Richard North, 22/12/2016  

If it wasn't for Brexit, it probably wouldn't have any significance outside the narrow world of customs administration – so much so that not even this blog would have reported it.

In this case, the "it" is COM(2016) 813 final, a Communication from the Commission on "Developing the EU Customs Union and Its Governance". Helpfully, it is accompanied by a press release in which the Commission set out "the strategic way forward for the EU's Customs Union".

There are several reasons why the Communication matters, the most important for the time being the obsession with continued membership of the customs union amongst the political classes and the media. For this reason alone, a minor administrative issue has become one of major political importance.

Before we explore this, though, it's worth noting that the 2016 Communication refers us to an earlier COM final, this one COM(2008) 169 final of 1 April 2008, headed: "Strategy for the evolution of the Customs Union". Here, the opening paragraph of Section 2 is of very great interest, as it tells us:
The creation of the Single Market meant that all customs formalities at the borders between Member States were abolished. National Customs authorities became responsible for the protection of the external border in relation to goods, becoming the only firewall between international illicit or dangerous trade and the freedom of movement of within the Single Market.
And just in case the message doesn't get through, we found this in The Economist of 20 October 2012. It says:
Economic integration has been at the heart of the European project from the outset. The single market dates to the 1986 Single European Act, comprising nearly 300 measures that were to be completed by the end of 1992, from the abolition of physical customs checks to the mutual recognition of standards.
This rather puts the fatuous Financial Times of 19 December 2016 back in its box. Leaving the customs union, it says, means:
… subjecting UK exports to spot checks on whether they meet European standards, and whether third countries are using Britain as a back route into the EU by exporting via the UK at lower tariffs. Such checks do not necessarily involve lots of border stops but their costs are not likely to be negligible, either.
And to rule out any possibility of this misinformation being accidental, the paper repeats it in another piece, headed: "What are advantages of Britain remaining in EU's customs union?" According to these geniuses:
Membership of the customs union would ensure goods were not subject to import tariffs or - probably more importantly - to checks that they met EU standards.
Despite the FT, however, we can establish that it is the Single Market rather than the customs union which is responsible for the elimination of customs checks at internal borders. Thus – all other things being equal – if the UK wishes to keep its current status, it must continue its participation in the Single Market. The customs union is an irrelevance.

But what does have relevance, though, is the subject of COM(2016) 813 final - the latest Union Customs Code (UCC), which came into force last April.

This highly complex and detailed code sets out the procedures for managing the Union's external borders, to which Member State customs administrations are obliged to comply. And now, with this current COM final, the Commission is publishing its outline plans for the next stage of development.

What is not particularly helpful is that the Commission itself is getting confused as between the application of the customs union and customs cooperation.

Readers will recall that the respective legal bases in the current treaty can be found in Articles 30-32 TFEU and Article 33. The customs union and customs cooperation are entirely separate entities. Thus, even if we adopted Articles 30-32 on the customs union, that would leave Article 33 on customs cooperation unaffected.

To give us the legal base for customs cooperation, a post-Brexit UK would need an agreement which replaced and gave effect to Article 33, in which event one might ask why it would be necessary to retain membership of the customs union.

The Union Code (UCC) itself is given effect by Regulation (EU) No 952/2013 which, as the first recital attests, relies on Article 33, further cementing in the importance of this provision. The customs cooperation programme, known as Customs 2020, relies on Regulation (EU) No 1294/2013. This also relies on Article 33 for its legal base.

As the UCC and Customs 2020, plus secondary and supporting legislation, are all implemented by EU Regulations, which have direct effect, these automatically cease to apply on Brexit. And although the Government plans to re-enact EU law in the Great Repeal Bill, it is hard to see how any of this law could apply once we have left the EU.

Looking at Regulation (EU) No 1294/2013 on Customs 2020, for instance, we see that it sets up a programme "involving and affecting all Member States". It can apply to acceding and candidate countries as well as potential candidates and partner countries of the European Neighbourhood Policy, but only "if certain conditions are fulfilled".

Thus, even if the UK enacted this law, writing it into the UK statute book, it could not apply as we would no longer be Member States. For it to take effect, we would have to negotiate with the EU to acquire "partner status" in the European Neighbourhood Policy, or something very similar. Failure to do so would means that the UK's customs administration would fall further and further out of synch with its EU counterparts, to the extent that we would have difficulty maintaining regulatory convergence.

Likewise the UCC is addressed to EU Member States, part of which provision is then for those States to recognise systems and procedures in other Member States, on a mutual recognition basis. Again, merely writing the code into the UK's statute book would not give it legal effect.

What this all amounts to is that, rather than chasing after the invisible "benefits" of the customs union – visible only to the likes of the Financial Times and their fellow travellers – we will need something like the agreement between Canada and the European Community on Customs Cooperation and Mutual Assistance in Customs Matters, which dates back to 1997, augmented by CETA. Or perhaps we should go for something like the customs agreement with India, signed in 2004, or the Swiss Agreement of 2009.

If our ministers don't wise up to this and keep chasing after the chimera of a customs union, they will be in for a shock. But then, so will we. This will be "train-wreck" Brexit.

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