Home Affairs Committee
Oral evidence: Implications of the UK's exit from the EU – Wednesday 25 January 2017, HC 494
Wednesday 25 January 2017
Ordered by the House of Commons to be published on 25 January 2017.
Members present: Yvette Cooper (Chair); James Berry; Mr David Burrowes; Mr Ranil Jayawardena; Tim Loughton; Stuart C. McDonald; Naz Shah; Mr Chuka Umunna; Mr David Winnick.
Questions 125-187
Witnesses
I: Andrew Baxter, Managing Director, Europa Worldwide Logistics, Graeme Charnock, Chief Financial Officer, Peel Ports Group, James Hookham, Deputy Chief Executive, Freight Transport Association, and Jack Semple, Policy Director, Road Haulage Association.
Andrew Baxter, Graeme Charnock, James Hookham and Jack Semple.
Q125 Chair: Welcome to this afternoon’s session. Thank you very much for coming to give evidence to us at relatively short notice. We want to explore today some of the practical issues created by the withdrawal from the customs union and whatever the replacement arrangements will be. Obviously, we do not yet know what the Government’s intentions are or what the negotiations will conclude, so many of the questions will be very practical ones about your experience of different arrangements at the moment. We very much appreciate your contributions today.
First, could you introduce yourselves and say which organisation you are from, what your experience is of dealing with goods that are from within and without the customs union and what the key differences are in the experience for you and for your organisations? Mr Semple, could you start?
Jack Semple: I am Jack Semple, director of policy at the Road Haulage Association. We represent a lot of the international hauliers in Britain who go into Europe. We have 12% of the international traffic at the moment—UK haulage. That isn’t a lot, but it is very important. If you imagine 4 million vehicle trips across the channel a year, that is a lot of haulage activity, but what is really important is the jobs, the trade and the food that is on board those journeys.
The haulage industry is largely ignored and taken for granted, but in the last few weeks and months it has become an increasingly important element of the Brexit debate, because of what happens at the border. At the moment, we are used to, we have become accustomed to, and all the companies and their customers have processes and have become accustomed to, a service that is pretty much as any other haulage service is within the UK, in terms of the EU. That is the essential ingredient of what is now quite a sophisticated, service-driven industry.
In terms of international lorry haulage, there is very little coming from outside the EU, but lorries have a different and slightly more clunky—if I can put it that way—passage through customs. That is not particularly a criticism of customs; it is just that there is a clunk in the process.
Q126 Chair: You say “clunk”. What does that mean in practice? Can you give us an example of what it means?
Jack Semple: You may have some checks; you have a lot more paperwork to do—that is essentially the difference—whereas with EU work, it’s a free flow. If you are going to continental Europe, you just have to get on a ferry. If you are going from Northern Ireland to the south of Ireland, it is a completely different issue, and that is a separate issue that we may come on to; it has all sorts of problems on its own.
Q127 Chair: We certainly want to cover the Northern Ireland issue specifically in due course.
You talk about more paperwork or more checks. Is it possible to give us an example of either the time that additional delays might take or the financial burden from additional paperwork? Do you have any estimates for that?
Jack Semple: We reckon it’s £45 to £50-worth of direct admin—
Q128 Chair: Per what?
Jack Semple: Per journey. So the administrative cost is not huge, and the delays, for example, are not a significant issue, because hardly any trucks from outside the EU come through Dover.
Chair: Thank you very much. Mr Hookham.
James Hookham: Good afternoon. My name is James Hookham. I’m the deputy chief executive of the Freight Transport Association. Our members include many hauliers who travel to and from the continent. I think an important additional dimension to this debate is the traffic across the Irish sea. We also have members in Northern Ireland, who at the moment trade freely in the Republic.
Forty per cent. of the UK’s international trade by value moves in lorries, a lot of it across the Dover straits. It is extremely important traffic. As you have been hearing, the key issues include the transition—if we have to make it—from relatively free movement at the moment, because we are part of the union, to some kind of institutionalised controls, possibly including customs declarations and some of the non-tariff barriers, such as food hygiene checks and other safety and welfare checks that may need to be performed. That would disrupt what at the moment is very free-flowing movement of traffic. That has been in place for a good many years and many businesses in the UK rely on the smooth transit of traffic into and out of the European Union to keep their supply chains at the required levels. The introduction of checks, especially at ports, could seriously disrupt that and require significant reconfiguration of Britain’s supply chain. At this stage, that remains a concern.
Having said that, we note the Prime Minister’s intention to seek a frictionless trade pattern with Europe. We sincerely hope that that can be achieved, because there will be some real issues in planning for the contingency of customs checks on EU traffic.
Q129 Chair: I want to come back to what the key issues would be for you, but do you have experience of different arrangements for goods going within the customs union and those going without?
James Hookham: Yes, of course. The Freight Transport Association includes many manufacturers, exporters and importers—businesses that are importing from all over the world. This country trades under many different trading regimes, depending on the country involved—from the relatively open arrangement that we have with the other 27 member states of the EU through to full World Trade Organisation arrangements with particular nations with which this country trades. There is knowledge in the industry about how to transport under the different arrangements. Clearly that is clustered around businesses that choose to trade in those markets. One of the issues will be whether everyone else has to follow the learning curve to learn the rules that at the moment are specialised for particular markets.
Q130 Chair: Can you describe the difference in experience, for example, for an exporter or importer dealing with a non-EU—or non-customs union—situation, and for one that is dealing with things within the customs union. I appreciate that there will be variations.
James Hookham: Yes. Take the example that Mr Semple gave: at the moment vehicles that are entering the UK, let’s say from across the Dover straits or through the tunnel, undergo virtually no customs interventions at all. Notifications are made for trade-tracking purposes, but there is open transport. It is a free border so there is no intervention in the way, for example, that imports or exports from non-EU countries are subject to a physical check and possible inspection at the port of entry, where dedicated space is made available. That kind of physical space or infrastructure is not available, for example, at Dover or at many of the other ports through which EU traffic, both to the continent and to Ireland, currently pass.
Q131 Chair: On average, how long would those sorts of checks take on non-customs union traffic?
James Hookham: The experience we have dates back to pre-’93, which was the last time we had to do this sort of thing.
Q132 Chair: For goods perhaps coming in from non-customs union countries at the moment. Let me come back to you, Mr Hookham, and bring in Mr Charnock.
Graeme Charnock: My name is Graeme Charnock; I am the CFO at Peel Ports Group, which is the second largest ports group in the UK. We operate ports from Liverpool, Medway, Great Yarmouth, Glasgow and Heysham, where we serve both the Belfast and Dublin markets. Towards the end of last year we opened a new deep-water container terminal. That is intended to bring containers closer to their ultimate destination. The advantage that we see for people in our hinterland, if you like, is that they can get their goods more quickly than they could otherwise by bringing them through congested south-east ports. So the point about time, I think, is quite critical for a number of people in the UK—particularly manufacturers.
If we look at a lot of what we do, we are effectively the physical infrastructure for where something either goes out of the country or comes into the country, and there are a number of different processes that happen before it affects us, and a number of processes that happen after that; but essentially our role in all of this is to make sure that we can actually unload containers, for example off a vessel. We bring goods into storage; we then get the necessary paperwork hopefully to release those goods to a haulier, and the goods then leave the port estate. So from our point of view a quick turnaround is what we are used to for EU imports.
