Written evidence submitted by the Freight Transport Association (UNF0014)

 

Unfettered Access: Northern Ireland and customs arrangements after Brexit

 

About the Freight Transport Association

 

The Freight Transport Association (FTA) is one of the UK’s largest trade associations, and uniquely provides a voice for the entirety of the UK’s logistics sector. Its role, on behalf of over 18,000 members, is to enhance the safety, efficiency and sustainability of freight movement across the supply chain, regardless of transport mode. FTA members operate over 200,000 goods vehicles - almost half the UK fleet - and some one million liveried vans. In addition, they consign over 90 per cent of the freight moved by rail and over 70 per cent of sea and air freight. 

 

Will the revised Northern Ireland Protocol allow goods produced in Northern Ireland unfettered access to the rest of the UK internal market;

Northern Ireland is an important trading partner of Great Britain and will continue to be due to the interconnectedness of supply chains, geographical proximity and the economic value of trade, which was worth £7.6bn in external sales of Northern Irish goods to Great Britain in 2017.

From a UK import perspective (ie. for the goods to be able to enter Great Britain) it is unclear at present. The UK Government has stated that “Some practical information will need to be provided electronically on movement of goods West-East”, without specifying which data sets or in which format and within which timelines.

Based on InterTrade Ireland research, 70% of cross border trade on the Island of Ireland is in intermediate goods. These are ingredients and components used to manufacture products, most notably agri-food products, that are then sold to end users in Great Britain and the EU. To ensure products exported from Northern Ireland to Great Britain can continue to have unfettered access, any agreement must allow for ‘bi-lateral cumulation’, so that products partly produced in the EU and partly produced in the UK can benefit from zero tariff and quota access to both the EU and UK markets.

Whenever possible, ‘diagonal cumulation’, which would allow products partly produced in the EU and in the UK to benefit from preferential access granted by both EU and UK trade agreements with third countries, should be negotiated with key trading partners.

 

What customs checks, processes, declarations and infrastructure improvements will need to be implemented under the revised Protocol by (a) businesses and (b) customs authorities in (i) Northern Ireland and (ii) Britain in order to export goods from (A) Northern Ireland to Britain and (B) Britain to Northern Ireland;

On both sides of the Irish Sea, businesses and logistics providers need to have timely clarity on operational requirements and new processes so they have enough time to implement them. An example of operational issues that industry should know and plan for well in advance would be the need to know if certain entry points will have to be used for transporting goods for sanitary and phytosanitary procedures, or what processes will be used for accompanied freight.

The protocol agreement states there will be a single regulatory zone on the island of Ireland, so that an open border is maintained on the island of Ireland. This involves Northern Ireland aligning with particular EU regulations covering trade in goods. As a result, any processes normally required for goods entering the EU will be implemented at the Northern Ireland-Rest of World border or on trade moving from Great Britain to Northern Ireland.

 

 

 

 

Northern Ireland to Great Britain

From an EU export perspective (ie. for the goods to be able to leave Northern Ireland): all shipments will require an export declaration to be lodged (which includes the exit summary declaration) or an alternative (eg. transit or ATA carnet).

The Protocol contains no requirement for additional regulatory checks on goods moving from Northern Ireland to Great Britain. The decision to introduce any new requirements and checks would be taken by the UK Government at a later stage.  

 

Great Britain to Northern Ireland

From a UK export perspective (ie. for the goods to be able to leave Great Britain): UK export requirements are unclear at this stage.

From an EU import perspective (ie. for the goods to be able to enter Northern Ireland): Goods moving from Great Britain to Northern Ireland will be required to complete both import declarations and Entry Summary (ENS) Declarations because the UK will be applying the EU’s Union Customs Code in Northern Ireland. These requirements are similar to requirements that would apply from Great Britain to continental EU.

Additional processes are likely to be introduced, either to prove that goods are not ‘at risk’ of entering the EU and should not incur tariffs, or to benefit from any reimbursement scheme developed by the UK Government. The details of these arrangements will be defined during the transition period and are unclear at present.

No tariffs will be paid on goods moving from Great Britain to Northern Ireland unless they are deemed to be ‘at risk’ of entering the EU. This applies to all goods that are not subject to further processing and that meet the criteria that the Joint Committee will establish in order to determine the risk of the onward movement of 

The Joint Committee will establish, by the end of the transition period, the criteria for the above risk assessments and may amend the criteria during their application. Such criteria shall take into consideration issues such as the final destination of goods and value or risks of smuggling.

