Taxation (Cross Border Trade) Bill committee – sittings five and six

Taxation (Cross-Border Trade) Bill – Public Bill Committee

Sittings five and six -  Tuesday 30 January 2018

Clause 13 - Dumping of goods, foreign subsidies and increases in imports

Introducing clause 13, Parliamentary Under-Secretary of State for International Trade Graham Stuart explained that the European Commission currently carries out trade remedies investigations and imposes measures on the UK’s behalf. “Once we leave the EU, we will need to be able to do that for ourselves. Clause 13, together with schedules 4 and 5, sets up the UK framework to allow us to do just that.”

Shadow Economic Secretary Jonathan Reynolds (Lab) moved three amendments (137, 138 and 139) which together sought to make the power to give effect to an accepted recommendation of the Trade Remedies Authority (TRA) exercisable by regulations rather than public notice. The amendments discussed in this group are important because the Bill introduces a ‘troubling’ concept, he said, that of making law by public notice, on which the Bill is heavily reliant. This is effectively a modern form of rule by proclamation that removes the opportunity for parliamentary scrutiny, said Reynolds. The only qualification for public notice is that the person who issues it has selected a channel that they consider appropriate; however a definition of ‘appropriate’ is absent from the Bill. “Where matters of taxation are concerned, the parliamentary process is usually more rigorous with respect to the reasons for setting the duty,” he said. He called upon MPs to support the amendment, “to ensure that we [parliamentarians] can continue to perform our vital role providing checks and balances in the structure of taxation and customs law in the UK.” If the Government’s concern is the wish to bring a trade remedy during recess, they have to invent a new constitutional procedure to do that, he said. Responding for the Government, Graham Stuart said the imperative is to act quickly once the Trade Remedies Authority has identified the need to tackle injury to UK industry. The use of public notices to implement trade remedies measures is consistent with the approach taken in comparable WTO countries, he added. Amendment 137 was defeated 10-8 in a vote. Amendments 138 and 139 consequently fell too.

Shadow Chief Secretary to the Treasury Peter Dowd (Lab) proposed New Clause 5 which sought to establish a system of enhanced parliamentary procedure for regulations setting quotas under Clause 13 to give effect to recommendations of the TRA, with a requirement for the House of Commons to pass an amendable resolution authorising the quota provisions of the proposed regulations, and also requires that certain regulations under Schedules 4 and 5 are subject to the affirmative procedure. Dowd argued that as this was being deemed a Money Bill the Government were accepting that the matters within it were essentially fiscal. Thus it was appropriate that statements made to the House of any regulatory changes in relation to fiscal matters are Parliament’s responsibility and duty, as they have been for centuries. SNP economy spokesperson Kirsty Blackman supported him. Responding for the Government, Graham Stuart said the Bill ensures that any duties are set at the level needed to address injury to UK industry and no higher. The TRA will make independent recommendations to Ministers, who will then reach a final decision. He added that it is common to have framework primary legislation supplemented by detailed and technical secondary legislation. He accused the Opposition of trying to “create burdensome parliamentary oversight”. New clauses are not voted on until the end of committee stage.

Schedule 4 — Dumping of goods or foreign subsidies causing injury to UK Industry

MPs then debated 46 amendments to schedule 4 tabled by Opposition MPs. Introducing the first group of these, Peter Dowd said they would clarify a number of important points about constructing a functional trade remedy mechanism that will not be open to challenge in the courts and will not slow the process down. For example, Amendment 23 sought to ensure that the comparable price for the purposes of determining normal value of a good would be assessed with respect to independent consumers, rather than consumption by anyone in the exporting country or territory. Amendments 24 and 25 sought to “introduce proper detail to the procedure for determining the value of goods, and therefore to the understanding of comparable prices for the purposes of assessing market distortions”. Amendment 26 “would ensure that once a proper procedure for determining normal value had been conducted in the manner I outlined, the value would be compared with the export price in a fair manner.” Amendments 62 to 64 sought to ensure that the definition of the term ‘serious injury’ corresponded to the agreed terminology of the World Trade Organisation.