To the extent that EU imports were to follow a non-EU route going forward, that ultimately would require a larger footprint and more warehousing facilities, which we are expected to provide for other users, whether they are the importer or the exporter, or customs or any other public authority. You asked a question about how long it takes. I think, as colleagues have explained here, if it is coming in from the EU it is more or less coming through and out of the door. For non-EU, customs and other authorities effectively pick a random sample and do inspections and those sort of things. So, as I say, we are then providing facilities, and we are also effectively going to increase the dwell time for those containers.
Typically, if a container has been picked for inspection, for whatever reason, its dwell time at the port estate can be anywhere between two and four days, in our experience, anyway; for other goods—and those goods can be from the EU, or non-EU—if all the paperwork matches and everything else works it can be literally out of the port in a matter of hours. So from our point of view, if we are going to increase the dwell time, that means we need bigger areas, and possibly warehouses as well. On a busy port estate there are constraints around that.
Q133 Chair: Just to clarify, if you have got two containers of—I don’t know—toys or whatever, coming in, one from inside the customs union and one from outside the customs union, what is the difference on average, in the amount of time that they will take going through?
Graeme Charnock: If all the paperwork matches up and they are not picked for inspection, broadly it will be when the haulier is there to come in and pick it up; so there could be no difference at all. The issue, then, is that if it has come from within the EU it is effectively there to move freely, so there are no other additional checks, because somebody somewhere inside the EU has done all those checks. So it could be the same goods coming from the same destination, but they could have been checked in Italy, for the sake of argument—so they could have done what we, or what customs, would be doing to the same goods if they were coming directly to the port.
Q134 Chair: I see. So the additional customs checks, then, for the one that has come directly from outside the customs union, will take how long?
Graeme Charnock: It depends. Part of it could be from customs, but it largely depends. The inspection routines could be down to what the product is. Presumably those inspections—you would have to ask the relevant authorities—are done on some sort of risk-based approach; so, if the goods are coming from a particular country, there might be a presumption that there is a higher risk, simply because the controls there are not as good as in another country—in particular an EU country—or the product could be more risky. So if it is agricultural or it is livestock, or it is anything that has got a degree of sensitivity to it, that presumably carries a higher risk; and therefore those items, one would presume, are more likely to be called for inspection.
So it is not just customs. Customs is making sure the appropriate taxes and duties, and the descriptions, etc., are undertaken. They will do periodic inspections, I am sure, but the ones that are likely to take longer are the ones for more sensitive products. That is why I use a range of anywhere between two and four days.
Q135 Chair: Thank you, Mr Charnock.
Andrew Baxter: I am Andrew Baxter. I am the managing director of a company called Europa Worldwide Group.
I am the managing director of a company called Europa Worldwide Group. We are one of the largest distribution companies between the UK and Europe. About 80% of our business is trade between the UK and Europe. We are not especially focused on the full-load market. We are more focused on what is called the groupage market, which involves the grouping together of multiple consignments to transport them from, say, the UK into Italy, Spain or wherever.
I would say our area will be one of the most significantly impacted if what happens is that customs clearance is reinstated. Broadly speaking, what we do is this. We have a network of depots around the UK. They trunk into a hub in Dartford. From that hub, we trunk every night to about 30 continental depots, and from those depots, the distribution will be done. We will trunk every night to, say, Milan, and then distribution will be done in northern Italy; and every night there will be a trunk that goes from Milan and comes back into Dartford, and then that will distribute goods around the UK.
In relation to the issues around customs clearance, the issues with full loads are much less than the issue with groupage shipments. The reason is—
Chair: Sorry, I don’t know whether the problem is your microphone, but could you speak up slightly?
Andrew Baxter: Sorry. You are talking about full loads and asking about the difference between a full load that comes from the EU and one that comes from a non-EU country. If it comes from the EU, the truck will literally just come through the tunnel and drive straight through—there are no checks whatsoever. If it comes from a non-EU country, such as Switzerland, it would have to—well, normally it would report at customs in Dover. If customs don’t want to check anything, that would delay the vehicle by about an hour or an hour and a half. If customs wanted to do a documentary check, that could delay it by up to three hours, and if there was an inspection of the goods, that could delay it by up to five hours.
Any of those timeframes is not too bad: normally, you would still be able to deliver the goods on the day that they were supposed to be delivered. The issue comes much more when you are talking about delaying trailers with multiple shipments from multiple customers, because then one shipment can cause a delay—that delay could be enough to stop that trailer hitting distribution, therefore delaying the distribution of all those goods.
I believe there are very significant things that the Government needs to do in order to preserve transit times of goods going from Europe into the UK or from the UK into Europe, if it wants to preserve the transit times of goods. Obviously, that is a very important matter. Mainly, what we are talking about is increasing transit times for a proportion of goods. It is very hard to judge what proportion that might be. It might be 30%, 40% or 50% of goods being delayed by a day. Those things are very important because in today’s world everybody wants products—people want to order things today and receive them tomorrow. If transit times turn the time for receiving them from 24 hours into 48 hours, or from 48 hours into 72 hours, that is quite an issue. I will give the example of the location of manufacturing plants and distribution warehouses. It is very important that they are located in places where they can get goods quickly to market or they can receive product quickly from suppliers in order to turn around through a manufacturing process.
Q136 Chair: You used the example of goods that might have come from Switzerland. Those have obviously been through other EU countries or other countries within the customs union first. Do you have any examples of goods coming directly into the UK from outside the customs union?
Andrew Baxter: The main non-EU markets that we deal with are Turkey, Switzerland and Norway, and I would say that the impact on all three of those is about the same. We don’t do much that comes in from other non-EU markets by road—from Russia or from Belarus. The proportion of consignments that come from those markets is tiny. There is no practical difference, as far as I am aware, between the goods coming in from Russia or from Switzerland. They both have to go through a customs clearance and process, and therefore the issue that we are talking about here is what the impact will be if customs clearance is reinstated.
Q137 Chair: Before I bring in other members of the Committee, we want to probe in detail some of the issues around staffing, capacity, ports’ computer systems and those sorts of things. Can you give us a quick overview? If the arrangements ended up being the same for the EU as for outside the customs union, what would the consequences be? Then we can explore later on the key things that you would be looking for out of a new customs arrangement. Assume for a moment there were difficulties getting a customs union agreement and you were left with the current arrangements that apply for non-customs union, non-EU countries. What key things would need to change? What would the impact be?
Andrew Baxter: First, there would need to be the assumption that customs are ready to deal with that increased volume of clearances. There would be an enormous increase in the workload for customs. If you are asking about their being fully prepared, which is a very significant challenge, there are issues. The requirement for change is significant. For example, today we deal with customs in Tilbury. Our hub is in Dartford and we bring non-EU goods into the terminal there. Customs close at 4 o’clock in Tilbury, so you have to have goods arrive at our terminal before 3 o’clock in order to get them into distribution the next day. If that was the arrangement going forward, you would be talking about a very substantial proportion of goods having an extra day’s transit time.
