Taxation (Cross Border Trade) Bill Committee hearing.
The UK Government Public Bill Committee have taken evidence from expert trade witnesses and explored the question of if the new Customs Brexit Bill is fit for purpose. Under scrutiny was the Taxation (Cross Border Trade) Bill
Experienced representatives from the British Retail Consortium, Agency Sector Management, British Chambers of Commerce and the Association of Freight Software Suppliers presented their positions and opinion on behalf of their members.
10 Key Points from the trade:
The committee and the witnesses cut through a number of areas of the bill and discussed general Customs topics.
The key themes are:
- HMRC Capacity: widespread worry over Customs ability to handle trade enquiries and deal with new applications Customs procedures right now. Will HMRC have the skills and resource to cope during transition or post-Brexit ?
- Post Brexit simplifications. Authorised Economic Operator (AEO) must play a key role in the future Customs landscape. Mutual recognition of AEO between the UK and EU is therefore critical. However, trade concerns about UK Customs processing of AEO applications as slow and onerous compared to other EU countries. This is holding back participation. The UK has 10 times less AEOs than Germany and a much lower proportion of SMEs. AEO facilitation and benefits are not clear to business which is stifling interest. AEO is no “silver bullet” for the future but is seen as a viable way forward to help trade and Customs cope with Brexit change.
- Trade Readiness. Operators only now beginning to “wake up” to the potential for change in Customs processing. A feeling trade are somewhat unprepared and burying head in sand about the true extent of changes they may need to make, the systems affected and the skills they may need. More detail on Customs requirements is required to properly inform trade. The change from CHIEF to CDS is an immediate priority and focal point for HMRC and software providers this year.
- Timescale. Experience of recent deployment effort for the Union Customs Code (5 years) suggests trade and HMRC needs several years to adapt to major change such as Brexit. Therefore ability of trade and HMRC to cope and remain effective is a concern.It was stated that 2 years is needed by trade software providers from date of HMRC issuing technical specification of major changes to operators being ready to go and there is no agreement about how Brexit will impact Customs let alone a technical spec. The Bill generalizes and leaves all options open.
- Clarity. This Bill allows a great deal of flexibility in law to respond to negotiated Brexit scenarios. However, the lack of clarity aout the direction of travel concerns business. On one hand that allows for Customs flexibility on the other trade are concerned that processes will be forced upon them. There remain many options of how Customs may operate, none are close to being agreed which is hindering business planning, investment decisions, IT changes and identifying skills gaps.
- Other agencies. The focus may be on Customs, however the supply chain is reliant on 30-40 other government agencies at the frontier. This is onerous and trade are concerned that other non-Customs agencies are engaged. How other agencies cope and respond to Brexit changes must be dealt with alongside this Bill to ensure a smooth transition. The UK has good port and Customs systems however overall integration and connections to other agencies is a concern now and for Brexit.
- 79% of food is EU sourced. The current Just-In-Time models in food supply chains are at risk. This may lead to cost base changes and consumer impact regarding “food on the shelf” if HMRC, ports and other agency processes are not thought about as a whole.
- RORO ports. Roll On Roll Off ports that deal predominantly with EU traffic today do not have the systems or infrstructure to deal with Customs freight processes. A specific solution for those ports must be sought to avoid congestion. There were less concerns about other ports that already handle 3rd country traffic.
- Taxation Bill – will it work?; The panel generally agreed that the Bill will “do the job” and is fit for purpose provided that focus shifts quickly to implementation. It was noted that some 1500 Statutory Instruments would be needed and time is of the essence. Whilst the effort will be no more demanding than managing EU legislation changes there is a concern that lack of detail means progress will not be made quickly enough on practical details. The panel expressed concern about readiness in Europe to prepare in their own parliaments.
- HMRC Engagement. The panel were asked to rate communication and engagement by Customs. The panel felt that freight was a poor relation at ports with a clear Customs focus on passengers.Whilst recognising there was a challenge ahead for Customs and trade all of the representatives were positive about the level of engagement so far with HMRC. When pressed they all rated levels of engagement between their associations and Customs as good or very good.
In Summary
It is a positive that the new Customs Bill takes the current Union Customs Code and data sets rather than starting afresh however time is of the essence. The Bill leaves all things open, the devil will be in the detail. Trade wants policy and details so it can prepare effectively for the largest upheaval in cross border regulation for 30 years.
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