Unfettered Access: Customs Arrangements in Northern Ireland after Brexit Contents

Conclusions and recommendations

Introduction

1.With less than six months to go, businesses are still in the dark about what they should be preparing for on 1 January 2021. The situation is now urgent, and the continued lack of detail risks Northern Ireland not being prepared for the new trading arrangements, an outcome which would have significant economic consequences. We remain to be convinced that the Government fully understands that its political approach, apparently informed by limited understanding of how business works, provides neither the clarity nor the detail that Northern Ireland business requires. Political theory cannot trump commercial necessity. We also remain to be convinced that the cumulative impact of Protocol uncertainty, coupled to Covid-19, has been fully reflected upon. (Paragraph 8)

2.Notwithstanding the convention that Government Departments respond to Select Committee reports within 60 days of publication, the existential nature of the matters raised in this report for businesses, compounded by the pressures of Covid–19, merit a response being provided by the end of August. (Paragraph 11)

Customs arrangements under the Northern Ireland Protocol

3.The Government’s optimistic aspiration to facilitate unfettered access set out in the Command Paper on the revised Northern Ireland Protocol is welcome. The acid test for the Government will be the extent to which it can negotiate the translation of that aspiration into a functional reality. (Paragraph 25)

4.The Government must set out the parliamentary timetable by which it plans to translate its aspiration to legislate for ‘unfettered access’ into law. (Paragraph 26)

5.The Government must clarify the process and criteria by which Northern Ireland goods will be given qualifying status and so benefit from unfettered access. If the Government’s policy includes the certification of goods by businesses, it must set out what actions businesses will need to take no later than 1 October 2020 to allow businesses time to prepare. (Paragraph 27)

6.We are concerned that, in spite of the importance and urgency of the work to be done by the Joint Committee and Specialised Committee in order to implement the Protocol, they have met a combined total of three times. (Paragraph 36)

7.Both the UK and the EU will need to engage constructively to make the Protocol work. The Protocol was created to address the specific circumstances of Northern Ireland. In line with the Protocol, the Joint Committee should therefore be a problem-solving forum where the best interests of Northern Ireland come first and the operation of the all-island economy is taken into account. (Paragraph 37)

8.Effective parliamentary scrutiny of decision-making in the Joint Committee and Specialised Committees will require active facilitation by Government, because the relevant papers and records are not in the public domain. (Paragraph 40)

9.In consultation with the Liaison Committee, the Government must agree routinely to share the relevant agendas, summary minutes and minutes of the Joint Committee and the specialised committees with the appropriate parliamentary Select Committees and Committees of the Northern Ireland Assembly. (Paragraph 41)

10.The Government must establish a mechanism by which Northern Ireland businesses, representatives, trade unions, academics and other interested parties can engage with the Joint Committee, Specialised Committees and the Joint Consultative Working Group. (Paragraph 44)

11.The Northern Ireland Protocol creates new possibilities of future legal divergence between Northern Ireland and Great Britain. The extent of this divergence will depend, in part, on the outcome of talks on the future relationship, and, in part, on future policy decisions taken by the UK Government. Both the UK Parliament and the Northern Ireland Assembly will need to be able to monitor and scrutinise the Protocol beyond the end of the transition period. (Paragraph 48)

12.The Government must establish mechanisms for the reporting and scrutiny of future regulatory divergence arising from the Northern Ireland Protocol after the transition period. At a minimum, those mechanisms should include a requirement that all future UK legislation include a Northern Ireland Protocol Impact Statement. This statement should:

a)report any interaction between the legislation and the areas of EU law listed in Annex 2 of the Northern Ireland Protocol; and

b)state whether the legislation creates new regulatory divergence between Northern Ireland and Great Britain as a result of the Northern Ireland Protocol.