First, it is about additional transit time. Secondly, that has implications within the sector because it would require products coming in to effectively be stored for one day. Distribution centres do not necessarily have the capacity to suddenly store lots of products, so there are consequences arising from that. In addition, you are talking about the fact that customers would have to pay customs clearance charges. An importer might have to pay, for example, £50 for a consignment as a customer clearance fee for the goods coming in, or an exporter might have to pay £15 or something for an export clearance for goods going out. There are a range of issues, including the cost of customs clearance and whether any tariffs are involved.
One of the biggest issues is delaying goods and extending transit times. That is a big issue. Having a secure supply chain is massively important to our customers, as is knowing that the goods that are supposed to get to them in 48 hours actually do and that they do not get caught up in a customs process. The idea that things can get snagged in a process is a real problem. Some of the things around transit times are probably bigger issues for our customers than the financial issues themselves.
Graeme Charnock: I will probably just reiterate some of that. The issues are around time cost or resource/capacity. For us it would be, as I have illustrated, around capacity and whether we could deal with more at the port than we currently do at the moment. We could certainly resource it, but it would be a capacity issue for us.
I think that the concerns of most people in the supply chain are around this time issue. There are two things. One is this: can they actually get something when they actually want it—if they can’t, what will they do? For manufacturers, where they operate a “just in time” situation, they are probably looking at having to carry additional stock, just to prevent a stock-out for anything like that. So there is probably a genuine cost for those who have “just in time” procedures.
As I say, for most people in the supply chain it is the time that it is going to take. What does that mean? I suppose that people could start the processes earlier. I mean, not everything works on a “just in time” basis, so people can start the processes earlier. However, for those manufacturers and other service providers who rely on competitiveness, if they haven’t got the goods when somebody actually wants them, as Andrew has illustrated, you are at a disadvantage compared with others.
Looking at it, I would say that if all the EU moves to a non-EU status, there are issues around those moves. I would also reiterate that, for a number of different user groups or people within that supply chain, the resource issues will vary.
James Hookham: There are a number of issues. I have mentioned this already, but are the computer systems and the arrangements that customs have in place big enough to cope with what is a really big step change in the number of transactions that they need to do? Some estimates are that there will be around 300 million additional transactions and declarations a year. Will the computer systems cope, as well as the actual resourcing of that enforcement by customs?
Also, there is not just the physical infrastructure to consider. There is scope here for rethinking how customs enforcement is conducted, so as to be less intrusive, and to address some of the concerns that we’ve been hearing about and that really exist.
There is a human side to this. As I was saying earlier, it has been a long time since businesses that trade with the EU as manufacturers and shippers have had to worry about all of this, so there is a learning curve for shippers, forwarders and carriers no doubt, who will have to do this for the first time. It’s not a show-stopper, but allowance needs to be made for the fact that people need to be trained to do this and to do it reliably.
I don’t think that we should ignore the fact that we need comparable frictionless arrangements to be put in place by our trading partners. Whatever we might think we are able to do in the UK, it needs to be reciprocated by the EU, in Ireland, France and Belgium, which are the principal landing points.
We should absolutely and categorically try to avoid physical checks on vehicles in our ports. I’m not denying that some of those checks will need to be done, but, as you’ve been hearing, a lot of ports—especially Dover, where the bulk of this traffic is moving—simply don’t have the physical space. Because of the nature of the supply chains and the goods that are moving, there’s no time; there are perishable goods and other time-sensitive goods that simply cannot tolerate that kind of intervention. One would hope that, in this intelligence-led digital era, there is no need for traditional physical interventions, which perhaps we experienced the last time we were there.
My final point is around the need for some clarity and visibility for all of us in the timelines here. The Prime Minister offered the idea, or prospect, of frictionless trade with the European Union, and let’s hope that is where we end up, because all of this would become academic.
However, one can envisage negotiations reaching a point where they could yet not achieve that outcome, resulting in very, very little time for all these matters to be addressed by UK traders. That would be a nightmare scenario, where we are confronted with a matter of days before these kinds of systems would need to be put in. The Government need to be honest and realistic about the prospect of some kinds of controls being put in, because they need to be investing—as we have heard—in the resources and people, in anticipation.
Jack Semple: Picking up on all the comments that have been made before, there is a potential increase in road haulage costs. But I absolutely agree with Andrew’s point: it is the service to the supply chain, particularly between the UK and Europe, which it is vital to protect. We have a very clear request of Government: we need a public statement from Ministers to say that they understand the significance of customs in this issue; and that it is likely that customs will have to have a significant increase in its budget, take on more people and have to upskill.
The key point is to say publicly that customs has to do what needs to be done to have that in place from day one, so that the service to the UK economy can be assured, and also so that companies can be reassured that it is going to be in place. That is the significance of a public statement, so that officials at HMRC are not worried about spending a little bit more money, because we will have to spend more money on this. This is in all likelihood going to be an area of cost, and we need a statement to say, “We understand this. This is an important issue within Brexit. We are going to ensure that the service levels that the economy and the supply chain enjoy now will be maintained, and maintained from day one.”
The haulage companies and other companies involved may also have to do some upskilling themselves, so they have to have time to adjust. Ireland is a separate case, but I will also mention, in terms of sending goods into Europe, that there will be an issue there. We will want to encourage our European partners, particularly in the busier areas in terms of taking UK goods, to ensure that they have the resources in place as well. Their companies that receive goods will have an interest in saying the same sorts of things to their Government.
In some parts of the EU, the overall volumes will be fairly small; in some parts, such as Belgium, northern France and so on, it is quite a high proportion of what customs is dealing with potentially, so they will have a similar issue there. This week we have been having meetings with Belgian traders, and it is a concern that they have as well.
The key point, at the top level of Government, is to have a public message that we understand this and that HMRC will have the resources to maintain the service from day one and to do whatever it is that needs to be done to make sure that it happens.
Q138 Chair: Has anyone in Government approached you, whether from HMRC, Border Force, the Brexit Department, the Home Office, the Treasury or the BEIS Department, to ask you any of these questions or to start discussions with you?
Jack Semple: We have been engaged for some time in group discussions at HMRC. The reality is that they have been slightly unfocused. The Prime Minister’s statement last week has brought a bit more focus to the discussion. Now we really have to get down to business.
It is very important for the Government at a senior level to give that service-level commitment to the supply chain and to the haulage industry, so that they can understand that their officials are very clear what their objective is and that cost will not be the primary function. The primary function is to do what is necessary to ensure unimpeded flow of goods, in so far as is possible.
Q139 James Berry: I have to dash off in a minute, so I will ask a question just of Mr Charnock. From our briefing, it seems that there are four benefits to membership of the customs union: first, common tariffs applying to external borders, which is obviously a matter for the negotiations; secondly, a common approach to warehousing procedures, which I assume that we could adopt in any event outside the customs union, if we so chose; thirdly, a single administrative document, which I understand that some non-customs union countries already adopt anyway and that we could continue with outside the customs union; and, fourthly, the facilitation of movement of goods without checks at every border, which is exactly the point that all of you gentlemen have been making.
Is it not right that whether that actually introduces a delay is very much a consequence of how strict the checks are going to be, which will be in the Government’s gift to decide? Is it also not right that there are calls—there have been calls in the House from members of the Committee—for more checks to take place on containers coming to this country? A lot of counterfeit tobacco comes from within the EU in containers that are not checked, for example.
