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Draft Customs Safety, Security and Economic Operators Registration and Identification (Amendment etc.) (EU Exit) Regulations 2020

Debated on Monday 23 November 2020

The Committee consisted of the following Members:

Chair: Graham Stringer

† Cartlidge, James (South Suffolk) (Con)

† Davies, Dr James (Vale of Clwyd) (Con)

Grady, Patrick (Glasgow North) (SNP)

† Johnson, Gareth (Dartford) (Con)

McDonnell, John (Hayes and Harlington) (Lab)

Mishra, Navendu (Stockport) (Lab)

† Mohindra, Mr Gagan (South West Hertfordshire) (Con)

† Mumby-Croft, Holly (Scunthorpe) (Con)

† Norman, Jesse (Financial Secretary to the Treasury)

† Oppong-Asare, Abena (Erith and Thamesmead) (Lab)

Osamor, Kate (Edmonton) (Lab/Co-op)

Rees, Christina (Neath) (Lab/Co-op)

† Rutley, David (Lord Commissioner of Her Majesty's Treasury)

† Smith, Jeff (Manchester, Withington) (Lab)

† Wheeler, Mrs Heather (South Derbyshire) (Con)

† Wild, James (North West Norfolk) (Con)

† Williams, Craig (Montgomeryshire) (Con)

Sarah Rees, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 23 November 2020

[Graham Stringer in the Chair]

Draft Customs Safety, Security and Economic Operators Registration and Identification (Amendment) (EU Exit) Regulations 2020

At the beginning of the sitting, I am asked to remind people to sit in the seats marked with ticks, and to respect social distancing. May I also ask members of the Committee who have speaking notes to send them to hansardnotes@parliament.uk? That would be helpful to our colleagues from Hansard.

I beg to move,

That the Committee has considered the draft Customs Safety, Security and Economic Operators Registration and Identification (Amendment) (EU Exit) Regulations 2020.

It is a pleasure to serve under your chairmanship, Mr Stringer. I notice that some of my colleagues, due to the covid safety requirements, have adopted ticked seats on the other side of the room. It is a little bit unnerving for me to look over, and I hope it is not a sign of widespread defections, but I thank all colleagues for joining us for this important event.

This statutory instrument was debated in the other place last Thursday, 19 November, and passed unanimously. It is part of the Government’s package to prepare for the end of the transition period. The instrument concerns safety and security declarations, and registration for an economic operators registration and identification or EORI number.

The statutory instrument is essentially technical in nature. As well as correcting a deficiency in retained law, it provides support to help businesses prepare for the end of the transition period. My hon. Friends and colleagues will be aware that the Secondary Legislation Scrutiny Committee reported the regulations as an instrument of interest in its 32nd report, published on 29 October 2020.

The safety and security provisions of this instrument are best understood in the context of the UK’s existing safety and security regime. The UK is guided by the World Customs Organisation’s SAFE framework of standards to manage the risks associated with goods entering and leaving the country. SAFE sets out minimum standards for customs administrations to control for security risks in the international supply chain. This includes collection and risk assessment of data on consignments of goods. The collection of this data is required before arrival or departure for all goods movements. These declarations are currently implemented through the Union customs code and will be retained in UK law after the end of the transition period by the European Union (Withdrawal) Act 2018.

While we have been part of the EU’s safety and security zone, we have only required these declarations for goods moving into or out of the EU. When the transition period ends on 31 December 2020, goods moved between Great Britain and the EU, as well as the rest of the world, will require these declarations. This statutory instrument introduces a temporary waiver on the requirement for safety and security declarations for goods imported into Great Britain. An additional statutory instrument, laid on Monday 16 November, will introduce contingency powers for export safety and security requirements, allowing the Government to take appropriate action if necessary in relation to exports.

As we announced in June, the Government are adopting a staged approach to the introduction of controls at the border after the end of the transition period. This will see the introduction of a six-month waiver on the requirement to submit entry summary declarations for goods imported from the EU. This waiver will give time and flexibility to businesses affected by covid-19 so that they can meet the new requirements. There will be no requirement for entry summary declarations for goods imported into Great Britain from territories where the UK does not currently require such declarations during the waiver period. From 1 July 2021, these declarations will be required on all goods moved into Great Britain. This waiver only applies to goods movements for which there is not currently a declaration requirement. As is the case at present, Border Force will undertake intelligence-led risk assessments of these movements. The requirements for entry summary declarations for goods imported from the rest of the world will not change. As a result, there is no significant short-term increase in the security risk to the UK from this waiver.