The Government should establish a mechanism that allows Parliament and the Northern Ireland Assembly to be informed whenever the EU, in the Joint Consultative Working Group, notifies the UK of planned EU legislation within the scope of the Protocol. (Paragraph 49)

Movement of goods from Northern Ireland to Great Britain

13.In practice, we expect ‘unfettered access’ to mean the absence of new regulatory barriers, costs or administrative requirements to businesses moving goods from Northern Ireland to Great Britain. Benefits would accrue from the same being true for movements in the opposite direction. (Paragraph 55)

14.The Government must ensure that Northern Ireland businesses do not face new up-front or ongoing costs in order to move goods from Northern Ireland to Great Britain. Such costs would not be compatible with the Government’s commitment to unfettered access. (Paragraph 56)

15.It is unclear whether the Government believes that the agreement of the WAJC is necessary or merely desirable to avoid the imposition of export or exit summary declarations on goods leaving Northern Ireland. There has to be a suspicion that the Government sees its Command Paper as just that, a command, rather than a proposal which requires negotiation and agreement. The UK’s approach depends on the EU granting waivers from export declarations and exit summary declarations. While the Government’s interpretation is desirable, it is ultimately a matter for the EU whether it grants that concession. We note that such declarations will be required under the Protocol if the rule is not waived, and that this would be incompatible with the commitment to unfettered access. (Paragraph 59)

16.The Government must set out, in a timely fashion, how it will facilitate unfettered access if it does not secure a waiver from export declarations and exit summary declarations in the Joint Committee. (Paragraph 60)

Movement of goods from Great Britain to Northern Ireland

17.The Protocol recognised Northern Ireland’s integral place in the UK’s internal market. That recognition should mean that businesses and consumers in Northern Ireland can buy as freely from Great Britain as they can sell into it. The Command Paper confirmed that that will not be the case. Movements of goods from Great Britain to Northern Ireland will be subject to new administrative requirements, with associated costs. In this respect, Northern Ireland businesses will trade at a competitive disadvantage with other UK firms, and consumers in Northern Ireland are likely to see increased prices and reduced choice as a result. The net effect of those changes will create an imbalance in the UK internal market that may have wider implications for the Union. (Paragraph 71)

18.The Government must deposit in the Libraries of both Houses of Parliament quarterly reports for the first two years after the introduction of the new arrangements, and annual reports thereafter, on the effect of the new customs regime on (a) investment and (b) business competitiveness in Northern Ireland. (Paragraph 72)

19.The Government must commit to covering the costs to businesses of complying with the Protocol, such as the cost of completing new declarations and the cost of new hardware and software, to prevent any disincentive to trade between Northern Ireland and the rest of the UK. In providing such support, the Government will need to consider the effect of the provision of such support on compliance with Article 10 of the Protocol concerning state aid. (Paragraph 73)

20.The Command Paper correctly prioritised minimising administration associated with moving goods from Great Britain to Northern Ireland. However, elements of the Government’s approach rely on agreement and co-operation by the EU, and the Command Paper does not specify what form such agreement and co-operation might take and what specific decisions the Joint Committee will need to take to implement that approach. (Paragraph 74)

21.The Government must set out the decisions that it believes must be taken by the Withdrawal Agreement Joint Committee to implement the Protocol in the way outlined in its Command Paper. It must clarify which of the facilitations allowed under the Union Customs Code the Government would seek to employ, and whether it will seek any additional facilitations. (Paragraph 75)

22.The Government must clarify by 1 October 2020 under what circumstances, if any, movements of goods from Great Britain to Northern Ireland will be subject to customs or regulatory checks. Specifically, the Government must confirm the circumstances under which the following would be required:)

a)import declarations;

b)entry summary declarations

c)safety and security certificates;

d)export health certificates;

e)phytosanitary certificates; and

f)certificates of origin. (Paragraph 79)

23.We welcome the Government’s assurance that it will waive and/or reimburse tariffs on goods moving from Great Britain to Northern Ireland, even where such goods are classified as being ‘at risk’ of entering the EU market. This assurance is key to maintaining business confidence in Northern Ireland, the UK and the EU. (Paragraph 84)

