Solving the Northern Ireland border problem has only one solution
that is compatible with Brexit and that is to collect customs dues
elsewhere. It should also be understood from the outset that there is no obligation under the Good Friday Agreement (GFA) to maintain open borders for trade, the GFA scarcely mentions trade.
All across the EU there are differences in alcohol excise duty, there is widespread overstaying of tourist visits and, until recently, porous borders in the East. Only 2-3% of goods imported from outside the EU are checked at the EU's external borders. Violations of conformity and standards in imported goods are nearly all picked up by the various trading standards agencies as the goods are used, not at borders. Despite the absence of borders in the EU the Member States collect excise duty and enforce migration limits and trading standards internally.
Given that all that is proposed in Northern Ireland after Brexit is the collection of tariffs away from borders this is a small step compared with what is already accomplished. The simplest solution is for customs dues to be declared as part of a quarterly self-assessment return by Northern Ireland businesses. Perhaps VAT liable NI businesses could make a return as part of their VAT return and non-VAT liable NI businesses and individuals could be provided with a quarterly customs form. It would make sense to have a customs free amount of £200 - 500 dues annually so that much of small business is duty/dues free.
What the Irish and EU government decide to do about borders is up to them. If they really cared about borderless Ireland they would replicate the UK solution. Self Assessment is indeed the moral high-ground of the border debate, it is the right solution. If introduced with considerable publicity as the moral option it would give the EU and Ireland no choice but to accept it.
Enforcement of the self declaration of customs dues is no different from the enforcement of Self Assessment of income tax or VAT. It is easier to enforce because any attempt to smuggle large amounts of cars or food into mainland UK would be obvious to the customs officials who are normally stationed at Northern Irish ports and airports. Foreign exchange and bank transactions will also identify fraudsters. There will be fraud, as there is always fraud around taxation. The risk to the UK economy is very small because Northern Ireland only exports about £10bn of goods to the mainland annually.
The smuggling of drink and tobacco into the mainland might require special consideration after a year or two. It may or may not become a problem. However, there are existing customs checks at Belfast for the transport to the mainland of items that attract duty - see for instance smuggling from Belfast to Glasgow. It should be remembered that there are substantial duty differences between EU countries at present and these have not led to calls to leave the Single Market because of the potential for smuggling.
Standards (Conformity) for the products travelling between the two parts of Ireland will be close in the first few years after Brexit and producers on both sides of the border could be given a free pass on these for, say, 3 years. A comprehensive free trade deal might be expected to occur between the EU and UK in that period but if this does not occur it would be necessary for importers and exporters to certify that their products meet the appropriate regulations (Declaration of Conformity). Note that, given CE stickers can be bought freely, Conformity is enforced by Trading Standards Officers or equivalent, generally not Customs. The whole process for Conformity would be little different from what happens with non-EU imports into the RoI or UK at present.
Is it really so problematical to replace people choosing to go through a Red Channel at a Customs post with people choosing to declare customs liability in the office or at home? Self Assessment is already available in practice throughout the EU because any traveller who fails to go through the Red Channel is usually permitted to declare their liability from home.
More about importing into Northern Ireland
Many imports come from exporters who know the system for UK imports and will pay the tariffs and complete the paperwork. These will present little more difficulty than scanning barcodes.
The border issue arises from purchases made South of the border and simply freighted North by the purchaser or a local farmer etc. without documents.
The simplest, though not the cheapest, way to import goods that have no documents is to ask a Customs Approved Third Party Service Provider to manage the process. These are often Freight Forwarders and can be found online.
My recommendation would be for the Government to offer two free training sessions with Service Providers for those who expect to import goods and wish to manage their own documents. This would involve visiting the Service Provider and being given a guide to importing their goods, samples of documentation and being taken through the process with an actual import consignment.
The Government should also provide an online self assessment system for imports and exports that actually works, not the current system of dispersed "guides" and CHIEF which, charitably, is designed to confuse. The new CDS system may be the answer.