The instrument also updates retained legislation amending a list of locations currently granted shorter timing requirements for the submission of safety and security declarations for maritime movements. The time limit pre-arrival or pre-departure by which safety and security declarations are required varies by mode of transport. The retained legislation was drafted for the geography of the European Union. It contains a list of territories allowed shorter time limits for the submission of safety and security declarations for movements by sea. This accounts for the practicalities of those shorter journeys, where the default time limits can be challenging for carriers to meet.

Places such as Morocco, from which the journey to Great Britain by sea is lengthy, are currently on the list. However, the list does not currently allow shorter timing requirements for our closest neighbours and trading partners. Default timing requirements are impractical for the well-established trade routes, including channel crossings and movements to and from the Atlantic coast of Spain and Portugal. This instrument corrects the territory list in the retained legislation, adding territory to cover some of our most significant trade routes and removing those distant territories at the border of the EU that no longer need this consideration. This amendment corrects a deficiency in the retained legislation to reflect the UK’s new status as an independent customs regime.

The instrument also updates the retained law governing EORI registration. EORI numbers are unique identifiers that businesses are required to have to interact with Her Majesty’s Revenue and Customs, as the UK’s customs authority. EORI numbers are required to make customs declarations, apply for customs simplifications or undertake other customs engagement with HMRC. Existing UK EORIs will remain valid after 31 December 2020 for use in Great Britain and will continue to be prefaced with the letters, “GB”.

A UK EORI will be required for individuals or businesses established in Great Britain who want to trade with the EU or the rest of the world from 1 January 2021. Individuals and businesses without a UK EORI will need to obtain one. Persons established outside Great Britain who wish to undertake customs processes in Great Britain will also require a UK EORI. This instrument updates references in retained law that are no longer relevant. In doing so, it ensures that we continue to have a functioning EORI system. It also maintains a registration requirement where such a requirement exists in national law. No new requirements are imposed by this instrument.

The Northern Ireland protocol means that there are no safety and security requirements for goods moving between Northern Ireland and the EU. The protocol applies EU Union customs code rules in Northern Ireland. Therefore, the safety and security aspects of the instrument do not apply in relation to goods movements in and out of Northern Ireland. Goods moving between Northern Ireland and the rest of the world will be subject to safety and security requirements. Traders in Northern Ireland will continue to register for EORI numbers under UCC rules.

Amending the list of territories is a necessary step in updating our legislation to be fit for purpose after the end of the transition period. The temporary waiver on the requirement for entry summary declarations for movements from the EU strikes an appropriate balance between maintaining safety and security standards while giving businesses time and flexibility to adjust. The technical amendments to the EORI regime will allow businesses to register as they do currently. I commend these regulations to the Committee.

On behalf of the shadow Treasury team, I welcome this opportunity to address this draft statutory instrument. I should also like to pass on the apologies of my colleague the shadow Financial Secretary to the Treasury, my hon. Friend the Member for Ealing North (James Murray). He has not been attending Parliament during the covid-19 outbreak for medical reasons, although he and I have discussed this statutory instrument in detail before today’s sitting.

The Opposition recognise that the UK has left the EU and very much support the Government in ensuring as smooth an end to the transition period as possible on 31 December. However, we have concerns about three issues in the draft instrument, on which I would welcome a response from the Minister. As he just mentioned, the Union customs code is the overarching legislative framework for customs, adhered to by all EU member states and the UK during the transition period. The code’s registration requirements were due to be incorporated into UK law at the end of the transition period, with amendments made by the Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019. However, as the explanatory memorandum to the draft instrument makes clear, the necessary amendment to the Union customs code power to require businesses to register with a customs authority for other legislation was omitted from the regulations. We understand that the draft instrument corrects that error, revokes the previous regulations and ensures that there is no change in the UK’s registration powers after the end of the transition period.

Although it is welcome that the error was identified and, we hope, corrected in time, how can the Financial Secretary be confident that the Government have not made any other such errors, particularly given the scale of the necessary preparations for the end of the transition period? I would be grateful if he explained with references to specific processes that may be in place how he is making sure that any such errors are identified and corrected in time.

