EU Exit and Customs Aaron Dunne Stakeholder Engagement

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EU Exit and Customs Aaron Dunne Stakeholder Engagement and Analysis EU Exit Customs Policy

EU Exit and Customs Aaron Dunne Stakeholder Engagement and Analysis EU Exit Customs Policy Team Delivered by John Griffiths International Trade Development Liaison Officer. 17 April 2018

Lancaster House Speech • “Britain will not be part of the Common Commercial Policy

Lancaster House Speech • “Britain will not be part of the Common Commercial Policy nor bound by the Common External Tariff. We will therefore no longer be part of the Customs Union. ” • “Britain will also no longer be a member of the EU Single Market. ” • “Instead, the UK will pursue a new strategic partnership with the EU, including an ambitious and comprehensive Free Trade Agreement and new customs agreement. This will seek to ensure that crossborder trade with the EU is as frictionless and seamless as possible. ”

White Paper - UK Negotiating Objectives • ‘ 8. Ensuring free trade with European

White Paper - UK Negotiating Objectives • ‘ 8. Ensuring free trade with European markets – We will forge a new strategic partnership with the EU, including a wide reaching, bold and ambitious free trade agreement, and will seek a mutually beneficial new customs agreement with the EU. ’ • ‘Our new relationship should aim for the freest possible trade in goods and services between the UK and the EU. […] This should include a new customs agreement with the EU, which will help to support our aim of trade with the EU that is as frictionless as possible. ’

Article 50 Letter • ‘[T]he United Kingdom does not seek membership of the single

Article 50 Letter • ‘[T]he United Kingdom does not seek membership of the single market: we understand respect your position that the four freedoms of the single market are indivisible and there can be no "cherry picking". ’ • We should work together to minimise disruption and give as much certainty as possible. ’ • ‘In order to avoid any cliff-edge [. . . ] the UK and the EU would benefit from implementation periods. . . ’ • ‘We want to avoid a return to a hard border between our two countries. ’ • ‘’[W]e also propose a bold and ambitious Free Trade Agreement. . . ’

European Council Guidelines • ‘The main purpose of the negotiations will be to ensure

European Council Guidelines • ‘The main purpose of the negotiations will be to ensure the United Kingdom's orderly withdrawal…’ • ‘To that effect, the first phase of negotiations will aim to: provide as much clarity and legal certainty as possible […] on the immediate effects of the United Kingdom's withdrawal from the Union; settle the disentanglement of the United Kingdom from the Union. • The European Council will monitor progress closely and determine when sufficient progress has been achieved to allow negotiations to proceed to the next phase. ’ • ‘[A]n overall understanding on the framework for the future relationship should be identified during a second phase of the negotiations under Article 50 TEU. ’

Future Customs Arrangements: A Future Partnership Paper • Published on 15 August - responses

Future Customs Arrangements: A Future Partnership Paper • Published on 15 August - responses invited and can be emailed to Customs. Stakeholders@hmtreasury. gsi. gov. uk • ‘In assessing the options for the UK’s future outside the EU Customs Union, the Government will be guided by what delivers the greatest economic advantage to the UK, and by three strategic objectives: o ensuring UK-EU trade is as frictionless as possible; o avoiding a ‘hard border’ between Ireland Northern Ireland; and o establishing an independent international trade policy. ’ 6

Streamlined Customs Arrangement ‘A highly streamlined customs arrangement between the UK and the EU,

Streamlined Customs Arrangement ‘A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on EU trade as possible. This would aim to: continue some of the existing arrangements between the UK and the EU; put in place new negotiated and potentially unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. This approach involves utilising the UK’s existing tried and trusted third country processes for UKEU trade, building on EU and international precedents, and developing new innovative facilitations to deliver as frictionless a customs border as possible. ’

New Customs Partnership ‘A new customs partnership with the EU, aligning our approach to

New Customs Partnership ‘A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU. This is of course unprecedented as an approach and could be challenging to implement and we will look to explore the principles of this with business and the EU. ’

Interim Period ‘Agreeing an interim period would: • provide the necessary time for both