Enforcement would be for the HMRC as it is for Taxes, VAT and Customs at the moment. During VAT inspections the inspector should examine any large invoices from the South or elsewhere in the EU and request the customs documentation. Any large scale movements of food and cars out of NI to the mainland might be queried at ports and airports (as it probably is at the moment). Any large scale suspicious freight activity to locations that have no documentation would be investigated.
There is no need for stopping lorries coming from the South for random checks if a Self Assessment System is used.
Some concern has been expressed about the small cross-border trader. The £200-500 exemption will deal with the tariffs for many small businesses. If the RoI does not agree to a self assessment system for cross-border customs dues, or there is a WTO Brexit, then cross border trades by RoI business would be dealt with using permits. These would be paid for at the end of the year and cost the expected or declared tariffs that had been collected.
The following examples would apply to larger businesses operating transborder trades:
Example 1: An NI plumber does cross border plumbing. The plumber should keep two sets of accounts, one for purchases of materials made in RoI and one for purchases made in NI.
Example 2: An RoI plumber does cross border plumbing. Ideally the RoI would agree to implement the same solution as NI. If the RoI does not implement the same solution then the RoI plumber would need a permit issued by NI that would be priced according to the dues on expected turnover in the North.
As the ERG has recently proposed, maintaining the EU agricultural standards in the UK after Brexit would resolve most of the concerns voiced by Irish farmers and other opponents of an open NI border outside the EU.
Footnote: The European Union Customs Code (UCC) already embodies the possibility of declaring goods (Entry Summary Declaration, ENS) at places other than the port of first entry:
"3.2 Lodgement of ENS at another customs office
One of the options to lodge ENS provided in the UCC is to submit it at a customs office different from the customs office of first entry. This possibility may be available only if customs authorities so allow. MSs will provide information about the availability of this functionality in their system information available to economic operators."
A single Member State (MS) such as the Republic of Ireland is therefore in principle able to implement the declaration of customs liability away from the border without the whole EU needing to agree to this change. Furthermore the UCC also recognises International Agreements between Member States and other States as grounds for a waiver of Office of First Entry requirements.
"4.1 General overview
There are two types of waivers from the obligation to lodge ENS:
for goods carried by means of transport that only pass through the territorial waters or the airspace of the customs territory of the Union without a stop within that territory, or in other cases which are duly justified by the type of goods or traffic, or where required by international agreements."
All across the EU there are differences in alcohol excise duty, there is widespread overstaying of tourist visits and, until recently, porous borders in the East. Only 2-3% of goods imported from outside the EU are checked at the EU's external borders. Violations of conformity and standards in imported goods are nearly all picked up by the various trading standards agencies as the goods are used, not at borders. Despite the absence of borders in the EU the Member States collect excise duty and enforce migration limits and trading standards internally.
Given that all that is proposed in Northern Ireland after Brexit is the collection of tariffs away from borders this is a small step compared with what is already accomplished. The simplest solution is for customs dues to be declared as part of a quarterly self-assessment return by Northern Ireland businesses. Perhaps VAT liable NI businesses could make a return as part of their VAT return and non-VAT liable NI businesses and individuals could be provided with a quarterly customs form. It would make sense to have a customs free amount of £200 - 500 dues annually so that much of small business is duty/dues free.
What the Irish and EU government decide to do about borders is up to them. If they really cared about borderless Ireland they would replicate the UK solution. Self Assessment is indeed the moral high-ground of the border debate, it is the right solution. If introduced with considerable publicity as the moral option it would give the EU and Ireland no choice but to accept it.
Enforcement of the self declaration of customs dues is no different from the enforcement of Self Assessment of income tax or VAT. It is easier to enforce because any attempt to smuggle large amounts of cars or food into mainland UK would be obvious to the customs officials who are normally stationed at Northern Irish ports and airports. Foreign exchange and bank transactions will also identify fraudsters. There will be fraud, as there is always fraud around taxation. The risk to the UK economy is very small because Northern Ireland only exports about £10bn of goods to the mainland annually.
The smuggling of drink and tobacco into the mainland might require special consideration after a year or two. It may or may not become a problem. However, there are existing customs checks at Belfast for the transport to the mainland of items that attract duty - see for instance smuggling from Belfast to Glasgow. It should be remembered that there are substantial duty differences between EU countries at present and these have not led to calls to leave the Single Market because of the potential for smuggling.