Labour’s Nic Dakin said the problem with this part of the Bill is that it is just a framework with nothing more to it and he welcomed the amendments tabled by his party’s frontbench. Major foundation industries, such as steel, ceramics, oil and gas, that rely on strong trade defence instruments to ensure that they can trade not only freely but fairly need significant capital investment to stay at the cutting edge of development. To make that capital investment now, they need confidence about the framework of the future, he said.

The minister, Graham Stuart, said the detail of the secondary legislation will be constrained by and compliant with the WTO rule but because they will be set out in secondary legislation there will be the necessary flexibility to allow changes to be made quickly, reflecting developments in best practice and WTO case law. “Cutting and pasting WTO agreements with which we will comply is not the same as having an appropriate system in place for the UK”.

Amendments 23, 24 and 26 were all pressed to the vote, each being defeated 10-9.

MPs then moved on to debate a second group of amendments to schedule 4 which relates to injury caused by dumping. Labour’s Jonathan Reynolds introduced them: “Amendment 28 provides a definition of financial contribution by reference to the WTO agreement on subsidies and countervailing measures. Amendment 29 provides that the meaning of injury for the purposes of schedule 4 shall reflect the provisions of the relevant article of the agreement on implementation of article VI of the general agreement on tariffs and trade 1994. Amendment 30 is consequential on amendment 29, as is amendment 31. Finally, amendment 33 requires regulations determining what constitutes “negligible” and “minimal” to have regard to relevant WTO provisions.” Reynolds said the Manufacturing Trade Remedies Alliance had made it clear that the methodology of the assessment on how to decide appropriate trade remedies was a key detail that it was missing in the Bill. The package of Opposition amendments offers a ‘relatively straightforward’ solution by using a pre-existing, widely accepted set of terms to define injury which is a set of World Trade Organisation rules, which already provide a blueprint, he added. Responding, the minister tried to reassure MPs that the Government had carefully considered the right balance between primary and secondary legislation, and that they and the TRA were required to have regard to international obligations. Nevertheless Labour pressed amendment 28 to the vote, seeing it defeated 10-9.

Labour’s Anneliese Dodds proposed a group of six amendments (32 and 34-38) to schedule 4 which together would remove the need for a market share requirement to be met before the TRA may initiate a dumping or subsidisation investigation. According to the Government’s proposals, applications to the TRA for an investigation will be subject to a UK market share threshold, but Dodds said ‘we do not know how the threshold will be determined nor what its range is likely to be, let alone the actual value for different industrial sectors’. If an application does not meet the UK threshold but does meet WTO thresholds, the TRA may use its discretion as to whether to accept it, she said, asking “why the TRA should be put in a potentially difficult position, especially when legal action could be levelled against it by the company that is deemed to have engaged in dumping precisely because the TRA has used that discretion.” SNP’s Kirsty Blackman said it was strange that market share is being used in this regard as something that will be taken into account. It is almost as if the TRA cannot be bothered to investigate a company if it does not have a certain market share, she thought. She later said she hoped for a little more impact assessment before the UK signed up to a system that is unique in the world. The minister replied that the Government is working closely with industry and producers as it develops secondary legislation, including on methodology. It will enable UK industries, and the Trade Remedies Authority, to avoid spending time and resources on a lengthy investigation process unlikely to result in measures being imposed, we were told. For example, a company could be the only producer of widgets in the UK and therefore meet the WTO requirements to bring a case, but if that company has a de minimis share of the UK market as a whole, putting duties in place would have a disproportionate effect on the rest of the market. The Bill allows the TRA to choose to waive the market share threshold in special cases. Amendment 32 was defeated 10-9 in a vote.

