Implementing Brexit: Customs: Joe Owen Marcus Shepheard Alex Stojanovic

IFG ANALYSIS | IMPLEMENTING BREXIT
Implementing Brexit:
Customs
Joe Owen | Marcus Shepheard

Alex Stojanovic
Our Brexit work
Following the UK’s vote to leave the European Union
(EU), the Institute for Government has launched a
major programme of work looking at the negotiations,
the UK’s future relationship with the EU and how it
governs itself after Brexit. Keep up to date with our
comment and Brexit explainers, read our media and
broadcast coverage, and find out about our events at:
www.instituteforgovernment.org.uk/brexit
About this paper

This is the second in a series of papers on
implementing Brexit by the Institute for Government.
Each paper looks at an area of UK Government policy

that needs to change as a result of Brexit, and makes an
assessment of how it might change, what will be
required to implement the change and whether or not
there is a cliff edge – that is, policy areas where there
will be significant disruption on the day of the UK’s exit
from the EU, unless all necessary preparatory measures
are in place or a transitional/phased implementation
deal can be reached with the 27 EU member states.
In each paper, we set out the policy options for the

Government after exit, noting where those choices are
dependent on the outcome of the exit deal and future
arrangement with the EU. We look at the task ahead for
the Government, what will be required to design and
implement a new policy and system, and highlight
some key considerations and recommendations.
Contents
List of abbreviations 2
Summary 3
1. Introduction 6
2. How customs works now 8
3. What could customs look like after Brexit? 17
4. What are the key implementation challenges? 24
Policy and legislation 24

Technology 26
Customs infrastructure 29
Government co-ordination and capability 32
Preparing business 36
A canyon, not a cliff edge 40
Appendix A 43
Appendix B: Full names of government departments 45
References 46
List of abbreviations
AEO Authorised Economic Operator
APHA Animal and Plant Health Agency
CBI Confederation of British Industry
CDS Customs Declaration Services
CHIEF Customs Handling of Import and Export Freight
CIS Customs Information System
CITES Convention on International Trade in Endangered Species of Wild Fauna

and Flora
EEA European Economic Area
EMCS Excise Movement and Control System
ENS Entry Summary Declaration
EU European Union
EU27 27 other EU member states
EUROPHYT European Union Notification System for Plant Health Interceptions
GMPP Government Major Projects Portfolio
HGV Heavy goods vehicle
ICT Information and communication technology
JCCC Joint Customs Consultative Committee
NCTS New Computerised Transit System
RoRo Roll-on, Roll-off ships
SAD Single Administrative Document
SME Small and medium-sized enterprises
TRACES Trade Control and Export System
UCC Union Customs Code
WCO World Customs Organization
WTO World Trade Organization
2 IMPLEMENTING BREXIT: CUSTOMS

Summary
The Government has set out its objectives for Brexit: the UK will leave the jurisdiction
of the European Court of Justice, control immigration from the European Union (EU)
and pursue an independent trade policy. Meeting these objectives means that the UK
will leave the European Single Market and the EU Customs Union.
This inevitably means significant changes to the way the UK border operates, whether
it is the Irish land border or ports and airports around the country. This is true
regardless of whether the UK continues as a member of the Single Market, creates a
new customs union or signs a ‘deep and comprehensive’ free trade agreement.
Traders who are used to moving goods freely to the EU will need to adapt. They will
have new requirements for paperwork and their goods could face significant checks at
the EU border. Supply chains that are optimised for speed and fluidity will need to find
the space and time for customs authorities to carry out checks and inspections.
For the UK, ‘taking back control’ of its borders is likely to mean the introduction of
checks for goods arriving from the EU. For the Ports of Dover and Holyhead and the
Channel Tunnel, which have adapted to EU membership and between them account for
almost half of all the UK’s trade in goods by value, the number of customs checks could
increase by a hundredfold. International agreements mean that there are certain
requirements that the UK must meet at its border; there is no option of simply deciding
to give EU goods preferential treatment without a deal between the two. That also
makes a deal critical to managing the specific set of challenges faced at the Irish
border.
The introduction of border checks between the UK and the EU could happen overnight.
As the Government has recognised, customs is a cliff-edge issue. On the day of exit
from the EU, the UK authorities will need to perform new functions or face disruption
at the border. There will be new document checks and fiscal requirements, which is the
primary focus of the Government’s view of customs, but also a number of other key
activities that regulate goods crossing borders. This report takes into account the
broader spectrum of activities which relate to the cross-border movement of goods.
Implementing the customs changes required for Brexit is a huge task with a hard
deadline. For government, successful delivery requires overcoming some big risks:
• With 19 months until exit, there is no clarity on what customs will need to look
like on day one of Brexit – currently 29 March 2019 (hereafter referred to as ‘day
one’). The UK Government has set out its preferences for an interim period and
options for a future relationship with the EU, but each brings with it different
implementation requirements. The EU will have its own position and until an
agreement is reached, whether it is a transitional or final arrangement, government
must continue to prepare for ‘no deal’, which means the most extreme change in the
shortest period of time.
• The Government has said it wants to explore options for transition that mean
business only has to adjust once to a new customs arrangement. The only option for
delivering this continuity looks very similar to applying all of the rules of EU
membership but leaving the political institutions. Until there is agreement on
IMPLEMENTING BREXIT: CUSTOMS 3

transition, there will be continued uncertainty not only about what is required for
customs post-Brexit but also about when it will be required.
• Preparing for day one requires government to orchestrate change across over 30
government departments and public bodies, with more than 100 local authority
organisations affected. Responsibility for different elements of the customs
process sits right across the public sector. From HM Revenue and Customs (HMRC) to
the Horticultural Marketing Inspectorate, from Border Force to over 100 port health
authorities across the country, day-one delivery depends on a very large, disparate
group all working closely and effectively.
• The government information and communication technology (ICT) ‘Customs

Declaration Services’ programme started long before the EU referendum was
announced but is critical to customs after Brexit. It is under real pressure and
successful delivery is in doubt. The programme has had to contend with constricting
timelines and a huge change in some requirements. Non-delivery would leave the
UK facing significant disruption on day one.
• Despite these government ICT challenges, new and innovative technology is being
touted as the answer to the Brexit customs problem. With less than two years to
deliver and no clear idea of what this ‘new technology’ is, ministers must be clear
about what is and what is not feasible.
But the biggest risk for government is just how little of the process it controls. If the
UK is going to avoid the customs cliff edge, the Government is one of many different
players who are needed to be ready if disruption is to be minimised:
• UK customs relies on private sector organisations. Government collects the duties

on goods and conducts the checks, but it is the private sector that provides the
infrastructure, logistics and paperwork. Port operators, clearance agents and freight
forwarders are just a few of the players in the complex web that sits outside
government. Successful change relies on all these organisations being ready. In
the past they have been given years to adapt to any government change; they now
have fewer than 20 months to prepare without yet being clear what they are
preparing for.
• There are 180,000 traders who will need to make customs declarations for the first
time after exit; many of whom will be small and medium-sized enterprises (SMEs).
They will need to manage increased administration and incur the cost of doing so.
The introduction of customs declarations alone could end up costing traders in
the region of £4 billion (bn) a year. For these traders to be ready for exit,
government must be clear about when and how they must adapt, and leave them
enough time to do so. Until they are given some certainty on what is required from
them on day one, the amount of this work that can take place is limited.
• There is a cliff edge at the other side of the English Channel too. Even if the UK’s
border is ready for Brexit, issues in Calais, Rotterdam or other European ports could
cause significant disruption for British exporters and supply chains. The famous
queues of lorries along the M20 in Kent in June 2015 were a result of problems on
the French side, not in Dover. Government is dependent on the successful
preparation of European partners. Engagement and collaboration are critical but so
is certainty on what customs after Brexit will look like.

Customs is undoubtedly one of the challenges, if not the biggest challenge, facing the
Government in avoiding the cliff edge and implementing Brexit. This paper considers
the administrative task and highlights some key recommendations:
• HMRC should replicate the Union Customs Code (UCC) in its entirety for its
immediate post-Brexit plans, as it has indicated it will. The UK’s existing customs
system is designed around this and keeping it will help to ensure continuity.
• HMRC must prioritise the delivery of its ICT ‘Customs Declaration Services’
programme in its current form, delivering the basics before introducing new
functionality.
• Ministers must recognise that ‘innovative, new ICT’ is not a viable option in the
short term.
• The Department for Exiting the European Union should seek to negotiate continued
access to EU customs systems, in particular the EU’s New Computerised Transit
System (NCTS) and the Common Transit Convention.
• HMRC and Border Force need to recognise the constraints at the physical border
and find means to limit the activity required at key ports or crossings, such as
trusted trader schemes.
• The Government should continue to use the cross-government Border Planning

Group to orchestrate preparations for day one, but there must be clear ownership
of, and responsibility for, delivering the overall plan for readiness.
• HMRC, Border Force, the Department for Environment, Food and Rural Affairs (Defra),
the Department for Exiting the European Union and other key public bodies and
departments must expand engagement with the private sector beyond the Joint
Customs Consultative Committee. They should use more detailed working groups to
manage implementation and the dependencies on the private sector as well as
detailed transition planning for traders – with, as already noted, 180,000 traders
due to make customs declarations for the very first time after exit.

1. Introduction
The UK needs to address how it will manage the movement of goods in and out of
the country following Brexit. Customs is an exclusive EU competence, which means
that the treatment of goods at the UK border has been determined in Brussels for
past decades. Outside of the EU, not only will the UK regain ‘control’ of its borders,
it will also face the introduction of potentially significant barriers to trade. Some of
these may be reduced or eliminated by negotiations, but what remains will require
the implementation of a new and expanded system of customs to handle trade with
the EU.
This is our second paper looking at how Brexit will affect specific areas of government
policy and what steps need to be taken to implement the necessary changes. Our last
paper looked at how changing our immigration system creates implementation
challenges.1 This paper takes a similar look at the requirements associated with
implementing changes to our customs regime.
We present two views of customs: the first captures the current situation while the
second presents an assessment of how customs could look after Brexit. We then
examine six key areas where the Government and the private sector will need to
deliver in order to ensure that the UK’s system of customs continues to function, and
function well:
1. Policy and legislation – key policy questions facing Whitehall and how the
Government can ensure that legislation is passed to avoid a cliff edge.
2. Technology – the essential ICT work under way to prepare for day one of Brexit, the
viability of ‘new technology’ as a solution to Brexit border problems and key EU
systems for negotiators to focus on.
3. Customs infrastructure – the constraints that limit the potential for expanding
customs infrastructure in response to increasing demand and how the Government
should look for alternative solutions that shift the emphasis of customs away from
the border.
4. Government co-ordination and capability – how the Government should manage

the major cross-government exercise that is customs preparation by supporting
effective communication and co-ordination between departments, local authorities
and public bodies.
5. Preparing business – how the Government should work with the extensive private
sector interests in customs to ensure that issues are addressed and there is
sufficient preparation and capacity for customs on day one.
6. A canyon, not a cliff edge – there are two sides to the cliff edge and preparations
across the Channel are just as important as preparations in the UK for minimising
disruption.
The breadth and complexity of customs pose a challenge to any summary analysis of
this kind. The focus of our research has been on the impacts on the major seaports and
the Channel Tunnel link. The lessons that can be learned there are applicable to

airports and minor points of entry. We do not try to do justice to the specific question
of the Irish border, although we do reference it where directly relevant.
This paper does not cover what the legal oversight of customs might look like after
Brexit, or how this will affect supply chains. These issues are discussed in several of our
other Brexit-related reports.

2. How customs works now
For the hundreds of thousands of importers and exporters, customs is a critical part of
how they do business. Moving their goods from A to B involves interactions with
multiple actors, modes of transport and technology systems.
Take, for example, a Turkish manufacturer of white goods to be exported to the EU.
They load a crate of the goods onto a container, put it on the back of a lorry and it is
driven away from the factory. Government has already been notified of the trade
through an export declaration, submitted electronically by a ‘freight forwarder’ – a third
party paid by the exporter to handle paperwork and transport the goods. The goods are
taken to the ‘port of exit’ to leave the country, but before they can do so they need to
be cleared by customs authorities.2 The authorities carry out a risk assessment, based
largely on the information submitted in the export declaration, and decide whether or
not the goods need inspecting. If they are cleared without inspection, they are loaded
onto a ship and head towards their destination. If they require inspection, they must
first be placed in storage to await inspection from port authorities.
Next stop is the ‘port of entry’. The goods are presented to the authorities of the
country of entry via another declaration. The white goods are unloaded and placed in
temporary storage while the country of entry conducts another risk assessment. Once
all applicable duties have been paid and the goods have been cleared, the container is
loaded onto another lorry and transported to the importer’s storage space. From there
it is distributed to local stores.
Customs is about more than just revenue

The example above offers a simplified example of how an integrated country outside
the EU trades with the bloc. This is enabled by multiple interdependent processes and
systems owned and operated in hundreds of different locations by thousands of
different organisations, both public and private.
What we call customs goes beyond simply the collection of tariffs on goods as they are
traded (see Table 1). It involves enforcement of a wider set of rules and regulations that
determines what can be traded and how it is treated by authorities.

Table 1: List of border operations
Functions Related activity

Revenue collection • Collection of customs dues, excise dues and other indirect taxes
• Payment of dues and fees
• Management of bonds and other financial securities
Safety and security • Security and smuggling controls
• Dangerous goods
• Vehicle checks
• Immigration and visa formalities
• Export licences
Environment and health • Phytosanitary, veterinary and hygiene controls
• Health and safety measures
• Convention on International Trade in Endangered Species of Wild Fauna
and Flora (CITES) controls
• Ships’ waste
Consumer protection • Product testing
• Labelling
• Conformity checks with marketing standards (for example, fruit and
vegetables)
Trade policy • Administration of quota restrictions
• Agriculture refunds
• Trade defence
• Customs agreements
Source: Grainger (2011)3
With falling tariffs and higher volumes of trade, focus has shifted from revenue
generation and towards security, regulations and standards. Governments are focused
on the careful management of what is going in and out of their country – preventing
smuggling, making sure that animals aren’t carrying diseases, checking that food is safe
to eat, ensuring that chemicals are properly handled and car parts aren’t faulty and,
crucially, making sure that their domestic traders aren’t being unfairly undercut.4 These
rules and regulations are just as important as duties and taxes being collected (if not
more so).
Modern customs systems must strike a balance between providing this security and
facilitating the flow of goods. There are 37 million tonnes of trade a year passing
through Southampton alone, including more than a million containers. Inspecting every
import or export would be a massive undertaking, creating delays and blockages.
To minimise unnecessary checks and prevent disruption to supply chains, customs has
become intelligence led. Risk assessments help customs authorities to target
inspections, identifying goods or traders that present most risk while allowing
legitimate trade to pass as freely as possible. As a result of this approach, documentary
checks are carried out on less than 3% of imports (non-EU only and further specialist
checks may take place for highly regulated goods).5 Decisions on what to check are
driven by information such as where the good is from, the volume and type of good
and the trading history of the importer or exporter. A small package from an unknown
trader is treated with greater scepticism than a weekly consignment from a company
that has been shipping like clockwork for the past 20 years.

