In addition to being the date on which the Veterinary Medicines Irish Sea Border comes into effect for the first time, New Years Day will also witness the arrival of the new EU customs procedures on the Irish Sea Border called Import Control System 2 (ICS2). This innovation presents a major challenge for Northern Ireland’s small businesses. I know of at least one that is unsure whether they will be able to continue because of the burdens created by the new regime.
It is not uncommon to hear people say, ‘Look at the mess Brexit has caused in Northern Ireland’, but the truth is that, far from being the consequence of the impact of Brexit on Northern Ireland, the mess is the result of the denial of Brexit in our part of the UK and the interaction of this with the provision of Brexit in the rest of the country. The combined effect of withholding Brexit from Northern Ireland, while providing it in Great Britain (in as much as this has been possible with part of the country still in the EU), has been the chaos that has placed the integrity of the United Kingdom in jeopardy and ICS2 is now poised to make a very bad situation even worse.
Not one of the 17.4 million people who voted for Brexit, the biggest democratic vote in our history, voted for Great Britain to leave the EU for a simple reason – that option was not on the ballot paper. The question was rather whether the United Kingdom of Great Britain and Northern Ireland should leave the EU or not, something that nearly ten years on from referendum still has not been delivered.
The EU Customs Code embraces the whole EU and Northern Ireland, declaring that all other jurisdictions, including Great Britain, constitute ‘third countries’ that is foreign countries, in relation to it. This is hugely problematic because the Northern Ireland economy has been fully integrated with that of Great Britain, creating the United Kingdom economy, for over two hundred years.
Some understate the difficulty by assuming that the level of inconvenience facing businesses moving goods from Great Britain to Northern Ireland is comparable to that which exists when moving goods from one country to another. Those who have fallen into this trap have on occasion implied that, while this arrangement is far from fair on Northern Ireland (which pays its taxes like every other part of the UK in expectation of unfettered access to the UK internal market), it need not inconvenience the people of NI wanting to buy from GB any more than it inconveniences people in the UK wanting to buy goods from France.
This logic, however, is based on a complete misunderstanding of the nature of the presenting challenge, appreciation of which depends on grasping the very significant difference between trade within national economies and trade between national economies. The two are like chalk and cheese. While lorries moving goods within an economy will often contain lots of different products, sometimes as many as 300, lorries engaging in international trade will typically only carry one or two products in bulk. Why?
The reason is straight forward enough. Businesses need to limit the amount of paperwork required to move goods because having to complete paperwork absorbs resources and erodes profits. While this is an inconvenience for a lorry carrying two different products in bulk, it will be manageable because the cost of generating two customs forms, and possibly two SPS (Sanitary-Phyto-Sanitary, i.e. plant and animal health) forms, expressed as a proportion of the total value of the load will be tiny. By contrast the cost of having to produce 300 customs forms and possibly up until 300 SPS forms, expressed as a percentage of the value of the value of the cargo, will be huge and is likely to make economic exchanges that were previously viable, unviable.
Until 31 December 2020 lorries could move from England to Northern Ireland, as they can today from England to Wales, or Wales to Scotland etc, within the UK Internal Market. They encountered no customs or international SPS border and so could facilitate diverse movements including up to 300 different products per lorry. From 1 January 2021, however, (and often considerably later because of grace periods), the lorries were confronted with both a customs and SPS border, the consequence of which have been far-reaching.
The imposition of a customs and SPS border across domestic trade flows is the reason for the extraordinary statistic that, despite only accounting for a tiny part of the EU economy, 20% of all documentary checks on goods entering the EU in January and February 2021 were performed on those entering Northern Ireland. This makes no sense until we understand the difference between domestic and international trade flows and appreciate that since 2021 GB to NI flows, that should be treated as domestic trade flows, have been treated as if they are international trade flows. As such they are completely different from goods movements into all other parts of the EU where the points of entrance align with the border between national economies and do not seek to cut any national economy into two. The imposition of an international border across domestic trade flows makes the Irish Sea border the most divisive and complicated economic border in the world. And things are about to get worse.
As the UK well knows, the EU has a tendency towards increasing bureaucratisation which is one the reasons why we were keen to leave. In this context the bureaucratic burdens are not constant but tend to increase as they will in relation to the border between the entire EU and the outside world from 1 January. Up until now the customs border for entering the EU has been run on the basis of something called Import Control System 1 (ICS1) but on 1 January (some places actually switched on 1st September) we move to Import Control System 2 (ICS2).
The impact of ICS2 must be understood on two levels.
First, in relation to the international trade flows for which it was designed. Lorries engaging in international trade will find this innovation a frustration. Under ICS2 the amount of information that must be provided will be considerably more than under ICS1. The practical consequence is that those engaging in international trade into the EU will be faced with more time-consuming customs forms, requiring significantly more product code information.
Second, in relation to the domestic trade flows between Great Britain and Northern Ireland for which it was not designed. Under ICS2 the requirement for significantly more information is going to have a far more debilitating impact because of the much more diverse nature of domestic trade flows between Great Britain and Northern Ireland than on the international flows manifest at all other entry points into the territory of the EU Customs code. In order to fully appreciate the implications of this, it is important to understand the following:
In the first instance, ICS2 cancels out any gains arising from Green Lane customs form simplification. While the creation of the Green Lane did not remove the Irish Sea border (you can only use it with an export number, customs forms, SPS forms and checks at border control posts), it did make some of the forms a bit simpler in exchange for embracing alternative border frictions. Small businesses, however, are telling me that these simplifications will be completely cancelled out by the increased demands of the ICS2.
In the second instance, the impact of the greater frictions on the flow of goods from GB to NI created by the ICS2 Irish Sea Border, cannot but have the effect of diverting the flow of trade to an even greater degree than we have experienced since 2021, courtesy of the ICS1. These enlarged frictions will generate more pressure for the redirection of the flow of goods from GB to NI so they move instead increasingly from the Republic of Ireland to NI, in relation to which access is (by contrast to GB) completely unfettered. As such it will further compound the problems for the Windsor Framework arising from its operation in violation of its own trade diversion red lines set out in Article 16 of the Agreement.
The division of the UK by ICS2 from 1 January provides yet another reason for replacing the Irish Sea Border with the only credible way of managing the land border between the UK and the Republic of Ireland, which is to move the customs and SPS border to the international border and manage it through Mutual Enforcement. As set out by my EU Withdrawal Arrangements Bill, this would protect both the integrity of the EU Single Market for Goods, and the integrity of the UK Single Market for Goods, without requiring Border Control Posts on the international border.
1 January 2026 and the Division of the United Kingdom by the EU’s Import Control System 2
