What a fortnight it has been. The outcome of the UK’s EU referendum has been to leave the EU, leading figures in the UK leave campaign have resigned and we wait to see who emerges as the new prime minister and what happens to the leader of the opposition.
Those of us who work in the area of international trade, customs and border management are in for an exciting few years. I’m sure that many of you, like me, will have been thinking about a wide range of issues, ranging from changes to regulation and the impact on UK-EU trade to migration and the impact on public service delivery.
In this short post I’ll look at some of the likely operational impacts on customs authorities in the UK and the rest of the EU.
The need for flexibility
The vote to leave marks the start of an uncertain, complex and probably lengthy process for the UK in determining its new relationship with the EU and the world. The initial focus of the UK government and the EU will be the terms under which the UK leaves and what access it has to the single market once it has left. There will be significant transitional work in the UK as EU responsibilities, such as trade negotiation, move back to the UK. The net impact will be a prolonged period of uncertainty regarding the regulation that will eventually govern UK trade.
Day to day operations cannot stop. The UK remains a member of the EU until the exit negotiations complete, along with all the rights and responsibilities that come with that membership. This includes implementing the changes required by the Union Customs Code which entered into force on 1st May 2016. Once outside the EU the UK will continue to comply with the worldwide standards and regulations that govern international trade, but it will have the flexibility to alter its customs regulations and processes in its own economic interest. This will likely include negotiating free trade agreements with other countries and trading blocks such as China and the US.
The UK and its main trading partners need flexible processes and systems that accommodate today’s reality and can rapidly adapt to an unknown future where the UK is out of the EU.
Increased import & export declaration volumes
Almost half of the goods leaving the UK are currently destined for other EU member states and therefore do not require import or export declarations. The number of import and export declarations processed by UK and EU customs authorities will increase significantly once the UK leaves the EU as these same movements will require a declaration. This increase will be more significant than any reduction due to new tariff and non-tariff measures decreasing EU-UK trade. The impact will be the greatest in the UK where CHIEF, HRMC’s aging import and export system, is already struggling to keep pace with changes in customs legislation. Other EU countries with strong trading links with the UK, such as Ireland and the Netherlands, will also see a significant rise in declaration volumes.
Data sharing for security and anti-fraud purposes is at risk
The UK participates in mutual assistance and data sharing initiatives with other EU member states for the purposes of improving security and preventing, investigating and prosecuting operations which are in breach of customs legislation. This includes initiatives such as the EU’s central Customs Information System, the sharing of Entry Summary risk assessments between member states and the collection and sharing of Container Status Messages provided by carriers. When the UK leaves the EU it will lose access to this valuable source of data and the EU will lose access to the information that would have been contributed by the UK. The EU and UK will need to consider what agreements, processes and systems will be used for data sharing after the UK leaves.
An uncertain future for EU innovation programmes
The UK has been an active participant in the EU Research and Innovation programme in the areas of supply chain and customs innovation. An example is CORE, which looked at ways to increase supply chain security and visibility by easing data sharing between different parties. Both government and the private sector benefit from this sharing as it improves the quality of customs’ risk assessments and enables the optimisation of supply chain processes. Hopefully a way can be found to ensure the successful continuation of these programmes.
The result of the UK’s EU referendum is clear; a majority of the UK has voted to leave the EU. Organisations must prepare now for an uncertain outcome and a different relationship between the UK and the EU. I am looking forward to an exciting few years helping them do this and contributing to the success of the both the UK and the EU.
Further information to help all organisations think through the potential implications of Brexit is available on IBM’s dedicated site “Navigating Disruption – Responding to the UK EU Referendum”.
I’d like to thank Norbert Kouwenhoven for contributing to some of the ideas outlined in this post.