Technology and a greater use of data have helped to speed things up and improve
intelligence gathering. Crucially, they mean that paperwork can be submitted and
checked electronically before the goods leave the factory, let alone reach the border.
But, for trade with most countries outside the EU, some customs checks are
unavoidable. For trade between EU member states, these checks are almost
non-existent.
Membership of the EU means a single approach to

customs
The longstanding ambition of the EU has been a ‘borderless Europe’ where people,
goods, capital and services can move freely without regard for national boundaries.6 In
many respects, it has been successful. Customs procedures, regulating the movement
of goods, have been largely eliminated for trade between EU member states. A trainer
manufacturer in the UK can sell to a shop in Toulon with little more hassle than selling
in Tunbridge Wells; there is very little of the process we described at the start of this
chapter (shown below in Figure 1). UK traders looking to send their goods to the EU fill
in at most a single form, an ‘Intrastat declaration’ for VAT, and the goods move across
borders unchecked and unimpeded.
The reduction in customs procedures for trade between EU member states (known as
‘intra-community’ trade) is driven by the EU Customs Union and the European Single
Market.
The EU Customs Union ensures that any non-member wishing to sell their product
inside the EU faces the same tariff regardless of which member state it arrives in. By
setting up a common external tariff, duties are also removed for trade within the EU’s
Customs Union. The Single Market has driven harmonised or equivalent regulation,
generally meaning that goods meet a common EU-wide standard regardless of the
country or region they come from. Because of this, goods that are produced and can be
legally sold in one member state are trusted by all others and do not need additional
checks as they cross borders. This trust is reinforced by the oversight of EU-wide
regulatory agencies and the European Court of Justice.
With the Customs Union ensuring that goods moving within the EU do not face tariffs
and the Single Market removing ‘non-tariff’ barriers, trade can pass freely between
member states. This level of integration means that trade between member states is
not even classified as imports and exports; it is called arrivals and dispatches. It is not
seen as international trade, but ‘intra-community’ trade.
A country outside of these agreements is called a ‘third country’. Their trade is

classified as imports and exports and its treatment, from tariffs to customs procedures,
is determined by the country’s relationship with the EU as a whole. The EU has its own
common procedures, but preferential treatment can be given to certain third countries
based on free trade agreements, bilateral customs co-operation agreements or
customs unions.
Regardless of these agreements, trade with a third country is typically subjected to

significantly more burdensome customs procedures than trade with a EU country.
Figure 1 is a simplified example of a typical third-country customs process. To ensure

compliance, third-country goods can be subject to anything from document checks, to
inspection, to actual testing of samples at the border depending on the good.
Import1:process
Figure from non-EU
Import process countries
from non-EU (‘third(‘third
countries countries’)
countries’)
• An importer in the UK must be registered

Key registration
• HMRC must be provided with information such as: the
documents are commodity code, VAT registrations, certificates of origin
provided to HMRC
• The firm will receive an EORI* number
Entry Summary • Detailed information about the import is submitted

Declaration (ENS) is electronically
submitted to the port • Often done by a private organisation such as a customs
of entry broker or freight forwarder
• Information provided by the importer is used to

Goods are risk-assessed conduct a risk assessment
prior to entry • The risk assessment determines the level of
inspection required
Goods
arrive at
port
Customs authorities • Goods are presented to authorities with an
receive goods to carry additional declaration
out checks • Rules of origin are checked
• Community system provider unloads cargo and places

Goods are stored it in temporary storage for up to 90 days
temporarily and checks
• Additional detailed checks and inspections of
take place
highly regulated goods take place
• Goods are warehoused, continue under transit

Goods are cleared to leave procedures or are released for circulation into the
UK market
* Source:
EORI = Institute
Economic forOperator Registration
Government analysis and Identification.
Source: Institute for Government analysis
Underpinning the EU’s approach to trade is a common ‘customs code’. The UCC is the
framework regulation through which customs co-operation between EU member states
is achieved. It defines the process and formalities – import–export procedures, data
requirements and common risk criteria – that must take place when goods move
between EU member states and third countries.
UK trade has adapted to the Single Market and Customs

Union
The UK has adapted to the EU’s customs arrangements. Our recent paper, Frictionless
Trade? What Brexit means for cross-border trade in goods, shows the extent to which the
Single Market and EU Customs Union have resulted in highly integrated supply chains
across Europe.7 Manufacturers rely on seamless and rapid movement of goods to
complete orders and sustain production. For industries such as the automotive sector
and chemicals, the UK is one part of a European supply chain, importing and exporting

parts such as bumpers and exhausts, as well as cars ready to drive. The EU’s internal
borders are important in ensuring that these supply chains work effectively.
In 2016, £382bn of goods were traded between the UK and the EU as either arrivals or
dispatches with minimal or no customs. In contrast, £393bn of UK goods were traded
with the rest of the world as imports and exports and were subject to customs checks
and controls like those shown in Figure 1.8
Dover is a key artery for UK trade heading to continental Europe (see Figure 2). Since
the Single Market was created in 1993, it has seen an increase of 150% in the number
of lorries using its routes, with over 2.5 million heavy goods vehicles (HGVs) now
passing through the port every year. Goods worth £119bn passed through the port in
2015, representing around 17% of the UK’s entire trade in goods by value.9 To
facilitate this growth, the port has added new berths, bigger boats and more frequent
services, but the area where traffic is processed has remained the same, with no
additional capacity for customs checks.10
Annual lorry traffic and EU share of trade for selected major
Figure 2: Annual
UK ports lorry traffic and EU share of trade for selected major UK ports
in 2015
in 2015
75–100
Percentage of trade with EU

Forth
Belfast 414 50–75
153,730
Tees and Hartlepool
4,369
25–50
Hull
66,264
0–25
Grimsby and
Liverpool
Immingham
Holyhead 125,729 87,287
286,003
Felixstowe
8,311
Harwich
180,163
Milford Haven
33,307
1,000,000
Number of lorries
100,000
London Dover
12,783 2,564,994
10,000
Southampton
No lorries
Channel Tunnel
1,641,638
Source: Department for Transport: Maritime and Shipping Statistics
The UK’s customs infrastructure has been shaped by these

arrangements
Substantial checks on EU goods are not required at the UK border, so customs capacity
at each port is scaled to the amount of non-EU trade it processes. The physical
infrastructure supporting trade – in terms of both the ports themselves and the

transport links that surround them – has been carefully calibrated to support an
ever-growing
Compositionflow of goods,
of unitary particularly
freight trafficinpassing
lorries and containers
through major(see
UKFigure
ports,3).
by type of freight unit, 2015
Figure 3: Composition of unitary freight traffic passing through major UK ports, by
type of freight unit, 2015
All lorry traffic
EU 24% 45% 24% 7%
Non-EU 99%
1m 2m 3m 4m 5m 6m 7m 8m
Containers Roll-on, Roll-off Trailers Other
Broadly speaking, there are two types of trade: bulk goods (including coal, natural gas
and things like lumber and cement) and unitary. Bulk goods are typically transported in
specialised ships, and often require specialised facilities to store and handle them,
such as silos, pressure vessels or tanks. In contrast, unitary trade refers to goods
transported within a generic unit, such as a lorry, trailer or a shipping container. This
includes everything from fresh fish and medicines, to smartphones and screws.
Non-EU unitary trade is done almost exclusively through containers (see Figure 3).
These arrive on big ships that are often at sea for weeks. Once unloaded, these
containers sit at ports such as Southampton for a period of time until the importer
takes them inland; it could be minutes, days or weeks. Customs processing can be done
while the containers are at sea, authorities can plan what is arriving and when, and,
with containers already sitting around waiting to be collected, there is already ‘dwell
time’ during which authorities can carry out checks. Ports managing container trade are
large and have storage capacity on site for containers awaiting checks or onward
shipping.
It is a different story for ‘arrivals and dispatches’ – the UK’s trade with the EU. This
relies overwhelmingly on a continuous movement of lorries carried by ferries or trains
across the English Channel or the Irish Sea. This type of trade, where the goods remain
on the back of the lorry and are driven on to a ferry or the Channel Tunnel, is called
‘Roll-on, Roll-off’ (RoRo). There are more lorry movements between the UK and EU
through major ports each year than there are container shipments to or from the rest of
the world, and these lorries only account for 45% of all (non-bulk) trade with the EU;
trailers that are dropped off and picked up the other side by another haulier account
for a further 24% (see Figure 3).11
A lorry driver arriving at Dover or the Channel Tunnel en route to France will stop only
briefly to show passports and boarding information, and on arrival can be on the
French motorway in minutes. These crossings are designed for intra-community trade:
they rely on fast-moving flows and as little ‘dwell time’ as possible. Less than 1% of
lorries arriving in the UK through Dover or the Channel Tunnel require customs checks,

but with no facilities at either terminal, that clearance is done six miles away – at a
truck stop off the M20 with just 82 parking spaces.12
The other major trade route between the UK and the EU is in Ireland. There is a
continuous daily flow of lorries across the Irish land border, which has over 200
crossing points with no customs controls. Similarly, RoRo traffic across the Irish Sea
between Dublin and Holyhead carries a significant proportion of all the goods moving
between the UK and Ireland. As with Dover and the Channel Tunnel, the port at
Holyhead has shed most of its customs capacity since 1993, while also seeing
increases in traffic volumes.
The Irish land border has unique complications, which we will be exploring in a later
paper. But the most-affected ports of entry in the UK are the ports of Dover and
Holyhead, and the Channel Tunnel terminal at Folkestone.
ICT systems have also converged and are heavily

interdependent
The common approach to customs within EU member states extends to their ICT
systems. For intelligence-led customs, rapid sharing of data is critical and so is a
consistent approach to risk assessment and the certification of heavily regulated
goods.
There are a number of key EU-wide systems that support customs authorities across
the EU. From tracking goods and sharing information to providing common approaches
and mechanisms, operations at the EU’s external border are shaped by these systems.
But the UK also has its own ICT infrastructure, critical to the running of the border
system. The backbone of the UK’s ICT is a system called Customs Handling of Import
and Export Freight (CHIEF), which is responsible for managing import and export
declarations. CHIEF is in the process of being replaced by a new system, Customs
Declaration Services (CDS), which was designed to meet the EU’s new customs
requirements in the UCC. But even after this change, there will be a complex web of
systems beyond CHIEF and CDS, with specialist functions and interfaces right across
government and the private sector.
Customs is a major cross-government operation

Responsibility for customs activity spreads well beyond HMRC, the non-ministerial
government department responsible for collecting duties and tariffs. While
declarations are made to HMRC, it is the Home Office’s Border Force that carries out
many of the core operational functions at the border. But as the focus of customs has
shifted towards complex non-tariff barriers, government has needed more specialist
functions to be involved. Customs is now a huge cross-government operation.
There are now 36 organisations involved in either customs operations or policy (see
Figure 4). This constellation of government agencies is important for ensuring that
there is regulatory compliance at the border, that there are vets for checking any
animals, that there are specialists checking plant products or meat and even that there
is a role for those who can assess fine art or diamonds. It also includes local

government, with port health authorities and Trading Standards both playing important
roles.
Government departments and public bodies with operational or policy
Figure 4: Government
roles relating departments and public bodies with operational or policy
to customs
roles relating to customs
HMRC
Animal and Horticultural Marine Rural

Forestry
Defra Plant Health
Agency
Marketing
Inspectorate
Management
Organisation
Payments
Agency
Environment
Agency
Environmental
Health Commission
Driver and Driver and

Maritime and
Vehicle Vehicle
DfT Standards Licensing
Coastguard
Agency
Agency Agency
National Crime
HO Border Force Agency Border

Policing
Command
Intellectual National
BEIS Property
Office
Measurement
Office
Health and Office for

DWP Safety
Executive
Nuclear
Regulation
DCMS Arts Council
Policy owners
Government
FCO Diamond
Office
Operations
Operational policy
Atomic
MoD Weapons
Establishment
Policy owners and operations
Operations and operational policy

Medicines and
DH Healthcare
Regulatory
No specific responsibility
Agency
DflD
In addition to these organisations there are
agencies within the devolved administrations
with the same or similar responsibilites for the
DIT
border, such as Marine Maritime Scotland
HMT
Other government organisations with roles at the border
Food Local Force

Standards Local Port health Trading
Special
Agency authorities authorities Standards
Branch
See Appendix B for list of full names for Government departments

Source: Institute for Government analysis of a letter from Director General, Customer Strategy & Tax Design
Source:
(HMRC)Harra J (2017)
to Chair of theLetter
Houseto
ofthe Rt HonTreasury
Commons Andrew Select
Tyrie MP13
Committee (2017)
The private sector also plays a critical role

This complex web of organisations is matched in the private sector.
While government is one piece of the customs puzzle, an exporter or importer needs
to work with a number of private sector organisations to get their goods to or from
other countries (see Figure 5). Freight forwarders, hauliers, customs handlers, customs
clearance agents, community system providers, port operators, ferry companies and
others all play important roles in the movement of goods between countries.

Government departments and public bodies with operational or policy
Figure 5: The division
roles relating of customs roles between the Government and the private
to customs
sector in regulating and supporting trade in goods
Government departments
Exporter and agencies1
Private sector
Government
Customs
CHIEF/CDS
broker²
Flow of goods
Interactions
Freight
forwarder3
Community
system Warehouse,
providers4 HMRC, Border
temporary storage
Force and other
or specialist
government
customs facility
departments and
(e.g. a border
agencies6
Port operator inspection post)5
or authority
1.Source:
Government departments and agencies fulfil many customs-related roles away from the border, both operational
Institute for Government analysis
and policy-related. These include setting and enforcing regulations, inspecting factories and farms, issuing
licences, registering businesses and conducting risk assessments for different products.
2. Customs brokers handle export declarations on behalf of firms. They relay information to government IT systems
such as HMRC’s CHIEF/CDS for a fee.
3. Freight forwarders are logistics firms that handle the transportation of goods for some or all of their journey. They
may also provide services similar to a customs broker.
4. Community system providers are specialist firms that record and track the movement of goods within ports. Their
work is supervised by Border Force, which has ultimate responsibility for security and the control of freight as it
crosses the border.
5. Goods may require temporary storage or longer-term warehousing, or may be diverted to a specialist facility, such
as a border inspection post for food products.
6. There are 13 government departments and agencies that have operational roles at the border, either checking
goods – which may involve contracting private specialists such as vets to perform inspections – or in roles relating
to security, logistics or revenue collection.
Source: Institute for Government analysis
Within the UK, private enterprise provides many customs services and owns much of
the major infrastructure, such as ports (see Figure 5). The UK has a system of fully
privatised ports.14 These differ from other port models in the fact that the Government
has no ownership of the port infrastructure. This can make it more difficult for the
Government to control the development of these ports. The ports and all the other
private sector organisations are set up to facilitate trade and help importers and
exporters to meet the current rules and regulations governing international trade.
These private firms are central to the successful delivery of customs.