24.The Government must confirm how it intends to use the flexibilities allowed under Article 5(6) of the Protocol to waive or reimburse the cost of tariffs on the movement of goods from Great Britain to Northern Ireland. (Paragraph 85)

Making the Protocol operational

25.There is a widespread perception that the Government has failed to communicate effectively with businesses and wider society in Northern Ireland, and that the Government has not involved Northern Ireland stakeholders sufficiently in developing the arrangements under which traders will be expected to operate once the Protocol takes effect. (Paragraph 95)

26.The Government must begin registering businesses for its new customs systems by 1 October 2020. Businesses must be told what preparations they need to make in order to avoid disruption to goods movements in January 2021. (Paragraph 96)

27.We welcome the formation of the Business Engagement Forum to improve communications with businesses in Northern Ireland. The Government must publish terms of reference for the forum, so that its purpose can be properly understood, and it must clarify how it will engage small businesses and trade unions with the forum. Given that the Cabinet Office leads the Government’s work on the Withdrawal Agreement Joint Committee, whose decisions will be of significant consequence for businesses, the Cabinet Office must work closely with the Northern Ireland Office on business engagement. (Paragraph 97)

28.The Government must ensure that the Business Engagement Forum is informed and consulted on future developments in relation to the Protocol, including new UK Government legislation, new EU legislation that may apply under Annex 2 of the Protocol and decisions of the Joint Committee. (Paragraph 98)

29.The Government must set up a dedicated advisory service to support businesses in their preparations for moving goods across the Irish Sea under the Protocol. (Paragraph 99)

30.We welcome the Government’s clarification that, although existing infrastructure at points of entry may require expansion, it does not intend to create new infrastructure at points of entry that do not already process plant or animal products. (Paragraph 103)

31.The implementation of the Protocol is potentially an opportunity to update the UK’s customs and port infrastructure with digital technology. We note that modernising Northern Ireland’s customs infrastructure has the potential to make Northern Ireland a more attractive place to do business. (Paragraph 104)

32.The Government stated that many administrative requirements on Great Britain to Northern Ireland movements can be simplified or waived using digital processes. Such facilitations will require co-operation with and agreement by the EU. We welcome the aspiration to streamline customs processes, but businesses need more detail if they are to take advantage of these facilitations and avoid incurring new costs. The Government will also need to ensure there is sufficient time to trial and test the new processes so that business can use them with confidence from 1 January. (Paragraph 108)

33.HMRC’s engagement with businesses on the IT required to implement the Protocol is welcome. As previous Brexit deadlines have shown, however, supporting businesses to prepare appropriately is challenging. This challenge is compounded by the effects of Covid-19 on businesses and on public finances. (Paragraph 109)

34.The Government must publish the risk register for the implementation of its IT platform for managing the movement of goods across the Irish Sea, so that this project can be properly scrutinised. HMRC officials should agree to provide a written update to the Committee before the end of July, and to appear before the Committee to give oral evidence on the implementation of the project before the end of October. (Paragraph 110)

35.The Government must set out:

a)how many new customs transactions on movements of goods between Great Britain and Northern Ireland it believes will take place under the Protocol in each of the next three years;

b)the number of additional customs agents and official veterinarians it estimates will be needed to process those transactions; and

c)the number of customs agents and official veterinarians recruited since the adoption of the Protocol. (Paragraph 115)

36.The introduction of new customs arrangements is an opportunity for new kinds of customs fraud. We note that in the past the proceeds of such crimes have been used to fund paramilitarism. The Protocol was conceived to protect the gains of the peace process, and it must be implemented effectively in order to serve that function. An important element of effective implementation will be close liaison with the Police Service of Northern Ireland and the Gardaí to prevent exploitation of the new arrangements for criminal gain. Our Committee intends to monitor this issue closely. (Paragraph 118)





Published: 14 July 2020