ensure these rules are applied. The IfG report points out that the high volumes of goods in transit between countries today means that modern customs systems must strike a balance between providing security and facilitating the flow of goods.
11.In 2015, goods worth £696 billion crossed the UK border; imports were worth £411 billion and exports totalled £285 billion. The value of goods traded between the UK and the EU was £382 billion in 2016, compared with £393 billion traded with the rest of the world. About four million goods vehicles cross the Channel each year, with 2.5 million passing through the port of Dover alone in 2015; and 40% by value of the UK’s international trade moves in lorries. Currently, HMRC collects £3 billion in customs duties annually; 80% of which is passed to the EU.
12.Approximately 141,000 traders currently make customs declarations for trade outside the EU. HMRC has estimated that an additional 180,000 traders will need to make customs declarations for the first time, assuming the UK leaves the EU customs union. In addition, there are around 8,700 other users and intermediaries in the customs system, including freight suppliers, customs agents and software providers.
13.As we have noted, HMRC is the lead government agency for customs arrangements, with Border Force providing the operational arm. However, a vast range of other government departments and public bodies also have a role: the IfG report identified 36 organisations involved in customs policy or operations. The NAO provides examples of the variety of organisations involved—including the Department for Business, Enterprise and the Industrial Strategy, the Department for Environment, Food and Rural Affairs, the Department for International Trade, the Department for Transport, local authorities and trading standards, the Driver & Vehicle Licensing Agency, the Export Control Organisation, the Forestry Commission, the Medicines and Healthcare Products Regulatory Agency, and Port Health Authorities.
14.The private sector also plays a key role: ports in the UK are entirely privately owned; and the users of customs services are thousands of private companies including manufacturers, distributors, hauliers, freight-forwarders and import and export companies, as well as specialist customs handlers.
15.A customs union is an arrangement whereby a group of countries act collectively to impose the same customs duties and apply the same trade regulations for goods entering from third countries; and do not charge customs duties between themselves. Customs unions reduce administrative and financial trade barriers, such as customs checks and charges. Customs is an exclusive EU competence which means that UK customs arrangements have been determined by the EU since the Single Market was created in 1993.
16.There are no customs duties at the EU internal borders including with the UK, and very few checks of EU goods are carried out on the border. All goods not under customs control are in “free circulation” within the EU customs union area, whether they are made in the EU or imported from outside. The Common External Tariff means that any goods coming into the EU from outside pay the same tariff no matter which country they enter through. The Union Custom Code (UCC) underpins EU customs arrangements and sets out the arrangements which have to be adhered to when EU member states trade with third countries.
17.Witnesses explained that goods vehicles entering the UK from the EU “undergo virtually no customs interventions at all” and generally simply drive straight through the border. At Dover, for example, where the goods are predominantly “roll-on, roll off” (RoRo), there is little “dwell time” (where a load is stopped and checked) and lorries arriving are not routinely subject to any checks. In contrast, lorries carrying non-EU goods may be subject to a range of checks at UK border entry points. Witnesses stated that, at the very least, vehicles have to wait for about an hour at the border for a decision to be made on whether a documentary check is required, which means the vehicle will need to park in the port area. If customs do decide to carry out a documentary check, the delay at the border might be around three hours; and a physical inspection means a delay of up to five hours. Ninety-nine per cent of non-EU freight passing through major UK ports is comprised of containers. By contrast, only 24% of EU freight is comprised of containers; 69% is lorry traffic.
18.The NAO notes that, due to the high volumes of freight and traffic and the infrastructure constraints, such as limited numbers of searching bays, border officials are only able check a small percentage of traffic. A risked-based, intelligence-led system is used to determine which goods and vehicles are checked. As a result, documentary checks of non-EU goods are carried out on less than 3% of imports (compared to less than 1% of lorries arriving at Dover or through the Channel Tunnel).
19.Even if this small percentage is maintained, the sheer volume of UK trade with the EU means that the number of checks is expected to increase substantially after Brexit. If there is no agreement with the EU before Brexit, vehicles carrying goods to and from EU countries are likely to become subject to the checks currently reserved for non-EU goods. We discuss the many implications this has for government systems, infrastructure, businesses and supply chains in Chapter 4.
9 Institute for Government,
10 Institute for Government,
11 Public Accounts Committee, Oral evidence taken on Brexit and the Future of Customs, , HC 401, Q21
12 NAO, , July 2017, Key Facts; Oral evidence taken on , HC 434, Q125; and Institute for Government, , p 12
13 NAO, , p 12
14 Institute for Government, , pp 15–16; and NAO, , p 12
15 Institute for Government, , p 6
16 Institute for Government, , p 11
17 Oral evidence taken on , Qs 130, 135
18 Institute for Government, , p 13
19 NAO, , pp 11, 18 and 30
20 Institute for Government, , pp 9 and 13
21 Oral evidence taken on , Qs 130, 135
13 November 2017