Fortieth Report of Session 2019–21 Contents

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3Northern Ireland Protocol: Market access for goods from African, Caribbean and Pacific (ACP) countries32

This EU document is legally and politically important because: it concerns the EU’s Market Access Regulation which sets out the arrangements for goods originating in some African, Caribbean and Pacific countries to access the EU market; the Market Access Regulation continues to apply in Northern Ireland under Article 5 of the Protocol on Ireland/Northern Ireland; the Withdrawal Agreement Joint Committee has established criteria for determining whether goods brought into Northern Ireland are “at risk” of entering the EU market and must be charged the applicable EU tariff; and goods that are subject to EU safeguard measures (such as a higher tariff or quota) under the Market Access Regulation are likely to be considered “at risk” and charged the higher EU tariff if they enter the UK via the Northern Ireland. Action Draw to the attention of the Northern Ireland Affairs Committee, the International Trade Committee, and the International Development Committee.

Overview

3.1This European Commission report concerns the operation of the EU’s Market Access Regulation (2016/1076) which sets out market access arrangements for goods originating in certain African, Caribbean and Pacific (ACP) countries.33 The arrangements apply in the period between the conclusion of negotiations on an Economic Partnership Agreement (EPA) with the EU and its ratification and entry into force. EPAs are trade and development agreements. Their purpose is to encourage sustainable development and poverty reduction in ACP countries through preferential (duty- and quota-free) access to the EU market. The Market Access Regulation provides a bridge to these preferential terms. It gives the European Commission power to amend the list of ACP countries to whom the market access arrangements apply (for example, by removing a country if it has failed to ratify an EPA within a reasonable period of time) and to make other technical changes. It also allows the EU unilaterally to impose safeguard measures—essentially customs duties or tariff quotas—if there is a surge in imports which might cause serious injury to domestic industry in the EU, to sectors of the economy, or to agricultural markets.

3.2The Market Access Regulation forms part of the body of EU law that continues to apply in Northern Ireland, but not the rest of the UK, under the Northern Ireland Protocol.34 In earlier correspondence, the Minister of State at the Department for International Trade (Rt Hon. Greg Hands MP) told us that the Government saw no need to replicate in domestic law the unilateral safeguard provisions contained in the Regulation.35 He added that the 2016 Regulation would only ‘bite’ on “at risk” goods—in this case, ACP goods brought into Northern Ireland which were considered to be “at risk” of onward movement to the EU.

3.3While the Minister was unable to speculate on the outcome of discussions in the Withdrawal Agreement Joint Committee on the criteria for determining “at risk” goods and how these criteria would affect the application of EU tariff and quota-based safeguards on goods entering Northern Ireland, he made clear that even where goods were classified as ‘at risk’ of entering the EU market, the Government intended to “make full use of the provisions in the Protocol to waive and/ or reimburse higher tariffs where these have been paid”. The Minister also highlighted the Government’s Trader Support Service (TSS) which was established to provide free “end-to-end support for traders importing into Northern Ireland” and to “avoid burdening businesses with any potential complexities in the system—including any associated with the ‘at risk’ regime”.36

3.4We wrote to the Minister in December asking him to update us on any agreement reached in the Withdrawal Agreement Joint Committee on the criteria for determining “at risk” goods and to explain how these criteria would affect the application of EU tariff and quota-based safeguards imposed under the Market Access Regulation on goods entering Northern Ireland.37

3.5In his response of 12 February 2021, the Minister says that Joint Committee Decision No 4/2020 (agreed on 17 December 2020) establishes the relevant “at risk” criteria and that “EU tariffs will only be charged where goods are destined for the EU, or where there is a genuine risk of onward movement”. He continues:

Businesses authorised under the UK Trader Scheme can undertake that the goods they are moving into Northern Ireland are ‘not at risk’ of onward movement to the EU. These goods will therefore not be liable to EU tariffs. To avoid shell or letterbox businesses from taking advantage of this scheme, the UK Trader Scheme will be open only to businesses established in Northern Ireland, or businesses who meet certain closely linked criteria. For imports into NI from outside the UK or the EU, the scheme will apply where the differential between the UK and EU’s tariffs is less than 3% points.

Our assessment

3.6Under the relevant provisions of the Northern Ireland Protocol, traders must establish that the goods they bring into Northern Ireland from outside the UK and the EU are “not at risk” of subsequently being moved into the EU, applying the criteria set out in Joint Committee Decision No 4/2020 on the determination of goods not at risk. Two sets of criteria are relevant in the case of goods which are brought into Northern Ireland directly from ACP countries. These goods will be considered “not at risk” and, as such, will not be charged an EU tariff if:

• they are not subject to commercial processing in Northern Ireland and the applicable UK tariff is equal to or higher than the applicable EU tariff; or
• they are not subject to commercial processing in Northern Ireland and the goods are brought in by an authorised trader under the UK Trader Scheme and the difference between the applicable EU and UK tariff is less than 3% of the customs value of the goods.

3.7Conversely, if by applying these criteria the goods are considered to be at risk, then different tariff quotas or customs duties could apply to the same goods, depending on their point of entry into the UK—the EU tariff for entry via Northern Ireland and the UK tariff for entry via Great Britain. Goods which are subject to safeguard measures under the Market Access Regulation are far more likely to attract a higher EU tariff. This is because the Joint Committee Decision disapplies the second set of criteria for goods subject to EU trade defence measures—and safeguard measures under the Market Access Regulation are a form of trade defence—meaning that they are less likely to meet the criteria for “not at risk” goods.

3.8The Minister does not reiterate the commitment given in his earlier letter of 25 November 2020 to “make full use of the provisions in the Protocol to waive and/ or reimburse higher tariffs where these have been paid” and to “minimise the impact on Northern Ireland business and traders as a result of the Protocol”. We trust that it nonetheless still stands.

Action

3.9We draw our observations and correspondence with the Government to the attention of the Northern Ireland Affairs Committee, the International Trade Committee, and the International Development Committee.