The appropriate UK tariff will be paid on goods moving from outside the UK or EU to Northern Ireland unless they are deemed to be at risk of entering the EU. The Joint Committee will agree the criteria to be used in determining whether goods are not considered to be at risk of entering the EU.

The UK may also apply a system of reimbursement and waivers, subject to provisions relating to state aid also set out in the Protocol.

Specific categories of goods (such as personal items, consignments of negligible value or sent by one individual to another) would benefit from a duty waiver – but no mention has been made of a potential customs formalities waiver.  

Goods moving from Great Britain to Northern Ireland will have to meet the requirements of all relevant EU legislation, including regarding the characteristics of the product; the means for testing or approval; and any requirements to have legal persons based within the single market.

Goods arriving in Northern Ireland, including from Great Britain, would undergo regulatory checks (eg. SPS checks), in accordance with EU law.

Agri-food goods moving from Great Britain into Northern Ireland would need to be notified to the relevant authorities before entering Northern Ireland and would be subject to checks including identity, documentary and physical checks by UK authorities (but on the basis of EU rules and standards).

There will be additional documentation required on all agri-food goods moving from Great Britain to Northern Ireland to ensure that they comply with the necessary EU regulations. These are likely to include Export Health Certificates (EHCs) for products of animal origin (POAO), fish and live animals; and phytosanitary certificates (PCs) for plants.

As agri-food goods enter Northern Ireland from Great Britain, they would do so via a Border Inspection Post (BIP) or Designated Point of Entry (DPE) as requested by EU law. There would be additional fees to cover document and physical inspections as well as EHCs and other administrative checks prior to arrival at the border.

For other goods subject to market surveillance (but not SPS requirements), under the Northern Ireland Protocol, EU legislation relating to market surveillance will apply in Northern Ireland, meaning UK market surveillance authorities will conduct risk-based checks on an ‘adequate scale’, on goods entering Northern Ireland from Great Britain. This approach means that not all goods are checked, and instead checks are prioritised on shipments with the highest risk of non-compliance. Though some documentary checks could take place whilst the goods were in transit, physical checks would have to take place in a controlled environment at the point of entry.

 

 

For as long as Northern Ireland participates in the customs arrangements and regulatory zone, there will therefore be processes to ensure that goods entering Northern Ireland destined for the EU pay the right duty and that all goods comply with the appropriate rules. The implementation and application of these arrangements will be managed by UK authorities in accordance with the arrangements set out in the Protocol.  However, EU representatives can also request to be present at customs or regulatory inspections.

 

Whether the UK has sufficient (a) customs agents, (b) customs officials and (c) veterinarians to facilitate the new customs arrangements;

Industry on both sides of the Irish Sea face significant challenges as many may need to complete customs documentation and other formalities for the first time at the end of the transition period. There is a substantial customs agent shortage in the UK with Northern Ireland businesses facing added pressure due to the potential formalities associated with the protocol that will not be faced by other UK businesses in Great Britain.

There are very few specialist Customs Clearance Agents and Freight Forwarders currently operating in NI due to the current volume of consignments requiring clearance with Third Countries. To date, these companies have been very conservative in scaling-up for the withdrawal from the EU with little recruitment during 2019.

The Northern Ireland Department for Economy published its customs capacity study with service providers in March 2020 that concluded that one third of interviewees said they have recruited additional staff in the past 12 months to work on customs procedures, and a further two companies said that recruitment had taken place within their GB customs operations in preparation for Brexit. However, most service providers were adopting a ‘wait and-see’ policy until they have greater clarity as to the actual implications the Protocol will have on the local economy. The research emphasised that service providers and their clients will require clear guidance from government to understand the practical implications of the revised Protocol in order to put the necessary plans in place for customs administration. Given that the sector estimates it takes six months to train new recruits to a reasonable level of capability, recruitment therefore would need to commence in the first half of 2020.

The UK government along with government departments and agencies in Northern Ireland need to urgently address this shortage of customs agents. Co-funded training or making it available under apprenticeships should be provided for those new to completing customs and other declarations.

