UK informs EU it will continue not to impose checks on goods movements between Great Britain and Northern Ireland following EU legal warning; signs of settlement by April 2023
Following the EU’s launching of a third set of Northern Ireland Protocol infringement proceedings in July, the UK has informed the EU that it will not enforce customs and excise checks on goods moving from GB to NI. The EU had also included e-commerce VAT compliance failings of the UK government. Theses checks were agreed to by both sides at the time of Brexit to prevent the need for a hard border on the island of Ireland.
The new UK government of Liz Truss has stated that these controls undermine the peace and stability of the Good Friday agreement. Her government will also continue the passage of the controversial Northern Ireland Protocol Bill in the UK Parliament. This would unilaterally end the requirements for the agreed checks. However, compromise talks are now underway with a break through possible in April 2023.
EU counter proposals; US-UK trade deal delay opens path to compromise
The EU has proposed alternative customs procedures which both sides are now discussing. This includes the UK providing the EU with real-time data on ferry shipments between GB and NI. This would enable processing during sea journeys, and then only a very limited number of checks at the port of arrival. This could apply where there is a reasonable suspicion of illegal trade smuggling, illegal drugs, dangerous toys or poisoned food.
The practice likelihood is that the EU will not press hard on the continuing infringement proceedings, and allow a compromise to emerge over the next few months. Since the UK now seems reconciled to now US-UK trade deal, which would have included the UK diverging from EU veterinary check requirements, there may be space for a crucial compromise on livestock and foods checks.
The UK has in the past days indicated that it would like to strike a deal by April 2023 to mark the 25th anniversary of the UK-Ireland Good Friday Peace Agreement.
EU July 2022 legal action against UK on failure to fully implement Northern Ireland Protocol:
Import One-Stop Shop e-commerce VAT return; customs checks of goods between NI and GB; and excise measures
The European Commission had started in the summer four infringement procedures against the UK around the operation of customs, VAT and excise rules under the Northern Ireland Protocol, part of the Brexit Withdrawal Agreement.
The Commission believes that the UK should address these issues for Northern Ireland to continue to benefit from its privileged access to the European Single Market, and is necessary to protect the health, security and safety of EU citizens as well as the integrity of the Single Market.
The EU has partially issued the proceedings in response to the UK’s own threat to overwrite elements of the Protocol in its UK VAT and Northern Ireland Protocol Bill 2022 which is just passed its second reading in the UK House of Commons.
These new procedures come following the issuing of two previous legal actions on the NI Protocol earlier this year.
July 2022: Customs, VAT and excise infringement procedures
The four new infringement procedures are:
- UK’s failure to implement the EU Import One-Stop Shop for e-commerce sellers and marketplaces selling goods to consumers not exceeding €150;
- Full customs checks and risk controls on goods moving to Northern Ireland from the rest of the UK (Great Britain). The required Northern Ireland customs controls have been delayed by the UK several times, the latest to 2023.
- UK failure to transpose EU Excise Framework Directive for excise rules scheduled for 2023
- UK lack of transposition of EU rules to enables the application of reduced excise duty rates for small producers of alcohol beverages
Latest legal action adds to ongoing SPS and agri-food proceedings from earlier this year
These new procedures add to two existing rounds of infringement proceedings:
- June 2022: UK failing to carry out its obligations under the EU’s sanitary and phytosanitary (SPS) rules. In particular, the UK is not carrying out the necessary controls, and is failing to ensure adequate staffing and infrastructure at Border Control Posts in Northern Ireland. The UK’s Protocol Bill has also has the effect of disapplying EU law. Secondly, failing to provide the EU with certain trade statistics data in respect of Northern Ireland, as required under the Protocol.
- March 2022: UK failing to properly implement the certification requirements for the movement of agri-food. This infringement proceedings has since been escalated with a Reasoned Opinion in June 2022. If no action is taken by the UK, the next step is a referral to the ECJ.
Dual customs and VAT status for NI goods
Following the end of the Brexit transition period on 31 December 2020, NI has taken up a dual position in the EU Customs Union, Single Market and VAT regime as well as in the UK’s equivalents for goods only. However, the reality is that NI is in the EU sphere, and clashes are appearing where goods cross into GB. The rules of engagement for this were contained within the Northern Ireland Protocol, which accompanied the January 2020 Withdrawal Agreement which, in turn, sealed the UK-EU exit terms.
The aim was to avoid the needs for border controls between NI and the island of Ireland (IE) instead, moving any checks onto the goods moving between GB and NI with an eventual EU destination to the GB/NI border.. So, while the term ‘border in the Irish Sea’ has become popular, it is actually a border at the NI ports.
In addition to avoiding the need for an IE-NI border, the NI Protocol enabled the UK to diverge from the EU regulatory regime. This is something which had not been envisaged in the 2019 Theresa May ‘backstop’ proposal whereby the UK would remain in the Customs Union for a period.