If you want to ship goods from country A to country B you typically go through customs at least twice; once on export and once on import. On import, customs checks ensure any duties applicable can be paid, depending on what the good is, as well VAT and other charges.
Customs exists for a number of reasons, not least to avoid fraud. But it can be costly for traders. Many countries strike international agreements that help facilitate the movement of goods by reducing the administrative requirements.
Post-Brexit the UK will potentially face a host of new administrative burdens when moving goods. As an Institute for Government report makes clear, this would overwhelm our current port infrastructure. The Government’s proposals of a “streamlined customs arrangement,” includes the aim to sign up to the Commons Transit Convention as one existing agreement that could help facilitate the flow of goods.
Common Transit Convention – what it’s about
The Common Transit Convention allows a suspension of customs checks and payment of duties until the goods reach the destination country. Its signatories include the EU member states, the European Economic Area (EEA) states, Macedonia, Serbia and Turkey.
This is of significant benefit if you’re, say, a UK importer of washing machines from Turkey. Normally, to do that a haulier (employed to transport your goods by road) is going to have to go through the import process at the first customs office the goods enters the EU by – in this case Bulgaria. As part of the Convention, the Turkish transporter only needs to present a transit accompanying document at this intermediary customs office rather than completing import declarations when they cross a new border. This minimises the cost of duties and delays.
It’s not just the agreement that matters but the technology that underpins it. The New Computerised Transit system (NCTS) is only open to members of the Convention. For both exporters and authorities, it increases the efficiency and security of the procedure.
From the exporter’s perspective, an electronic transit declaration tells customs they want to use the transit procedure. The person making a transit declaration is responsible for the movement of goods and they have to provide a guarantee – a “customs debt” that is due if something goes wrong. This can be a cash deposit or a guarantee from a financial institution. The exporter is then given a time-limit within which it needs to reach its destination. By supporting paperless customs clearance, NCTS reduces the cost of customs procedures and the number of trucks queuing at the border, meaning a faster flow of goods.
From a customs authority’s perspective, NCTS connects customs offices across the signatory countries. When a declaration is made, a Master Reference Number is given to the shipment to track its movements. At the same time a message anticipating its arrival is sent to both the transit offices the goods will pass through and the destination office it will arrive at. This allows customs to monitor the goods at each stage of the movement meaning shipments can be tracked across jurisdictions.
Helping alleviate border pressures post Brexit
If the UK opted for a harder Brexit it is an open question as to whether the UK would be able to join. But the fact that Turkey and Serbia are signatories suggests it possible for countries with a close relationship with the EU.
Signing the Convention could potentially address some issues for some shipments. Under transit, it means goods from outside the EU could pass through the UK as a third party with duties suspended to another destination – Ireland for instance. Likewise, for Ireland the UK is a land bridge for its exports to other countries – it’s estimated in a report for the Irish Government that 53 per cent of Irish goods exports (measured in volume) to other countries are transported via the UK. Transit would be vital to maintain this trade.
Article 55 of the Convention also provides for transit simplifications. The simplifications make it possible for a trader to receive goods at an authorised place without the need to present the goods at the port. However the trader would need to be approved as an “authorised consignee” which only applies if they regularly receive goods placed under the procedure and also have the appropriate premises approved as a “Temporary Storage facility.” There are host of strict conditions attached to qualify and the approvals process can take many months.
It would be worth exploring how far NCTS or another system like it could provide for relieving pressure at the border. But there are still many issues the current provisions wouldn’t solve. For a start, any good going through the normal import process would still create huge issues for ports like Dover.
In addition the current facilities and the number of approved traders are not prepared to handle the scale of trade requiring clearance post-Brexit. These facilities would need significant infrastructure investments and capacity upscaling, which take time and money. The requirement of guarantees also presents a cashflow problem if you wanted to try to expand the use of NCTS.
Then there are regulatory issues that are not touched by transit. Under EU law, regulatory checks for goods like food have to be done at a border inspection post, a huge risk which the Commission’s notice to stakeholders makes clear.
Nevertheless, for customs at least, joining the Common Transit Convention does offer Britain one lever to alleviate pressures at the border.
Alex Stojanovic is researcher at the Institute for Government.