Secondly, as the Financial Secretary said, the draft instrument introduces a six-month temporary waiver on entry summary declarations for goods from the end of the transition period. It would therefore run from January to June 2021. The explanatory memorandum explicitly asserts that that is to mitigate the impact on readiness that the covid-19 pandemic has had on the logistics industry. However, the original statutory instrument, which the draft instrument intends to replace, also envisaged a six-month waiver from March to October 2019. Although we recognise that situations then and now are not directly comparable for a number of reasons, that raises questions about whether six months is a reasonable period for the situation we face now. I therefore ask the Financial Secretary to make clear today why the six-month waiver is needed. Assuming that he now considers covid to be the contributing factor, how can he be confident, if the six-month waiver was needed to deal with the process pre-covid, that six months will be enough now, given the additional effects of covid on the situation?

The draft instrument changes the deadline for when declarations need to be submitted for short sea journeys to reflect the fact that goods coming into and going out of the UK will come into contact with a customs border much more quickly after the end of the transition period. To achieve that, a number of changes will have to be made. They include allowing declarations to be submitted up to two hours before arrival or departure. The period is currently longer—in some cases, up to 24 hours. We understand and appreciate that the change seeks to avoid congestion as a result of late changes to the transportation of goods, and it seems to make sense in principle. However, the explanatory memorandum notes that HMRC will need to put processes and procedures in place so that entry summary and pre-departure declarations are submitted within the relevant timescales.

We are very conscious that HMRC is subject to job cuts and reorganisation and will have a significant amount of work in the coming months, not only assisting with the end of the transition period, but, realistically, also managing many of the Government’s covid support schemes. How can the Financial Secretary therefore be confident that HMRC will have the capacity to put in place the processes and procedures that the draft instrument envisages?

Thank you again, Mr Stringer, for the opportunity to raise concerns with the Financial Secretary about the draft instrument. As I said at the beginning of my speech, we recognise that the UK has left the EU, and we very much support any steps that the Government are taking to ensure that the ending of the transition period on 31 December is as smooth as possible. However, I would welcome a detailed response from the Financial Secretary to the concerns that I have set out.

Let me say how much I welcome the hon. Lady to the shadow Front Bench. If the fiendish complexity of the questions that she asked and the charm with which she asked them are any indicators of the future, she is destined for a long and successful career. I thank her very much indeed for those questions.

The hon. Lady asked three questions. The first question was how can the Government be comfortable that there are no, as it were, remaining errors left in the legislation. I hope that I can give her some comfort by reminding her of the extremely detailed process that the measure has gone through. There was a formal consultation on this legislation. Predecessor versions have been debated in the House, and it has gone through the mill of review by committees. It has been subject to significant cross-examination and reflection by intermediaries and other communities that it would affect. It has been specifically reviewed in the House of Lords. Human error being what it is, in an imperfect world, we cannot say that perfection is given to everything, but we would like to think—and we strongly believe, for the reasons I have indicated—that this is a sound and good piece of legislation.

Secondly, the hon. Lady asked whether or not the six-month period would be adequate, especially given that covid has been an additional factor. All I would say is that when this was originally framed, covid was not in the picture but, at the same time, there was considerably greater uncertainty about what the timing of this would be and what its effect would be on the relevant traders concerned. Since then, an enormous amount of work has been done to recruit over 250,000 traders to the EORI-number process, to stand up a very substantial programme of investment in intermediaries and training. Those are things that, on due consideration and in consultation and discussion with stakeholders, give us—and HMRC in particular—cause to believe that six months will be adequate.

Finally, the hon. Lady raised the question of the timing of journeys and whether or not it might be an unrealistic burden on HMRC, given all the other constraints that the organisation has met. I am sure that she would join me in saying that it is a source of national wonderment how well HMRC has done in dealing with the covid crisis, in standing up in record time furlough, self-employment and other schemes, and in adapting and elaborating them as the pandemic has evolved. However, I think that it does not feel—and we have not been advised—that there is any particular concern in this area. On the contrary, it has been successful in recruiting 6,000 of 7,000 needed and new customs agents. There is every expectation that that process will be completed as needed. I should also say—of course, we must not prejudge future spending announcements and discussions —that there is widespread understanding in HMRC and the Treasury that the organisation has reacted extraordinarily effectively and well, not least in dealing with the potential risks to its own staff from covid and in the reorganisation, in terms of working from home, that it has managed to achieve. For all those reasons, I hope that I am able to give the hon. Lady satisfaction on the three topics that she has raised, and I commend the statutory instrument to the Committee.

Question put and agreed to.

Committee rose.