I know you are probably all opposed to that, for obvious reasons, but it is very much the Government’s decision whether they want to check every container for customs or counterfeit goods, or whether they want a more liberal policy. It may not actually introduce any additional delays.
Graeme Charnock: It might. You’re right on all of that. I would not just want to focus on customs. You’ve mentioned health, Chair, and there is Border Force as well. There are a number of areas that need resourcing, but in all that, one would presume, as you have referred to, a risk-based approach is taken by those checking. That can be changed, and we can adopt different levels of tolerance for countries of origin for types of product and so on, so it is within our gift as to where they are on the scale. We don’t check them, just to be clear.
Q140 James Berry: So things coming from within the customs union may be deemed by the Government to be low risk. Indeed, I think Mr Baxter said some things are not checked if they have already been checked somewhere else on the external border. For instance, the policy could be that, if something has already been checked in Spain, it doesn’t need to be rechecked in the UK.
Andrew Baxter: First, there is no doubt that, if customs clearance is reintroduced, that will categorically put delays into the distribution of goods. If you are talking about our exports going into EU markets, they will have to be customs-cleared, either at border points—that trucks have to stop in order to do that—or they will arrive at authorised overseas depots, where goods will have to be customs-cleared. That means sending an entry to the local customs authority, and having to get an answer back from them whether it is going to be allowed to be distributed or not.
A big factor in that is the times customs is open or not in customs offices all over Europe. This is not a matter of EU policy or decided by the EU; it is about what customs is doing at the local level in countries all over Europe. I am not even sure this is matter than can be negotiated in the negotiations. The reality is that a significant proportion of our exports will get delayed if customs clearance is reintroduced; what exact proportion that is, I am not sure. If anyone thinks that they won’t, they are mistaken.
Q141 James Berry: But surely that depends on whether you have a mandatory check or a spot check. Obviously, the ones that are going to be spot-checked are going to be delayed.
Andrew Baxter: Okay, but this is a matter for customs in all of those European countries.
James Berry: Yes, but it would have to be agreed.
Andrew Baxter: So customs in all of those countries are going to agree not to have spot checks—
James Berry: Only to have spot checks.
Andrew Baxter: Yes, but the way the system works at the moment is that you submit the details of the goods that are coming in, and then you get an answer back as to whether or not the goods are going to be checked. It is that process in itself—even if none of it is checked, it is delayed anyway. The very process of having to check whether it needs checking creates delays.
If you’ve got 20 shipments on a trailer and one of them needs checking, it will delay all 20 shipments. Even if they all go through and are all okay, that will cause delays. If some of them require checking, that will create further delays. Delays are a part of that process, and that will not be negotiated away.
Q142 James Berry: So delays, and the costs associated with reducing them, are the main thing?
Andrew Baxter: Yes.
Q143 Mr Burrowes: On the current level of demand in capacity generated by cross-border transport of commercial goods, can I ask your sense of the state of capacity at the moment, ahead of additional demand—particularly, getting techy, in relation the whole process side of things and the electronic import and export declarations?
I understand that the current CHIEF—customs handling of import and export freight—system is due to be replaced by what is a smaller acronym, but hopefully a better system: customs declaration services, or CDS. Given that the expectation is that the replacement will be in January 2019, which conveniently fits with the time when we will effectively be leaving the European Union following negotiations, do you think that new system will be achievable?
Do you think the new CDS system will be fit for purpose, given that its spec is on current levels of demand? Will it be achievable for working demand and spec purposes? Following on from that, will the current CHIEF system, as a backstop, have sufficient capacity, given that the projected demand is currently 50 million, the system is now designed for 100 million and you are going to get 300-odd million? Is it all going to work? At the end of the day, are you going to be left with some manual checking process that is going to cause a huge nightmare?
Graeme Charnock: I think you have almost answered the question at the same time as raising it. I suppose that if one looked at all that, with the project—when the upgrade was being designed it could not have possibly had a Brexit as an outcome in its design. If I were in charge of that project—unfortunately I am not—I would think that a major worry.
Jack Semple: I have a colleague at a meeting at HMRC as we speak. In this area, HMRC has been focused on container ports—on big containers coming in from overseas—because almost everything coming in through the other ports has been as though it was coming from Manchester. That is the real leap that HMRC has to grasp. The 4 million vehicles a year travelling across the Dover straits alone, and through the other ports, have been of very little interest to it, at the end of the day, because of the arrangements we have had.
Whatever system is in place will be very different and will require more work. That is why the critical point, for the confidence of the supply chain, is for Government to say that they understand that and that HMRC will have the resource it needs to be ready on day one.
We cannot have slippage, and we cannot have lack of confidence that the Government do not recognise the significance and are not going to make the resources available. Plus, the private sector has to do what it has to do as well. Tying in to that, in the greater scheme of things, the clock is ticking and there is a sense of urgency in this area—certainly among our members, there is a lot of worry.
Q144 Mr Burrowes: When you say “slippage”, do you mean that the system just takes longer or that it means manual checks—which is obviously, frankly, huge?
Andrew Baxter: I don’t envisage manual checks could work, so I don’t think there is an option to have manual checks instead of electronic checks. The manual things done in customs are all about entering information into CHIEF, getting a piece of paper back and then taking that to customs. Without a computer system—it has to go through the customs computer system. It is a very real question whether the new system will be able to cope with it. If it can’t, that needs to be dealt with very rapidly because it will cause a major issue.
Scaling up, in terms of the customs organisation, is also a massive issue. At Dover today, a fraction of the vehicles that come through are non-EU; you are going to turn it to a situation where 100% of them are non-EU. That is a huge increase in workload and it will require not just many more customs officers, but much more substantial facilities, parking areas and so on—literal infrastructure things.
If you said you had to make those infrastructure things happen in two years, you would have your work cut out. To make them happen in a year—that is not enough time. There are literal things. I believe that all this is possible, but it requires a fast reaction from the Government to make sure that we are properly prepared for Brexit.
Q145 Mr Burrowes: Coming to staffing, can you give us your assessment of the level of staffing that is now going to be needed, and also the level of expertise that will be needed within that staffing? As I understand it, there is a disparity with other countries. I think the UK has 5,000 customs staff and France has 16,500 customs staff. There is already a disparity. What do you think that is going to need to be increased by to meet need? Do you think there is a need for particular experience in relation to the administration of international trade-related customs procedures?
Andrew Baxter: I don’t know what it means literally, but the statistic of going from 90 million clearances to 390 million clearances tells you something about the scale of what has to be achieved. It is enormous.
Q146 Mr Burrowes: In terms of technical expertise, taking areas such as valuation or origin in terms of determining the correct amount of tariff duties, is there a gap already, and does that need to be filled?
James Hookham: Absolutely, yes. At the moment, all these are complete unknowns, and there is no real experience on EU trade within the industry to answer that question. It depends on the severity of the controls that result from the negotiation.
At the moment, we are barely a week beyond the Prime Minister’s statement that we will be coming out of the customs union, so we are still thinking through the full implications of that. Recognition of the current limitations of the specification for our customs declaration system would be helpful, because at least it would register with the industry that the Government have got that and see the urgent need for investment and upscaling—also, recognition that we may not have to do customs checks in the way we have always done; that is the point I was making earlier. It is not beyond the realms of imagination to find a way by which the necessary checks are able to be done on an intelligence-led basis, but without causing the disruption to traffic that we have been discussing hitherto.
