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NAO raises concerns over systems preparedness for import controls

Delivery of enhancements and funding issues for the second phase of the Customs Declaration Service are among the points highlighted in latest report

The National Audit Office (NAO) has published a report raising a number of concerns over the UK’s ability to deliver the systems needed to bring in import controls, reduce the burden on traders, and resolve the complexities at the Northern Ireland border.

According to the report, published 5 November, the government was able to introduce the systems, infrastructure and resources by the end of the transition period to allow the trading of goods to continue as of 1 January 2021, despite a “very challenging set of circumstances”.

However, it noted this was partly achieved using temporary measures, and that government and departments must now progress from this temporary arrangement to a fully functional setup.

Further changes are needed to various systems to provide the extra capacity to deal with increased volumes of declarations, ensure system resilience and provide additional functionality in advance of the introduction of full import controls.

Defra projects

The report said HM Revenue and Customs (HMRC) had delivered most of the system changes relating to the Great Britain-European Union (GB-EU) model by June 2021 ahead of the expected increase in traders making full customs declarations.

However, it warned that more changes are required before January 2022 to support traders, the most significant being the enhancements to the Goods Vehicle Movement Service (GVMS), and to improve integration with other HMRC platforms. In January 2021, concerns were raised over traders’ ability to use GVMS and other border IT systems.

According to the NAO report, HMRC said it is confident the changes to GVMS to satisfy its own needs will be delivered before January 2022. However, the tax department said it was still working through the Department for Environment, Food & Rural Affairs’ (Defra’s) requirements to see if the changes could be accommodated in time.

Citing findings from the Border and Protocol Delivery Group (BPDG) at the Cabinet Office from August 2021, the NAO said that there was a high risk the Defra-related GVMS changes would not be ready in time for January 2022, even though plans for workaround solutions were being developed.

Also in preparation for the introduction of full import controls, Defra needs to move traders for the remaining categories of animal and food-related EU imports on to the Import of Products, Animals, Food and Feed System (IPAFFS), which is already in place. In addition, the department needs to finish the build of IPAFFS, so that imports of all plants and their products can be handled by the system and users migrated.

Moreover, Defra will need to build a digital interface which would enable IPAFFS to draw data from Export Health Certificates (ECHs) and reduce the admin burden on traders. A limited trial is due to start for this functionality, which was planned as part of the 2025 Future Border Strategy but has been accelerated. However, Defra noted the full roll-out of this feature will depend on development work in other countries as well as the UK.

Last-minute changes in policy was a concern mentioned by Defra to the NAO, as they might need to be incorporated into systems quickly, even though the department said in June 2021 that it was on track to deliver the changes required.

The report noted the success of the programme related not only to the technology itself, but Defra’s ability to ensure users in the UK and the EU know about the systems and can use them.

Concerns over CDS

Other significant future events relating to border management cited in the NAO report include the implementation of the Customs Declaration Service (CDS) and migration of traders.

Customs declarations for GB-EU trade are submitted via Chief, a system that is 25 years old and is being phased out in 2023 to be replaced by CDS. Due to the delays in rolling out CDS, both systems are running in parallel until traders have been fully migrated to the new system.

According to the NAO report, only 42 users out of a population of around 5,000 had migrated to CDS by October 2021. HMRC told the NAO that 12 of these were high-volume users and responsible for making large numbers of declarations. The department also predicts that volumes of declarations will increase significantly as trade volumes increase and import controls are phased in.

Additionally, the NAO noted that CDS capacity is at 200 million declarations following technical work by HMRC, which expects to complete key CDS work by January 2022, shifting all users to the new system. The migration will take place in a phased manner, with Chief closing to import declarations in September 2022 and closing to export declarations in March 2023, prior to its full retirement by late June 2023.

HMRC’s timetable for completing work on CDS has been described in the NAO report as “challenging” with the department’s current resources. The department is now identifying its highest priorities to reduce delivery risk, the report added, meaning that future work will be needed to further develop CDS. This is because CDS will not be able to replicate Chief’s functionality immediately, so workarounds will be needed for some low-volume declarations.

Northern Ireland

Other IT-related issues raised in the NAO report included the systems introduced to support the Northern Ireland (NI) Protocol, which introduced new obligations for traders moving goods into NI from Great Britain. According to the report, the systems delivered in January 2021 meet basic operational needs, but not the full capability needed to implement the protocol.

According to the NAO, upgrades to CDS are needed to enable new critical features to facilitate NI trade, while GVMS needs to be upgraded to support access of Northern Ireland goods into Great Britain. That is so HMRC can remove some of the easements at the border and improve revenue collection and security.

However, delivering on those requirements would be “challenging” considering the ongoing political uncertainty in relation to Northern Ireland. Additionally, there is a risk HMRC will not have the money required to fund the enhancements. The report added that the department rated delivery risk of systems required for Northern Ireland imports and exports, including CDS phase 2, as amber.

Other systems introduced with the aim of helping traders complete new processes or refund costs mentioned among the concerns raised by the NAO report include the Trader Support Service (TSS). The system completes customs and safety and security declarations in HMRC systems, and is developed by Fujitsu under a contract with the tax department at a cost to the taxpayer of £360m between 2020 and 2022.

According to the NAO report, TSS facilitated the movement of around 1.2 million consignments moving into Northern Ireland between January and September 2021. It is noted that despite its initial success, TSS faced issues in customer satisfaction in relation to increasing complexity in customs declarations.

TSS issues were caused by a lack of expertise to resolve more complex issues relating to the system, as well as lack of staff familiarity with the platform, the report said. While Fujitsu claimed improvements to training of agents, HMRC told the NAO that it has been monitoring the preparedness of the intermediary market ahead of the expiration of the Fujitsu contract in 2022.

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