3. What could customs look like after
Brexit?
The UK Government wants future customs to be
‘as frictionless as possible’
In its position paper on future customs arrangements, the UK Government has said that
it wants to ensure that cross-border trade with the EU is ‘as frictionless as possible’,
seeking a new customs arrangement within a free trade agreement.15 As our report,
Frictionless Trade? What Brexit means for cross-border trade in goods, argues, there is no
pre-existing model of relationship with the EU that would completely mitigate
disruption and the need for border checks.16
The Government has put forward two options for future customs arrangements, one
that attempts to minimise friction and another that attempts to remove it altogether.
The first option, ‘a highly streamlined customs arrangement’, would use ‘tried and
trusted’ processes along with international precedents to try to deliver a border that is
light touch, but it would still be a step change in customs administration for goods
coming from/going to the EU. The second option, a more speculative ‘customs
partnership’, proposes having no UK–EU border while allowing the UK to leave the
Single Market and strike free trade deals. As the Government notes, this would be
‘unprecedented as an approach and could be challenging to implement’.17
But the future of the UK–EU border depends as much on the position of the EU27 as it
does the UK Government. The European Parliament’s lead co-ordinator on Brexit, Guy
Verhofstadt, has referred to the proposal for no border as ‘a fantasy’ and the European
Commission has restated Michel Barnier’s position that ‘frictionless trade is not
possible outside the Single Market and EU Customs Union’.18
Ultimately, an agreement will need to be negotiated by the EU and the UK and the
detail of the deal they strike will determine the customs arrangements, and level of
friction, for future trade between them.
The Government’s position paper offers an indication of its thinking,19 but it does not
offer any certainty. The paper also does not cover the UK’s position on key parts of the
deal that will be critical in determining how the UK border looks after Brexit.
But until a deal is agreed, the details will not be clear…

The outcomes of the negotiations still range from ‘no deal’ to a bespoke arrangement
that could, theoretically, maintain most elements of the status quo. All of these
arrangements would entail a degree of friction relative to the existing system of
trading as a member of the EU. But the scale of the changes required and the
implementation challenges these changes would create vary significantly.
Trading relationships tend to focus on four key objectives, which help to reduce checks
at the border:
1. Reducing or eliminating tariffs.

2. Minimising non-tariff barriers through regulatory equivalence or mutual recognition.
3. Limiting administration for importers, exporters and customs authorities at the

border.
4. Fostering consistency, co-operation and communication between customs

authorities in different nations.
Any ‘deep and comprehensive’ free trade agreement would look to make significant
progress against all four of these pillars. However, the Government’s position paper on
future customs arrangements focuses on the third and fourth objectives almost
exclusively.20
A free trade agreement is not the only route to minimising friction: there are other, less
ambitious, agreements that can reduce checks required at the border. For example,
bilateral agreements, such as on customs co-operation, focus on improving alignment
between two countries in specific areas that affect friction at the border. That could
mean sharing data and information between authorities, or it could mean recognising
that product standards in a certain good are equivalent in each country and so checks
at the border can be reduced.
Almost all of the EU’s major trading partners – Canada, Japan, South Korea and the
United States – have some form of agreement that aims to facilitate trade in customs
and increase security co-operation. However, the different agreements between the EU
and its major trading partners reduce but do not remove friction. Any UK deal starts
from a point of no friction and looks to limit the introduction of checks and border
activity. This is unlike any other deal the EU has negotiated with a third country.
Nonetheless, there are the same key elements of any deal that will determine how
smoothly customs operates post Brexit. For a list of specific examples, see Appendix A.
It is important to keep tariffs low, but most friction comes from other
forms of trade barriers
Both the major political parties in the UK have stressed that they think it is important to
ensure that trade continues tariff-free after Brexit. In her Lancaster House speech,
Theresa May emphasised that any deal the Government sought would include “tariff-
free trade with Europe”, while Jeremy Corbyn has repeatedly stated that what Labour
wants is “tariff-free trade access to the European market”.21, 22 Tariffs would impose a
significant burden on importers and exporters as well as requiring significant new
capacity at the border. And customs would need to check that duties have been paid
correctly for the good being transported. But tariffs can be more straightforward to
reduce or eliminate than other causes of friction.
Customs co-operation can help to minimise the administrative burden

on traders
The Government’s paper on future customs arrangements is focused predominantly on
building a deep customs co-operation agreement.23 These types of agreement aim to
align border processes, facilitate information sharing between customs authorities and
reduce some of the documentary burden for traders. For example, continued
membership of the Common Transit Convention, which simplifies border crossing for

goods in transit and involves non-EU countries, would give the UK access to key EU
systems and limit the paperwork for traders who operate across numerous borders.
Information sharing is the key enabler of modern customs. The UK currently benefits
from access to more than 20 EU systems, which do everything from tracking the
movements of goods and vehicles to storing risk profiles for goods and producers from
around the world, and the UK shares its own data as part of this. Our customs systems,
such as CHIEF and CDS, are designed to operate with ready access to these data. A deal
could see the UK granted permission to continue to use at least some of the critical
systems. No deal, on the other hand, could require the UK to build and integrate new
systems, populating them with data from scratch.
But removing tariffs and aligning customs systems are not sufficient to deliver
frictionless trade. Customs is as much about regulation as it is about tariffs, computers
and paperwork.
There are key parts of the deal relating to regulation that will
determine what customs will look like after Brexit
Converging regulations and product standards for goods has led to simpler customs
across the EU. This process builds trust that goods from member states are either
compliant with the rules of the Single Market or equivalent to domestic products and
so require no special scrutiny.
Customs exists to ensure that any differences between imported goods and domestic
standards do not introduce risk to the market or supply chain. Broadly speaking, the
greater the variance in two countries’ standards and regulations, the more checks that
take place on goods being traded.
Agreements often try to remove barriers to trade by aligning regulatory regimes. They
can do this if parties agree to share equivalent standards, or acknowledge that the
relevant authorities in each nation can conduct approved checks, ensuring that
standards are being met and allowing customs authorities to waive certain checks at
the border. But formal agreement is essential. If one country’s regulations mirror
another’s in practice, but there is no formal and binding agreement, the benefits of
alignment cannot be realised. Their goods receive no preferential treatment at the
border. If the UK and EU diverge on standards after Brexit, friction at the border will be
introduced; the greater the divergence the greater the potential for friction.
The Government’s paper on future customs arrangements does not cover regulation
and its potential as a source of friction. Its position paper on Northern Ireland and
Ireland24 does recognise the challenge of regulation specific to the land border,
particularly in ‘agri-food’, but the issue is not unique to Ireland. The agreement reached
between the UK and EU on the issue of regulation will have a big impact on customs
checks all over the country, particularly in areas such as agriculture.
The rules on agri-food currently applied in the UK mean that between 20% and 50%
of shipments of beef and lamb imported from outside the EU must be checked by a
food health agency at the border. However, the UK is also a party to agreements such
as the one between the EU and New Zealand, which exempts most checks. The EU–NZ
deal only requires 2% of lamb shipments to be sampled at random. Which shipments

are randomly sampled is determined by HMRC and relayed to freight services agencies
at ports and airports via CHIEF.
After Brexit, the default position on how many shipments from the EU, of any type of
goods, will require checks is undefined. This is particularly important for agri-food,
which represents a significant fraction of all trade by volume, and tends to require
more checks than other forms of goods. Currently 70% of the UK’s food imports by
value come from the EU and are not subject to checks. In the absence of a deal the UK
could unilaterally continue allowing EU goods to enter the UK without regulatory
checks, on the basis of trust. To do so is within the UK’s gift as an independent nation.
This may be the favoured approach as any arrangement which sees an increase in
checks will place substantial new burdens on the UK’s border operations. In particular,
shipments of agri-food which require a Border Inspection Post for checks and – unlike
most other goods – cannot generally be cleared inland due to the risks of spreading
pests and diseases while in transit.
There are similar issues for other goods. Deals that limit regulatory divergence require
smaller shifts in practices and infrastructure. The further apart the UK places itself, or
the less it agrees to share or co-operate with the EU’s existing trade frameworks, the
more customs capacity we will need to develop.
The UK must decide what it is going to do to prepare for

‘no deal’
Now that Article 50 has been triggered, preparation and planning for ‘no deal’ must
take place.
‘No deal’ represents the most extreme change in the shortest time, so it
needs to be planned for
Leaving the EU with ‘no deal’ would introduce friction that is greater than that faced by
any of the EU’s other major trading partners. For UK customs, it would involve the
greatest amount of change in the least amount of time, with a huge increase in demand
on capacity and capability at the border. New systems, staff and infrastructure would
need to be in place for 29 March 2019.
Under ‘no deal’, our ports could ‘grind to a halt’

HMRC estimates that the total number of customs declarations will undergo a fivefold
increase when the UK leaves the EU.25 But the increase in customs checks will vary
significantly between ports, depending on the proportion of their trade that comes
from or goes to the EU. Ports such as Dover, where over 99% of all trade is with the EU,
would see increases in customs declarations of over a hundredfold.26 The major
concern on the UK side of the border is that an increase in declarations is linked to
more and longer delays. The Road Haulage Association has said that, in the case of ‘no
deal’, it ‘expect[s] that movements will rapidly grind to a halt as vehicles back up
waiting to be processed by customs authorities’.27
Without an agreement between the UK and the EU, if a lorry needs checks it would
‘have to wait while each separate pallet is checked, requiring extensive investment in
parking facilities at UK ports… or UK port towns’.28 The scale of change for trade
through Dover, Holyhead and the Channel Tunnel would be significant. The ports,

designed for an almost free flow of goods, would have to accommodate documentary
checks, which currently add up to three hours to journeys, and the space and time for
the inspection of goods, which add a further five.29
If Dover, Holyhead and the Channel Tunnel were to ‘grind to a halt’, the impacts would
be felt across the UK. For the Channel Tunnel alone, the economic footprint extends
across the whole country. For example, 20% of all exports (by value) from the West
Midlands – including £2.2bn of iron, steel and metal products – passed through the
Channel Tunnel in 2015.30 Businesses in every region of the UK trade via this route;
even Scotland saw 5% of its exports (by value) shipped through the tunnel.
In a ‘no deal’ scenario the UK would have some flexibility but cannot
just do what it wants…
Even outside the EU, the UK’s ability to unilaterally control its borders with respect to
trade is constrained. The Government has committed to being a ‘strong supporter of
the rules-based global trading system’.31 As a result, though there is scope for flexibility
to unilaterally apply a lighter-touch regime, the UK would be unable to liberalise its
borders for EU imports completely.
First, under World Trade Organization (WTO) rules, unless the UK is prepared to drop
tariffs for all imports, it will have to collect duties on EU imports.32 As the House of
Lords’ Trade in Goods report notes, collecting tariffs would ‘require customs posts and
inspections, where currently there are none’.33
Second, as a member of treaty organisations such as the WTO and as a signatory of the
TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary) agreements, the
UK would be bound by the principle of non-discrimination when it comes to applying
regulatory checks. The SPS agreement prohibits the application of different
requirements where ‘the same or similar conditions prevail, unless there is sufficient
scientific justification for doing so’.34 The UK could plausibly argue that if there is no
increase in risk to the public there is no justification for significantly increasing checks.
It would be down to other third countries to submit challenges to the WTO if they
wished to dispute this.
In the short term, it would be in the UK’s gift to decide whether to introduce regulatory
checks for EU imports. But the EU’s own rules would not allow similar lenience to be
applied to exports from the UK into the EU. That asymmetry may be politically difficult.
Moreover, even though the UK could decide not to conduct regulatory checks for EU
goods, it would still have to have a means of distinguishing EU goods from non-EU.
Since we would no longer be part of EU systems, there would need to be a way to
check the origin of goods.* Consequently customs clearance would be required for all
EU traffic.
If the UK were overwhelmed by the volume of increased checks and decided to

unilaterally apply a light touch regime, there could be consequences for UK exporters.
The border plays an important role in ensuring that unsafe food or appliances do not
make it onto the UK market, and the level of checks will affect how other countries
* If we maintained the EU’s VAT central clearing process then the invoice could be the proof of origin – no other
paperwork would be required. However, under no deal we would cease to be a part of the EU’s VAT regime – see
Appendix A.

view the UK’s exports. A UK manufacturer might face greater checks when it sells
products or parts abroad if those countries suspect that its supply chain could be
compromised by a less secure UK border.
What happens on the EU side of the border matters too, and the UK
would have no say on that
The EU cannot unilaterally revoke its obligations to secure its borders without
contravening its own laws and those of international treaties, so in the event of the UK
leaving the EU with no deal, UK exporters would likely face burdensome checks when
goods entered the EU.
In June 2015, more than 7,000 lorries were parked on the M20 in Kent, unable to pass
through Dover. Businesses lost £21 million (m) worth of stock and the Kent economy
lost £1.5m a day. These delays were a result of a strike on the French side of the
border. Preventing disruption requires both sides of the border to be prepared for
changes and facilitate movement. The UK is therefore reliant on its European partners
to avoid chaos at the border.
A transition can provide valuable preparation time, but

different transitions have different demands
The Government’s position papers on future customs arrangements35 and on Northern
Ireland and Ireland36 confirmed the UK’s desire for an interim arrangement on customs.
It is the clearest statement to date that the Cabinet is seeking a transitional deal with
the EU that can offer certainty to business, minimise disruption at the border and,
importantly, allow time for implementation.
This news will be welcomed by many outside government. Both the Confederation of
British Industry (CBI) and the Institute of Directors have called for clarity and certainty,
and the CBI has called for a transition that ‘replicates as much of the economic
relationship [as] is in place at the moment’.37, 38
The Government’s paper on future customs arrangements suggests that it is listening. It

indicates that the Government will seek to negotiate a transitional arrangement that
retains the status quo, at least in customs, for a ‘time-limited period’. It wants to
explore options that ensure that ‘businesses and people in the UK and EU only have to
adjust once to a new customs relationship’.39
To achieve this, the Government has suggested that it would retain a ‘close association
with the EU Customs Union’,40 which could include the formation of a new customs
union for a time-limited period. The UK’s relationship with the Single Market, Common
Agricultural Policy and Common Fisheries Policy will also be a key factor in the level of
friction at the border. As we have shown in the previous section, customs arrangements
are as much about regulation and standards as they are about tariffs, computers and
paperwork.
The only ‘off-the-shelf’ transitional model capable of delivering the continuity wanted
in Westminster looks very similar to applying all of the rules and submitting to the
constraints of EU membership but leaving the political institutions, or, as the EU has
called it, a ‘time-limited prolongation of Union acquis’.41

Anything that does not ensure continuity in customs will require changes to be
implemented, both at the border and for businesses. The Government is rightly looking
to limit the number of changes required, but leaving the Single Market could restrict its
ability to do so.
The length of any transition period is unclear

The exact customs arrangement that will be in place for any ‘time-limited’ transition
will need to be negotiated and agreed with the EU27, as will the length.
Reports have suggested that there is not yet a consistent position in the Cabinet on
how long any transition might be, but the position paper on future customs
arrangements states that it ‘needs further consideration and will be linked to the speed
at which the implementation of new arrangements could take place’.42 The European
Parliament has passed a resolution that says that any transitional period should last no
more than three years.43
Until there is agreement on transition, there will be continued uncertainty, not only
about what is required for customs post Brexit but also about when it will be required.
The next chapter considers some of the challenges facing the Government as it looks
to undertake the task of implementing its post-Brexit customs arrangements.