Labour’s amendment 39 sought to require recommendations made by the TRA (under Schedule 4) to be made available to relevant select committees of the House of Commons, along with an account of the evidence basis for the recommendation. This was grouped with amendment 70 which asked for the same thing under schedule 5. For the Government, Graham Stuart said that to protect the TRA’s status as an independent public body, its recommendations to the Secretary of State should not be subject to political influence before a decision to accept or reject them has even been taken. Whether the Secretary of State accepts or rejects the recommendation, the evidence base for the TRA’s recommendation will be made available to the public, as is required under the terms of the WTO agreements. For Labour, Jonathan Reynolds refuted that scrutiny by Select Committee would increase the partisanship or the partiality of the transparency of the process. Amendment 39 was pressed to a vote by Labour but was defeated 10-9.

MPs then debated a group of five amendments tabled by the Labour frontbench relating to the economic interest test in the Bill. Amendment 40 sought to remove the requirement for the TRA to be satisfied that requiring a guarantee meets the economic interest test. Amendments 58 and 75 sought to provide greater specificity to the operation of the test. Amendments 59 and 76 would have removed the requirement to take account of the economic significance of affected industries and consumers in the UK. Proposing the amendments Peter Dowd (Lab) said the tests will be bureaucratic and will lead to inflexibility. He said amendment 40 would “remove the burden of the economic interest test being placed on the TRA at this early stage in proceedings to allow it to take swift provisional measures pending further investigation, and so that we can act quickly as and when necessary to protect our industries”. In relation to amendment 59 he argued that, as it stands, schedule 4 “gives preference to large enterprises over small and to established sectors over new. Without our amendment, the Secretary of State could stamp out a small, growing sector or extinguish an embryonic area of British entrepreneurship because they deemed it not of “economic significance” to the UK. That would be a travesty.” The minister, Graham Stuart, replied that the economic interest test “ensures that measures are not imposed where they might have disproportionate impacts on wider groups such as downstream industries or… consumers.” He said the test the test would operate “on a presumption in favour of anti-dumping and anti-subsidy measures, and is not intended to deny protection for markets or businesses based on their size.” Amendment 40 was pressed to the vote and defeated 10-9.

The next group of eight amendments (41-44 and 49-52) – all tabled by Labour’s frontbench – concerned the removal of a mandatory lesser duty rule for estimating the injury of state-sponsored dumping. In the final act of this sitting Peter Dowd explained that the mandatory lesser duty rule requires the calculation, in dumping investigations, of the level of injury to domestic industry, in addition to the level of dumping. The duties correspond to the lesser of the two indicators, which means that they might not necessarily properly reflect the damage to British industry, said Dowd. “As witnesses from key industries, including steel, ceramics and chemicals, pointed out last week, the best estimate of the distortion to trade is the dumping and subsidy margin. The creation of a mandatory lesser duty will result in lower duties that in some cases may not reflect the actual injury.” Labour backbencher Nic Dakin noted that the EU “is going for a conditional application of the lesser duty rule, which is the right direction of travel. It makes it slicker and simpler, and still effective.” The minister, Graham Stuart, replied that WTO rules “clearly provide that anti-dumping measures cannot exceed the margin of dumping and anti-subsidy measures cannot exceed the amount of subsidy. That is a strict requirement… [O]ur policy intention is simply to incorporate those WTO rules and not to provide that the amount of subsidy somehow offsets the dumping margin, or vice versa — I think there may have been some misunderstanding of the Bill’s phrasing.” Dowd responded that Labour’s amendments were “genuinely an attempt to listen to what the witnesses were saying to us… [Their evidence] leads us to believe that the Government, in the round, are perhaps going a step too far. Our amendments are an attempt to bring the balance back.” Amendment 41 was pressed to the vote and defeated 10-9.