Q147 Chair: Are you aware of countries that do that in a way that is better than ours?
James Hookham: A certain degree of intelligence-led interventions are made at the moment. The point I made earlier is that those interventions are made, and investigations are conducted, but away from the borders—away from the ports. That is where the issues will arise: when all that kind of activity is focused on just a few what will become border crossing points between the UK and the EU.
For the reasons that you have heard, that is going to disrupt flows, because there is no space, there is no provision in the timescales of the supply chains, and at the moment there is no resource. We are starting from a blank sheet of paper here. The Government need to start to think this through and make the plans and the investments. We cannot have a cliff edge here for customs procedures.
Q148 Naz Shah: Could you explain to us what you think France and Belgium will do? What extra delays do you think our exporters face, even if the UK customs service improves its service?
Jack Semple: The issue there is that it is for the Belgians and the French, at the end of the day. From our point of view, it would be useful to encourage them and discuss with them the best way of going about it. As I was saying before, quite a significant proportion of the imports of those near territories come from the UK, so there will be quite a significant degree of change—not as great as what we are talking about for the UK, but they will face similar issues. Their receivers of goods will be keen to get what they get from the UK as quickly as they can, but that is outside the scope of UK control. Clearly, that is an issue for us to work on with the customs authorities there.
Q149 Naz Shah: So do you think there will be any extra delays for our exporters?
Jack Semple: We need to avoid that. It is something that our members in the haulage industry are concerned about, because there is a cost to them if there are delays, in terms of vehicle cost, driver cost and disruption to the regular service schedule, and those are not insignificant. Of greater potential significance, however, would be the cost to the supply chain service level that the shipper or receiver of the goods or produce is relying on.
James Hookham: There is an interesting precedent that might help us answer the question, and the Committee is familiar with it: the juxtaposed immigration and passport controls. Despite the pressure they have come under in recent years, they have survived, because there is mutual benefit to the UK and continental partners there. Some of the issues we have been talking about could well be addressed by doing some of the checks and interventions for freight on the continent or possibly in Ireland before the goods leave for the UK. That would take some of the tension out of the port area. It does require good will, as you imply, but I would hope that there is enlightened self-interest, for the reasons that Mr Semple has given.
These are businesses and economies that want to continue trading. One would hope that the nature of the negotiations is such that that good will is preserved, because one of the things that our members in particular experience at first hand are the sometimes vexatious enforcement checks carried out by customs officials on British trucks. That kind of disruption should be avoided at all costs.
Q150 Chair: If you are relying on a level of public sector and private sector investment in the UK to prevent difficulties for importers, do you have the same confidence, shall we say, that that same level of public and private sector investment will be forthcoming to match that capacity increase on the continent?
Graeme Charnock: As far as ports are concerned, you are probably very familiar with the fact that in the UK, what happens at ports is largely driven by the private sector. In Europe, it is driven by the public sector. They are very different funding models. Out there, clearly the equivalent to our customs would be in the public sector, so it would mainly be a public sector change, as opposed to being a public and private sector change here in the UK.
Andrew Baxter: Obviously, a big difference is that the upscaling in customs required in the UK is massive because it is all our imports and exports with the EU. If you are talking about the implications for a customs office in Hanover, then today they are dealing with goods that are coming in from Norway, Switzerland and Turkey. In the future, they will have to deal with goods coming from the UK, too. That will be a marginal, possibly meaningful increase in their workload, but it is much more manageable for them to deal with. In terms of whether that will happen, yes, it will. In order to make goods flow freely into the UK, there are quite a few things that the Government could do, such as ensuring that the customs office in Tilbury does not close at 4 o’clock in the afternoon. They need to make that—
Q151 Chair: We’ve got the point.
Andrew Baxter: Okay. They need to make those regional customs offices work on a 24/7 basis. That is within the power of our Government. Getting the customs office in Hanover to work on a 24/7 basis is not within our control. Broadly speaking, that is not going to happen. The reality is that goods will therefore get delayed in distribution into the European market. There will be delays; it is as simple as that. You cannot reintroduce customs clearance—look at Switzerland. Transit times between the UK and Switzerland are longer than they are to another place of equivalent distance from the UK. They just are, because of the customs process.
Q152 Chair: So the Prime Minister has said that she want to not be part of the common external tariff. Can you see any way that you could avoid internal customs clearance checks if we are outside the common external tariff? If the tariff level for goods from the United States or China, or wherever, is different in the UK compared with the rest of the EU, can you see any way of avoiding, either from the UK or the EU’s point of view, the need to check whether the tariffs have been paid or to check what the standards are?
Andrew Baxter: I would have thought that it is unlikely that we are going to be able to negotiate that—otherwise, people would import goods into the UK and distribute them out into Europe. I don’t believe that the EU will accept that that is what happens. Is it technically possible? Of course it is. Is it likely? I would have thought not.
Q153 Chair: Does anyone else have a different view on that?
James Hookham: Where there’s a will there’s a way. Given that this traffic, or this trade, is well established and well known, and that the risk to the avoidance of tariffs and duties would be understood, I hope that there would be much greater use, for example, of fast-track clearances—so the “trusted trader”-type arrangements—and the authorised economic operator model, but, hopefully, expanded. That is where customs and other authorities perform a risk assessment of trading parties and then decide on the level of intervention or the lightness of touch of checks and declarations, depending on the status of the assurance that the company has given them that they will do what they are supposed to do. That could lighten the load considerably, with a bit of imagination.
Q154 Chair: But the risks presumably substantially change. You describe it as being a known risk, but if you don’t have a common external tariff, you are suddenly introducing a big change in the levels of risk and incentive for importers and exporters.
James Hookham: That is not quite the point I am making, but the entities that you are dealing with—a couple of businesses and the different parties in the supply chain—will remain those that are currently there. It is not as though we are suddenly taking on a lot of new trade from markets we have not traded with before, using carriers and intermediaries that are unknown to the authorities. This is happening today and will continue to happen after Brexit, so one could hope that sensible risk assessment techniques could reduce the burden considerably.
Q155 Chair: Mr Semple, do you want to add to that point?
Jack Semple: I think that is an area that will be explored, but our members are very much of the view that there will be some degree of impediment to goods. We need to minimise that from day one. We have been very much focused on goods movement by lorry between the UK and continental Europe. In Ireland, I think there are more serious and challenging problems. There, they really struggle to see how the existing models that we know about can work.
Chair: We need to come on to Northern Ireland in a second, but I will bring Tim Loughton in first.
Q156 Tim Loughton: Why does Tilbury customs close at 4 o’clock?
Andrew Baxter: I don’t know.
Q157 Tim Loughton: Has it always closed at 4 o’clock?
Andrew Baxter: I think that kind of thing is quite common around Europe. At Dover it is 24/7, and that is pretty unusual. customs in Switzerland closes at 7 o’clock. It is a non-EU country—why does it close at 7 o’clock?
Q158 Tim Loughton: Do other ports like Tilbury close at 4 o’clock, or close to it? Is there some sort of medieval law that says it has to close then?
Andrew Baxter: The answer is that they need to be open 24/7.