4. What are the key implementation
challenges?
Policy and legislation
This section looks at the key policy questions facing Whitehall and how the
Government should carefully manage legislation to avoid the cliff edge.
It is not clear what customs will look like after Brexit, or when any
changes will need to be made. The Government must be clear on the
scenarios it is preparing for
As we have set out in previous chapters, the future UK–EU relationship will determine
the level of ‘friction’ at the border for goods being imported and exported between the
two. Customs processes on each side will depend on exactly how ‘deep and
comprehensive’ any deal is.
But customs is a cliff-edge issue and, without a transition period, any changes will need
to be in place for day one of Brexit. Agreeing a transitional deal, or ‘implementation
period’, does not in itself delay the need for change, however. Any type of transition
that does not preserve the status quo will require adaptation.
The uncertainty surrounding the detail of the deal and transitional period creates a
challenge for the Government. It must clearly identify the possible outcomes it is
working towards and the extent to which it will prepare for them.
But regardless of the future relationship with the EU, Brexit means that
the UK will need its own ‘customs code’. It should copy the Union
Customs Code
At the moment, what happens to goods as they arrive at the UK border is determined
by the UCC.44 The UCC is a set of regulations outlining the rules and procedures for
customs authorities throughout the EU. It tells them how to treat goods that arrive from
outside of the EU, the formalities of checks and documents required. With no customs
deal, all exporters would need to complete both a Single Administrative Document
(SAD) and an Entry Summary Declaration (ENS), with additional specialist
documentation required for highly regulated goods, transport permits and insurance
certificates.45 The SAD alone consists of 54 boxes with eight parts, which must be
completed and submitted for every declaration.46
Leaving the EU gives the UK freedom to develop its own customs code in order to
monitor and manage the flow of goods in and out of the country. It will be free to set
import–export procedures, data requirements, risk criteria and standards. The question
for HMRC is whether it should use this freedom to diverge from the existing code.
The UCC came into force in May 2016, with a four-and-a-half-year phased
implementation running until the end of 2020. It is the basis of the current UK customs
system and it set the requirements on which HMRC’s new ICT system, the CDS, has
been developed. The UCC has received some criticism in the UK for the lack of
business engagement in its design and the introduction of financial guarantees that are

required for certain goods/procedures;47 but it gives customs authorities greater
flexibility to suspend duties, improves data and incentivises the EU’s trusted trader
scheme called the Authorised Economic Operator (AEO) scheme.48
From inception to implementation, the UK has been a supporter of the UCC and sees it
as meeting its needs and ambitions.49 There is little to suggest that we would benefit
significantly from using Brexit as an opportunity to design something substantially
different. In fact, there is a strong incentive to prevent divergence – synchronising the
UK’s and EU’s customs administrations would create the best basis for minimising
friction in trade and support trusted traders. However, for these benefits to be realised,
the future relationship will need to include mutual recognition between the EU and UK
customs codes. The National Audit Office has said that if the UK diverges from the UCC,
the new ICT system being delivered in HMRC will no longer be consistent with UK
customs policy, and preparedness for day one will be at risk as a result.50
The Government has suggested that continuity in customs is one of its priorities, and
should ensure that it replicates the UCC rather than looking to diverge at this point.51
But, before a new code can be put in place, regardless of how similar it is to the UCC,
Parliament must pass critical legislation to give ministers the powers that, under EU
membership, currently sit in Brussels.
Legislation is required to avoid a cliff edge and a legal hiatus –

ministers and Parliament need to work together to ensure that the
necessary legislation is passed in time
The two-year Article 50 window means that Brexit legislation needs to run alongside
negotiations – despite the complex interdependencies. The legislation will need to be
in place before the date of withdrawal from the EU and before the future relationship
is agreed. As a result, any bill will need to give the Government scope to adapt to the
outcome of negotiations, requiring significant flexibility. And the most likely
mechanism for providing it will be broad statutory powers for ministers – so-called
Henry VIII powers – to allow the Government to adapt as necessary to whatever
emerges from an agreement.52
The Government has already announced a customs bill in the Queen’s Speech to give it
the necessary powers.53 As with other Brexit legislation, this bill is likely to prove
controversial, but if the legislation fails to pass there will be a legal hiatus on the day
after exit from the EU. Any customs provisions in the withdrawal or future relationship
agreements will also require ratification in the UK and the EU.
To smooth the passage of the bill, the Government must engage Parliament early and
offer clear and detailed information about its intention for the legislation. The white
paper on customs that is promised for the autumn, along with early engagement
highlighting the critical nature of the legislation, could reduce the likelihood of a legal
hiatus at the end of the Article 50 period. Both ministers and Parliament must be clear
that customs legislation is essential in avoiding a cliff edge. They must work closely to
prevent potential disruption.

Recommendations – policy and legislation
1. HMRC should replicate the Union Customs Code as far as possible, as it has
indicated it will do. The UK’s existing customs system is designed around this and
keeping it will help to ensure continuity. Any changes that the Government
wishes to make to the customs code should be done in the longer term.
2. HMRC needs to publish a detailed white paper on its proposals for customs
before introducing legislation and ensure that Parliament is well informed about
its plans for customs policy and legislation.
Technology
This section looks at the essential ICT work under way to prepare for day one and the
viability of ‘new technology’ as a solution to Brexit border problems. It also highlights
the importance of continued access to key EU systems.
Customs currently depends on an old system that was supposed to have

been scrapped five years ago
Technology already underpins much of how modern customs functions. At the heart of
the UK’s current customs ICT is HMRC’s Customs Handling of Import and Export Freight
(CHIEF). This system was built by British Telecommunications in 1989. Its ‘retirement’
was announced in 2010, with a new, upgraded version to be implemented in 2012. But
the project failed to deliver. The design of the new system had not been finalised by
early 2012, at which point HMRC confirmed that there would be a delay. Then in June
2013 it was announced that the project would be mothballed in favour of a ‘CHIEF 2’
replacement programme – Customs Declaration Services (CDS).
Work on CDS began later in 2013, with its design and functionality based largely on
the UCC. The UCC supports greater use of technology in areas such as ‘self-
declarations’. A new ICT system was needed, because HMRC’s CHIEF system is not
capable of meeting the new EU standards.
The critical ICT system needed for Brexit is ‘in doubt’

Brexit has thrust these ICT systems into the spotlight. HMRC is still reliant on CHIEF,
which can process about 60 million declarations a year, and CDS was halfway through a
five-year delivery programme at the time of the vote to leave the EU, based on designs
and requirements set before the vote.54 CDS was designed to manage volumes of up to
150 million declarations.55 It is likely that on exit from the EU, HMRC will need ICT
capable of processing an estimated 200 million more declarations a year.56 Both
systems running side by side may be required to meet capacity requirements for
customs declarations alone.
But delivery of CDS is now facing ‘significant issues’. It received an ‘Amber/Red’ rating
from the Infrastructure and Projects Authority in January 2017, and a rating of ‘Amber’
in July. Andrew Tyrie, chair of the Treasury Select Committee at the time, said that
confidence in the project had collapsed, and a recent National Audit Office report
shows the extent of the risks and issues being faced by the programme.57 Due to
deliver in January 2019, just a few months before the Article 50 period ends, any delay
to the project would have a significant impact on the UK’s preparedness for day one

outside the EU. This timeline is some 21 months shorter than the original plans before
Brexit, and the National Audit Office suggests that, as a result of exit, HMRC will have
had around three years less time to develop, test and roll out the new system.
Delays are not uncommon in major government ICT projects. But CDS contingency
plans are not yet in place, and are expected to rely almost solely on CHIEF, which will
be a 30-year-old system managing an estimated fivefold increase in volume. HMRC is
planning a technical upgrade to CHIEF to ‘increase stability and capability’, but the
unsuccessful 2010–12 upgrade programme shows that even this is likely to be a
challenge.58
If CHIEF cannot cope with the volume, and the current CHIEF fallback measures are put
in place, ports of entry will largely come to a stop. Fallback measures would mean that
only a small subset of goods will be processed by customs authorities, such as ‘life or
death consignments’, perishables and live animals. But even those that can pass
through the border would need to navigate a paper-based customs system without any
of the modern advances or technological support.
Government must prioritise delivery of CDS in its current form – the

focus should be on ensuring that the basics are in place
With new requirements likely to emerge as the shape of the new UK–EU customs
arrangement becomes clearer, and delivery of a new customs system already in
progress, there will be a temptation to ‘tinker’, introducing additional functionality to
CDS in order to reduce friction or potential disruption once the UK leaves the EU.
But, introducing changes in scope increases delivery risk. With delivery of CDS already
in doubt, and its rapid deterioration to an ‘Amber/Red’ rating from the Infrastructure
and Projects Authority just months after the Brexit vote likely to be a result of huge
changes in capacity requirements, the Government must avoid making further changes.
The most recent ‘Amber’ rating shows improvement, but the programme is unlikely to
withstand further changes to requirements.
Operators of the web of private sector systems that interface with government will also
need to adapt to any changes. These private sector organisations are designing their
systems to be compatible with CDS. If the Government decides to tinker, it needs to
give those organisations the information and time to reflect on the changes. With
around 8,700 users and intermediaries affected by the system,59 one small change by
government could mean that thousands of these users and intermediaries need to
make changes in order to accommodate it.
The priority now is a CDS programme that is operational for day one. The design of the
system should be ‘locked down’, preventing any change that could impact overall
delivery and any change that is non-essential to day-one operations. The rest of the
customs landscape will need to adapt to what is deliverable with the ICT, rather than
expecting the ICT to quickly adapt to suit the needs of the wider customs landscape.
Some ministers are placing a lot of faith in innovative new technology

– this is not viable, at least in the short term
Digital technology and a ‘virtual border’ are often touted as the guarantor of seamless,
frictionless trade. Secretary of State for Exiting the European Union, David Davis, told
the Exiting the European Union Committee that the Government intended using

technology to ensure control of goods without border posts (particularly in the case of
Northern Ireland, but Davis expected it to be used in cross-Channel trade as well).60 The
Committee was also told that such technology was still in the design phase, and that
there was ‘quite a lot of design work to do’.61
There is potential for new ICT. Sensors, scanners and using data to target interventions
and manage risk are all used in some customs systems around the world and are likely
to become increasingly important to modern customs. But in the short term, they are
not a viable solution to the Brexit border question.
The design and delivery of such technology on this scale and of this importance are
likely to warrant inclusion in the Government Major Projects Portfolio (GMPP), which is
‘composed of the largest, most innovative and highest risk projects and programmes in
government’. Recent GMPP ICT projects have a duration of, on average, five and a half
years from start to finish.62 By the time the UK formally leaves the EU in March 2019, it
would have only had two years and nine months to design, build and implement any
new technology.
Major ICT projects, in government and the private sector, are risky. One in four of the
ICT projects in the GMPP are rated either ‘Red’ or ‘Amber/Red’ (‘Red’ means that
successful delivery appears unachievable, with major issues that do not appear to be
manageable or resolvable; ‘Amber/Red’ means that successful delivery is in doubt, with
major risks or issues apparent and urgent action required). This high level of risk
contributes to the extension of delivery timelines. Based on the current batch of GMPP
ICT projects, every year they have spent in the portfolio has seen their expected
delivery date delayed by 186 days.
Our work on Universal Credit shows the danger of unrealistic timelines and unclear
requirements to major project delivery;63 and both the Public Accounts Committee and
the National Audit Office have reports containing similar lessons. In the Brexit context,
these dangers are simply the reality of the constraints on government.
An innovative new ICT programme in this environment is very unlikely to deliver what
is needed, when it is needed. The Government should not rely on undefined modern
technology to solve its knottiest problems.64
Government’s immediate focus should be on securing continued access

to the EU’s customs systems
This wider customs landscape includes a lot more government ICT. CHIEF and CDS are
the key customs systems, but they are just two of 57 that make up HMRC’s border ICT.
Of these 57 systems, it is expected that 25 will require changes in order to prepare for
exit from the EU65 – systems that, for example, hold the information for non-EU traders,
support trusted traders, carry out risk profiling and quality assurance, or track goods as
they move between countries.
Updating these systems will be a big task in and of itself, adding to the ICT delivery ask
for HMRC, which, it should also be said, is also delivering Making Tax Digital, one of
government’s flagship digital transformation programmes, and experiencing issues of
its own.