Small and medium sized enterprises will rely on logistics providers and customs agents to manage any new formalities. In 2017, Large businesses with more than 250 staff accounted for 41% of the total value of goods (£4.3bn) purchased by Northern Irish businesses from GB with the remaining 59% (£6.3bn) being purchased by micro, small and medium businesses. It is therefore critical that logistics service providers to such businesses in Northern Ireland are supported to ensure they have appropriately trained staff and capacity to service the local economy

 

What effect the new customs arrangements will have on the (a) volume and (b) profitability of (i) West-East and (ii) East-West trade between Northern Ireland and Great Britain;

 

West – East: In 2019, a total of 426,774 Roll-On / Roll-Off movements were recorded as exiting Northern Irish Ports bound for Great Britain. Trade from Northern Ireland to Great Britain is dominated by agri-food, engineering and construction goods

East – West: In 2019, a total of 425,166 Roll-on / Roll-Off freight movements were recorded entering Northern Ireland Ports from Great Britain. Freight into Northern Ireland is dominated by retail and accounts for approximately 70% of all freight by value via Roll-on/Roll-off into Northern Ireland from Great Britain while 19% of goods from Great Britain is for local manufacturing.

A report published by the Department for Economy in March 2020 on customs capacity with service providers in Northern Ireland concluded that not all providers charge a set rate for services with some presenting a spread of rates charged to clients. This spread can be explained by factors including the complexity of the declaration or the fact that different rates are agreed with different clients. However, the current average rate charged by companies for a basic export declaration is around £26, whilst the overall average rate quoted for a basic import declaration is in the region of £40. The study also highlighted the other costs local businesses will face due to additional administration costs, IT systems costs, training costs and one-off costs to familiarise themselves with new processes and declarations for the first time.

Typical profit margins in the haulage market are between 3 to 5%. Irish Sea transport is priced on a lorry travelling laden in both directions with 40% revenue on the Eastbound journey and 60% revenue on the Westbound journey. Transport operators will not be able to absorb costs associated with new trade formalities between Northern Ireland and Great Britain and will be passed onto the end user.

Any trade imbalance caused as a result of trade barriers or higher costs for trade facilitation such as customs formalities could disrupt these supply chains and the provision of services.

 

What potential economic effects the revised Protocol will have on Northern Ireland;

In the event of the government or a public body creating or facilitating border arrangements or regulatory barriers between Great Britain and Northern Ireland, the cost of implementing or enforcing these should not fall onto business or logistics providers. To facilitate a level playing field for trade within the UK internal market, local Northern Irish businesses or logistics providers should not be burdened with new costs in order to continue facilitating current or new trade between Great Britain and Northern Ireland.

The Common Travel Area protects the employment status of UK and Irish nationals working across the border, but we need further assurance that Northern Irish businesses can still employ current or new EU national workers who reside across the border in the Republic of Ireland. In order to compete over an open land border with the EU, a Shortage Occupation List for Northern Ireland that would address skills shortages in the logistics industry would help businesses remain competitive in the labour market and enable the industry to continue to deliver services.

The Protocol provides that Northern Ireland is in the UK’s customs territory. It makes clear that Northern Ireland may be included in the UK’s future trade deals with third countries, and that Northern Ireland will be included in the UK’s World Trade Organization (WTO) schedules. For the Protocol to deliver economic benefits for the Northern Ireland economy while protecting its supply chains, it is imperative that as well as having continued access for goods with the EU, those same goods should also be part of unfettered access to the UK internal market and any future trade deal negotiated by the UK with third countries.

 

Other issues and challenges arising from the implementation of the Northern Ireland Protocol.

A simplified approach recognising the nature of all-island supply chains and the use of Dublin Port for ‘Just in time’ freight to Great Britain should be adopted and recognised by the UK and EU to ensure continued unfettered access of Northern Irish goods to the GB market. This could include for example be achieved using: a new trusted trader scheme to allow intra-company movements to have priority if selected for borders control at ports; Incentivised uptake of Customs Transit facilitations to enable businesses to clear goods at their distribution centres; and a new Environmental Health trusted trader facilitations to let agri-food goods be vet-certified at manufacturing facilities.

Consideration should be given to movements on the island of Ireland, as the Protocol in the withdrawal agreement does not address road freight connectivity. On an average day, approximately 13,500 commercial goods vehicles cross the border in Ireland on just six of its roads (Source: Transport Infrastructure Ireland)

The UK and the EU must negotiate an agreement allowing for the free passage of commercial vehicles on similar terms as at present for the Island of Ireland that will help protect current long-standing cross border supply chains with 70% cross border freight consisting of ingredients and components. Clear and enforceable rules, providing for non-discrimination of all operators, should be in place. Transport Manager and Driver Certificates of Professional Competence (CPC), as well as driver licences, should be mutually recognised without the need to retake tests or exchange qualifications. Cabotage rights should be preserved and long-term mutual recognition arrangements for safety and security authorisations secured.

 

Seamus Leheny

Northern Ireland Policy Manager

Freight Transport Association

 

April 2020