Q159 Tim Loughton: Sure. I am trying to find out what is restricting them from doing that at the moment. Is there just not enough trade going through Tilbury?
Andrew Baxter: I suspect it is the desire to be open beyond that.
Q160 Tim Loughton: Is it because it would cost them more in staff? This is quite an important point. If you say, Mr Baxter, that most, or a lot, of your trade goes through Tilbury—
Andrew Baxter: It doesn’t go through Tilbury. Tilbury is our local customs office, because our hub is based in Dartford. The nearest customs office to us is Tilbury, so we use that. You can bring goods in and clear them at the border or you can bring them into an authorised warehouse and clear them there. Our warehouse is an authorised warehouse, but other operators’ warehouses might be in Birmingham or Manchester. It is not just a question of opening and closing times at the port. It is also a question of opening and closing times at regional customs offices around the country.
Q161 Tim Loughton: I understand, but could you not therefore choose someone from somewhere other than Tilbury that is open beyond 4 o’clock to come and clear your secure zone?
Andrew Baxter: No, because that is the customs office that is responsible for our area.
Q162 Tim Loughton: So you are tied to Tilbury, whether you like it or not.
Andrew Baxter: That’s my understanding, yes. Therefore we are left with those two options: either Tilbury, or we clear at the port.
Q163 Tim Loughton: This is all new to me, although I have one of the largest trust ports in my constituency in Shoreham and I have never heard these problems come up there. On the clearance procedure, basically it is a man or woman with a clipboard who will come along and look at some lorries.
Andrew Baxter: No. If you are talking about going to the port, you will take in the documents that relate to the goods and they will arrive the goods, as they call it, at that point. They will say, “Here are these 20 shipments.” They will enter that into their computer system and “arrive” those goods. They are now here. They will have to wait one hour and then they will get an answer back as to whether those goods need to be inspected or whether the documents need to be inspected or whether the goods are free to go on.
Q164 Tim Loughton: So your lorries in your approved secure zone have to travel to Tilbury, even though they are not going to be using the port facilities at Tilbury.
Andrew Baxter: No. They travel to our warehouse and our warehouse is authorised to do that as an ERTS facility.
Q165 Tim Loughton: So the man or the woman with the clipboard and the elaborate computer system comes from Tilbury to your warehouse.
Andrew Baxter: No.
Q166 Tim Loughton: How does it happen physically? I’m getting confused.
Andrew Baxter: Physically how it happens is that the truck comes to our warehouse. We cannot start the clearance process before it has arrived at our warehouse. We then send the information electronically to customs at Tilbury. Then we have to wait one hour for an answer as to whether the goods are free to deliver or whether they want to inspect the documentation or whether they want to inspect the goods. Once we have got that answer, we can react, as in we can put the goods into distribution or hold them back or send them with the relevant documentation.
Q167 Tim Loughton: So, if the answer is that they do want to inspect documentation and/or the physical lorry, a man or woman with a clipboard then comes from Tilbury to your warehouse.
Andrew Baxter: If they wanted to inspect the documentation, we would just send them the documentation by email or whatever. If they wanted to inspect the goods, a customs officer would come to our warehouse and see those goods.
Q168 Tim Loughton: Right, so the only geographical limitation on that is the percentage of those lorries they would require to have a physical inspection. Very roughly, would you talk about one in a hundred, 10 in a hundred?
Andrew Baxter: The number of consignments that require a physical inspection is a fraction of one per cent.
Tim Loughton: Tiny.
Andrew Baxter: Tiny.
Q169 Chair: Is that under the EU arrangements or the non-EU arrangements?
Andrew Baxter: That is under non-EU. The actual proportion that requires inspection is tiny. The issue is that all the goods that come from a non-EU country have to go through this process. Today, if something comes from the EU, we take goods off one vehicle and put them directly on to another vehicle and it is free to go.
Now, what we have to do is bring it to the terminal and wait one hour, and then we get the clearance as to whether it can or not. That is not fine, that we have to wait one hour. That has consequences. It is particularly not fine if the truck arrives at five minutes past three. Because at five minutes past three that one hour cannot be achieved before they go home. Therefore, anything that arrives after that moment gets delayed by—
Q170 Tim Loughton: I entirely understand that point. For the purpose of this inquiry, it strikes me that what is causing hold-ups now and what might put on more pressure for future hold-ups is the fact that it seems to be a very inflexible system. If you happen to be located just outside Dover you have got a 24-hour system. Whereas, if you happen to be located in that area that comes under the aegis of Tilbury you are stuffed if your lorry comes in after three o’clock.
Therefore, a solution to all of this, regardless of what may happen with Brexit, is to have a more flexible customs service that is situated closer to the customer, rather than have to rely on a completely arbitrary port that you do not use.
Andrew Baxter: We use Dover.
Tim Loughton: Well, you don’t use Tilbury.
Andrew Baxter: Yes, quite.
Q171 Tim Loughton: That is an interesting hold-up that is being caused at the moment. What typically causes other hold-ups for your lorries that come over from Dover to Calais by boat or by tunnel?
Andrew Baxter: The issue we’re talking about here is all about that customs clearance process; I presume you are not wanting to talk about other things that cause hold-ups.
Q172 Tim Loughton: I am, because nobody has so far mentioned people trafficking. When we went to Calais, we saw the intense scrutiny, X-rays and everything else that goes with it that is now required because of people stowing away. That is not necessarily going to get any better or any worse because of what might happen with Brexit. We were told by freight haulers, during our inquiry on that, that at the moment that is quite a time-consuming, and therefore resource-intensive, procedure. Nobody has mentioned that, and that is not going to change.
Andrew Baxter: It is a very real issue to us. We have had lots of issues with illegal immigrants coming over in our vehicles. Yes—that is an issue.
Jack Semple: The nature of the issue around Calais has changed since the camp was finally dismantled several months ago; the migrants have been dispersed. The issue and threat of interventions to the lorry and violence against the driver and so on around the Calais area that caused so many problems before has lessened greatly. The issue of clandestines trying to get into lorries has not.
We have been supplying UK Border Force with intelligence from our members, and sometimes from foreign drivers as well; we have a multilingual phone line for intelligence. What we have seen is that it is more spread out. We have had reports from members in Belgium this week, for example. We are trying to follow the patterns of the organised gangs and what they are doing. In terms of security for the vehicle, it remains a very live issue for international operators—but they have come to live with it.
Q173 Tim Loughton: Okay, but in terms of hold-ups—assuming that there are juxtaposed controls—the time that inevitably has to be spent at the moment for physical checks on the lorries could be contemporaneously used for the additional paperwork that could now be required for those zero-point-whatever per cent. that require a physical inspection.
Somebody is doing that physical inspection at Calais already—it’s just that they are looking for people, rather for things that are not in line with the goods documentation, for example. That would be a more streamlined use of that time, which will inevitably have to be spent, because we will still have a problem with people traffickers.
Andrew Baxter: First, it would require the customs office to be in France, not Dover. If it could be, I think there is validity to that. Please don’t think I am saying that there aren’t potential things that can be done in order to minimise these things; I think many things can be done in order to reduce these issues. What we can’t do is just do what we do today.