But the scale of change required could be significantly greater. Around a half of those
25 systems are either EU-wide or require access to EU-wide systems in order to
function. The Government could need to build a number of new ICT systems from
scratch to replace functionality currently provided at the EU level. It could also no
longer rely on the years of historic data in those EU systems that would help to inform
and improve the authorities’ decisions on what to check.
Limiting the burden on an already stretched programme of ICT changes required for
exit from the EU should be a priority for the Government. Access to the EU’s customs
systems, through customs co-operation, should be a key objective in the negotiations.
For some systems, there is a precedent that suggests the UK should be able to gain
access.
The New Computerised Transit System (NCTS) is a particularly critical EU system. It is

part of the Common Transit Convention and allows signatories to submit transit
declarations and bond money electronically, as well as allowing authorities to track
consignments across different countries. It reduces the cost of customs procedures and
the number of trucks queuing at the border, supporting paperless customs clearance
and a faster flow of goods.66 The system can be accessed by all parts of the Common
Transit Convention, which includes European Economic Area (EEA) states, Macedonia,
Serbia and Turkey, and should be a priority area for the UK in negotiations.
Not all EU customs systems can be accessed by non-member states. For some, a
situation where the UK could continue to use them would be unique – although not
necessarily unachievable. Contingency work is being undertaken for these systems,
whether it is through commercially available alternatives or simply planning
operations on the basis that the UK loses access.
Recommendations – technology
1. HMRC needs to prioritise delivery of Customs Declaration Services (CDS) in
its current form, ensuring that the basics are delivered before adding new
functionality.
2. Ministers must recognise that ‘innovative, new ICT’ is not a viable option in
the short term and focus on upgrading existing systems to cope with Brexit.
3. The Department for Exiting the European Union should prioritise continued
access to EU customs systems during the negotiations and throughout any
time-limited transition, in particular the EU’s New Computerised Transit
System (NCTS).
Customs infrastructure
This section covers the constraints that limit the potential for expanding customs
infrastructure and the possibilities for shifting the emphasis of customs activity away
from the border.
There isn’t enough time to build new infrastructure

Building new physical infrastructure at the border will take time. Changes in trading
arrangements with the EU will require increased capacity to carry out checks. There is
likely to be a need for increased capacity at ports for customs, new border posts, new

roads, new lorry parks, new warehouses and new service stations. But the time
between now and Brexit in March 2019 is too short for major change.
For example, Kent County Council is already working on an M20 lorry park, being
developed as part of ‘Operation Stack’ (see the later section ‘A canyon, not a cliff edge’),
and it will take nine months to complete once building begins. But, like any
infrastructure project, there is a long planning and approvals process before ground is
broken, with proposals for the lorry park dating back to 2015. Even now, construction is
on hold after a judicial review.
Major changes at ports will also take time. The Port of Dunkirk, in 2014, outlined a
four-year strategic plan worth €250m that would expand harbour and customs
capacity at the port. It included a new border inspection post, which look 11 months to
build, cost €2m and increased capacity for checks from 1,000 to 5,000 consignments
per year.67 This was followed by a new car terminal, which opened in March 2016 after
over a year of construction at a cost of €14.9m.68 A new 3,000 square-metre logistics
warehouse opened in July 2016, costing €1.5m.69 For UK ports looking to make
changes that are significantly greater but without the clarity on exactly what will be
required, these timescales and costs show that March 2019 is a milestone that looks
unachievable for major change.
The Port of Calais is undergoing an even more ambitious expansion. The ‘Calais 2015’
project was designed and developed between 2009 and 2014, with phases of public
debate and inquiry, planning and tendering.70 Aiming to increase capacity, improve
transport links and add storage capacity, the expansion plan has a total cost of
€862.5m, of which €662.3m will be spent on the actual building works, which
commenced in the final quarter of 2015. Works are not due to complete until at least
mid-2021.71
The Ports of Dunkirk and Calais are functionally very similar to Dover, and in both cases
the timeframes for their expansions are measured in years; whereas the time until
Brexit is measured in months.
Even if there were enough time, there isn’t the space

Space is a constraint that affects all ports. The private sector organisations involved in
operating the ports are incentivised to maximise throughput and trade flow, with
available land used to generate revenue. They are not holding spare capacity that can
be easily used.
At the ports facing the greatest immediate impacts, there is very limited room to
expand. They are optimised for the current arrangements and are not able to rapidly
scale up their customs capacity by orders of magnitude.
The Port of Dover is pinned against the cliffs with access through the town; the only
direction to expand to is into the sea. The ongoing revival of Dover’s Western Docks is
adding space for an expanded container terminal and warehouse space by reclaiming
land. This project was proposed in 2007 and is not due to complete until 2020. What
space is being added has already been earmarked for use, and there is no new capacity
for customs. Customs facilities that existed prior to 1993 have been demolished or
repurposed, and even if the reclaimed land were turned over to customs operations it

would only offer enough space to process a fraction of all the daily shipments arriving
from the EU on RoRo ferry services.
Likewise, the Port of Holyhead is enclosed within the town, which is backed up against
mountains. While Folkestone is surrounded by fields, the terminus itself has no spare
room to add capacity and so any expansion would require purchases of private land.
So the Government must look to limit the demand placed on the

physical border
The challenge of accommodating an increase in customs requirements at the border is
a significant one. The Government should give serious consideration to schemes that
can shift the emphasis of customs away from the physical border.
One alternative to border checkpoints would be to carry out investigations and

compliance audits at the source of production rather than at the border. For instance,
conducting onsite veterinary controls of cattle and sheep going for slaughter could
allow them to be pre-cleared electronically, avoiding the need for testing and checks at
the border.*
Another option would be to use inland clearance depots away from the ports
themselves. For many goods the physical border can be separated from where customs
clearance is actually done. Vital to this would be the use of transit procedures – in
particular Common Transit – which allow goods to travel across EU borders without
being stopped. Any additional advances in transit procedures for road freight which
allow clearance to be done for goods en route to the UK, as is already common in
container shipping, would further ease the demand placed on the physical border.
For example, if a Turkish haulier passes through Bulgaria, even though the crossing into
the EU is there, with a transit declaration submitted on the NCTS system it can travel
through all the states of the EU without paying any duty or being stopped. The
consignment is tracked at each significant crossing point until it reaches the UK. Once
in the UK it is cleared at some inland facility, such as Stop24 on the M20.
One downside to this is that large guarantees would have to be provided by traders for
every shipment if all exports had to use this system. Nevertheless, it does mean that
the bottlenecks caused by UK imports at entry points could at least be alleviated in
principle.
In addition, there is still the issue of other compliance checks. It has been suggested
that such depots could operate as ‘single window’ points where inspectors for multiple
agencies (for example, revenue collection, veterinary health, trade standards) can
perform any necessary checks.72 A step further would be to allow for shared clearance
depots where customs authorities from both sides of the border could conduct
juxtaposed checks for both regimes at either side of the border.
Nevertheless, the introduction of inland controls still requires the Government to

identify where depots can be placed (with space at Dover already at a premium), the
cost to build them and the staff to operate them. As we have argued, new technology
* Pre-clearance for imports, exports and transit is provided for in the Union Customs Code, which allows declarations up
to 30 days prior to shipment (see Noordijk A, no date, Union Customs Code (UCC): The new face of EU customs
procedures, Damco, p. 9, www.damco.com/en/~/media/9f1edb7a46e5479b81d0c49642af4eb2).

to track consignments and new infrastructure will not be possible to implement in the
Article 50 window.
The Government has already suggested that it would look to use the EU’s trusted trader
scheme called the Authorised Economic Operator (AEO) scheme – or a new UK-based
equivalent – to reduce actual documentary requirements at the border.73 These
schemes are well-defined concepts within the World Customs Organization’s (WCO)
framework of standards and create a ready basis for building trust around products to
help reduce checks. It would allow certified trustworthy UK traders to benefit from
streamlined processes – including minimised documentary requirements, fewer
physical inspections and faster clearance times – and enable customs authorities to
concentrate on higher-risk traders. The big value in this is that it reduces the
guarantees needed to utilise NCTS.
However, the current EU accreditation process takes months to complete and involves
close scrutiny of financial records and supply chains. The UK would need to maintain
similar requirements as the EU to enable mutual recognition, but that may mean that
the system is too burdensome for some SMEs. We were told that the accreditation
process for AEO status can take around six months for businesses, meaning that clear
guidance is required early to ensure that traders are ready to make the most of the
scheme.74
All of these potential mitigations require co-operation and agreement with European
counterparts. This can only be achieved with shared trust and a broad preservation of
convergence in customs regulations and controls.* Yet even with such an agreement,
the Government must recognise that there is neither the time nor the space to simply
expand the infrastructure capacity, and even if there was there are further questions
about how expanded facilities would be staffed. A meaningful transition period will
offer all those involved the time to make the necessary adjustments – such as building
new facilities, hiring and training new staff, connecting the expanded capacity into
existing infrastructure and allowing businesses to qualify for AEO status.
Recommendation – customs infrastructure

HMRC and Border Force must recognise the constraints at the physical border
and find means, such as Authorised Economic Operators or moving checks inland,
to limit the activity required at key ports or crossings.
Government co-ordination and capability

This section looks at how government should manage the major cross-government
exercise that is customs preparation by supporting effective communication and
co-ordination between departments, local authorities and public bodies.
Implementing Brexit requires the transformation of a number

organisations
HMRC is the tip of the iceberg for customs. Responsibility spreads right across all levels
of government with 36 organisations (departments, public bodies, and other agencies)
* They also have extra complications when it comes to the Irish border due to the preponderance of SMEs, the over 200
crossing points and the political sensitivities around any form of hard border. For a further discussion of these, see
Hayward K (2017) ‘A hard Irish border is quite possible, a frictionless one is an oxymoron’, blog, London School of
Economics, 10 July, http://blogs.lse.ac.uk/brexit/2017/07/10/a-hard-irish-border-is-possible-a-frictionless-one-is-an-
oxymoron/

involved in policy and operations relating to the border. These range from the
Government Diamond Office to the Food Standards Agency (see Figure 4 in Chapter 2).
There the more visible work of Border Force is supplemented by specialist functions
across the public sector; the Arts Council has a specialist licensing agency for cultural
goods, the Forestry Commission requires notification and certification for plants being
imported and there are roles for the Ministry of Defence, the Horticultural Marketing
Inspectorate and many others. Local government also has responsibilities, with Trading
Standards and over 100 port health authorities playing important roles up and down
the country (see Figure 4 in Chapter 2).
Outside the EU, all parts of this jigsaw will need to adapt and implement the relevant
changes. For example, under any UK–EU free trade agreement which changes the
customs requirements for agri-food, Defra alone could face transformation in several
of its major public bodies. These include the Animal and Plant Health Agency, the
Forestry Commission, Rural Payments and the Environment Agency.
The Animal and Plant Health Agency (APHA) has 2,300 staff based around the UK to
enforce EU regulation and policy. At the moment, it has inspection posts at over 20
points of entry into England and Wales and it issues over 12,000 export certificates
and inspects quarantine-licenced premises.75 APHA’s focus is both EU and non-EU
trade, but the burden of checks on non-EU trade is significantly greater than for EU
trade. In 2013, 70% of the UK’s imports of food, feed and drink by value came from the
EU, and similarly 61% of the UK’s exports of the same went to the EU. Applying
increase checks to highly-regulated agricultural goods could have a dramatic effect on
the volume of work for bodies like APHA.76
Local government could also face new demands as a result of Brexit and changes to
customs, port health authorities in particular. These authorities are responsible for
carrying out many of the checks on food as it enters the UK and, while they do
currently look at some specialised or high-risk EU goods, checks on non-EU imports are
more thorough. They can range from simply checking documents against their
databases to physical inspection – opening packaging and smelling or tasting the item.
In some instances, the goods need to be tested in a laboratory before they can be
cleared to leave the port. Any increase in checks will have a big impact not only on UK
industry and supply chains, but also on local government – whether it is officials or
vets required to do more checks or the space for testing to take place.
The Government must be clear on its priorities and the balance

between trade facilitation and security
Despite the large and disparate constellation of bodies involved in the customs
process, there are two key players: HMRC and the Home Office. But they have very
different priorities, which need to be reconciled.
Customs is, as we have argued above, about both trade facilitation and security.
Facilitation of trade, allowing movement of goods to be as free as possible, generates
revenue for the Exchequer and supports UK industry, while security ensures that
safeguards are in place to prevent illegal practices and protect consumers and the
environment.
In the UK, HMRC is responsible for facilitation whereas the Home Office, through
Border Force, prioritises security. Other major trading nations, such as Canada and New

Zealand, have a single government department or minister responsible for both major
functions and the overarching policy. The split in responsibility in the UK has prompted
concern from those working in private sector customs organisations, who worry that
competing interests will affect the Government’s ability to design and deliver coherent
policy change at the border. The Government needs to be clear on its position and how
decisions will be made on future customs policy. Border Force and HMRC must be
tightly aligned to implement changes in customs.
The UK, like the Netherlands, is known for prioritising facilitation over security. As a
result, we were told,77 it is seen as having less rigorous checks for third-country trade
than many other EU members.
The Government has taken positive steps to manage this challenge

Co-ordination and implementation across departmental and agency boundaries are a
challenge that the Government is all too aware of. Steps have already been taken to
prevent further complications in the preparation for post-Brexit customs.
A new cross-government working group – the Border Planning Group – has recently
been set up, chaired by Jon Thompson, HMRC Chief Executive and Permanent
Secretary, which includes representation from Border Force, Defra, the Department for
Business, Energy and Industrial Strategy (BEIS), the Home Office, the Treasury and
others.
The group has much-needed heft behind it, with a new Director-General Border
Planning appointed in July 2017 with significant experience in operational delivery.
This role will be critical to ensuring that the board is able to be decisive and drive the
agenda, with analytical resources and clout to ensure that the group’s decisions are
translated into action. The Director-General Border Planning will also be critical for
co-ordinating change and ensuring ‘operational readiness’ at the border on day one.
Delivering major changes across departmental and organisational boundaries is

difficult. Clear accountability is a key component to project and programme delivery
but the National Audit Office argues that accountability can be blurred when delivering
across departmental boundaries.78 Customs preparations in government, until the
recent introduction of the Border Planning Group, had responsibilities spread out
across the range of departments and agencies, lacking a focal point for decision
making and co-ordination.
The formation of the Border Planning Group is regarded as a positive and important
step in Whitehall. The group is seen as an opportunity to improve communication and
co-ordination, facilitating a cross-government conversation on the detailed
administrative implications of policy options, where preparations have previously
suffered from a lack of clarity and information. It focuses accountability, with a single
decision-making body. The group is too new to be judged a success, and it no doubt
faces some significant challenges, but its creation is a constructive move that is
welcomed by those involved in preparations for post-Brexit customs.
Retention and stability will be critical if government is going to deliver

Even with strong leadership from the Border Planning Group, preparation for day one is
dependent on teams of specialists at all levels, from different departments and
agencies.