The next group of five amendments, again all from the Labour frontbench, related to time periods. Amendments 45 and 54 would have mandated the Secretary of State to make a decision on TRA recommendations within two weeks. Moving amendment 45, Labour’s Jonathan Reynolds said that although there is provision in the Bill for a deadline to be brought on the TRA through secondary legislation at various points in an investigation but none specified for the Secretary of State - in theory, that would allow decisions to be delayed indefinitely. “That raises a concern that there could be an option simply to kick the can down the road when a politically difficult decision presents itself.” In a similar vein, the Bill specifies a maximum five-year period but no minimum with regard to the time considered necessary for duties to be imposed where that forms part of the TRA’s recommendations. The default duration of duties should be five years, starting from the date of definitive measures, says Labour, and that is what amendment 47 sought to do. The remaining two amendments (48 and 53) would have removed the provision for the TRA to recommend an earlier date than the day after the day of publication of the public notice. For the Government Graham Stuart said to place an arbitrary two–week time limit on the Secretary of State was a mistake as there will inevitably be difficult matters that he will need to reflect on. He added that WTO agreements set out that measures may remain in force for up to five years and ’they do not provide that five years is the default’. The unintended consequence of the Opposition amendments in this group would be to prevent the TRA from collecting duties for a period before the date of the section 13 notice. Labour’s amendments were supported by SNP economy spokesperson Kirsty Blackman, who said the presumption should be five years, and the Trade Remedies Authority should make decisions for it to be less if it believes that that would be appropriate. Amendments 45 and 47 were put to the vote but were each defeated 10-9.

The next group of amendments to schedule 4, again from Labour, related to the public interest. Moving amendment 46, Peter Dowd explained that, along with the three other amendments in this group, it would define the public interest as referring strictly to the national security of the UK and its citizens. As drafted, the measures would create a public interest test that would allow the Secretary of State to veto any recommendations on the adoption of trade remedies from the Trade Remedies Authority on public interest grounds. “An undefined public interest test would give the Secretary of State vast powers that could easily lead to abuse”, he said. For the Government, Graham Stuart said that ‘only where there is a strong argument against following the Trade Remedies Authority‘s recommendations will the Secretary of State reject putting measures in place. In the exceptional case where he does, he will be required to explain his decision to Parliament’. In response to a challenge from Dowd he said the ‘public interest test’ was ‘not really a test’, it was more of a ‘sense check’. Dowd withdrew amendment 46 in a ‘spirit of co-operation and conciliation.’

Attention then turned to reviews. Moving amendment 55, Anneliese Dodds (Lab), said with no restriction on the time period before which reviews can be initiated, the UK again appeared to be going against the international direction of travel.  Her amendments 55 and 56 would ensure that reviews could not normally be opened into measures that were less than one year old, in line with EU practice, and that duties remained in place while reviews were conducted. The SNP supported her. International Trade minister Graham Stuart recognised “the desire for clarity regarding timelines in the review’s framework, but as demonstrated by the WTO agreements and EU rules, there is no uniform timeline that is appropriate for all review types.” This was a ‘complicated area’, he said. The amendment was withdrawn.

Next, Anneliese Dodds moved amendment 57 to provide for the TRA to seek to apply price undertakings in response to a request to do so. This amendment sought to clarify the precise role of the TRA within the process of application of undertakings, she said. The amendment would mean that the use of undertakings would rely solely on an undertaking being offered by an exporter or a foreign authority, and would deny the TRA the ability to prompt the offering of an undertaking. The minister, Graham Stuart, responded that removing this power would serve to undermine the TRA and the discharge of its functions. The amendment was withdrawn.

Finally on schedule 4 MPs debated that the schedule – in its original form as none of the amendments had been successful – stand part of the Bill. Graham Stuart explained that the detailed and technical provisions in relation to sanctions for dumping and related areas would be put in place through secondary legislation. He assured MPs that the Government would continue to engage with stakeholders as this is developed. Alongside this the committee considered new clause 15, which seeks a review of transitioning existing EU measures. The minister confirmed that current trade remedies would stay in place unless there is a very strong reason for them not to. Aksed by the minister whether the new clause was asking for the TRA to review each transition measure, or whether it was seeking to review the Government’s overall policy approach, Peter Dowd said it might relate to either or both. The schedule was agreed. New clauses are not put to the vote until the end of committee stage.

