At full speed towards Brexit
Brexit could still go in many directions. However, it is clear that customs formalities for the flow of goods between the United Kingdom and the Netherlands are becoming almost inevitable. So the worst thing in the world would be to adopt a passive attitude. Since the announcement of the UK’s withdrawal, Dutch Customs has been setting an example with a range of measures. “The Netherlands is one of the first EU Member States to employ additional customs staff,” says Brexit programme director Hans Klunder.
He is accustomed to dealing with sensitive files. Hans Klunder worked for three other departments before he switched to Customs in 2014. “At the Ministry of Justice & Security, I was involved in the implementation of migration policy for seventeen years. Brexit has created a similar political-social dynamic. After returning from a working visit to the United Kingdom at the end of 2017, our Prime Minister immediately entered into talks with bodies such as the umbrella organisations for trade and industry. The message was loud and clear: government and business, you must prepare for a worst-case scenario – or, in other words, a hard Brexit. That was particularly true for us as Customs and the Dutch Food and Consumer Product Safety Authority. This is one of the reasons we decided to combine all customs activities around Brexit into one programme. The green light was given in February of this year, and the necessary budget followed soon after. And I was appointed programme director as of 1 April.”
Preventing unnecessary delays
Prior to that, however, Customs had certainly not been sitting on its hands. “Our starting point was always to consider the consequences of a hard Brexit*. As soon as it became clear that the British were serious, we mapped out the consequences for our organisation. Recent VAT figures show that some 35,000 businesses trading with the UK are not in our customs systems, and therefore unaware of customs processes. Approximately 4,000 of them have a significant turnover – more than € 100,000. All in all, this will result in a 20% increase in import declarations and a 30% increase in export declarations. This means considerably more work, which requires extra capacity. Our organisation, which now encompasses 4,600 FTEs, will grow by 20 percent on the basis of a hard Brexit.”
“Within the programme, we are constantly working on ongoing activities, whereby we are creating more structure,” continues Klunder. “It will continue as long as necessary. At present, the main focus is on preparation for the hard Brexit date of 29 March 2019. We are doing all we can to avoid any unnecessary hold-ups for business. Soon, however, delays will be unavoidable: the UK’s decision to leave the Internal Market and Customs Union makes customs formalities inevitable.
Unfortunately, some confusion has also been caused by the UK’s claims that it would like to form a customs union with the EU, as was previously the case with Turkey. If that were to happen, it would make little difference in terms of the consequences however. At the end of the day, the UK is leaving the Internal Market, which provides for the free movement of persons, services, goods and capital. But while the country chooses to turn its back on the EU family, it wants to remain the ideal son-in-law. Regrettably, the UK – like any other third country – will have to face the formality regime: all administrative operations, licences, import and export declarations and physical checks on both sides of the border. That is by no means a trivial matter. In order to import or export something as simple as a jar of jam, nine extra formalities are required. This includes a summary declaration, a declaration for temporary storage, a phytosanitary check... Of course, in the future, the UK might well form agreements with the EU on issues such as security or the mutual recognition of AEO statuses, or conclude an agreement such as the one signed between the EU and Canada at the beginning of last year. However, this does not mean that the external border will disappear.”
Expansion on all fronts
One of the pillars of the programme consists of recruiting, training and employing new staff. The Netherlands is one of the first Member States to have already taken on additional people, in relation to Brexit. The first training course, involving a mix of ‘regular’ and ‘Brexit’ recruits, will be completed in January. The next one will start in September. In the event of an agreement between the UK and the EU, the number of employees would increase by 750;a hard Brexit corresponds to 928 new customs officers. Klunder: “The vast majority of these – 500 to 550 – will work in Physical Surveillance, while a smaller proportion will be employed in tax return processing. Customer management will also be expanded within the process, for example assessing permit applications. In addition, our national office and service organisation will need to be given extra capacity to manage the entire project.”
“This increase will have a considerable impact. There are implications for our accommodation, resources such as the car fleet, and the number of customs dogs and dog handlers. We have also initiated procurement processes for mobile scanning equipment, weapons, you name it. Together with the business community, we are looking at how we can best design accommodation with the option of a returns desk, for example. Supervision of ferry traffic between the UK and the mainland, which became obsolete in the early 1990s with the advent of the single market, will have to be revived according to current insights. We are currently trying to identify a good location for the new customs offices that we need, in order to be able to carry out our monitoring task efficiently. That’s not as easy as it sounds because the number of meters available for ferry operations in ports is limited. And when you consider that a ferry has a turnaround time of about three hours, it is clear that this is quite a challenge.”
The government’s efforts alone will not be anywhere near enough, says Klunder emphatically. “This involves the entire chain so, as mentioned previously, the business community has to make an effort too. The umbrella organisations have been working hard. We have organised various roadshows with them, including collaborations with business and entrepreneurial organisations, with regard to reaching out to their members. Several Brexit service and assistance websites enable companies to perform a scan to determine the impact of Brexit on their business. We are also in intensive discussion with the ferry companies. What if companies fail to submit declarations the day after the Brexit, or trucks drive on or off the boat without the required documents? Then they will have a problem too because their three-hour turnaround time will be jeopardised. Fortunately, the ferry companies are aware of the urgency.”
However, this does not apply to everyone, says Klunder. “Large companies with their own customs department or a customs agent are preparing for the change. They are recruiting new people who can be trained to cope with the extra volumes in the customs process. But this may be out of the financial reach of many small companies. In addition, a poll by the largest employers’ organisation in the Netherlands has shown that one third of industry is ready, one third is preparing, and another third is not focussing at all on Brexit. In order to investigate the situation more precisely, the government is doing additional research. A possible explanation for this apparent unwillingness to engage, on the part of the target group is that they are entrepreneurs and are used to taking risks. Some companies may also have an over-simplified view of the consequences. Some entrepreneurs have said: just tell us which permit we need and we can get on with things. They are then stunned when they are told what to expect.”
Ready for the future
Accurately predicting what will happen next year is difficult, Klunder acknowledges. “From our main ports, particular Rotterdam, the most important transit countries are Germany, Belgium and France. You can see movement going between these locations. The financial heart of London will also be hit. British banks are likely to relocate to the mainland or to Ireland. The British media are even discussing the possibility of airlifts between the English capital and the hinterland because of shortages of medicines and food in a no deal situation on 29 March 2019.”
The action on the Dutch side puts us in a good position, admits Klunder. “MP Pieter Omtzigt recently asked whether Customs is ready for a hard Brexit. My answer was a resounding ‘yes’. When we carried out the first stress test on our IT systems nine months ago, it all looked fine and now we’re going even further. Where possible, we are trying to shorten or adapt training courses so that new staff can be deployed as quickly as possible. We are also going to create greater flexibility within the regions in order to distribute the workload evenly. Of course, we will have to improvise from time to time, perhaps via internal transfers. And, in the end, we have no control over what happens in the UK. Fortunately, improvisation and flexibility are what Customs does best. The other day, I heard a colleague say; “We tackled the sudden outbreak of foot-and-mouth disease within a day and this will be fine too”. In future, we will do everything we can to prevent long queues of lorries. But we cannot avoid some form of administrative burden as a result of supervision over the flow of goods to and from the UK.”
* See also previous articles in Customs NL inSight (number 3 2017, number 1 2018).