Revenue Commissioners on how they see Brexit working out.

Revenue Commissioners on how they see Brexit working out.

Brexit Border has been given a briefing from the Revenue Commissioners outlining how they see some of the issues emerging from Brexit working out.

According to a senior Revenue official a UK exit from the EU customs union will raise all sorts of capacity issues for Irish customs, for other government control agencies, for ports and for everyone involved in supply chains into and out of this country. But the only certainty is that there is no one big solution to those problems.

Revenue regularly update traders and their representative bodies via the Customs Consultative Committee. What can they tell them about preparations for Brexit?

“Naturally we are hoping for negotiated solutions and sensible transition arrangements. If, however, we are faced with a worst-case scenario in April 2019 we are going to have to use all possible measures to mitigate the capacity issues. The greatest contribution may come from using simplified customs procedures that are already available under the Union Customs Code.”

Trade with non-EU countries currently relies very much on the EU’s ‘trusted trader’ scheme in which AEOs (Authorised Economic Operators) enjoy cooperation with customs. The AEO regime encourages companies to ensure compliance and increase safety and security in their international supply chain in exchange for incentives which will improve the efficiency of the supply chain and ultimately reduce costs.

The main benefits are:

  • Reduced customs controls
  • Priority processing
  • Advance warning of checks
  • “We come to you” – checks are carried out on the AEO’s premises.
  • Abolition of certain bank guarantees

“There are less than 200 AEOs in the country but they handle 85% of third-country imports to and exports from Ireland. If the UK were to become a third country in two years’ time and they had to handle the trade, their workload would need to increase by 500-700%. Of course this is only an estimate because we have no customs statistics for trade with the UK. We rely on imprecise VAT figures and survey data from the Central Statistics Office.

“In any event, we can’t just assume that the AEO programme will continue to be recognised by UK customs. It is an EU scheme so by definition recognition of British AEOs and vice versa falls away with Brexit and new agreements would be needed in the form of a Mutual Recognition Agreement; similar agreements are already in place with a number of the EU’s larger trading partners. It would seem to us that such an agreement is likely to be part of the second stage of talks on a final trade deal.

“We think the capacity issues and bottlenecks are likely to arise in food and agricultural products, which account for almost all the non-Customs control procedures. One complication is that while we can theoretically operate customs control procedures outside the ports, that may be unsuitable for food and agriculture checks which under current legislation must be performed at Border Inspection Posts (BIPs).”

‘’UCC offers a number of possible simplified customs procedures, the main two being a Simplified Declaration and Entry in the Declarant’s Records. A simplified Declaration allows the declarant, pre-approved by Revenue,  to lodge a declaration that does not contain all the information normally included in a full declaration, and Entry in the Declarant’s Records allows an approved trader to record their goods movements in their own records as opposed to declaring each movement to Revenue. Both simplifications are followed by a supplementary declaration the following month.’’

These are the positives that Revenue are working on, but when they looks at the wider context of Brexit they see all sorts of problems which can arise.

“We can only guess at the way transit to and from Ireland via the UK might work. Once the UK leaves the EU it needs to rejoin the Common Transit Convention, but membership is not a right. They must be invited to rejoin, and any contracting party may object. The alternative would be the old TIR (Transport International de Routiers) system, but it is not computerised so we would be back to sheaves of paper forms in lorry cabs, with a carnet to be stamped at every border crossing. Recently Revenue modelled a lorry carrying goods from Paris to an approved premises in the midlands via England. That could be eights stops and stamps and checking of the load. If each one takes an optimistic 15 minutes, that’s two hours. Multiply that all across a Just-in-Time supply line and you can see the sort of problems business will face.”

There is another aspect to border controls which gets little public attention: EU safety and security regulations require that goods entering the union be checked by customs at the first point of entry to determine whether there are threats of any kind. “The situation right now is that 75% of all non-EU goods come to Ireland via another member state, so someone else is carrying out those checks, and paying for them, often the UK. We would have to do that ourselves if the UK leave the safety and security zone and that would obviously have resource implications. You don’t have to make a customs declaration for goods valued under €150, but anything valued over €22 has to be declared for safety and security purposes.”

Which leads us right back to the capacity issue, starting with the customs service itself. “We suffer from many of the same problems as the rest of the public service in terms of resources and renewal. We are below our establishment figure, we have an ageing cohort of staff and are losing some of our most experienced people to retirement, and we have considerable training needs to maintain our skills set. Put Brexit in any form into the middle of that and we obviously have capacity issues of our own.”

So what sort of increase in staff and resources might be necessary? “We haven’t made any explicit estimates, and obviously won’t be in a position to do so until the outcome of any trade deal is known, but we are aware that other Member States have made projections and some are anticipating a need for up to 30% extra staff. The proportion of these Member States’  trade with the UK is far lower than ours, and obviously they have no land border with the UK.”

Yes, the land border. Doesn’t everything we discussed about trade through the ports apply equally to the land border with Northern Ireland? “In theory yes, but from the point of view of our planning it is a rather different proposition. I can tell you clearly that we have no plans for physical customs infrastructure on the land border. That is a decision for government.”