September 22, 2017 22:25

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UK trade sector warns of Brexit customs disruption at borders

20:07 | 24/10/2016

VCN- Business is warning of the risk of “major disruption” at the UK’s borders as Britain struggles to upgrade a troubled new computer system to cope with a huge increase in customs declarations expected after Brexit

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Should Britain leave the EU customs union, through which the bloc sets a common tariff, all imports and exports to the EU will require customs declarations and separate security checks. As a result officials have sought to scale up the new customs system’s maximum capacity to 350m declarations a year, against approximately 50m filings now handled and 100m that the new system was originally designed to process.

Mindful of the poor history of big public-sector computer projects in the UK, industry groups are raising the alarm over the risk of mistakes in the three-year-old IT programme, which was facing difficulties even before Brexit.

In a submission to a government-industry joint consultative committee, the UK trade sector said: “Trade has changed significantly since the 1970s and the concept of rolling the clock back 40 years and introducing frontier clearances … does not seem feasible.”

UK customs checks for non-EU products are presently processed on the Customs Handling of Import and Export Freight service (Chief), a near-25-year-old computer system that accounts for £34bn in revenue.

Britain aims to replace it with the new Customs Declaration Service (CDS) system by December 2018, just a few months before the UK’s likely departure from the EU.

Industry is seriously alarmed by the administrative test of applying customs checks and separate tariffs to EU trade. Noting the danger of “major disruption at the border”, the paper to the joint committee argued it was “difficult to see” how CDS or Chief would cope by 2019 with “any substantial changes to what we do now”.

Desmond Hiscock, director-general of the UK Association for International Trade, said there was growing frustration among his members over the uncertainties and risks. “The existing system will be not be able to cope and there is not much confidence that the untested and still incomplete replacement, CDS, will fare much better.”

The unprecedented administrative challenge posed by Britain’s EU exit is an increasingly important factor in cabinet deliberations on leaving the customs union or seeking a more gradual transition. “It is terrifying. But one by one the issues are sinking in,” said one senior Whitehall official.

The £87.4m CDS programme was flagged with an “amber-red” warning in Whitehall in 2015 because of the risks posed, although this was reduced to “amber” shortly before the Brexit referendum. To remain on course for its 2018 deadline, the CDS programme is supposed to have purchased and integrated two commercial off-the-shelf software packages by the end of this year.

Officials originally planned for CDS to manage up to 100m declarations. Since the Brexit vote, maximum capacity needs have been revised up to 350m declarations a year, according to Whitehall sources and industry experts familiar with the plans.

Many declarations are verified by customs officers, suggesting a big increase in staff will also be needed. Chief is expected to be in place as a backstop during the transition to the new system, but is already suffering occasional outages.

Listing a range of additional administrative requirements, uncertainty over duties, databases, security checks, listings and rules of origin procedures, Mr Hiscock said his members had “a very real fear HM Revenue & Customs have neither the infrastructure nor the trained personnel to cope”.

Gordon Tutt, chair of the Association of Freight Software Suppliers, said the transition was an enormous challenge. But he said industry and HMRC were working on ways to manage the uncertainty and reduce volumes, potentially through simplified customs procedures or “self assessment”.

The most effective workarounds would require EU countries to establish a separate, streamlined customs system for UK trade. But most EU countries will be loath to invest in a huge overhaul of systems; EU officials expect Britain to be treated like any other non-EU country outside the customs union.

HMRC said: “Chief currently processes millions of import and export transactions a year and provides a highly efficient service to those moving goods across the UK border, despite being 22 years old. We intend to replace Chief with CDS in 2018, which will give us greater flexibility, functionality and capacity to deal with increased volumes of imports and exports.”

Source: Ft.com