U.K. Retreats on Plan for Strict Customs Checks After Brexit
A banner placed by Border Communities Against Brexit reads “No Hard Border” near Newry, Northern Ireland. (Photographer: Aidan Crawley/Bloomberg)

U.K. Retreats on Plan for Strict Customs Checks After Brexit

(Bloomberg) -- The U.K. government backed down on plans to impose full border controls immediately after Brexit in an attempt to avoid piling an additional burden on businesses already struggling with the impact of coronavirus.

For the first half of next year, most firms moving goods into Britain will get six months to file customs declarations and pay any tariffs due whether the U.K.and the European Union reach a trade accord or not, the government said in a statement on Friday.

“This would be welcome news for many businesses, which simply aren’t ready for chaotic changes with our biggest trading partner at the end of the year,” said Josh Hardie, deputy director-general of the Confederation of British Industry, the country’s largest business lobby group.

The new border policy was announced after Britain and the EU agreed to step up the pace of their trade negotiations following months of sometimes bad-tempered deadlock. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will hold a call on June 15 aimed at injecting momentum into the talks.

With just six months left until Britain final leaves the bloc, businesses had been struggling to recruit a fraction of the 50,000 customs agents the transport industry says are necessary to prevent snarl-ups at the country’s ports once Britain leaves the bloc’s single market and customs union. Without enough agents, goods traveling to and from the EU are at risk of being delayed at ports.

New Facilities

The government said it will provide 50 million pounds ($63 million) of grants to help customs intermediaries prepare, and plans to build new border facilities to carry out customs checks.

Companies will still have to prepare customs declarations and keep records from January 2021. Those importing controlled goods such as alcohol and tobacco will still have to file customs forms immediately. From April, importers of products of animal origin, such as milk and honey, will have to pre-notify the health authorities. From July, all customs declarations and payments will have to made when goods are imported.

This “announcement is an important step towards getting the country ready for the end of the transition period, but there is still more work to be done,” Cabinet Office Minister Michael Gove said in a statement after he formally ruled out extending the post-Brexit standstill period beyond the end of the year.

Legal Challenge?

Even with the new policy, businesses will face full checks on exports to the EU unless the bloc reciprocates the U.K.’s offer, meaning firms will still have to grapple with new paperwork and the risk of border queues.

Nor will the relaxed rules apply to businesses in Northern Ireland, said Seamus Leheny, policy manager for the Freight Transport Association in Northern Ireland. The Brexit Withdrawal Agreement requires the authorities there to carry out checks on some incoming goods to protect the integrity of the EU’s single market.

There is also a danger that the U.K. policy will face legal challenges from other countries on the grounds that it shows favoritism toward the EU.

“Strictly, this is clearly contrary to World Trade Organization rules if there is no deal and probably even if there is a free-trade agreement,” said Alan Winters, director of the U.K. Trade Policy Observatory at the University of Sussex. “These require non-discrimination in trading processes as well as on tariffs, and also that a country’s custom regime be evenly applied at all entries.”

With time to reach a trade deal running out, Johnson will hold a call with Von der Leyen, European Council President Charles Michel and EU Parliament President David Sassoli on June 15. Five rounds of weekly trade negotiations will begin at the end of June.

If the two sides fail to reach an agreement by year-end, Britain will default to trading with the bloc on terms set by the WTO, leaving businesses and consumers facing disruption as well as the return of tariffs and quotas.

Asked at the government’s daily press briefing whether drugmakers will have adequate stockpiles of medicines at the end of the transition period, Transport Secretary Grant Shapps said he was confident there will be no shortages.

Johnson had previously threatened to walk away from the talks in June if it wasn’t clear that he was going to get an acceptable deal. The continuation of talks into the summer means businesses will face a longer wait for certainty over what Britain’s post-Brexit trade relationship with the EU will look like.

“Both the U.K. and EU need to signal a willingness to compromise when they meet next week,” said Adam Marshall, director general of the British Chambers of Commerce. “Allowing the present standoff to continue would be like kicking the economy when it’s already down.”

©2020 Bloomberg L.P.

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