Customs requires technical knowledge of a complex policy and operational landscape.
There is a lot of external engagement, with private sector organisations that specialise
in customs and know their parts of the puzzle in great detail. To understand the
process, deliver at the necessary speed and be credible with these external
stakeholders, government needs experienced specialists.
But some external organisations have found that government’s understanding of the
customs process has been patchy on occasions. In certain parts of government,
important experience has been lost over the past five years and newer members of
staff have had to manage a steep learning curve as a result of Brexit. Private sector
organisations involved in customs report of having to brief civil servants on certain
parts of the process, to build up knowledge.
Some churn is inevitable but, for customs and Brexit preparations, government is more
vulnerable to the negative effects. With very little additional resources made available
to date, limited time within which to deliver and high technical understanding
required, stability and retention are critical. Government must look to build resilience
into its staffing model wherever possible.
To start, vacancies need to be filled. As of 27 June 2017, the CDS delivery programme
was carrying around 50 vacancies, with four required immediately to prevent adverse
effects to delivery.79 Government must prioritise filling these gaps, as failure to have
customs prepared for day one could cause significant disruption.
Decisions need to be made quickly to ensure that government has

enough frontline staff for day one
The civil service’s capacity to deliver Brexit has been in question since immediately
after the EU referendum. In June 2016, the civil service was the smallest it had been
since the second world war and it faced the huge administrative task of unpicking the
UK’s relationship with the EU, repatriating powers and functions that have resided in
Brussels for over 40 years.
Since then, staff numbers have risen. Civil servants have been hired and drafted in to
key Brexit departments such as Defra and the Department for Exiting the European
Union. But these increases in staff numbers have largely been in Whitehall, boosting
the civil service’s capacity to undertake analysis, policy and legislation.
Adapting the UK’s border to ensure that it is ready for exiting the EU will need a
significant increase in frontline staff as well, all around the country. Government has
recognised the challenges it faces, along with those faced by SMEs, in recruiting and
training new staff to provide the necessary capacity at the border.80
Border Force is, we were told, already hiring some additional staff to give it a bit of
flexibility. But this is not enough to be ready for ‘no deal’. If government is going to be
prepared for a hard exit in March 2019, the big decision points for staffing are
imminent. It takes time to hire and just training new recruits would take a year or so.
This training is even longer for specialists. If the UK is required to undertake checks on
animal produce coming from the EU, it will need an increase in the number of vets.
There could be a need for an increase in experts available to test chemicals or plants as
well. It may not be possible to find and train all of these new specialists in time.

Government will need a clear plan of how to resource the border. It may need to look
abroad to attract the talent it needs.
Recommendations – government co-ordination and capability

1. The Government should continue to use the cross-government Border
Planning Group to orchestrate preparations for day one.
2. The Government should prioritise retention of staff and stability in key

specialist teams to prevent the loss of critical expertise and knowledge.
Preparing business
This section looks at how the Government should work with the extensive private
sector interests in customs to ensure that issues are addressed and there is sufficient
preparation and capacity for customs on day one. It covers two types of private sector
organisations: the businesses that play an active role in the customs landscape; and
traders.
Government is just one part of the picture – the private sector plays a
critical role in the process
The customs landscape in government is a complex picture, but that intricate image
with numerous moving parts is mirrored in the private sector.
From leaving the exporter to arriving with the importer, a good is likely to pass
through the hands of as many private sector organisations as it does government
departments or agencies. Private sector organisations own UK ports and airports,
operate them, transport the goods, handle the customs processing and manage
logistics (see Figure 5).
Any change made to the customs process by government will need to be reflected in
the private sector, whether it is new ICT, increased documentation or greater capacity
and related infrastructure. Successful day-one implementation is as much about these
private sector organisations that support UK border operations as it is about
government; effective engagement is critical.
But, in the past, government has struggled to effectively engage these organisations.
The National Audit Office has said that e-Borders, the failed Home Office ICT
programme, suffered from ‘underestimating the importance of stakeholder
management’ and focusing on delivery timelines to the detriment of engagement.81
Government needs to step up engagement with the private sector

organisations that support customs processes
There is, however, already a successful engagement mechanism in place for
customs. The Joint Customs Consultative Committee (JCCC) is an HMRC-sponsored
forum that brings together over 20 member organisations representing private
businesses in the customs process. It was set up almost 50 years ago and it meets
three times a year. Members cover the ports, hauliers, community systems providers,
freight software suppliers and logistics companies. In 2016, the JCCC set up a Brexit
sub-committee, which meets about once a month to discuss preparations for exit from
the EU.

But the JCCC, largely filled with senior figures from major representative bodies, can
suffer from being too high level and is at risk of becoming a talking shop. With such
complex and detailed interdependencies between government and the private sector,
high-level engagement will quickly need to become more detailed, involving working
groups and closer collaboration. Government will need to work in lockstep with these
organisations to ensure readiness for Brexit. Furthermore, implementation will require
engagement at all levels of the private sector, not just among the most senior decision
makers.
Previous Institute for Government research has shown the importance of detailed
engagement. During Automatic Pension Enrolment, government relied too much on its
engagement with trade associations. The lack of engagement with employers meant
that regulations needed to change mid-course, rather than being more effectively
designed at the start.82
But engagement is not enough on its own. Government needs to recognise that for
these private sector organisations to be ready, they will need time to adapt.
These private sector organisations will also need time to adapt their
processes to support the new customs requirements…
Some of these private sector organisations will need to adapt their ICT systems to
interface with new government systems, and port operators might need to find space
for inspections to take place and they may need to build new warehouses or hire and
train staff to manage a huge surge in activity.
For example, customs clearance agents based in the south-east of England currently
manage non-EU trade coming through Dover and the Channel Tunnel. This makes up
about 1% of total trade through the Channel ports. To scale these organisations up to
the point where they have the capacity to manage 100% of trade would require new
systems, staff and infrastructure. For organisations that currently employ around 20
people, a hundredfold increase in work would be completely incompatible with their
current business model.
These private sector organisations are usually given a period of years to adapt to
changes once government has implemented them. For changes introduced in the
Union Customs Code (UCC), plans were agreed in 2013, introduced in 2016, and
government and business were given until 2020 until they needed to be compliant.83
Organisations therefore had a four-year period to prepare. When the UK implemented
the Import Control System, introducing Entry Summary Declarations (ENSs) in what is a
relatively straightforward change compared with Brexit, organisations were given 18
months to adapt once the UK Government had finished work on the system.84 With
formal withdrawal from the EU in March 2019, organisations have got less than 20
months to prepare for an outcome that is not yet agreed.
In its position paper on future customs arrangements and position paper on Northern
Ireland and Ireland, the Government has acknowledged the challenges for businesses
associated with transition. It has placed an emphasis on negotiating a single-step
transition so that organisations need only change their practices once. Additionally,
although this transition would be ‘time limited’ its length would be ‘linked to the speed
at which the implementation of new arrangements can take place’.85

And they will want some certainty before they spend money
These private sector organisations will want assurances that they are not spending
money in vain. They will want to avoid the prospect of preparing for ‘no deal’, with the
significant investment it could require, only for a lengthy transition and soft Brexit to
be agreed.
Ultimately there is a need for certainty. At the moment, there is little clarity about when
these organisations can expect a decision to be made and whether they will be given
the time to prepare once it has been made. We have been told that some have received
so little information that they do not anticipate having to make wholesale change by
March 2019; they now believe that there is just not enough time.86
This lack of certainty extends to money, and who will pay for major upgrades. Some
businesses wonder whether they can expect support from government to finance such
large, expensive changes in the challenging timelines. But government will be reticent,
providing what could be seen as subsidies to certain private sector providers and
offering them a competitive advantage. Either way, clarity is required quickly and there
may need to be legislation to force private sector organisations to start making the
changes needed and incurring the costs in doing so.
Then there are importers and exporters, who face a major step change
in administration
So far this chapter has focused on organisations that are involved in the logistics and
operations of customs. But British businesses looking to import from or export to the
EU face a step change in administrative requirements, and they need to be prepared to
make it.
After exit from the EU, there will be 180,000 traders, from individuals and micro-
businesses to large organisations across different industries, who will need to make
customs declarations for the first time. Preparing these organisations to use a process
they are unaccustomed to is a huge task. They will need to navigate new technology
and provide detailed information, as well as potentially requiring new certification
from a range of public bodies.
Every trader looking to export to the EU could end up needing to complete a Single
Administrative Document (SAD) and an Entry Summary (ENS). As we stated earlier, the
SAD consists of eight parts with 54 boxes which must be completed and submitted for
every declaration.87 Along with numerous other documents such as insurance
certificates and specialist documents, this represents a significant additional burden to
businesses.
Without clarity on what customs will look like after Brexit, businesses cannot plan the
transition they need to make.
The Government does not yet have a plan for how it will switch traders to making
declarations through CDS once it is in place, nor does it know how to ensure that the
180,000 traders, making declarations for the first time, are aware of what is required of
them on day one.88 These plans for transition are critical, guiding organisations through
substantial change to ensure that they are ready to avoid a cliff edge.

The JCCC is a ready-made forum for engaging with key players in the customs process,
but there are ‘significant gaps’ in its engagement with the tens of thousands of
businesses that will need to be ready to trade in the new environment.89 The smaller
and less-established traders, without strong government relationships, are a
particularly key gap and they face potentially significant impact from any change.
Government must leverage its existing networks and prioritise improving engagement
with these groups, or it faces traders being unprepared for day one and consequences
for UK businesses.
Business needs to prepare itself to cope with the additional costs of the
new customs regime
In our recent paper, Frictionless Trade, we highlighted the potential disruption and cost
to supply chains as a result of a change in our relationship with the EU.90 Each option
for securing frictionless trade after Brexit, from continued Single Market membership
to a free trade agreement, introduces some element of cost to the supply chain.
Whether it is from tariffs or the introduction of ‘rules of origin’, which the Government
has previously estimated could cost firms 4–15% of the cost of the good, there are a
number of drivers for increased costs.91
The need for customs declarations alone could cost business billions. We were told
that a customs declaration is likely to cost a trader in the region of £20 to £45 per
declaration.92 With an additional 200 million declarations expected after Brexit, the
cost to business could be in the region of £4bn to £9bn.
Traders are also charged for checks. A physical examination of goods from port health
authorities can cost a trader anywhere between £106 and £600 per container,
depending on the test requirements.93 For some goods, this means being transported
to specific locations to be tested, which adds an extra £30 every two containers.94 For
those that then enter storage in order for checks to take place, rent can be charged.
The scale and cost of change for many traders could be significant. Government must
engage with them in detail about changes, understanding their requirements and
giving them as much time to adapt as possible. Preparedness for exit from the EU
depends as much on these groups of external stakeholders as it does the Government.
Government must be clear about the options and contingencies, offering as much
certainty as possible. Businesses, from customs handlers to exporters, must be given
the necessary information to allow them to plan effectively.
Recommendations – preparing business

1. HMRC must expand its engagement with the private sector beyond the Joint
Customs Consultative Committee (JCCC), using more detailed working
groups to manage implementation and the dependencies on the private
sector as well as undertaking detailed transition planning with traders.
2. The Government must publish detailed plans and scenarios for day one as
soon as possible. Businesses need to be given enough information and time
to prepare.

A canyon, not a cliff edge
This section looks at the role that member states will need to play in preparations for
the UK’s exit from the EU. There are two sides to the cliff edge and preparations across
the English Channel are just as important as preparations in the UK for minimising
disruption.
Customs is a bilateral process and how the EU will treat UK goods

matters
There are two sides to any border; any goods we export inevitably become an import in
another country. This is a symmetrical process and, following Brexit, both sides will
erect customs processes where there were previously none. As we have already
discussed, there is no way for these to replicate the same frictionless trade as the UK
currently enjoys through its membership of the Single Market and the Customs Union.
The UK has no say over how its exports are treated. Only a trade deal can change this.
The default EU position, which we would experience under ‘no deal’, is one where UK
goods would face extensive barriers to trade, in addition to high tariffs. Even with a
comprehensive trade deal in place, Belgium, France, Ireland and the Netherlands will
need to implement changes to their customs systems to process UK imports.
The issue is potentially most acute for Ireland. In addition to more than 200 points
where roads cross the land border into Northern Ireland, there is a significant amount
of trade across the Irish Sea. While ports such as Dublin and Holyhead may be
unprepared and unable to expand their customs capacity at short notice, the question
of how to handle goods crossing the land border is more pressing.
At the moment, the border is essentially non-existent. Free movement of goods has
enabled the integration of supply chains, ranging from drinks to car parts. If the EU
requires strict controls on UK goods, Ireland will be legally obliged to comply, with
potentially significant consequences. The Government’s position paper on the border
between Ireland and Northern Ireland set out its ambition to negotiate an arrangement
where no hard borders are required,95 but again this is a matter for negotiation and
agreement with the EU27.
The risk of disruption from the other side of the Channel is significant
The Ports of Calais, Coquelles and Dunkirk are the counterparts of Dover and
Folkestone; these ports share an exclusive trade flow of around four million lorries per
year by ferry and the Channel Tunnel. The challenge faced by Dover and Folkestone to
supply customs will be replicated in kind in these French ports.
Depending on the scope of the Brexit deal, this could mean extensive new
infrastructure, a significant workplace expansion and hundreds of millions of euros
being spent. Insufficient time to make changes, and the associated legal and
procedural requirements, are just as urgent in France as they are in the UK. The Ports of
Calais and Dunkirk are both in the process of multi-year upgrades costing almost €1bn
combined. While both projects will add some new customs capacity, they were
initiated well before the EU referendum and are scaled to the organic growth in trade
and customs requirements anticipated while the UK remained a member of the EU. It
would be complicated and costly to change the scope of these projects midway
through.

Disruption in Calais will be felt in the UK. In June 2015, strikes by French workers in
Calais resulted in over 30 miles of tailbacks along the M20 in Kent and the closure of
the road to coast-bound traffic for almost two weeks.
There is a limited amount of ferry capacity and what exists is scaled to support an
uninterrupted flow of lorries. If the ferries – or the Channel Tunnel transporters –
cannot unload, whether it is because of a strike or bad weather or because the port is
full of lorries waiting for checks, then those same ferries will not be able to whisk away
with the lorries waiting to depart. This would result in tailbacks both in France and up
the M20 as lorries waiting to embark are held up. In this sense, the customs issue is not
just a cliff-edge issue, but a canyon.
Currently, the only remedy for this scenario is ‘Operation Stack’, an emergency plan
that exists to reroute traffic around Kent in the case of delays. This procedure is based
on a set of emergency powers, which allow the police to control the movements of
lorries. While this can hold up over short periods, it was never designed to be the
default state. The events of June 2015 tested the limits of Operation Stack and cost the
UK dearly. Giving evidence to the Transport Select Committee, Natalie Chapman, a
Head of Policy at the Freight Transport Association, argued that every day of disruption
caused a loss to the UK economy of up to £250m, using an estimate provided by the
Port of Dover.96
What is notable is that every recent instance of Operation Stack has been due to issues
on the French side of the border. A lack of customs capacity at that border would
represent a new category of issue, which would have similar impacts on the Kent ports
and their surroundings but would not have any immediate hope for resolution, unlike
inclement weather or a temporary strike.
While trade is integrated most tightly across the Straights of Dover, and the Irish
border, there will be similar impacts on ports in other neighbouring countries. Ports in
Belgium and the Netherlands are already beginning to prepare for the impact of Brexit
on their staffing requirements and infrastructure. We were told that the Port of
Rotterdam may need to hire up to 800 more staff to handle the new customs work for
UK trade after Brexit.97
We have no control over how other countries prepare for Brexit

The EU27 member states will be legally bound to treat our goods as third-country
imports following a UK exit from the Single Market and Customs Union with no deal.
Only a formal agreement can mitigate that risk. While the similarity of the UK and EU
regimes provides a good basis for agreeing the continuation of smooth trade, it is not
enough in and of itself to limit checks.
There are some notable asymmetries in the cross-Channel flow of goods. While
UK-bound goods come from many nations or sources, EU-bound lorries are
overwhelmingly full of UK-made products. Similarly, the flow of value is unbalanced,
and the UK receives more in trade than it sends across the Channel.
Engagement will be critical

Relationships will be a major challenge, not just between the UK and other nations, but
also between government agencies in the UK and EU27, private companies working at
either border and all groups in between. Existing bilateral arrangements and legislation

that facilitate trade, such as the Channel Tunnel Act 1987 and the Le Touquet
Agreement 2003, were not designed for changes in the UK’s status within the EU. They
may need to be modified, or supplemented with new agreements that would foster
co-operation between customs agencies and other relevant authorities.
The Home Office currently has a working group with its French counterparts, but a
similar cross-Channel group including the transport teams for the councils of Kent and
Pas-de-Calais was paused some years ago, with no immediate plans to reconvene.
Solving this issue will require careful diplomacy as it is a complex combination of
bilateral relationships between the UK and its immediate neighbours that depends on
a higher-level multilateral consensus between the UK and the wider EU27.
Recommendation – a canyon, not a cliff edge

The Government should undertake detailed bilateral engagement activities
with authorities in France, the Republic of Ireland, the Netherlands and other
EU member states to ensure that both sides of the UK–EU border are prepared
for Brexit.

