EU Referendum

Brexit: of customs, chickens and roosts


Slowly, laboriously, the legacy media is beginning to pick up on some of the technical issues involved in withdrawing from the EU, with The Times reporting on fears that, post-Brexit, the customs computers will not be able to cope with the workload.

Actually this is only the smaller part of a much bigger problem, but it's a minor miracle that, amid the orgy of euphoria attendant on Mrs May's speech, a national newspaper has found space to publish this story at all. But, in a typical example of media coprophagia, we also get the Mail publish its own version.

In a nutshell, according to The Times, Revenue & Customs has been warned that their new £70 million computer system, installed to handle customs declarations will not be able to cope with the consequences of Brexit.

This will be the case, it is averred, we leave the customs union, which means that all goods arriving and leaving the UK will require customs declarations. We are told that "business leaders", through their joint consultative committee, are saying that departure would mean an increase from about 90 million to 390 million declarations a year by 2019 as EU goods movements are classed in the same way as imports and exports from third countries.

Staying with the reported detail, the current computer system, Customs Handling of Import and Export Freight (Chief), is 25 years old and was designed to handle 50 million filings a year. Its replacement, the Customs Declaration Service (CDS), had been intended to cope with 100 million.

"It's fair to say that Chief and what to do about its replacement is one of the more horrendous problems right now", a Whitehall official is cited as saying. The three-year IT project which is due to enter service in 2019, the same year as Brexit, was flagged as "amber" under an official traffic-light warning system used for major projects.

In addition to upgrading the new IT system to cope with an increase in filings, officials must design it without knowing the outcome of Brexit talks. One industry figure said: "It's true that there is no legal requirement to make customs declarations but then it’s hard to see how you could police any new tariff regime".

Here, we depart from the newspaper report for some factual input. The key point to hang on to is that this has nothing to do with the customs union. As we have pointed out earlier, this is about customs cooperation.

As it stands, UK exporters of goods to EU Member States are not required to make customs declarations (with some minor exceptions), as we are within the Single Market where there is free movement of goods.

When we drop out, if Mrs May follows through on her speech, exporters will need to make declarations on goods bound for EU destinations in the same way that they must when exporting goods to third countries. This is to ensure speedy clearance at UK ports, with minimal stoppages and inspections.

This is where the system begins to crumble under the load, as it is forced to handle volumes of data for which it was never designed. But this, as we hinted earlier, is only the half of it. There is then the small matter of clearance at the other end, as the goods arrive at their ports of destination in EU customs territory.

Under normal circumstances, data collected by UK customs authorities would be transmitted to the customs officials in the relevant EU Member States, to ensure minimal delays on the other side.

However, we now bump up against Commission Implementing Regulation (EU) 2015/2447, all 344 pages of it, implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code.

Specifically, this deals with the provision and availability of electronic systems in Member States, the harmonisation of equipment and reporting systems, and controlling the exchange of data and the processing of information.

All this is down through operational agreements between the Member States and the Commission, resulting (theoretically) in a seamless, integrated EU-wide computer system, comprised of all the different national systems talking to each other.

Currently, we are part of this system – which is undergoing major expansion and development but, with the advent of Brexit, we drop out of the regulations and are no longer part of the system.

Re-enacting these regulations onto the UK statute book via the Great Repeal Bill, when passed, will not achieve anything. The regulations set out obligation as between Member States, and the Commission. We cannot, through UK law, require EU Member States or the Commission to work with us.

To make the system work, we will need a comprehensive customs co-operation agreement, which needs the UK to be able to partake in the numerous technical committees and other bodies that work together to create and maintain a functioning system. This can be part of any free trade agreement that we have with the EU or it can be a separate treaty.

However, if Mrs May decides to "walk away" from a bad deal, this would means that there would be no replacement system in place. And without prior declaration, we would be back to physical checks on documentation, backed by load inspections to verify contents.

Already, the joint consultative committee is warning that: "The possible reintroduction of customs declaration requirements and frontier controls could potentially cause major disruption at the border, particularly at ... ferry ports and for trade using the Channel Tunnel". Please note the words: "major disruption", exactly as we have been warning.

On top of this, ministers are also being warned that a large amount of legislation will be needed to replace regulations. "We believe there are some 700 items of legislation that would need to be written as the basis of customs law going forward", a report from the committee says.

What they haven't said it that it will not only be the UK system which will have to take a massive amount of additional data. Even if we have a customs agreement, the systems on the other side of the Channel will likewise be overloaded. EU Member States will also need to upgrade their systems, while the Commission will have to update some 1,300 pages of legislation relation to the Union Customs Code, just to accommodate the UK's change in status.

Here, all sorts of issues arise – not least who is going to pay for the upgrades, and what happens if the disparate authorities refuse to co-operate. Even getting the system up and running in time might be difficult to arrange, while the Commission might have its own problems in dealing with the administrative burdens.

Altogether, we are looking at series of problems which, potentially, could bring to a halt the flow of goods across the Channel. This is very much a matter of chickens coming home to roost, as the problems arising from the changes in customs administration have been grossly understated.

Even then, we are just dealing with documentation issues here. The physical inspection of goods at ports of entry is yet another matter. The two combined could have a catastrophic impact – unless early measures are taken to ensure continued system functionality.

Nowhere, though, do we get the impression that the department for exit is on top of its game – or that Mrs May has the first idea of what she is faced with. Thus, I guess, as time passes, we are going to see a lot more chicken coming hope to roost. It may not be a pretty sight.