Under the Withdrawal Agreement, if it is approved or in an amended version of it is approved, the infamous “backstop” provides a customs union and regulatory alignment between the EU and Northern Ireland until some new better solution is found that avoids a hard border in Ireland. Of course, as noted above, in the absence of a Withdrawal Agreement being approved the possibility of a hard Brexit still remains.
The Withdrawal Agreement and backstop arrangements are very controversial. Under one version if it kicked in, in the absence of a trade agreement avoiding a hard border (which itself is said to be very unlikely) Northern Ireland would remain part of the EU customs territory. In this scenario, it would maintain a customs relationship between the EU and regulatory alignment to avoid any frictions in trade.
In such a scenario if it happened Northern Ireland could conceivably remain as part of European Union territory for customs and regulatory purposes so that GB transactions would be exports and imports. This seems very unlikely from a political perspective.
The Irish government, the EU and the United Kingdom have indicated that they will not apply a hard border in Ireland. It is part of the UK withdrawal legislation that there cannot be a hard border, in the sense of infrastructure at or near the border in the event of Brexit. This law could be changed if there was some kind of trade war or hardening of positions.
If this scenario arose then traders could continue to do direct exports to Northern Ireland in those small number of cases with no NI controls during the transition period and after that while the backstop remains in place.
At some point however the backstop might end and there may be a new solution involving customs controls in the sense of declarations but without physical infrastructure. At that point, many of the customs costs that apply to a hard Brexit might still apply going forward and indefinitely thereafter.
There is a distinct possibility that long term, the data required for Northern Ireland would be greatly simplified. We have set out the terms of both the Northern Ireland publication saying that there would be no controls whatsoever on the UK side for a period and also the UK temporary simplified import procedure which is available to traders in the UK for a temporary period.
There is a distinct possibility that something like this temporary simplified treatment may be implemented in the longer term in Northern Ireland for RoI trade. This would involve significant simplifications.
Northern Ireland / RoI Hard Brexit Position
The proposed treatment of Northern Ireland under the UK’s 13 March 2019 statement proposes no border controls (and no tariffs on imports directly into Northern Ireland. The proposed treatment is radical and may not endure. It is stated to be temporary and it is not stated for how long it is to apply. There are obvious flaws and it may be a political type statement rather than something that has a realistic basis in trade law and practice.
It has been argued in relation to Northern Ireland that there is a World Trade law special exemption that may be available. It is very debatable, but the EU and UK might agree on it, as giving some cover for a special Northern Ireland regime.
This is a WTO exception based on frontier treatment which is widely assumed to apply only in areas of a couple of miles rather than someplace as large as Northern Ireland. There is also a security exception which has been floated, but which seems unlikely to apply. Once again, it may not be enough although, it might be some kind of fig leaf if the EU and UK wanted cover.
The proposal would not obviate the need for export declarations on the EU/Irish side, but such declarations are intrinsically less onerous than import declarations. Because Northern Ireland is involved the EU may agree to let Ireland reciprocate some kind of exemption from the normal requirements. This would require a change in EU law, would be unique and should not be taken for granted.
Text of NI Special Treatment
The proposed Northern Ireland import treatment (13th March 2019) for a hard Brexit, but not, it appears, long term is radical. It is stated to be temporary and it is not stated for how long it is to apply. There are obvious flaws and it may be a political type statement rather than something that has a realistic basis in trade law and practice.
The UK government would not introduce any new checks or controls on goods at the land border between Ireland and Northern Ireland, including no customs requirements for nearly all goods.
The UK temporary import tariff announced today would therefore not apply to goods crossing from Ireland into Northern Ireland.
We would only apply a small number of measures strictly necessary to comply with international legal obligations, protect the biosecurity of the island of Ireland, or to avoid the highest risks to Northern Ireland businesses – but these measures would not require checks at the border.
Because these are unilateral measures, they only mitigate the impacts from the exit that is within the UK government’s control. These measures do not set out the position in respect of tariffs or processes to be applied to goods moving from Northern Ireland to Ireland.
Exceptions and Anti-avoidance
The special NI proposal is extraordinary as it could be used to circumvent the tariffs that have been proposed for GB trade. It also seems to open the prospect of Northern Ireland being a backdoor into GB or alternatively checks on trade between NI and GB which equally seem extraordinary, given their strident rejection by the UK Government.
If such an arrangement was ever to take effect it may be worthwhile for RoI exporters to transport its GB exports through Northern Ireland, the extra cost may be less than the general customs tariff and Customs compliance costs. The UK authorities have announced that there would be anti-avoidance measures against such a course.
There are proposals for certain products to be subject to special controls even under this regime. There are very little details. High-risk products affecting human animal or plant health would be subject to special controls although it appears, they would be away from the border. They do not seem to be of relevance to traders.
EU / Irish Export Procedure
The default position is that export declarations would be required in the EU and RoI regardless of whether simplifications apply in NI. The proposal would not obviate the need for such export declarations. Export declarations are intrinsically less onerous than import declarations.
Ireland is required to apply for this position under EU wide laws that would have to be amended to allow for variations. These laws apply across the world in various forms reflecting World Customs Organisations conventions and recommendations. Because Northern Ireland is involved the EU may agree to let Ireland reciprocate with a special exemption, but this would require a change in EU law
Exemptions and special treatment are rare, and it cannot be assumed that they would be readily forthcoming from the EU. The poorest EU former colonies and territories with special relationships are subject to the standard customs requirements in EU trade with some minor simplifications, which do not change the core process to be undertaken.