Q174 Tim Loughton: Sure. That is why I’m coming to how you think the nature of trade is going to change. Mr Baxter, you mentioned earlier that we can do what we do over here, but we can’t guarantee what they’re going to do in the customs office in Hanover or wherever. Is the nature of trade at the moment not that there is a big net surplus, certainly in value, of stuff coming from Europe into the UK, rather than other way?
Those who are going to be inconvenienced if the EU doesn’t reciprocate with a more streamlined way of dealing with this additional paperwork are an awful lot of Italian, German or French haulage owners. They are going to be angry because their lorries are going to take an awfully long time to make that trip and get back again, because the Hanover office is not being as efficient as it might be. That is the balance of what we’re looking at at the moment, so it really doesn’t help their interest if they are not going to be helpful.
Andrew Baxter: Sadly, I don’t really think it is quite like that. The piece that we really get to control is on our imports. We need to thicken that up, because we need our import process to work properly. What we are asking them to thicken up is the process of our exports to them.
In terms of the things that they will be sensitive about, if we were talking about something that would slow up their exports, they would be much more sensitive to that, but we are talking about something that will slow up our exports to them. Therefore, I do not believe that they will be that sensitive to it. And getting customs officers in 27 member states to gear up to a new standard that they have never geared up to before for Switzerland, Norway or wherever I suspect is quite difficult.
James Hookham: I want to stress the importance in the scenario that you described of the juxtaposed controls. Although there is inconvenience there, the reason why those immigration checks can take place is that they take place before the vehicles board the ferry to come across, so any delay is incurred out of the flow. It is not a pressure on the port of Dover, for example, it is a pressure on the port of Calais, but there is more space at Calais and also you can allow everyone else to get through and catch the ferry on time—you are not holding the whole show up because you have introduced controls upon landing. There is no reason why that could not work for freight checks on exports from the UK as well, where you would clear UK customs and the French or EU customs on UK territory. That kind of innovation is the kind of thinking that we need.
Q175 Mr Winnick: I have one or two questions on Northern Ireland before we finish. Just tell me, as organisations did you let Ministers know one way or another before or during the referendum about some of the inevitable changes and the impact? Did you consider that appropriate or otherwise? How you vote as individuals is entirely your right, as it is for the rest of us in the country, but as organisations did you make any of this clear or the cost involved?
James Hookham: Speaking for the Freight Transport Association, we did not take a position on the referendum question—our members did not mandate us to. We thought our role, though, was to inform that debate, and we certainly put out a lot of information about the value of the trade, the volumes of traffic and, to those who were willing to listen, descriptions of at least the current arrangements that in general work well and of the level of service of the UK economy that we currently enjoy. At that stage, of course, some of the scenarios we have been discussing were simply not being talked about.
Q176 Mr Winnick: From the evidence today, whatever view one takes about leaving the EU, the fact is that it will make quite a substantial difference. You have spoken about two to four days’ difference between items coming in tariff-free from the EU and—
Andrew Baxter: I believe that the maximum impact is adding one day to transit times. I think it depends.
Graeme Charnock: It was I who quoted the two to four days. I think it is a slightly different scenario that we are looking at in terms of the imports. I am talking about containers; you are talking about a lorry coming across from Europe to the UK. There are different scenarios. The danger with all of this is that we focus on one particular item and assume that that then means you can look across the whole spectrum and say, “Well, that would apply here”—that is the whole conundrum of particular issues that industries or ports may well be facing and others may not be, for example.
Q177 Mr Winnick: But clearly there is going to be a substantial difference.
Graeme Charnock: There could be a difference. The hypothesis that we are being asked to consider here is if all EU imports are treated as non-EU imports. So when we talk about what an outlook might look like, it is against that background. I think we have probably started to hear one or two solutions among the four of us, so that might be the hypothesis, but we might be able to bring it back perhaps into the centre, or in a different range as to the potential impact. It is probably not 100% and probably not what exists now. It is somewhere in between, and we are talking degrees.
Jack Semple: As far as the Road Haulage Association is concerned, we were not suggesting to our members how they should vote. We were engaging with Government and informing them. We mentioned the issue of the single market and customs, but we did not go into detail. I am not sure the debate was quite at that level before the vote. The important point now is that we can minimise the impact and maximise the success of Brexit if we get a clear focus from Government to give HMRC clear direction to maintain the service levels. Although we did not have a clear message during the referendum on that issue, we do have a clear message now, and that is it.
Q178 Mr Winnick: That is a lot of ifs, but perhaps it is inevitable. As far as Northern Ireland is concerned, the general consensus at ministerial level, as far as one can tell, is that it should not be such a problem as was said it would be before the referendum result. Do you share that sort of optimism about goods coming from Ireland into Northern Ireland?
Jack Semple: I think Northern Ireland is a separate case. I can highlight two particular points. We have had a fair bit of engagement with our members, who are frankly very worried about the impact of what all this is going to mean, and we cannot see, based on what we know now and what we think about the past, an easy solution. We had a meeting this week with a number of our members, with representation from the Department for Infrastructure, and from the Department for Transport in London. There are two particular differences. For goods coming into mainland Britain from Europe, we can get advice. In the past, customs has accepted what is on board the lorry, which gives them an hour or more to get working. That facility will not be available in cross-border movement between Northern Ireland and the South.
Secondly—this is a point that was made very strongly by our members this week—the economic integration of trade between Northern Ireland and the South is at a far more advanced level than it is between the UK and continental Europe. Much of that trade has developed over the years within the framework of the EU to quite a high degree within Ireland.
On a point related to employment, we have had concerns from a number of members in Northern Ireland about the ability to bring in skilled workers: workers that we require in what is, we must remember, an essential industry. It is not like making cups of coffee or sandwiches, nice though those are. Depending on how that plays out, I think we will have members potentially looking at moving to the South in order to have a different regime for the employment of drivers.
Mr Winnick: You keep on referring to the South.
Jack Semple: I mean Ireland.
Mr Winnick: Ireland would like to be recognised as Ireland.
Jack Semple: I beg your pardon. Ireland is what I meant to say.
James Hookham: The FTA took some comfort from the Prime Minister’s speech last week when she expressed the hope that the common travel area could be extended to freight. The idea of a relatively free circulation of goods may go some way to addressing these concerns. The reinstitution of a hard border between the north and the Republic obviously has connotations way outside logistics and freight transport. There may be some merit in addressing that, together with the innovative ideas around what interventions are made by customs and so on.
Q179 Chair: A lot depends on the objectives. The question is: how do you actually make this happen? Let us suppose we do not have a common external tariff on particular agricultural goods, for example. How would you avoid, in practice, having some kind of customs clearance checks at the Northern Ireland border? Even if nobody wants to have that, how would you avoid it?
Jack Semple: In terms of Northern Ireland, what we are getting from our members is that they do not see how that can be done easily, but a hard exit, given the political background in Northern Ireland, just is not where they want to be.
Andrew Baxter: An example of how you might be able to avoid border checks is that today, clearances have to be done either at the border or at approved warehouses. Our facility in Dartford is approved, and you can do export clearances and import clearances from there. So, for example, a distribution company in Belfast may collect goods in Northern Ireland, bring them back to their depot and then send a trunk trailer to Dublin, where the goods are distributed. They could bring those goods back, do their clearance at their depot, trunk them to Dublin and then distribute them there. It is possible that you could do all that through authorised depots and not actually at the border.