Schedule 5 - Increase in imports causing serious injury to UK producers

Schedule 5 sets out the provisions that will apply in cases where UK industry finds itself being harmed by unforeseen surges in imports. But before debating the schedule as a whole MPs considered a group of seven amendments (65-69 and 72-73) relating to the removal of the preliminary requirement for adjustment plans. Proposing the amendments, Jonathan Reynolds (Lab) explained that it seems ‘counter-intuitive’ to make it incumbent on industries to draw up their own adjustment plans. Surely if an application is being made to the TRA then this is already a measure of last resort for an industry, he said. “It may also provide an easy exit for the TRA to avoid opening an investigation if it is perhaps resource-constrained, by pointing instead to the measures that the producer has drawn up as an alternative to remedies being imposed.” The minister, Graham Stuart, said adjustment plans serve to reinforce the rationale for applying safeguard measures and ensure that measures are used fairly. “In terms of whether they would be overly burdensome on business, we will ensure that the process is both flexible and proportionate.” He claimed amendments the Opposition’s amendments would ‘have exactly the opposite effect to the ones that they claim’. Amendment 65 was pressed to the vote and defeated 10-9.

Moving to the schedule as a whole, Graham Stuart said that the WTO agreement on safeguards set out the requirements that must be met to be able to impose safeguard measures. “Through this schedule, we are adopting the key principles into UK law and setting out the broad elements of the safeguard process that will be operated by the TRA,” he explained. For Labour, Anneliese Dodds proposed amendment 74 which, she said, aimed to increase predictability for British business by making provision about ‘exactly how a safeguarding remedy could be extended’. She said the TRA would only recommend extending a safeguarding remedy beyond four years if the authority were satisfied that there was evidence that UK producers were adjusting to the importation of the goods in increased quantities - so not a plan, ‘actual evidence of that adjustment would be necessary’. The total duration of any such extended remedy would be only be another four years, so eight years in total. The minister responded that it was ‘not appropriate to introduce a requirement for producers to provide evidence of adjustment when seeking to extend measures beyond four years’. Calling Labour's proposal an ‘extraordinary innovation’, he asked: "Why on earth would the producers have to provide evidence of their adjustment when the main issue should be other aspects and criteria?” Dodds welcomed the minister’s statement that the Government would use secondary legislation to meet some of her concerns.  The amendment was still pressed to a vote and failed 10-9. Schedule 5 as a whole was agreed unamended.

Clause 14 - Increases in imports or changes in price of agricultural goods

Clause 14 enables the UK to invoke agricultural safeguards on certain agricultural imports post EU exit. It sets out the necessary provisions required to establish the UK’s independent agricultural safeguards regime.

The SNP’s Kirsty Blackman moved amendment 110 which would require consultation before the making of regulations to increase the customs tariff for agricultural goods. Financial Secretary to the Treasury Mel Stride said the SNP’s amendment would significantly add to the lead-in times required to set or amend agricultural regulations related to safeguards. That would not allow the Government to respond quickly to changes in circumstances or to update the measures in line with the latest import data in a timely fashion. Blackman withdrew her amendment but said she would reflect on whether to table a similar one at report stage.

Also debated here was Labour’s new clause 6, which the SNP also supported. This would establish a system of enhanced parliamentary procedure for regulations setting additional import duty on agricultural goods, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of import duty on particular goods and the relevant conditions. Labour’s Peter Dowd said this new clause was one of several in which the Opposition are calling on the Government to put critical decisions on tariffs, quotas and preferential rates in front of Parliament. Dowd said tariffs should undergo the same parliamentary process as taxation, with similar levels of parliamentary scrutiny. “We will oppose the Government’s attempts to give the Treasury delegated powers to set future customs duties and tariffs away from the public and parliamentary eye.” The new clause was not voted on at this stage. Clause 14 was passed without opposition.

