Of the three leading options for the UK’s future customs arrangements with the EU, ‘MaxFac’ has the best chance of making the most of the opportunities created by Brexit.
Those focusing on speculative estimates of the additional costs, therefore, risk missing out on the potentially much larger benefits.
It can’t be said often enough that remaining in any form of customs union would severely restrict the UK’s ability to run an independent trade policy, while only delivering the free movement of goods if combined with extensive regulatory alignment too.
The alternative of a ‘New Customs Partnership’ (NCP) would require sophisticated tracking technology and/or a burdensome tariff repayment system, even if the EU were willing to delegate control of its borders to a third country without wiping out more of the UK’s red line.
This leaves the third option: ‘maximum facilitation’, or MaxFac, which would simply mean incorporating a customs chapter in a new UK-EU free trade agreement that aims to keep procedures as streamlined as possible.
What’s more, the systems and technologies for MaxFac already exist and are being applied elsewhere.
There are many examples of how this could work, such as Authorised Economic Operator (AEO) schemes and new forms of electronic documentation.
Most customs experts, including the head of HMRC and his counterpart in the Republic, agree that there would be no need for additional infrastructure at the Irish border either.
Instead, objections tend to concentrate on timing or price. HMRC has estimated that the additional costs of customs declarations and ‘rules of origin’ could be as high as £17-20 billion annually. But there are many reasons to question these figures.
For a start, even within the customs union, the intra-EU trade still requires invoices and other paperwork, for example, to deal with VAT. Systems are therefore already in place. HMRC’s calculations also assume a high cost for additional declarations of £20-55 (averaging £32.50), despite the prospect of further savings from new technology, such as ‘smart ledgers’.
They then apply this unit cost in full to a theoretical maximum of 400 million individual transactions, which is twice the number of additional declarations that HMRC actually thinks will be necessary.