Archive for month: October, 2020

Industry body representatives are united in raising concerns on the lack of clarity for the UK’s post-transition border operating models.

And this week a Parliamentary scrutiny body forcefully added its own voice.  The influential Treasury Committee has formally written to the minister responsible for HMRC – Chancellor, Rishi Sunak – ensuring that “a series of concerns” are a matter of record.  Key issues are set out, below – and there is a link to the letter.

Whether there is a trade deal or no-deal, British companies are confronted with new and complex requirements applying to goods, to the vehicles on which they travel – and to every HGV driver crossing the border.

There is a significant risk to smooth flow of goods with chaos at the border – and an inescapable increase in costs from the increased bureaucracy when moving goods between the UK and Europe.

Whilst a member of the EU – and during the ‘transition period’ ending at 23:00 GMT on 31 December 2020 – the UK enjoyed free flows of goods, vehicles and drivers.  HMRC has just published a 270 page guide that comes into effect from 1 January 2021 – with multiple processes set out, depending on the nature of the goods – plus a raft of new paperwork including customs and safety declarations – and multiple IT systems to register for and navigate before goods can be shipped.

UK firms transport nearly $1 trillion (768 billion pounds) in annual trade.

Tony Shally, Managing Director of freight specialist Espace Europe is reported as saying that: “It’s going to be carnage…we’ll be fire-fighting from the 1st of January.”  [Reuters]

The UK is the world’s sixth-largest economy – importing goods worth 253 billion pounds and exporting 138 billion pounds-worth from and to the EU.

HMRC advice is that, if a company wishes to outsource notifications and paperwork, they should employ a ‘customs broker’.  However, this is a new requirement and there are not the numbers of trained operators available – even if the Government had made known what information is required and how the rules will be enforced.

With just weeks to go, companies used to borderless trading across 28 nations have yet to see the new IT systems.

For instance, the HMRC guide refers to a ‘Movement Reference Number’ generated alongside a ‘Transit Accompanying Document’ and an ‘Exit Summary Declaration’ – which is to be lodged with the ‘Goods Vehicle Movement Service.

This then generates a ‘Goods Movement Reference’ which is given to the driver – allowing a ‘Kent Access Permit’ to be obtained in order to enter the county of Kent.  It has been suggested by Government that the Kent Access Permit be printed and posted in the windscreen of the lorry so that border checks on are not needed on the country border.  Even if the goods get through Kent and cross the Channel, the guide states bluntly that anyone arriving in France without the correct documents could be sent back.

The transition period – chosen by the UK Government to end on in 68 days from now – was to allow time for preparations.  The logistics industry estimates that – starting on 1 January 2021 – an additional 215 million customs declarations will need to be filled in annually.    Customs brokers estimate that the cost of completing paperwork will exceed the cost of goods when moving small consignments – with a ‘typical’ export declaration requiring up to 50 pieces of information on transport, commodity codes, value and tariffs.

Richard Burnett, head of Britain’s Road Haulage Association (RHA), said industry faced a colossal challenge – with even some large companies in Britain and Europe not yet prepared.   Drivers who find themselves in charge of a truck that is not fully compliant, face charges and on-the-spot fines of £300 – with advice from HMRC to carry sufficient cash or letters of credit to cover in such circumstances.  Burnett warned that man European drivers would simply stop coming to Britain – and presently, European-registered trucks making the vast majority of EU-UK crossings. [Reuters]

If trucks do fail to cross the border it will most immediately be felt in Kent, home to the ports of Dover and Folkestone, which funnel around 10,000 trucks a day between Britain and Europe.

The Government contingency plan is to designate 10 holding areas near channel-crossing ports.  This includes Sevington in Kent.  In September, diggers and dumper trucks arrived to begin work on a 93-hectare site that will hold around 1,700 trucks – nestled between an ancient church and the village’s red brick cottages.  The Government expects to use it for five years, according to a letter sent to residents.  Neighbour Mandy Rossi “You look at it and think, how can that possibly be ready for the January 1st?” [Rueters]

Extract – letter from Treasury Committee to Chancellor, Rishi Sunak – 22 October 2020

“It appears that the Government has left it very late to develop all the IT needed in time, with testing and changes still being made now, years after the Government had chosen to leave the EU Customs Union.  For these IT projects to facilitate a smooth transition to the new customs regime in January, companies – both traders and customs agents – need to be able to use them well in advance of the go live date, so that staff can familiarise themselves with the processes.