Interim Period ‘Agreeing an interim period would: • provide the necessary time for both the UK and EU Member States to implement any agreed long term solutions; and • ensure that businesses, intermediaries and other third parties in the UK and the EU have the necessary time to implement the new arrangements, thereby providing businesses with certainty and enabling a smooth transition. ’

Implementation • ‘Regardless of the outcome of the negotiations, the Government will need to

Implementation • ‘Regardless of the outcome of the negotiations, the Government will need to legislate for a new customs regime to be in place by March 2019, and make changes to the VAT and excise regimes. ’ • ‘While the UK hopes and expects to achieve a negotiated settlement that is in the interests of all parties, it is only prudent that the Government prepares for every eventuality. ’ • ‘In this scenario, without any further facilitations or agreements, the UK would treat trade with the EU as it currently treats trade with non-EU countries. The EU would also apply the customs rules and VAT to imports from the UK that it applies to non-EU countries. The Government is actively considering ways in which to mitigate the impacts of such a scenario. ’

Customs Bill White Paper • Published on 9 October – responses invited and can

Customs Bill White Paper • Published on 9 October – responses invited and can be emailed to Customs. Stakeholders@hmtreasury. gsi. gov. uk • ‘As the government set out in ‘Future customs arrangements: a future partnership paper’ (‘the Future Partnership Paper’) in August, in assessing options for the UK's future customs relationship with the EU, the government will be guided by what delivers the greatest economic advantage to the UK. It will also be guided by three strategic objectives: ensuring that UK-EU trade is as frictionless as possible; avoiding a hard border between Ireland Northern Ireland; and establishing an independent international trade policy. ’ 11

Contingency Scenario • ‘While the government hopes for and expects a mutually beneficial outcome

Contingency Scenario • ‘While the government hopes for and expects a mutually beneficial outcome to negotiations, it is prudent for both government and businesses to plan for a contingency scenario, where the UK leaves the EU without a negotiated outcome on customs arrangements. ’ • ‘In this scenario, the Bill will make provision for the UK to establish a standalone customs regime from day one, including setting tariffs and quotas, and establishing a goods classification system in line with the government’s WTO obligations. ’ • ‘The government is committed to developing solutions to the issues that implementing a new customs regime would raise, particularly in the areas, such as ro-ro ports and the Northern Ireland border, that are likely to be the most complex. The government is seeking the views of businesses and other stakeholders on these solutions. ’ 12

Taxation (Cross-border Trade) Bill • ‘The purpose of the Bill is to allow the

Taxation (Cross-border Trade) Bill • ‘The purpose of the Bill is to allow the Government to create a functioning customs, VAT and excise regime for the UK after Brexit. ’ • ‘New domestic legislation is required because rules governing customs are mainly in EU law which is directly applicable in the UK. ’ • ‘The Bill is designed to be flexible enough to deal with a range of outcomes from the negotiations, including a transitional agreement and a scenario in which no deal is reached. ’ • ‘Parts 1 and 2 of the Bill […] provide for a new standalone Customs regime […] largely based on EU law. ’ • ‘Part 3 and Part 4 of the Bill cover VAT and excise duties. ’ 13

Delegated Powers • ‘For tax matters it is usual practice for primary legislation to

Delegated Powers • ‘For tax matters it is usual practice for primary legislation to set out a “framework”, and for secondary legislation to be used to set out rules concerning administration, collection and enforcement. ’ • ‘Delegated powers are included in the Bill to allow: • the government to make future amendments to the imposition, administration, collection and enforcement of Customs duty. • Flexibility to make appropriate amendments to VAT and excise legislation. • The government to make appropriate amendments to primary legislation and use secondary legislation to implement negotiated agreements. ’ 14

VAT and Excise • ‘In relation to VAT and excise, it is necessary to

VAT and Excise • ‘In relation to VAT and excise, it is necessary to amend existing legislation as a consequence of the UK’s withdrawal from the EU […] to ensure that these regimes work appropriately on withdrawal. ’ • ‘The Bill will give the government: • Flexibility to give effect to an agreement with the EU on supplies or movements in progress on the day of EU exit. • Flexibility to deal with VAT on movements of goods and services between the UK and EU. • Flexibility to allow HMRC to adapt IT systems, for example EMCS, for UK internal excise duty suspended movements. • Flexibility to vary the UK information sharing obligations to give effect to any new agreement…with EU Member States to tackle avoidance and evasion. ’ 15

