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Brexit poses smuggling and delay risk, says National Audit Office

[ October 16, 2019   //   ]

Brexit could lead to delays to freight and increased smuggling of goods and people, according to a National Audit Office report published on 16 October, barely two weeks before the official date on which the UK is due to leave the European Union.

NAO says that the government accepts that the border would be ‘less than optimal’ for a period with delays for goods, increased opportunities for tax and regulatory non-compliance, and less information to check people crossing the border. The report adds:

“It is likely that organised criminals and others would quickly exploit any perceived weaknesses, gaps or inconsistencies in the enforcement regime. The government acknowledges that some of the arrangements that it has put in place to facilitate flow at the border, including easements such as Transitional Simplified Procedures, and the arrangements for the Northern Ireland and Ireland land border are not intended to remain in place in the long-term and would not be sustainable.”

The report warned that testing of potential vital systems had not taken place. While the Department for Environment, Food & Rural Affairs (Defra) had developed the Import of Products, Animals, Food and Feed System (IPAFFS) to monitor and control the import of animals, animal products and high-risk food and feeds from outside the EU, it “had not been able to undertake the degree of user testing which it would have liked”.

Likewise, there was insufficient HMRC infrastructure and system capacity to handle an expected increase in transit goods coming through Dover and Eurotunnel.

While the New Computerised Transit System was now able to deal with the expected increase goods movements. HMRC had also secured three further sites in addition to the three Offices of Departure and Destination needed for handling the anticipated increased volume of freight moving through the short Channel crossings under transit arrangements.

Additional staff for government departments are now in the process of being identified and deployed including up to 500 additional Border Force staff in 2019-20 to support a projected increase in transit checks, of which around 250 posts are required by day one. Given the timescales, Border Force plans to use agency and temporary staff to fill the day one requirement and to run recruitment for permanent posts in parallel to this. On 11 October, it has secured around 200 agency staff for day one, supported by around 100 additional staff from across the civil service for transit checks and a further 175 staff to provide additional resilience for its front-line activities.

The report said that while the government has made progress with putting in place the systems, infrastructure and resources required to manage the border if the UK leaves the EU without a deal, there is still work to do to finalise arrangements in the short time that remains and bringing all these elements together for the first time in a live environment carries inherent risk.

The most significant are the readiness of business, controls on UK exports imposed by EU member and arrangements for the Northern Ireland/Ireland land border. Although the government has actions under way to influence these, mitigating these risks is now, to some extent, out of its control and it is impossible to know exactly what would happen at the border in the event of no deal on 31 October.

Many of the new arrangements the government plans to implement at the border to facilitate flow on day one would be temporary, and it will take some time for a fully functioning border to be put in place. In determining longer-term arrangements, the government would need to balance enabling the flow of traffic across the border with introducing appropriate controls to minimise the risk of non‑compliance or criminal activity.

The report said that HMRC now estimated that around 270 million customs declarations would be required under a no deal, compared with around 55m currently.

Moreover, only 25,000 traders have registered for Transitional Simplifi ed Procedures, out of the 150,000 to 250,000 who may need to make a customs declaration for the first time in the event of a no deal.

Only between 5% to 20% of small and medium-sized enterprises will be ready for customs clearances in France, under the government’s ‘reasonable worst-case scenario, the report added. The latest reasonable worst

-case scenario, from October 2019, is that the current flow of goods across the short Channel crossings could be reduced to 45–65%, but that rates would gradually improve to 100% over 12 months.

There would be new mandatory readiness checks on lorries to identify and divert hauliers without the right documentation if queues build on the approaches to Dover and Eurotunnel, but these would be challenging to operate, says NAO.

The plan is for checks on the M20 and at Manston Airport if queues occur as part of Operation Brock, which is the plan to manage traffic flow in Kent in the event of disruption to services across the short Channel crossings.

Hauliers lacking documentation would be given the option of travelling to and parking at specific sites where they would have up to 24 hours to obtain this or they would not be able to proceed to the EU border. The Department for Transport estimates that, in a reasonable worst-case scenario, just over 3,000 lorries a day (80% of lorries carrying loads) may need to be diverted.

But there is very limited time for the government to get the necessary infrastructure and resources in place to undertake these checks before 31 October. In addition, freight industry stakeholders are concerned about how the checks would operate in practice, including the lack of an agreed operating model and the feasibility of obtaining documentation within the 24-hour period available.

Temporary arrangements for managing the Ireland to Northern Ireland border are not likely to be sustainable. There is no customs infrastructure, and people and goods can cross freely. If the UK leaves the EU without a deal, Northern Ireland and Ireland would have different customs and regulatory regimes. In March 2019, the UK government confirmed that in the event of a no deal, it would not introduce any new checks or controls on goods at the land border and there would be no customs requirements for nearly all goods, with some limited exceptions. However, there is still uncertainty about what the Irish government would do; the EU is likely to require Ireland to impose controls on goods entering from Northern Ireland by land, but it is not yet clear what they would be or where they would take place.

 

FTA response

In response, the Freight Transport Association’s head of European and global policy,  Pauline Bastidon, said: “The NAO report highlights the scale of the challenge for industry. It echoes’ FTA’s messages to government about structural issues that are slowing down preparedness, such as the shortage of customs brokers able to support industry in complying with new customs formalities or the lack of clarity on operational details – not least in relation to how the Irish border would be managed by the Irish Government in a no-deal situation. The situation is particularly challenging for UK exports to the continent and Ireland – especially for agri-food products, where a shortage of veterinarians able to sign export certificates is to be feared. In spite of the industry’s best efforts, delays and disruptions cannot be and should not be excluded, at a time when logistics and supply chain managers are less able to mitigate disruptions due to high demand for transport and warehousing capacity ahead of the Christmas period.

“Preparing also comes at a substantial cost: the government estimated last week that the cost of complying with customs requirements alone would be in the range of £7.5 billion per year for the UK industry, which is significant and will be particularly heavy for SMEs. These investments need to be considered in the context of the prolonged uncertainty around the final Brexit outcome. While funding for industry and logistics training in particular is welcome, financial support came late in the day and will not be able to compensate for the lack of operational details. And while everyone focuses on day one after a no-deal outcome, we should not lose sight of the future: logistics currently has very limited visibility over the medium term as many of these arrangements have been deemed unsustainable, as highlighted in the NAO report, and even arrangements for road haulage and air freight are time limited.

“Despite FTA writing to Michael Gove on a weekly basis, we are still waiting for satisfactory responses on the majority of issues raised, both in relation to day one after no-deal and the medium term.  The logistics industry is resilient and flexible but preparedness can only be optimal if our members have full clarity on what is being expected of them operationally and what to prepare for at the border and beyond. With 15 days remaining, the government needs to address these critical issues and provide the information needed to keep Britain trading.”

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