The Committee is concerned that the IT will not be ready in time to allow companies to prepare sufficiently.  Can you set out to the Committee the hard deadline by which all companies will have access to GVMS, Smart Freight (now known as Check an HGV is Ready to Cross the Border Service) and any other system needed to trade with the EU, not limited to HMRC owned systems?

From 1 January, GVMS will be used for goods in Northern Ireland and for goods in transit under the Common Transit Convention. From 1 July, it will be used for full customs procedures. Can you set out what contingency plans have been prepared should it not be ready in time for either deadline?”

Regarding the border between Ireland and Northern Ireland: “We share the Minister’s concerns that the Northern Ireland Border Operating Model is yet to be published.  Without it, it is impossible for Northern Irish firms to know how to prepare for the changes that will come on 1 January.  The impact of this delay has been compounded by prevarications over whether to provide funding for customs training for Northern Irish firms.”

On staffing and training for the additional 7000 posts identified by HMRC as required from 1 January 2021: “Will you agree to provide us with fortnightly updates on how many of the final 1,000 vacancies have been filled, and will be fully trained and ready to work by 1 January?”

References

https://committees.parliament.uk/publications/3166/documents/29383/default/

Photo: “Kent – the ‘Garden of England’ – soon to be the ‘Lorry Park of England'”

 

On Saturday 17 October 2020, UK Prime Minister Boris Johnson wrote an open letter to the nation:

“Since the outset of our negotiations we were totally clear that we wanted nothing more complicated than the relationship the EU has with Canada.

One based on friendship and free trade.

But for much of the last few months the EU have refused to negotiate seriously.

Demanding the continued ability to control our legislative freedom and our fisheries in a way that is completely unacceptable to an independent country.

Which is why yesterday [16 October 2020] I decided that we should get ready for the end of the transition period on January 1st with arrangements based on the simple principles of global free trade, like Australia’s relationship.

For whatever reason the EU are not willing to offer this country, after 45 years of membership, the same terms as they did to Canada.

So now is the time to prepare.

And with you by our side we can do that with high hearts and complete confidence.

By embracing this alternative path we will prosper mightily as an independent free trading nation, controlling our own borders, our own fisheries and setting our own laws.

Boris Johnson

Prime Minister

The UK-wide referendum vote in June 2016 returned a wafer-thin majority in favour of Brexit.  Devolved regions, including Scotland – and British Overseas Territories, including Gibraltar – voted, some of them overwhelmingly, in to ‘remain’.

Over the last three-and-a-half years, the UK has struggled to come to terms with the outcome of the vote.  Initial discussion focussed on how profound the split should be.  A minimal split – with the UK in a similar position to other EU neighbours, such as Norway, allied within an economic but non-political ‘European Economic Area’.  This was favoured by business, commerce, central and left leaning political parties.  Or, whether to make a total break – leaving the UK outside: the ‘Single Market’; the ‘Customs Union’; and other forms of shared activities – such as anti-criminal, scientific, environmental and educational cooperation – the stance favoured by the ‘hard-line’ Brexit proponents.  In the end, the UK has chosen to sever all ties and leave on ‘third-country’ status.  This is entirely the UK’s own decision.  Whenever the subject has been raised, every EU representative has consistently expressed regret – firstly about the UK decision to leave at all, and then for the conditions under which the UK has chosen to leave.

Throughout the three-and-a half year Brexit process, the EU has shown patience with the UK – given that the decision to quit the bloc is one that can only weaken the strength of Europe and one that will harm its future – directly through the need to apply ‘third-country’ conditions to all dealing with the UK from 1 January 2021, and indirectly from the lack of the leading contribution from the UK to all aspects of social, economic, financial and scientific life in Europe.

UK management of the leaving process and timetable

Following the Brexit vote, the UK began to consider the terms on which it wished to end its membership of the EU.  Nine months after the referendum, Article 50 of the Consolidated EU Treaty was invoked by the UK on 29 March 2017 – triggering the minimum 2-year ‘notice period’ required by the treaty.

During the notice period, the UK remained a full and active member of the EU with all the rights and responsibilities – along with the freedoms and constraints – that it had been party to developing during its 47-year membership.  It continued to be represented and participate within each of the three ‘EU pillars’: the European Council, European Parliament the European Commission.

Towards the end of the minimum notice period, instead of a leaving on 29 March 2019, an extension of two weeks was requested by the UK Government in order to give the House of Commons time to reconsider its rejection of the negotiated withdrawal conditions.  The revised leaving date, 12 April 2019 – was again postponed.  This required the EU to accept the UK’s request for a ‘flexible’ extension with an end-date of 31 October 2019.

