In what will be a welcome piece of news for businesses, the UK Government has reportedly dropped plans to introduce a full customs border with the EU once the Transition Period expires at the end of this year, in response to challenges posed by Covid-19.
The UK will instead grant a breathing space to importers who are grappling to deal with Covid-19 and Brexit simultaneously, by introducing a temporary regime with lighter customs checks for goods coming in from the EU, which will allow business adjust to the changes to trading as a result of being outside the EU's Single Market .
This U-turn comes as the UK faces dual economic hits from Brexit and Covid-19, with the UK Government accepting that significant disruption at the UK/EU border will place too great a burden on British businesses.
Earlier this year, Michael Gove had announced that the UK intended to put in place a full customs, VAT and regulatory border at the end of the Transition Period. However, the UK Government has clearly accepted that businesses cannot be expected to cope with Covid-19 and simultaneously face the prospect of disruption at the border at the end of the post-Brexit Transition Period.
As such, it has announced that it will instead impose a temporary light-touch regime at UK ports such as Dover for incoming EU goods, under both a "deal" and “no-deal” scenario (notably, while a "deal" scenario may see the majority of tariffs for EU-origin goods removed and go some way to simplifying customs processes, it would still require a great deal of customs and regulatory checks and represent a significant difference from the status quo. In a "no-deal" scenario, disruption at the border would be even greater).
Full details of the soft border are expected to be announced soon, however it is anticipated that the approach would be closer to the no-deal arrangements set out in September 2019 that prioritised movement of goods over border controls. In particular, is it expected that only controlled goods will face immediate checks; that importers will be able to delay the need for customs declarations and postpone customs duty payments for certain goods; and that VAT payments can also be deferred. It is anticipated that checks on safety and security declarations will also be temporarily waived.
These temporary measures are expected to last six months (i.e. expiring at the end of June 2021).
However, there is no indication at this stage that the EU will offer reciprocal customs treatment to British goods crossing the border into the EU.
While the UK hopes that the EU will match its simplifications, there is as yet no guarantee of this. Moreover, the fact that the EU has already invested in new port infrastructure and personnel in both France and the Netherlands means it is unlikely that the EU will fully mirror the soft border.
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The government is expected to apply much less rigorous EU border checks on imports than it initially had planned, after the Brexit transition period finishes at the end of this year.