Appendix A
This table details components of the EU’s customs system which could be included as
part of any future EU–UK customs agreement as well as some important provisions
(included in other trade deals) which can facilitate the movement of goods.
Data protection
Data adequacy The EU’s General Data Protection Regulation regulates how personal
information is shared between countries. The expansive definition of
‘personal data’ used by the EU covers elements of what is shared between
customs authorities. EU-based organisations can only share data with third
countries that meet the same standards and are deemed ‘data adequate’.98
Access to this data allows HMRC to employ intelligence-led controls at the
border, and checks that are targeted using smart risk analysis. It also enables
the UK to share information with other EU member states about dangerous
goods, novel risks and criminal activities such as smuggling.99
ICT systems
New Computerised The NCTS allows traders to submit transit declarations and proofs of
Transit System guarantee (bond money). Consignments can be tracked as they travel across
member states. The NCTS enables paperless customs clearance, which in turn
(NCTS)
reduces the costs of customs and delays at the EU border.100
Customs Information The CIS is a single centralised source of EU-wide customs information, which
System (CIS) is used to investigate and prosecute against breaches of customs and
agricultural rules. It also enables data exchanges on goods moving between
the EU’s customs territory and third countries.101
Excise Movement The EMCS monitors the movement of excise goods – such as alcohol, tobacco
and Control System and energy products – that have yet to have their duties paid. This
information helps member states to co-operate by sharing this information.102
(EMCS)
Trade Control and TRACES is an EU-wide online tool that helps to control the import and export
Export System of live animals and animal products. It provides the mandatory veterinary and
sanitary certificates that any consignment of these goods requires.103
(TRACES)
European Union EUROPHYT is an online surveillance and warning system that helps to protect
Notification System the EU against the introduction of new pests and diseases affecting plants. It
tracks interceptions of dangerous imports, maintains a database of threats
for Plant Health
and shares alerts of new risks and dangerous consignments with member
Interceptions
state customs authorities.104
(EUROPHYT)
Rapid Alert System The RASFF allows rapid and efficient information sharing about food and feed
for Food and Feed safety between customs authorities. This can lead to product recalls and
other forms of risk-based control.105
(RASFF)
Registered Exporter The REX database lists the organisations that are entitled to certify the origin
(REX) system of their own goods, in line with the preferential tariff rates that the EU grants
to goods from certain countries. This relates to rules of origin.106
Regulation
Mutual recognition Agreements involving mutual recognition of conformity inspection allow
of conformity national regulators and other assessment bodies to check that goods comply
with the standards and regulations of another nation and have that
inspection
assessment trusted by the trade partner. This allows many checks and tests to
be done once, away from the border. These goods are essentially pre-cleared
before they arrive at the other country as imports, enabling trade to flow
more easily. However, a document check is still required at the border to
prove that the tests have been completed.
Equivalence Agreeing equivalence for a category of goods means that if it can be lawfully
sold in one market, it can be lawfully sold in another. Where equivalence has
been agreed between two customs territories, goods can be traded freely
without (or with severely reduced) document checks and other inspections.

Agreement on Hauliers moving freight require transit permits for their vehicles, which most
transport services nations or blocs assign according to strict quotas. These permits and licences
have to be presented every time the vehicle crosses a border. By agreeing to
waive this requirement, more vehicles can move more freely between
territories, such as the UK and EU.
Authorised Economic Operator (AEO)
Mutual recognition The Authorised Economic Operator is a standard convention defined by World
of trusted trader Customs Organization (WCO) rules. It is a designation that can be applied to
almost any organisation involved in trade, from exporters and carriers, to
schemes
brokers, ports and terminal operators. Companies earn this status by meeting
certain standards for record keeping and financial solvency. Agreements that
recognise the credentials of AEOs allow these firms to trade their goods with
fewer document checks. They may also be permitted to use simplified
customs procedures without providing financial guarantees.107
Tariffs
Rules of origin Where an agreement allows for preferential tariff rates, then rules of origin
will need to be observed. These require traders to submit proof that their
goods contain a certain proportion of materials or components from the
‘preferred’ nation in order to qualify for the lower tariff. Before traders can do
this, they need to be audited by a recognised authority and register with a
system such as the EU’s REX system.
EU VAT Regime
VAT Agreement Currently trade between UK and the EU enjoys zero-rated VAT. Leaving the
EU’s VAT regime will mean that reporting requirements will change. Goods
exported from the UK to an EU country will be subject to import VAT and
traders will have to register for VAT with the EU. The Government’s paper on
future customs arrangements explores not switching UK–EU trade to non-EU
status, and incurring an unwelcome compliance burden and cash-flow risk.108
It does not provide any more detail however. The UK could agree to remain
integrated in the EU VAT regime post-Brexit either for a transition or as part of
a deal. But the UK would have to remain harmonised with the EU’s VAT
Directive and subject to the European Court of Justice.

Appendix B: Full names of government
departments
BEIS Department for Business, Energy and Industrial Strategy
DCMS Department for Digital, Culture, Media and Sport
Defra Department for Environment, Food and Rural Affairs
DfID Department for International Trade
DfT Department for Transport
DH Department of Health
DIT Department for International Trade
DWP Department for Work and Pensions
FCO Foreign and Commonwealth Office
HMRC HM Revenue and Customs
HMT HM Treasury
HO Home Office
MoD Ministry of Defence

References
1. Owen J (2017) Implementing Brexit: Immigration, Institute for Government.
www.instituteforgovernment.org.uk/publications/frictionless-trade-brexit-august-2017
2. Grainger A (2017) ‘Trade and customs procedures in international freight transport:

requirements, issues and trends’, in Beresford A and Pettit S, eds., International Freight
Transport: Cases, structures and prospects, Kogan Page, p. 1.
3. Grainger, A (2011) ‘Trade facilitation: a conceptual review’ Journal of World Trade, 45(1),
39-62, p. 54, http://eprints.nottingham.ac.uk/1769/1/TRAD_45%281%29_Andrew_
Grainger.pdf
4. Grainger A (2017) ‘Trade and customs procedures in international freight transport:

requirements, issues and trends’, in Beresford A and Pettit S, eds., International Freight
Transport: Cases, structures and prospects, Kogan Page, p. 1.
5. Harra J (2017) Letter to the Rt Hon Andrew Tyrie MP, 21 February, www.parliament.uk/
documents/commons-committees/treasury/Correspondence/Jim-Harra-response-to-
Tyrie-21-02-17.pdf
6. European Parliament (no date) ‘The internal market: general principles’, European
Parliament, retrieved 30 August 2017, www.europarl.europa.eu/atyourservice/en/
displayFtu.html?ftuId=FTU_3.1.1.html
7. Stojanovic A and Rutter J (2017) Frictionless Trade? What Brexit means for cross-border
trade in goods, Institute for Government, www.instituteforgovernment.org.uk/sites/
default/files/publications/5704%20IFG%20-%20Frictionless%20Trade%20Web_0.pdf
8. HM Revenue and Customs (no date) ‘UKTradeInfo’, retrieved 30 August 2017,

www.uktradeinfo.com/Statistics/BuildYourOwnTables/Pages/Table.aspx
9. Dover Harbour Board (2015) Annual Report & Accounts: Port of Dover 2015, Dover Harbour
Board, p. 7, www.doverport.co.uk/downloads/DHB_Annual_Report%20and%20
Accounts%202015_WEB.pdf
10. UK Chamber of Shipping (no date) ‘Essential priorities to protect and grow UK trade and
shipping’, UK Chamber of Shipping, retrieved 30 August 2017, www.
ukchamberofshipping.com/blueprint-growth/essential-priorities-protect-and-grow-uk-
trade-and-shipping/
11. Department for Transport (2013) ‘Port freight (PORT02)’ dataset, PORT0207 data, retrieved
30 August 2017, www.gov.uk/government/statistical-data-sets/port02-freight
12. Groupe Eurotunnel ‘Parking facilities near the Eurotunnel terminals’,

www.eurotunnelfreight.com/uk/about/parking-facilities/
documents/commonscommittees/treasury/Correspondence/Jim-Harra-response-to-
Tyrie-21-02-17.pdf
14. World Bank (2003) ‘Alternative port management structures and ownership models’,
Public – Private Infrastructure Advisory Facility (PPIAF), p. 21, http://siteresources.
worldbank.org/INTPRAL/Resources/338897-1117197012403/mod3.pdf
15. HM Government (2017) Future Customs Arrangements: A future partnership paper, HM

Government, www.gov.uk/government/uploads/system/uploads/attachment_data/
file/637748/Future_customs_arrangements_-_a_future_partnership_paper.pdf

Government, p. 2, www.gov.uk/government/uploads/system/uploads/attachment_data/
18. Rankin J and Boffey D (2017) ‘“A fantasy”: EU leaders dismiss UK’s post-Brexit customs
plan’, The Guardian, 15 August, retrieved 30 August 2017, www.theguardian.com/
politics/2017/aug/15/european-minister-pours-cold-water-on-uk-interim-trade-
proposal-brexit

20. Ibid.

21. May T (2017) ‘The Government’s negotiating objectives for exiting the EU: PM speech’, 17
January, GOV.UK, retrieved 30 August 2017, www.gov.uk/government/speeches/
the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech
22. Corbyn J (2017) on Andrew Marr Show, BBC One, 23 July, news.bbc.co.uk/1/shared/bsp/hi/
pdfs/23071701.pdf

24. HM Government (2017) Northern Ireland and Ireland: Position paper, HM Government,
www.gov.uk/government/publications/northern-ireland-and-ireland-a-position-paper
25. Harra J (2017) Letter to the Rt Hon Andrew Tyrie MP, 21 February, p. 5, www.parliament.uk/
Tyrie-21-02-17.pdf
26. Department for Transport (2013) ‘Individual port traffic (PORT04)’ dataset, table
PORT0498, retrieved 30 August 2017, www.gov.uk/government/statistical-data-sets/
port04-individual-port-traffic
27. Giles C (2017) ‘How “no deal” could bring Britain to a halt’, Financial Times, 16 July,
retrieved 30 August 2017, www.ft.com/content/2ec71ab4-688a-11e7-8526-
7b38dcaef614
28. Oxera (2016) ‘Brexit: implications for the transport sector, Agenda, June, www.oxera.com/
Latest-Thinking/Agenda/2016/Brexit-implications-for-the-transport-sector.aspx
29. House of Commons Home Affairs Committee (2017) ‘Oral evidence: implications of the
UK’s exit from the EU’, 25 January, retrieved 30 August 2017, http://data.parliament.uk/
writtenevidence/committeeevidence.svc/evidencedocument/home-affairs-committee/
implications-of-the-uks-exit-from-the-european-union/oral/46107.html
30. Ernst & Young (2016) Economic Footprint of the Channel Tunnel Fixed Link, Ernst & Young,
p. 10, www.ey.com/Publication/vwLUAssets/Economic_footprint_of_the_Channel_
Tunnel_fixed_link/$File/Channel%20Tunnel%20EN%20light.pdf

32. World Trade Organization (no date) ‘Principles of the trading system’, World Trade
Organization, retrieved 30 August 2017, www.wto.org/english/thewto_e/whatis_e/tif_e/
fact2_e.htm
33. House of Lords European Union Committee (2017) Brexit: Trade in goods: 16th report of
session 2016–17, House of Lords, p. 61, col. 204, www.publications.parliament.uk/pa/
ld201617/ldselect/ldeucom/129/129.pdf
34. World Trade Organisation (1995) ‘The WTO Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS Agreement)’ Article 2, Paragraph 3, The World Trade
Organisation. www.wto.org/english/tratop_e/sps_e/spsagr_e.htm

37. Confederation of British Industry (2017) Brexit Policy Briefing: Staying in the Single Market
and a customs union until a new deal is in force, CBI, www.cbi.org.uk/cbi-prod/assets/File/
pdf/cbi-briefing-on-transitional-arrangements-proposal.pdf
38. Renison A (2017) Bridging the Brexit Gap: Options for transition, IoD, executive summary,
www.iod.com/Portals/0/PDFs/Campaigns%20and%20Reports/Europe%20and%20
trade/Bridging-the-Brexit-Gap.pdf?ver=2017-08-03-101139-523

40. Ibid.
41. European Commission (no date) ‘Negotiation mandate and transparency’, European
Commission, retrieved 30 August 2017, https://ec.europa.eu/commission/brexit-
negotiations/negotiation-mandate-and-transparency_en


43. European Parliament (2017) ‘Red lines on Brexit negotiations’, press release, 6 April,
retrieved 30 August 2017, www.europarl.europa.eu/news/en/press-
room/20170329IPR69054/red-lines-on-brexit-negotiations
44. European Commission UCC – An introduction, retrieved 30 August 2017, https://ec.