Between April and October 2019, a 500 page ‘Withdrawal Agreement’ was negotiated between the UK and EU.  In the end, this Agreement was subsequently ratified by the UK and European authorities during January 2020 and passed into UK Law and then formalised in an International ‘Treaty’.

The UK ended its membership of the EU at 23:00 GMT on 31 January 2020 after 47 years.

From 1 February 2020, the UK – whilst no longer a member of the EU – has been allowed to operate as if had remained an integral part of the European Union’s ‘Single Market’ or ‘Customs Union’.  The ‘transition period’ established in the Withdrawal Agreement allowed the UK time to negotiate future trading terms and to prepare for leaving the Single Market and Customs Union.

The length of the Transition Period was always the UK’s to set.  Any time until at least until the end of 2022 was an option – simply by naming the date.  The Conservative Government in its election manifesto, however, had stated that it would deliver the end of transition in the shortest possible practical time – claiming that it had an ‘oven-ready’ deal requiring minimal negotiations and a straightforward implementation – and did not need longer.

An end to the transition period was set as 23:00 GMT on 31 December 2020 by the UK Government – and immediately enshrined in UK law, leveraging the Government’s 80 seat majority in the House of Commons.  And so, the transition end-date became a constitutionally unchangeable event.

UK negotiations on terms of trade and the relationship with the EU post-transition

Between June 2016 and October 2020, a series of UK Ministers responsible for Foreign and EU affairs have held responsibility for overseeing the UK’s departure from the EU: setting the strategic direction; defining the ‘red lines’ without which there could be no deal; steering the decisions through Parliament in Westminster; negotiating the ‘Withdrawal Agreement’ with counter-parties from the EU; attempting to negotiate a ‘deal’ with Europe for the end of transition; replacing EU law and regulations with domestic equivalents – eight major Acts of Parliament and 600 ‘statutory instruments’ – and; preparing civil service, UK businesses and citizens for the end of the ‘4 freedoms’ –  free movement of goods, services capital and people.

The optimism maintained by successive Ministers since 2016 is little short of heroic.  The success that the same Ministers have achieved in securing and preparing for a ‘smooth’ transition is a long way short of heroic…and include: David Davies, Dominic Raab, Stephen Barclay, David Jones, the Baroness Anelay of St Johns, the Lord Callanan, the Lord Bridges of Headley, Steve Baker, Suella Braverman, Chris Heaton-Harris, Kwasi Kwarteng, James Cleverley, Robin Walker, and James Duddridge.

The European Commission has been directed and led by European Commission Chief Negotiator, Michel Barnier, throughout.

The EU set out its brief to its negotiating team in February 2020 – and the UK a month later.

The UK’s ambition was for a trade deal on the most favourable terms in place with any third nation – with some additional agreements on recognition of each other’s regulatory standards.  David Davies spoke of it as “Canada + +”.  The EU never acknowledged that this could or would be politically or operationally feasible.

Ending transition without a deal for trade in goods in place means hard borders, trading under WTO terms with tariffs and quotas, and no automatic recognition and acceptance of UK qualifications, certification, or standards.  Further, without a deal for trade in goods as a foundation, it is all but impossible to imagine agreement on services, finance, education, scientific and anti-crime cooperation.

During the early years of negotiations, the EU published a guidelines for smoothing some of transition issues – especially those needing time to make adjustments – for instance in aerospace, the airline and haulage industries.  With the UK initial vacillation on what it wanted, compounded by the series of arbitrary delays, and the final insistence by the UK on its red lines for the fishing industry and non-acceptance of the EU rules on non-intervention and government subsidies in competitive industry.

The concessions – unilaterally offered by the EU to make UK’s leaving easier – were not indefinite.  Timed to run from the UK’s notice of leaving in 2019, they had fixed end dates – depending on the complexity of achieving a smooth transition – after 3-6 months.

It is significant that EU attitudes and patience with the UK have hardened.  By the end of transition on 31 December 2020 all the concessions have ‘expired’ – and have not been renewed by the EU.  The ‘cliff edge’ so feared by Theresa May is looming.  It is almost incredulous that the UK Government is deaf to the concerns raised by 70 business groups united with the voices of trades unions and academic experts alike.

How will history judge the hard-line Brexiteers?  Perhaps, ‘be careful what you wish for’.