Mr. Gerry Harrahill:

I thank the Chairman. Good afternoon, Senators. I thank the committee for the invitation to attend today’s meeting. My name is Gerry Harrahill, Revenue Commissioner and Director General of Customs. I am joined today by my colleague, Ms Celine O’Neill, who is a principal officer in our Brexit policy and legislation branch. I very much welcome the opportunity to brief the committee on the operation of customs checks since 1 January.

In the interests of time, I have included as an appendix to my opening statement some additional information on Revenue’s preparations for Brexit and some of the challenges experienced since the beginning of the year. I hope this will be helpful to the committee.

It is now almost 20 weeks since the practical impacts of the UK being outside the EU customs union and Single Market have taken effect. In this time, stakeholders across a range of sectors such as haulage and logistics, importers, exporters, consumers, and indeed, State agencies have had to adjust to the biggest change in how we trade with the UK in almost 30 years.

Since 1 January, trade with the UK takes place under the terms agreed in the EU-UK Trade and Cooperation Agreement. This means that where goods once moved freely between the two jurisdictions, so much so that businesses may not have even considered themselves as either importers or exporters previously, businesses and State agencies alike are all dealing daily with the reality of Brexit. That reality means customs formalities apply to all goods, irrespective of the cost, value, or origin of the goods, imported from and exported to Great Britain. Those formalities also apply to EU goods moving through the UK, either using the transit procedure or from a distribution centre in Great Britain.

In practical terms, this means that all goods require a customs declaration and some goods will require additional documentary or physical controls when they arrive in Ireland. Tariffs may also be payable if the conditions of the EU-UK Trade and Cooperation Agreement are not met, as well as whatever VAT is payable. All import controls, including the payment of customs duty and VAT, must be completed before the goods can be released for free circulation. Unfortunately, complying with these formalities, as well as the additional time taken to move through the port, has impacts on businesses in terms of additional costs, longer lead in times, etc. This is the reality of trading with any third country.

For our part, we have tried to and will continue to work with trade to minimise these impacts by streamlining our processes in as far as is possible. Even with maximum efficiency, however, there will remain impediments to the free flow of trade with Great Britain that did not exist prior to 1 January.

I acknowledge the significant preparations undertaken by the majority of businesses in advance of Brexit. Testament to this is that of the approximately 105,000 freight movements into Dublin Port since 1 January, 82% have been green routed on arrival, meaning they passed freely through the port without the need for additional interaction with Revenue or any of the State agencies. Approximately 9,000 freight movements have arrived in Rosslare from Great Britain and, on average, 85% of those movements were green routed.

Trading with a third country, especially for businesses that previously traded solely within the EU, is complex and I want to take a moment to expand on this. Prior to Brexit, most goods imported to Ireland from a third country were shipped by lo-lo - containerised lift-on, lift-off sea movements - and by air. These goods were then placed into temporary storage facilities while the customs formalities were completed. While this allowed Irish businesses some additional time to complete all the import formalities, including the submission of documents, paying tariffs, etc., it also meant that goods were not released for free circulation for a number of days. The post-Brexit landscape is very different. The majority of third-country goods arrive in Ireland by roll-on, roll-off, ro-ro, ferry to supply the just-in-time market. It would be unacceptable for those businesses to have to wait several days before they can remove their goods from Irish ports. Consequently, Revenue introduced the customs ro-ro service to facilitate and support legitimate trade. This allows for the completion of customs formalities before the trucks and containers board a ferry, and as a consequence, certain import controls can be conducted in advance of the arrival of the goods, and trade can then flow efficiently through the ports on arrival in Ireland. When paperwork or physical checks are necessary on arrival, we can optimise the efficiency of procedures. The system also provides a direct channel of communication with the haulage sector, reuses data in as far as is possible, and gives visibility to all stakeholders at each step of the process before, during and after the ferry journey.

Revenue appreciates the challenges involved in complying with the import formalities within the tight timeframes associated with the just-in-time model and will continue to support those businesses experiencing difficulties. We have had excellent engagement with trade representative bodies, both directly and through stakeholder forums organised by the Department of Transport. This valuable feedback is being used by Revenue and the other agencies to improve our services with work already under way to enhance the functionality of our ro-ro service. I acknowledge, in particular, the very positive engagement we have had in recent months with the Irish Road Haulage Association, following a meeting with the Joint Committee on Transport and Communications Networks on 22 January.

It is important to be clear that we will never be able to achieve a situation where 100% of consignments are green-routed on arrival. Some goods will always require additional documentary or physical checks, for example, live animals or products of animal origin, as required under EU law. It is equally important to note that if declarations are not submitted in advance, 100% of goods movements arriving in Ireland would have to be red-routed to ensure compliance with import formalities. This is part of our obligation as guardians of the Single Market and the customs union. That is what provides the basis for the confidence of our EU partners in allowing Irish goods unfettered access to the European markets.

In terms of experiences over the first four months post Brexit, Revenue had its own challenge in the first ten weeks of 2021 in terms of the durability of our automated import system through which trade makes its import declarations. Apart from scheduled maintenance downtime, which is a normal feature of systems support, we unfortunately experienced performance degradation issues which impacted trade and business, sometimes on an intermittent basis. This caused frustration and delay for business for which Revenue apologised. More importantly, Revenue prioritised bringing greater stability to the system in conjunction with our IT partners. I am pleased to say that the system is highly performant since mid-March because of the improvement and stabilisation measures we implemented. We continue to prioritise the performance of customs IT systems.

Unfortunately, some businesses were not as prepared for Brexit as they needed to be because the necessary preparations were not completed and, in some instances, were not even started in advance of 1 January. For some, this was because of the late stage at which the Trade and Cooperation Agreement, to which I referred to earlier, was finalised and a misunderstanding that an agreement would mean no customs formalities or because of a lack of clarity on what the UK formalities would entail after 1 January, or in some instances because of an understandable focus on meeting an immediate challenge of Covid-19. These reasons are less than ideal in terms of preparation, but these circumstances were not unique to Ireland. They were similar to the experiences in many EU countries. Once 1 January passed, trying to adapt one’s business model in real time for something that had already happened, was going to be extremely challenging. However, Revenue has been steadfast in its engagement with trade and business over the last four months and we will continue to support and assist business in any way we can.

While businesses have made enormous progress in adapting to the new requirements in the four-month period, we need to be aware that other businesses which, because of significant stockpiling or perhaps because they have been closed due to Covid-19, may encounter similar challenges when the economy reopens over the coming months. There is also a need for businesses to prepare to comply with the UK formalities that, although delayed, will be introduced from October onwards. Revenue and the other State agencies will continue to work with trade to help in those preparations.

I reiterate that Ireland is a member of the EU customs union and Single Market and the UK is not. This permanently changes the nature of trade between the two jurisdictions with resultant impacts on costs, trade disruption and changes in trading patterns. Revenue’s role is to implement customs controls and to protect the Single Market and Ireland’s place in it, and we aim to do this in as fair, efficient and effective a manner as we possibly can. Subject to our duty under section 851A of the Taxes Consolidation Action relating to confidentiality for any individual taxpayer, I am happy to address any concerns and questions committee members may have.