Random and Systematic Interventions
An Irish trader and its corresponding GB importer or exporter should seek to establish themselves as reliable and trustworthy so that Revenue and HMRC trust consider them to be low risk. In this case, the vast majority of their movements would be green routed so that the goods effectively move freely over the RoI / GB border without being .stopped for physical inspection.
Even in this case, there is still going to be some possibility of random stopping and checking as part of the Irish and HMRC customs obligation to police customs compliance. This is much more likely to be on the import side than the export side. In most areas of business, checks on the exit/export side are much less common than in relation to imports.
Irish Revenue in the existing customs environment give prior clearance in 92% + of cases with approximately 4% to 5% further being subject to documentary checks and 2% to 4% being subject to physical checks
Being a trusted trader in this sense is not a formal status. There are special customs statuses that can be obtained but which are subject to significant qualification barriers which may not make them suitable for many traders, at least initially. They are more likely to be a status that the trader’s logistics provider may have and for which they would be more likely to qualify.
Limited Experience of Roll On Roll off Customs
The roll-on, roll-off ferry customs process and the land border customs process are largely outside the experience of even the most experienced of Irish Revenue, HMRC and most customs agents, freight forwarders and other customs service providers in Ireland and the UK. Almost all customs movements at present take place via deep-sea container traffic or movements by air from outside the European Union. In these cases, the containers arrive in Ireland or the United Kingdom and are cleared through Irish or UK customs only. Customs on the other exporting side will have been undertaken by an exporter in that other state.
The principal land border movements in Western Europe are with Norway and Switzerland. Despite ongoing development and customs cooperation, there are significant physical obstacles at the border that have been well documented in the media. This is despite the fact that Norway is in the EEA and part of the EU single market and Switzerland is in EFTA and party to many agreements equivalent to the EEA, including for free movement of people and the alignment of many trading rules with the EU.
The position is even more complicated at the Turkish border. Turkey is in a customs union with the European Union but is not part of the single market. Despite the customs union, there are considerable delays at the border checking both compliance with single market rules in respect of goods and also drivers’ licenses certificate of professional competence and the vehicle operators’ credentials.
A certain percentage of movements will be checked because the Revenue’s or HMRC’s risk analysis in relation to the movement requires it. A further consideration, is that in the early days of a hard Brexit scenario most participants in trade the Revenue at HMRC will be on a very steep learning curve. Errors by traders or even by other traders, in the case of a truck with numerous consignments, are likely to lead to delays.
Many movements of goods between Ireland and the United Kingdom are by small to medium-sized enterprises are of relatively small consignments ranging from large parcels to one or a few pallets. In most cases, the goods are “grouped” or packed with many other consignments in a single vehicle. Revenue intervention and inspection of any part of the merchandise may mean delays for everyone involved.
The possibility of delays at the border is obvious. A certain percentage of movements will be checked because the Revenue’s or HMRC’s risk analysis in relation to the movement requires it. Other checks will be undertaken on a more random, but systematic basis.
The cumulative effect of even small delays and movements can quickly cause inordinate delays. The costs of delays are multiple and may have knock-on effects. The very uncertainty and possibility of delays in themselves is a disruptive factor in itself.
The prospective loss caused by delays whether caused by direct checks by Revenue or HMRC or by checks to others to business is even more significant than might first appear. If goods are checked by Revenue at HMRC the default position is that this is done at the trader’s expense. This may involve incurring additional expenses with the carrier, ferry operator or the port authority. Where the carrier is delayed due to customs intervention the cost will be passed back directly to the particular trader or to all traders.
Fees to Deal with Queries
Although the cost of making customs declarations may be relatively modest and quantifiable, HMRC and Revenue interventions may require customs services whether provided by the freight forwarder, or another customs agent to deal with the particular issues raised by Revenue or HMRC. Although a light-touch approach may be taken in the early days of a hard Brexit, there is no guarantee. HMRC and Revenue officials may often have a significant element of discretion.
Customs is a tax and issues may arise ranging from those which are readily resolved to complex points of customs law and interpretation which requires advice and assistance, Customs service providers will be stretched and may be in a position to demand a premium for fees. The fact that the Revenue or HMRC intervention proves ultimately to be unjustified and that queries could be easily answered does not mean that it must pay the cost of whatever delay and consequences that arise by reason of the intervention.
Delays at the border may have other knock-on consequences. It may cause the seller to be in breach of his contract for the delivery of the goods at a particular time. The default Sale of Goods Act position is that goods must be delivered at the agreed time. It is presumed that the buyer has the right to cancel the contract, buy the goods elsewhere and be compensated for the loss. In the case of a standing arrangement for ongoing supply, one or a number of failures to deliver on time may enable the customer to cancel the entire contract.
The Revenue and HMRC will give final routing for the goods, only just before they arrive. This may occur early morning late evening or otherwise outside normal working hours. If the trader handles customs inhouse it would require personnel to be available to send documents where requested via ROS. In any event, the carrier will be required to deal with the check on the ground.
Additional personnel costs will arise for carriers and traders. If there are delays at or near the border this will involve prolonged hours worked by drivers and others. The EU rules on driving hours in the road transport sector are strict. Where the movement is longer than planned, a second driver or a compulsory rest period may be required.
In the case of non-Irish non-UK driver’s immigration issues may arise. Driver licence recognition issues may arise This may limit the pool of drivers available. Road transport operation licences operate in the EU single market so that the operator may not be able to undertake road transport business in the United Kingdom thereby making its entire model uneconomic or more expensive.
Spiralling Effects and Uncertainty
There would be likely to be many unpredictable economy-wide and sector-wide effects and knock-on effects of a sudden and hard Brexit. There may be a further sudden and unexpected fall in the value of sterling which may make more UK trade unprofitable in the short to medium term.
There would be a general hit to confidence caused by Brexit and by the very distinct possibilities of very substantial job losses. There is likely to be insolvency liquidation downsizing cessation of business of key suppliers and customers across the economy. There are likely to be further unpredictable second third and fourth etc. order effects. Even a handful of the above factors are sufficient to make many lines of trade no longer viable or to cause contraction and job issues.
It may be of course the case that some businesses in Ireland will have the opportunity to serve markets either in Ireland or the EU formerly served by UK firms in the medium to longer term. However, there is likely to be a slow process of adjustment and many firms would not have the working or long-term capital to support a complete reorientation and change in their business model and the customer base.
The third, fourth and fifth-order effects of a sudden Brexit are very unpredictable because they involve multiple new scenarios interacting. The very uncertainty in itself and chaos would itself cause a hit to consumer confidence and industrial output.