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Tech won’t solve customs border issues, House of Lords EU Committee finds

Tech won’t solve potential customs issues at the border post-Brexit, at least not in the short term, and especially not in case of no-deal Brexit, according to a House of Lords report

The House of Lords European Union (EU) Committee is sceptical to the government’s plans to rely on technology to solve any customs issues at the border post-Brexit, saying tech “does not yet provide the answer”.

The EU Committee’s report highlighted the Brexit customs challenge, found that there are still several issues, including technology, to be solved before the UK’s exit from the EU in March 2019.  

The UK government has touted technology several times as a way to solve and facilitate the UK-EU customs relationship after Brexit. This includes using technology to avoid a hard border in Northern Ireland when the UK leaves the EU Single Market and the Customs Union.

The EU committee said that a fully open border between Ireland and Northern Ireland “requires the avoidance of customs controls”, but that “technology does not yet provide the answer as customs checks do require some form of physical infrastructure”.

“As Swiss and Norwegian customs authorities told the EU Select Committee during its Brexit: UK-Irish relations follow-up inquiry, many technological developments that could reduce (though not fully eliminate) the need for physical checks at their borders with the EU remain a long-term aspiration,” the committee’s report said.

This echoes a report by the Northern Ireland Affairs Committee, published in March 2018, which said it has found no evidence that technology can solve the border problem, despite the government having promised a “frictionless” border between the UK and Ireland post-Brexit.  

The EU Committee’s report added that the event of a no-deal Brexit, there is no technological system that will “wholly remove the need for checks on some goods at the border”.

“This is of particular relevance to the Northern Ireland/Ireland border, where trade under WTO rules risks re-introducing a hard border,” it said.

The committee added that a no-deal Brexit could cost UK traders £18bn annually.

HMRC IT readiness

HM Revenue & Customs (HMRC) deployed the first phase of its new customs IT system, the Custom Declaration Service (CDS) in August 2018.

However, significant challenges still remain, and having a fully functional, operational system in place by March 2019 is unlikely. Even if there is a deal, traders – particularly those who export goods – will have only one month to complete the migration to the new system.

While HMRC has assured the committee that there is a plan in place to “introduce customs controls between the UK and the EU” from March 2019 if necessary, Jim Harra, second permanent secretary of HMRC, told the committee “that it would not be optimal from day one”.  

“We would need to make a number of improvements from March 2019 to try to reduce friction and costs in that system,” he said.

Member of Parliament (MP) Mel Stride, who is the financial secretary to the HM Treasury and paymaster-general, said HMRC would need to make “a number of improvements from March 2019” to reduce costs and friction.

The committee said Stride referred to an “end-state model with no deal” that included a “very facilitated and efficient border”, but that this would not be ready by March 2019.

“One component would be an inventory-based system at the port that allows you to match pre-declarations made en route to Calais – via vehicle number plate recognition technology – to the inventory system, which would tell you what is on the particular truck. That would help to control the whole process and keep it moving,” he told the committee.

However, despite the concerns, customs technology could streamline services in the future. HMRC told the committee they are working on a business case to follow the Singaporean model of single-window technology, which means integrating all of the 26 government organisations at the border, eliminating the “so called wet stamp”, which is an actual stamp on a piece of paper, and doing it electronically instead.

However, HMRC CEO Jon Thompson added that it would be expensive and take time to implement.

“We have set out the bones of it and ministers are very interested, but to be transparent with you, it is a significant technology programme – hundreds of millions of pounds – and will take five years to implement,” he said.

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