The road freight industry is in danger of being “thrown to the wolves” if the government fails to install a competent customs system in time for Brexit, the FTA warned this week.
The warning came in response to the Public Accounts Committee (PAC) report: Brexit and the future of customs, published yesterday (14 November).
The report raises concerns that HMRC’s current customs system is incapable of handling a predicted five fold increase in customs declarations that Brexit will create.
It adds that its new customs system, which is currently in development, will not be ready until January 2019. This is just two months before the Brexit deadline. HMRC has been working on the new system, known as the Customs Declaration Service (CDS), since 2014.
This will replace the outdated Customs Handling of Import and Export Freight (Chief) system, which currently processes around 55 million import and export customs declarations each year. Post-Brexit HMRC estimates customs declarations will rise to around 255 million a year.
The committee warned that if CDS is not in operation by the time the UK exits the EU in March 2019, and there is no contingency plan in place, the UK could suffer huge disruption, with lengthy queues at Dover resulting in food rotting in trucks at the border.
Its report calls on the government to provide sufficient funding to ensure CDS is up and running in time for Brexit and that Chief is updated so it can operate as a back-up system capable of coping with the increase in customs declarations post-Brexit, in the event of CDS being delayed.
It also wants HMRC to make CDS “one of their top priorities” and warned: “The UK cannot afford for this to go wrong.”
James Hookham, FTA deputy chief executive, told MT: “The government needs to throw money and resources at this to make sure it gets it right.
"It cannot skimp on this issue and given that the timetable for Brexit is largely of the government’s own making they need to support our businesses to make sure they do not get thrown to the wolves.”
Hookham said the concerns raised by the report give weight to the arguments for a transitional period which would extend the Brexit deadline.
“It emphasises the need for a transition period, not only for business and industry but also for all the government departments that need to prepare for Brexit,” he said.
The RHA criticised the government’s lack of progress on customs arrangements. National policy director Duncan Buchanan said: “The government needs to get on and make the necessary arrangements so our members and their customers can start their own preparations.
“We need to know what to do in such a way that ensures fluidity through the ports for both importers and exporters and we need to know what they arrangements are for the border with Ireland too and so far we see little progress on either.”
PAC chairwoman Meg Hillier MP warned that if the government failed to put in place a viable customs system before Brexit it would “wreak havoc for UK business, trade and our international reputation. Confidence would collapse amid the potentially catastrophic effects”.
She added: “HMRC is under considerable pressure to deliver the new Customs Declaration Service in time, but it does not yet have funding to increase the capacity of CDS to deal with the consequences of Brexit—nor to develop contingency options. This is deeply worrying.”
She called on HMRC to press its case for funding. “HMRC tells us it is merely 'in conversation' over Chief upgrade costs when, on behalf of business and the British public, it should be banging on the doors of the Treasury.”
The PAC report also criticised HMRC for failing to do enough to manage the “huge uncertainty” created for businesses having to make customs declarations for the first time.
It also singled out the lack of information available on HMRC’s website for traders, and questioned why HMRC has not made greater efforts to increase the number of Trusted Traders who are authorised to make customs declarations under simplified arrangements.
Kevin Hopper, MD of international haulier Brian Yeardley Continental, echoed PAC’s concerns and called for more information from the government.
“My customer base, both in the UK and Europe, are all extremely nervous about what Brexit will bring. What can I tell them to reassure them about Brexit? What guarantees can I give them, when I do not know what the plan is and when no one in government appears to know what the plan is?
"And how do we tender for a contract that runs for three years when there is this big question mark around Brexit? Once those contracts are signed we are committed to giving that service for three years.
"We’ve got through many challenges in this industry over the years and I am not frightened of Brexit, but what does frighten me is the lack of information from government right now,” he said.
The report’s key recommendations:
- HMRC should inform traders of the CDS timeline and progress by January 2018 and increase the number of registered Trusted Traders.
- HMRC should ensure the CDS system and Chief option are capable of managing 255 million customs declarations every year; able to meet the wider challenges of an integrated customs and trade system for the UK, such as managing changes to tariffs, Free Trade Agreements and international trade quotas.
- The Treasury should ensure that HMRC has sufficient funding by December 2017 to increase the capacity of CDS, and to develop functioning contingency arrangements.
- HMRC should report back to the committee by March 2018 with clear plans on how it will manage the many challenges it faces due to Brexit and its ongoing transformation programmes, including how this will help to mitigate the risks in the CDS programme.
Images: PA Images