Clause 15 - International disputes etc

Clause 15 enables the Secretary of State to vary the rate of import duty when a dispute or other issue has arisen between the UK Government and the government of another country, and the UK is authorised to do so under international law.

The SNP proposed four amendments (111-114) to this clause. Moving amendment 111 Kirsty Blackman cited concerns by the Law Society of Scotland about what is meant by ‘international law’ in regards to this clause. This amendment would have required the Government to make regulations defining it within three months of the passing of the Bill.  Amendment 112 suggests to the Minister what he might mean by ‘international law’, she said. Amendment 113 asks the Government to come back, again within three months of the passing of the Bill, making clear what the relevant international law authorising the exercise of powers would be and the circumstances in which they consider it appropriate to deal with a dispute by varying the amount of import duty.  Amendment 114 has, she said, a slightly different purpose: to increase the accountability of Government. It asks the Secretary of State to lay before the House of Commons an annual report on the exercise of these powers, making clear the circumstances in which they have used them, which matters were in dispute and which was the relevant international law in deciding the changes. Responding for the Government, Graham Stuart said there were “a number of situations under international law in which countries may be authorised to vary their rate of import duty for the purposes of retaliation or compensation, including in disputes under different types of international agreements and, just to make it even more complicated, in other contentious situations that do not involve a formal dispute. Given the different context in which clause 15 would apply, it is sensible to refer broadly to authorisation under international law. Adopting a narrower approach would risk constraining future action in situations that are not currently foreseeable,” he argued. He said he anticipated that when the power is exercised, the Government will identify the legal basis in international law for any proposed variation of import duty. “It would be extraordinary to imagine any Government doing other than that. If Parliament were not satisfied that a proposed variation was authorised under international law, it would have the opportunity to pass a motion to annul the Government’s instrument. That is a more appropriate procedure for parliamentary oversight.” Amendment 114 was pressed to the vote but defeated 10-9.

Also debated in this group was Labour’s new clause 7, which argued for an enhanced parliamentary procedure if import duties must be varied as a consequence of an international dispute. Anneliese Dodds said that at EU level such disputes are not so frequent that appropriate scrutiny would not be possible. These disputes do not affect just economic policy; they can have a significant impact on other areas of public policy as well. Another important reason to have an enhanced procedure is that there is a lot of public concern at the moment about international economic disputes and how they tend to be resolved, she said. The minister, Graham Stuart, responded the question is not really the frequency but whether, when it does happen, ‘we have a procedure in place to allow us quickly and effectively to take action to ensure that we put the matter right’. New clauses are not voted on until the end of committee stage. Clause 15 itself was agreed without a vote.

Amount of import duty: supplementary
Clause 16 - Value of chargeable goods
Clause 17 - Place of origin of chargeable goods
Clause 18 - Currency

These three clauses were agreed without debate.

Clause 19 – Reliefs

Clause 19 allows the Treasury to make regulations for full or partial relief from a liability to import duty. Labour tabled two amendments (126 and 127) to ensure that regulations made under clause 19 are subject to the affirmative procedure. “Extensive powers are being handed to the Treasury to adjust fiscal policy without reference to Parliament at all,” argued Peter Dowd. Kirsty Blackman (SNP) said clause 19, ‘in effect, gives the Government power to create loopholes—tax reliefs—in the legislation’.  FST Mel Stride argued that the measures are important facilitations rather than loopholes. He thought the negative procedure was ‘both appropriate and proportionate, given the technicality of the regulations and the frequency and speed with which they may need to be made’. But Dowd and Blackman remained unconvinced, Dowd arguing that “this seems to be a potential slew of tax reliefs… that will be given the imprimatur of a Minister or the Treasury without Parliament having any say whatsoever in that tax raising”. Amendment 126 was pressed to the vote but defeated 10-9. The clause was agreed without a vote.

Clause 20 - Notification and payment of import duty, etc
Schedule 6 - Import duty: notification of liability, payment etc

This clause and schedule were agreed without debate.