December EU Council meeting • ‘The European Council welcomes the progress achieved during the

December EU Council meeting • ‘The European Council welcomes the progress achieved during the first phase of negotiations…and decides that it is sufficient to move to the second phase related to transition and the framework for the future relationship. ’ • ‘As regards transition, the European Council notes the proposal put forward by the United Kingdom for a transition period of around two years, and agrees to negotiate a transition period covering the whole of the EU acquis. ’ • ‘The European Council calls on the Commission to put forward appropriate recommendations […] and on the Council to adopt additional negotiating directives on transitional arrangements in January 2018. • ‘The European Council […] will adopt additional guidelines in March 2018, in particular as regards the framework for the future relationship. ’ 16

EU-UK Art. 50 Negotiations – 19 th March 2018 • We’ve now taken another

EU-UK Art. 50 Negotiations – 19 th March 2018 • We’ve now taken another significant step by agreeing the terms of a time-limited implementation period. It will end on 31 December 2020. • The agreement gives businesses and citizens the time they need to put in place new arrangements, as the terms of our future partnership become clearer. • Access to one another’s markets will remain unchanged during the implementation period. | Security Marking | Presentation Title | 17

Thank you Aaron Dunne Stakeholder Engagement and Analysis EU Exit Customs Policy Team aaron.

Thank you Aaron Dunne Stakeholder Engagement and Analysis EU Exit Customs Policy Team aaron. dunne 1@hmrc. gsi. gov. uk

Supplementary slide - Key definitions (I) Single Market (Internal Market) • ‘The internal market

Supplementary slide - Key definitions (I) Single Market (Internal Market) • ‘The internal market of the European Union is a single market in which the free movement of goods, services, capital and persons is assured, and in which citizens are free to live, work, study and do business. ’ (EU) Customs Union • ‘A customs union is created when a group of countries join together to apply the same rates or import duties on goods from the rest of the world. The countries within that union also agree not to apply duties between themselves. Essentially, once goods have passed customs they can move freely between those countries within the customs union. ’ (EU)

Supplementary slide - Key definitions (II) Free Trade Agreement • ‘In the WTO, regional

Supplementary slide - Key definitions (II) Free Trade Agreement • ‘In the WTO, regional trade agreements (RTAs) are defined as reciprocal trade agreements between two or more partners. They include free trade agreements and customs unions. ’ (WTO) • ‘Generally speaking, RTAs must cover substantially all trade […] and help trade flow more freely among the countries in the RTA without raising barriers to trade with the outside world. ’ (WTO) • ‘A customs union differs from a free trade agreement in that a free trade agreement only abolishes customs duties between the countries concerned. There is no agreement to apply the same rates of duties to goods coming from other countries. ’ (EU)

Supplementary slide - Timeline (I) • 23 June 2016 – Referendum on the United

Supplementary slide - Timeline (I) • 23 June 2016 – Referendum on the United Kingdom’s membership of the European Union • 17 January 2017 - The government's negotiating objectives for exiting the EU: PM speech • 2 February 2017 - The United Kingdom’s exit from and new partnership with the European Union White Paper • 29 March 2017 - Prime Minister’s Article 50 letter to Donald Tusk • 29 April 2017 - European Council (Art. 50) guidelines following the United Kingdom's notification under Article 50 TEU

Supplementary slide - Timeline (II) • 20 June 2017 – Mansion House 2017: Speech

Supplementary slide - Timeline (II) • 20 June 2017 – Mansion House 2017: Speech by the Chancellor of the Exchequer • 21 June 2017 – Queen’s Speech 2017 • 15 August 2017 - Future customs arrangements: a future partnership paper • 9 October 2017 – Customs Bill White Paper • 20 November 2017 - Taxation (Cross-border Trade) Bill • 14 -15 December 2017 - EU Council meeting • 22 -23 March 2018 – EU Council meeting