Ms Carol Lynch:

I thank the Chairman for the opportunity to contribute to the committee’s work. I will base my input on the customs requirements and regulations which will impact on Ireland should the UK leave the customs union in 2019. These comments are based on the provisions set out by the Union customs code, UCC, and delegated and implementing regulations, as amended.

The original customs code established the integration of customs procedures across member states of the European Union following the implementation of the Single Market. The new Union customs code continues to solidify that, in that it lays out common risk criteria and standards which must be followed in order to facilitate legitimate trade and fight against fraud.

Paragraph 19 of the UCC establishes this quite clearly when it states that use of information and communication technologies should be accompanied by harmonised and standardised application of customs controls by the member states to ensure an equivalent level of customs control throughout the Union so as not to give rise to anti-competitive behaviour at the various Union entry and exit points.

Thus, the customs control of imports into and out of the EU is delegated to the customs authorities to ensure all controls at all borders are applied equally. The UCC reinforces that by stating: "The completion of the internal market, the reduction of barriers to international trade and investment and the reinforced need to ensure security and safety at the external borders of the Union have transformed the role of customs authorities giving them a leading role within the supply chain and, in their monitoring and management of international trade, making them a catalyst to the competitiveness of countries and companies". The reason I reference that is because the customs code legislation is directly applicable in Ireland as in all other member states and therefore the leeway for customs in implementing alternative rules to those set out by the UCC is limited.

The customs code requires, first, the implementation of the customs tariff. This means that all goods being imported into or exported out of the EU are subject to the same duty rate and controls on import and export. Second, it requires the identical application of customs trade legislation as set out by the UCC. This means that when goods clear customs in any member state, they are able to move freely within the EU and are not subject to customs controls in other member states.

Once the UK leaves the EU customs union, for customs purposes they will be a non-EU or third country. As a non-EU country operating outside the customs tariff and the Union customs code, it is therefore difficult to see how, at this point, the UK would not be subject to the same import and export controls as any other non-EU country.

This was reiterated last week by Mr. Michel Barnier when he stated:

Because we are part of the EU, businesses can trade goods without customs duties and documentation requirements are very simple ... [But this is what a member state enjoys] and this is what a member state loses when it leaves the Union.

Customs controls require the following process. An import declaration must be lodged with customs for all imports into the EU and an export declaration for all exports out of the EU. This declaration requires 54 boxes of information from details of the consignor to the consignee, the product details and tariff details, values, country of origin information, weights and packaging information and terms of trade. In terms of lodging customs declarations, there are two options. A company can employ a clearance agent to act as their representative or they can request authorisation to lodge these declarations themselves. Most goods are cleared for import or export instantly, but about 8% will be subject to checks by customs. This is required by harmonised risk management rules. Importers and exporters can be subject to post-clearance audit checks by customs any time within the following three years. When goods are imported, however, duty and import VAT is payable on arrival unless a deferred payment authorisation is agreed with customs. This allows for payment of duty and import VAT to be deferred to the 15th of the month following entry. This facility is, however, subject to a provision of a bank guarantee.

All of those conditions apply to trade with any non-EU country such as, for example, the US. The implication of this for Irish industry is significant. First, there will be a requirement to lodge customs declarations on all imports from and exports to the UK. It is to be assumed the same requirement will be implemented in the UK. There is a necessary cost for this, either in the payment of a clearance agent or the recruitment of staff in addition to logistics-related costs. A reasonable estimate would be €100 per movement. Second, there is a significant learning curve to ensure declarations lodged with customs are correct to ensure compliance, minimise risk of delays and avoid additional charges. This can be achieved, but will involve investing time and effort in upskilling. At the same time, we do need to take on board that this is completely achievable and many Irish companies engage in this non-EU trade without difficulty every day.

Third, for the agrifood industry in particular, it is critical that delays at borders are minimised and every simplification allowed by the customs code is provided to Irish businesses to enable them to streamline their customs processes. Fourth, there are cash flow considerations to build into any future business model. Finally, depending on whether a free trade agreement is concluded, there may be customs tariffs. These tariffs average at 5% but can range from 0% to 20% depending on the industry. In addition, for companies trading in agricultural and food products, there are additional agricultural levies to consider. In this context, it is critical that Irish businesses are educated to the duty savings opportunities provided for in the customs code, which will reduce duty costs on goods for import and re-export, for example.

In BDO, we have carried out an optimism index in which we found that Brexit is having an impact on business confidence, with first quarter projections at their weakest since 2013. Of particular concern is that we found that only 4% of Irish companies have sought external advice and support on the implications of Brexit and just one in 20 firms have a plan in place to deal with a potential customs Border with the North following the Brexit vote. We are therefore advising our clients that it is critical at this point to start the preparatory work in getting ready for Brexit. This is to ensure that companies have the information available to complete declarations, have built in the additional costs and potential delays at border crossings and have accounted for the potential risk of tariffs. In addition, a particular focus is on ensuring companies are established to move their goods as seamlessly as possible across the Northern Ireland Border. Again, the only way to achieve this will be by preparing and developing their customs capabilities to ensure they can take advantage of any simplifications Revenue introduces, as well as ensuring they qualify for all duty-saving procedures provided for by customs.

It is clear from our work that Brexit presents challenges and opportunities for companies operating in Ireland. Our key message is that planning is key in order that our clients continue to be able to access the lucrative UK market.