Clause 21 - Customs agents

Clause 21 allows importers to appoint an agent to act on their behalf in respect of their import obligations, the minister, Mel Stride, told the committee. He said the changes made by clause 21 would allow two classes of agent – direct and indirect - to be appointed. The clause allows HMRC to make regulations about how the appointment is notified as well as withdrawn, which may be as little as confirming the appointment on the declaration. It also sets out the circumstances in which the agent is jointly liable for import duty.

Kirsty Blackman (SNP) put forward an amendment (115) that asks for the Government to produce a report in relation to the ‘proposed criteria for appointment of Customs agents, and… the proposed standards which persons must meet to be approved for appointment’ within three months of the passing of the Bill. That will provide a level of certainty to companies about what criteria customs agents will be expected to meet in future, she said.  Mel Stride said the UK has authority to further regulate customs agents under the existing customs regime. There are currently no plans to introduce such additional regulation on customs agents, so requiring a report to be produced is unnecessary, he said. The amendment was withdrawn. The clause was agreed without a vote.

Clause 22 - Authorised economic operators

Clause 22 allows the setting up of an authorised economic operator (AEO) scheme, which is an internationally recognised quality mark indicating that an operator has met recognised standards of compliance. The status could give special access to some customs procedures and the right, in some cases, to fast-track shipments through customs. Moving the clause, the FST, Mel Stride, said that the AEO concept was well known in international trade, with 41 customs territories (including the EU) having a version of it. AEO status enables qualifying traders to “access customs facilitations and simplifications and undertake customs activities with only light-touch oversight from customs authorities”, he said. He added that the clause provided for the creation of different classes of AEO status, ‘appropriate to different types of business’ and ‘avoiding a one-size-fits-all approach’.

Four amendments were debated here. Labour’s amendment 128 would confer powers on the Treasury to exercise regulation-making powers under the clause instead of HMRC commissioners. Peter Dowd explained: “Treasury Ministers are democratic agents, accountable to the general public. We cannot allow a situation where unelected officials can disapply large sections of parliamentary legislation with no democratic recourse or public oversight.” Mel Stride replied that the AEO scheme ‘provides administrative benefits only, and AEOs will be required to pay any tax and duty due, just as other traders will’. It was therefore appropriate for HMRC commissioners to exercise the power in clause 22. Labour also proposed two other amendments (129 and 130) seeking to require regulations under Clause 22 to be subject to the affirmative procedure. Amendment 128 was defeated 10-9 in a vote.

Kirsty Blackman spoke to her party’s amendment 116 which displayed its concerns about the AEO scheme. It calls for a report to be provided on the level of proposed resources to be allocated by the HMRC Commissioners for the authorisation of new AEOs. “The UK scheme is managed dramatically differently from schemes in other countries,” said Blackman. She noted in particular the UK Government’s requirement for companies to have someone with three years of customs experience in order to be approved as an AEO. “That is how things have been applied and work now, but if we suddenly include the, I think, 130,000 new companies that have not previously had to do customs checks, we will need a different system, because those companies will not have someone who has been working for three years in a customs-related role. The Government will have to agree that some sort of external company can take on the role of that person, or that the companies can have a differentiated system until they have had that three years of experience in exporting. It is reasonable to expect the Government to be a bit more flexible.” Responding, the FST agreed with Blackman that taking 12 months to process an AEO application was too long (though he thought that was unusual). He said that the three-year requirement was an EU requirement. “As we move out of the EU, that could be an area that we look at, and we may decide that changes are appropriate,” he said, while saying that the authorisation criteria for AEO status will be ‘largely be the same as the current EU criteria’. He reassured the committee that HMRC had carried out a detailed review of resources required to manage an upturn in AEO applications. Amendment 116 was pressed to the vote but defeated 10-9.

Sitting 5 can be read in full here.
Sitting 6 can be read in full here.
Public bill committee proceedings can be read in full here.

George Crozier and Hamant Verma, CIOT External Relations Team