Q180 Chair: Presumably that works in favour of the biggest companies, which have those big systems in place. It adds some bureaucracy for you, but makes market entry harder.
Andrew Baxter: Potentially, but I don’t think you are talking about needing to be a big, big operator in order to do this. Even very modestly sized organisations could organise themselves to do that.
Graeme Charnock: But you are right in terms of saying there is a standard that you need to abide by before you can get into that position. It is not necessarily to do with size itself, but you need to be able to demonstrate that you have the capability and wherewithal.
Q181 Mr Winnick: There is a risk, is there not, as far as the EU is concerned—in the minds of the 27, at least—that Northern Ireland in some respects could be a way in which non-EU items would not have the same tariffs as they would otherwise? One can understand the suspicion. Am I not right?
James Hookham indicated assent.
Chair: Mr Hookham nodded, for the record.
Q182 Tim Loughton: I want to come back to how you think the nature of trade may change. For example, at the moment, a consignment of tequila from Mexico comes over on a boat to Bilbao and is then put on to various lorries, and some of it ends up in Italy and some of it ends up in one of your warehouses, Mr Baxter, or whatever. Is that going to change? Will more go by sealed container—by sea or air—or, given that what a bottle of tequila from Mexico needs to look like is specified under EU regulations, which we subscribe to at the moment, could we continue to subscribe to the Mexican tequila regulations after Brexit, in which case consignments could continue to come in via Bilbao, get on the lorry and end up at Mr Baxter’s depot without any requirement for additional checks? Is anything actually going to change?
Graeme Charnock: If you are looking at a shipment like that—you are never going to get a shipment that is full of tequila all coming to the UK.
Tim Loughton: We might get a taste for it. You never know.
Graeme Charnock: We would have to have a big taste for it. Usually, cargo is initially, on its first leg, dropped at much larger ports, and then it is transhipped elsewhere and perhaps transhipped again. In your example, we would rely on Bilbao doing all the necessary checks and balances; then, when it came to us, it would come straight in. If you like, a fellow EU country has done our homework for us. Going forward, all things being equal, you may be right. If someone has to check it there and then it has to be re-checked over in the UK, why wouldn’t we do it once?
Andrew Baxter: But there would still be a customs clearance process.
Q183 Chair: I am conscious of the time, and I am very grateful for your time. May I quickly ask two brief final questions? We talked a bit about transitional controls and having time to plan. We presume at this stage, although it is not yet clear, that the new customs arrangements will be part of the free trade agreement as opposed to being part of the exit settlement. We don’t yet know whether those will be done contemporaneously or whether the new free trade agreement will not come until after the exit settlement has been agreed. If that adds delays to the process and you need time to plan, to invest or to get new systems in place, would it be better, from your point of view, to stay in the customs union until a new free trade agreement was in place?
James Hookham: Yes.
Graeme Charnock: I think that must be right.
James Hookham: Definitely. In your scenario, Chair, you had current arrangements as per the EU, an exit—the default there is WTO arrangements, which have their own implications customs-wise—and then some kind of halfway house, where we have negotiated under an FTA what the longer-term arrangements are. That sounds like maximum disruption and maximum uncertainty to me, so some kind of transitional arrangement, by agreement, that gets us to the free trade agreements—the FTA outcomes—and gets us there in one go, with adequate time to address some of the infrastructure and institutional issues we have talked about, would probably be the best—
Q184 Chair: So in terms of the length of time that you would need, you would need both time until the agreement of the implementation of the FTA, and then any additional time needed from the point at which you get certainty about what the FTA will be until the point of implementation of the FTA; and during that transitional period, however long it may be, you will need to be inside the customs union.
James Hookham: That would be my estimate.
Andrew Baxter: My view is that you can’t have Britain leave the customs union unless customs are ready to deal with the things that they need to deal with. That cannot happen, because the implications of it are that you will have queues at borders of trucks waiting to get into the country and not fulfilling our supply chain. That can’t happen; it doesn’t have to happen. Government just needs to act in order to prevent that problem.
Q185 Chair: Given that it would be possible to remain inside the customs union and be outside the single market and have the other things that come from being outside the single market, again, from your point of view, with a realistic assessment of what the likely Government investment will be—we assume there will be some additional Government investment—in customs, Border Force and so on, and a realistic assumption of the way in which France, Belgium and other countries will respond and of what will be practical given the withdrawal from the common external tariff and the consequences of that for customs clearance requirements, would it be better to stay inside the customs union and be outside the single market, or wherever we end up on the single market, or not?
Andrew Baxter: If you are asking me to answer from a personal perspective, I believe that we should leave the customs union. I believe in Brexit. I voted for it; I was involved in the campaign to leave; and I still believe in it. But—
Mr Winnick: You’ll have little to complain about, Mr Baxter!
Chair: I am not entirely sure from your evidence that that entirely follows from any of the pieces of evidence along the way.
Andrew Baxter: Do you want me to answer? My reasons—
Chair: Just on the customs union. I am sure you will have all sorts of other reasons around the single market or other issues—immigration or whatever it might be—but I would like you to answer specifically on the customs union, which you could in theory detach from the other questions.
Andrew Baxter: Right. I believe that Britain should be a free, governing country. I don’t believe that we should be part of the customs union. I believe we should be free to do free trade deals and so on. We need to prepare properly for Brexit, and that’s what I’m interested in happening.
Q186 Chair: Does anybody else have any different view just in terms of the customs union, detached from the other issues?
James Hookham: I think the answer to your question, Chair, is that customs and other organisations need to invest sufficiently to preserve as closely as possible the levels of service and reliability through our ports that we have at the moment. Our economy is currently based on those assumptions about transit time and dwell time that we have heard about. There would be a shock to the system if something different was put in. I am sure we would work through that. It may leave a residual overhead of cost in the economy, but what we need to do is to avoid the shock effect, which does actually bring supply chains to a halt. That would give us serious disruption of the economy and is seriously not what the public expect to happen, as well as costing a lot of money and inconvenience. So I cannot answer your question directly, but we have very clear outcomes that we are looking for in terms of what needs to happen in order to keep Britain trading.
Jack Semple: I appreciate that like Mr Hookham, I am not answering your question directly, but the important thing has just been set out. Beyond that, there is a fear in the industry that this may not be recognised at the level in Government where it needs to be recognised. We need a clear direction to HMRC and a public statement that recognises the importance of this and makes available to HMRC the resources that it needs to put in place the solution, whatever it is.
Q187 Chair: So effectively, it would be fair to say that your conclusion is that you find it hard to see how coming out of the common external tariff—it can be confusing what the customs union is—would avoid some kind of additional border clearance or customs clearance checks. You then have a series of things that you think are needed to mitigate the economic cost, but you do not seem confident that that cost can just be vanished.
Jack Semple: To make Brexit a success might be another way of stating it. I think our confidence would be greatly increased if Ministers would say, “We are going to do what’s needed.”
James Hookham: I think the golden rule is not to fall into the assumption that all these checks have to be done at the border. That is where the space is limited; that’s where the pressures are. It also applies to our airports, because there is a lot of other trade through air traffic as well as through our sea ports.
Chair: Thank you very much for your time. If you have any further thoughts that you want to send in to us, you are very welcome to add them in written evidence. We appreciate your time this afternoon.