europa.eu/taxation_customs/business/union-customs-code/ucc-introduction_en
45. Booth S, Shankar A and Scarpetta V (2017) Nothing to Declare: A plan for UK–EU trade
outside the Customs Union, Open Europe, p. 19, http://openeurope.org.uk/intelligence/
economic-policy-and-trade/nothing-to-declare-a-plan-for-uk-eu-trade-outside-the-
customs-union/
46. HM Revenue and Customs (2012) The Single Administrative Document for Import and
Export, HM Revenue and Customs, www.gov.uk/guidance/declarations-and-the-single-
administrative-document
47. HM Government (2014) Review of the Competences Between the United Kingdom and the
European Union: Single Market: Free movement of goods, HM Government, pp. 44, 55,
www.gov.uk/government/uploads/system/uploads/attachment_data/
file/288194/2901479_BoC_SingleMarket_acc5.pdf
48. HM Revenue and Customs (2016) Customs Vision for 2020, HM Revenue and Customs, p.6,
retrieved 30 August 2017, www.gov.uk/government/publications/customs-
visionfor-2020
49. Ibid.
50. National Audit Office (2017) The Customs Declaration Service, National Audit Office, p. 16.
51. Prime Minister’s Office (2017) The Queen’s Speech, 21 June, Prime Minister’s Office, www.
gov.uk/government/uploads/system/uploads/attachment_data/file/620838/Queens_
speech_2017_background_notes.pdf
52. White H and Rutter J (2017) Legislating Brexit: The Great Repeal Bill and the wider legislative
challenge, Institute for Government.
53. Cabinet Office (2017) Queen’s Speech 2017, GOV.UK, www.gov.uk/government/speeches/

queens-speech-2017
documents/commonscommittees/treasury/Correspondence/Jim-Harra-response-to-
Tyrie-21-02-17.pdf
56. House of Commons Home Affairs Committee (2017) ‘Oral evidence: implications of the
UK’s exit from the EU’, 25 January, retrieved 30 August 2017, http://data.parliament.uk/
writtenevidence/committeeevidence.svc/evidencedocument/home-affairs-committee/
implications-of-the-uks-exit-from-the-european-union/oral/46107.html
57. Commons Select Committee (2017) ‘Collapse in confidence in the Customs Declaration
Service’, Parliament UK, retrieved 30 August 2017, www.parliament.uk/business/
committees/committees-a-z/commons-select/treasury-committee/news-
parliament-2015/collapse-in-confidence-cds-16-17/; National Audit Office (2017) The
Customs Declaration Service, National Audit Office.
58. National Audit Office (2017) The Customs Declaration Service, National Audit Office.
www.nao.org.uk/report/the-customs-declaration-service/
59. Ibid.
60. House of Commons Committee on Exiting the European Union (2017) ‘Oral evidence: the
UK’s negotiating objectives for its withdrawal from the EU, HC1072’, 15 March, retrieved
30 August 2017, http://data.parliament.uk/writtenevidence/committeeevidence.svc/
evidencedocument/exiting-the-european-union-committee/the-uks-negotiating-
objectives-for-its-withdrawal-from-the-eu/oral/48859.html
61. Ibid.
62. Infrastructure and Projects Authority (2016) Annual Report on Major Projects 2015–16,
Cabinet Office, www.gov.uk/government/uploads/system/uploads/attachment_data/
file/535243/ipa_annual_report_on_major_projects_2015_2016.pdf
63. Norris E and Rutter J (2016) Learning the Lessons from Universal Credit: Briefing paper,
Institute for Government, www.instituteforgovernment.org.uk/sites/default/files/
publications/5087%20IFG%20-%20Universal%20Credit%20-%20Briefing%20
Paper%20WEB%20AW_0.pdf

64. Commons Select Committee (2017) ‘Collapse in confidence in the Customs Declaration
Service’, Parliament UK, retrieved 30 August 2017, www.parliament.uk/business/
committees/committees-a-z/commons-select/treasury-committee/news-
parliament-2015/collapse-in-confidence-cds-16-17/
Tyrie-21-02-17.pdf
66. Erceg A, ‘The new computerized transport system and e-customs influence on savings in
transit times and costs’, p. 149, ftp://ftp.repec.org/opt/ReDIF/RePEc/osi/bulimm/PDF/
BusinessLogisticsinModernManagement13/blimm1314.pdf
67. Dunkerque Port (2015) ‘Port of Dunkirk: inauguration of new border inspection post’,
press release, 9 October, retrieved 30 August 2017, www.dunkerque-port.fr/en/press/
news/2015-10-08-port-of-dunkirk-inauguration-of-new-border-inspection-post-
en-40946.html
68. Ibid.
69. Dunkerque Port (2016) ‘New warehouse for Taillieu Logistique Nord (TLN)’, press release,
12 July, retrieved 30 August 2017, www.dunkerque-port.fr/en/press/news/2016-07-11-
new-warehouse-for-taillieu-logistique-nord-tln-en-45612.html
70. Port Boulogne Calais (2015) ‘Calais Port 2015’, Port Boulogne Calais, retrieved 30 August
2017, www.portboulognecalais.fr/en/calais-port-2015
71. Société des Ports du Détroit (no date) ‘Works schedule’, Société des Ports du Détroit,
retrieved 30 August 2017, www.spd-calais.com/en/work-site/works-schedule
72. Hayward K, Campbell M and Murphy R (2017) ‘The Irish border as a customs frontier after
Brexit’, CEPS blog, 11 July, p. 3, www.ceps.eu/publications/irish-border-customs-frontier-
after-brexit

Government, p. 8, para. 33, www.gov.uk/government/uploads/system/uploads/
attachment_data/file/637748/Future_customs_arrangements_-_a_future_partnership_
paper.pdf
74. Institute for Government interview (2017).
75. Animal and Plant Health Agency (no date) Annual Report and Accounts 2015/16, Animal
and Plant Health Agency, www.gov.uk/government/uploads/system/uploads/attachment_
data/file/540433/apha-15-16-ara.pdf
76. Defra (2014) ‘Overseas trade in food, feed and drink’, www.gov.uk/government/statistical-
data-sets/overseas-trade-in-food-feed-and-drink
78. National Audit Office (2016) Delivering Major Projects in Government: A briefing for the
Committee of Public Accounts, National Audit Office, p. 14, www.nao.org.uk/wp-content/
uploads/2016/01/Delivering-major-projects-in-government-a-briefing-for-the-
Committee-of-Public-Accounts.pdf

Government, p. 13, para. 58, www.gov.uk/government/uploads/system/uploads/
attachment_data/file/637748/Future_customs_arrangements_-_a_future_partnership_
paper.pdf
81. National Audit Office (2015) E-Borders and Successor Programmes, National Audit Office,
p. 9, www.nao.org.uk/wp-content/uploads/2015/12/E-borders-and-successor-
programmes.pdf
82. Norris E, Kidson M, Bouchal P and Rutter J (2014) Doing them Justice, Institute for
Government, www.instituteforgovernment.org.uk/sites/default/files/publications/
Policy%20Implementation%20case%20studies%20report%20-%20final.pdf
84. HM Revenue & Customs (2009) ‘Customs Information paper (09) 75’ HM Revenue &
Customs, p. 2, http://webarchive.nationalarchives.gov.uk/20130127141905/http://www.
hmrc.gov.uk/jccc/cips/2009/cip-09-75.pdf

87. HM Revenue and Customs (2012) The Single Administrative Document for Import and
Export, HM Revenue and Customs, www.gov.uk/guidance/declarations-and-the-single-
administrative-document
89. Ibid.
91. Centre for Economic Policy Research (2013) Trade and Investment Balance of Competence
Review, GOV.UK, p. 58, www.gov.uk/government/uploads/system/uploads/attachment_
data/file/271784/bis-14-512-trade-and-investment-balance-of-competence-review-
project-report.pdf
93. The Mersey Docks and Harbour Company (2016) Schedule of Common User Charges, The
Mersey Docks and Harbour Company, p. 3, www.peelports.com/media/1263/ltc6-rsct-
common-user-charges-effective-from-april-2016.pdf
94. Ibid.
96. Kent County Council (2016) ‘Written evidence from Kent County Council (OPP0021)’,
Parliament UK, retrieved 30 August 2017, http://data.parliament.uk/WrittenEvidence/
CommitteeEvidence.svc/EvidenceDocument/Transport/Operation%20Stack/
written/29779.html
98. European Data Protection Supervisor (2014) The Transfer of Personal Data to Third
Countries and International Organisations by EU Institutions and Bodies: Position paper,
European Data Protection Supervisor, pp. 20–1, https://edps.europa.eu/sites/edp/files/
publication/14-07-14_transfer_third_countries_en.pdf
Tyrie-21-02-17.pdf
100. European Commission (no date) ‘Common and Union transit’, European Commission,
retrieved 30 August 2017, http://ec.europa.eu/taxation_customs/business/customs-
procedures/what-is-customs-transit/common-union-transit_en
101. EUR-Lex (no date) ‘CIS system’, Europa, retrieved 30 August 2017, http://eur-lex.europa.
eu/legal-content/EN/TXT/?uri=URISERV%3Al11037
102. European Commission (no date) ‘Excise Movement Control System’, European
Commission, retrieved 30 August 2017, https://ec.europa.eu/taxation_customs/business/
excise-duties-alcohol-tobacco-energy/excise-movement-control-system_en
103. European Commission (no date) ‘Trade Control and Expert System’, European Commission,
retrieved 30 August 2017, https://ec.europa.eu/food/animals/traces_en
104. European Commission (no date) ‘European Union Notification System for Plant Health
Interceptions – EUROPHYT’, European Commission, retrieved 30 August 2017, https://
ec.europa.eu/food/plant/plant_health_biosecurity/europhyt_en
105. European Commission (no date) ‘RASFF – food and feed safety alerts’, European
Commission, retrieved 30 August 2017, https://ec.europa.eu/food/safety/rasff_en
106. European Commission (no date) ‘The Registered Exporter system (the REX system)’,
European Commission, retrieved 30 August 2017, https://ec.europa.eu/taxation_customs/
business/calculation-customs-duties/rules-origin/general-aspects-preferential-origin/
arrangements-list/generalised-system-preferences/the_register_exporter_system_en
107. HM Revenue and Customs (2012) ‘Authorised Economic Operator’, HM Government,

retrieved 30 August 2017, www.gov.uk/guidance/authorised-economic-operator-
certification

Government, p.12, www.gov.uk/government/uploads/system/uploads/attachment_data/

About the authors
Joe Owen is a senior researcher at the Institute for Government, working on our Brexit
programme and leading our research into Whitehall’s preparation for exiting the
European Union. He has also worked on the Institute’s digital government and
departmental transformation research.
Marcus Shepheard is a researcher at the Institute for Government, working in the Brexit
team, principally on customs and public bodies.
Alex Stojanovic is a researcher at the Institute for Government, working in the Brexit
team, principally on customs and trade policy. He has previously worked for the
Department of Culture, Media and Sport on the National Citizen Service Programme.
Acknowledgements
This paper would not have been possible without those who agreed to contribute or be
interviewed as part of the process. We are unable to name many of those we spoke to,
but would like to thank Andrew Grainger, Richard North and Rob Hardy.
As always, thanks go to colleagues at the Institute for Government – Jill Rutter, Matthew
Batchelor, Bronwen Maddox, Nicole Valentinuzzi, Harry Cutbill, Euan McCarthy and Rob
Adam – for their comments and publication support. Any errors or omissions are those
of the authors.

The Institute for Government is the
leading think tank working to make
government more effective.
We provide rigorous research and

analysis, topical commentary and
public events to explore the key
challenges facing government.
We offer a space for discussion

and fresh thinking to help senior
politicians and civil servants think
differently and bring about change.
Copies of this paper are available Institute for Government

with our other research and analysis at: 2 Carlton Gardens, London SW1Y 5AA
www.instituteforgovernment.org.uk United Kingdom
[email protected] +44 (0) 20 7747 0400

@instituteforgov +44 (0) 20 7766 0700
September 2017
© Institute for Government 2017
The Institute for Government is a registered charity in England and Wales (No.1123926) with cross-party
governance. Our main funder is the Gatsby Charitable Foundation, one of the Sainsbury Family Charitable Trusts.

Implementing Brexit: Customs: Joe Owen Marcus Shepheard Alex Stojanovic

Uploaded by

Copyright:

Available Formats

Implementing Brexit: Customs: Joe Owen Marcus Shepheard Alex Stojanovic

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Implementing Brexit: Customs: Joe Owen Marcus Shepheard Alex Stojanovic

Uploaded by

Copyright:

Available Formats

IFG ANALYSIS | IMPLEMENTING BREXIT

Joe Owen | Marcus Shepheard

About this paper

Each paper looks at an area of UK Government policy

In each paper, we set out the policy options for the

2. How customs works now 8

3. What could customs look like after Brexit? 17

4. What are the key implementation challenges? 24

Policy and legislation 24

Appendix B: Full names of government departments 45

APHA Animal and Plant Health Agency

CBI Confederation of British Industry

CDS Customs Declaration Services

CHIEF Customs Handling of Import and Export Freight

CIS Customs Information System

CITES Convention on International Trade in Endangered Species of Wild Fauna

EEA European Economic Area

EMCS Excise Movement and Control System

ENS Entry Summary Declaration

EU27 27 other EU member states

EUROPHYT European Union Notification System for Plant Health Interceptions

GMPP Government Major Projects Portfolio

HGV Heavy goods vehicle

ICT Information and communication technology

JCCC Joint Customs Consultative Committee

NCTS New Computerised Transit System

RoRo Roll-on, Roll-off ships

SAD Single Administrative Document

SME Small and medium-sized enterprises

TRACES Trade Control and Export System

UCC Union Customs Code

WCO World Customs Organization

WTO World Trade Organization

2 IMPLEMENTING BREXIT: CUSTOMS

IMPLEMENTING BREXIT: CUSTOMS 3

• The government information and communication technology (ICT) ‘Customs

• UK customs relies on private sector organisations. Government collects the duties

4 IMPLEMENTING BREXIT: CUSTOMS

• The Government should continue to use the cross-government Border Planning

IMPLEMENTING BREXIT: CUSTOMS 5

4. Government co-ordination and capability – how the Government should manage

6 IMPLEMENTING BREXIT: CUSTOMS

IMPLEMENTING BREXIT: CUSTOMS 7

Customs is about more than just revenue

8 IMPLEMENTING BREXIT: CUSTOMS

Functions Related activity

IMPLEMENTING BREXIT: CUSTOMS 9

Membership of the EU means a single approach to

A country outside of these agreements is called a ‘third country’. Their trade is

Regardless of these agreements, trade with a third country is typically subjected to

10 IMPLEMENTING BREXIT: CUSTOMS

• An importer in the UK must be registered

Entry Summary • Detailed information about the import is submitted

• Information provided by the importer is used to

• Community system provider unloads cargo and places

• Goods are warehoused, continue under transit

UK trade has adapted to the Single Market and Customs

IMPLEMENTING BREXIT: CUSTOMS 11

Percentage of trade with EU

CITES Convention on International Trade in Endangered Species of Wild Fauna

4. Government co-ordination and capability – how the Government should manage

3. Limiting administration for importers, exporters and customs authorities at the

4. Fostering consistency, co-operation and communication between customs