Standards (Conformity) for the products travelling between the two parts of Ireland will be close in the first few years after Brexit and producers on both sides of the border could be given a free pass on these for, say, 3 years. A comprehensive free trade deal might be expected to occur between the EU and UK in that period but if this does not occur it would be necessary for importers and exporters to certify that their products meet the appropriate regulations (Declaration of Conformity). Note that, given CE stickers can be bought freely, Conformity is enforced by Trading Standards Officers or equivalent, generally not Customs. The whole process for Conformity would be little different from what happens with non-EU imports into the RoI or UK at present.
Is it really so problematical to replace people choosing to go through a Red Channel at a Customs post with people choosing to declare customs liability in the office or at home? Self Assessment is already available in practice throughout the EU because any traveller who fails to go through the Red Channel is usually permitted to declare their liability from home.
More about importing into Northern Ireland
Many imports come from exporters who know the system for UK imports and will pay the tariffs and complete the paperwork. These will present little more difficulty than scanning barcodes.
The border issue arises from purchases made South of the border and simply freighted North by the purchaser or a local farmer etc. without documents.
The simplest, though not the cheapest, way to import goods that have no documents is to ask a Customs Approved Third Party Service Provider to manage the process. These are often Freight Forwarders and can be found online.
My recommendation would be for the Government to offer two free training sessions with Service Providers for those who expect to import goods and wish to manage their own documents. This would involve visiting the Service Provider and being given a guide to importing their goods, samples of documentation and being taken through the process with an actual import consignment.
The Government should also provide an online self assessment system for imports and exports that actually works, not the current system of dispersed "guides" and CHIEF which, charitably, is designed to confuse. The new CDS system may be the answer.
Enforcement would be for the HMRC as it is for Taxes, VAT and Customs at the moment. During VAT inspections the inspector should examine any large invoices from the South or elsewhere in the EU and request the customs documentation. Any large scale movements of food and cars out of NI to the mainland might be queried at ports and airports (as it probably is at the moment). Any large scale suspicious freight activity to locations that have no documentation would be investigated.
There is no need for stopping lorries coming from the South for random checks if a Self Assessment System is used.
Some concern has been expressed about the small cross-border trader. The £200-500 exemption will deal with the tariffs for many small businesses. If the RoI does not agree to a self assessment system for cross-border customs dues, or there is a WTO Brexit, then cross border trades by RoI business would be dealt with using permits. These would be paid for at the end of the year and cost the expected or declared tariffs that had been collected.
The following examples would apply to larger businesses operating transborder trades:
Example 1: An NI plumber does cross border plumbing. The plumber should keep two sets of accounts, one for purchases of materials made in RoI and one for purchases made in NI.
Example 2: An RoI plumber does cross border plumbing. Ideally the RoI would agree to implement the same solution as NI. If the RoI does not implement the same solution then the RoI plumber would need a permit issued by NI that would be priced according to the dues on expected turnover in the North.
As the ERG has recently proposed, maintaining the EU agricultural standards in the UK after Brexit would resolve most of the concerns voiced by Irish farmers and other opponents of an open NI border outside the EU.
Footnote: The European Union Customs Code (UCC) already embodies the possibility of declaring goods (Entry Summary Declaration, ENS) at places other than the port of first entry:
"3.2 Lodgement of ENS at another customs office
One of the options to lodge ENS provided in the UCC is to submit it at a customs office different from the customs office of first entry. This possibility may be available only if customs authorities so allow. MSs will provide information about the availability of this functionality in their system information available to economic operators."
A single Member State (MS) such as the Republic of Ireland is therefore in principle able to implement the declaration of customs liability away from the border without the whole EU needing to agree to this change. Furthermore the UCC also recognises International Agreements between Member States and other States as grounds for a waiver of Office of First Entry requirements.
"4.1 General overview
There are two types of waivers from the obligation to lodge ENS:
for goods carried by means of transport that only pass through the territorial waters or the airspace of the customs territory of the Union without a stop within that territory, or in other cases which are duly justified by the type of goods or traffic, or where required by international agreements."
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