The text of the revised Brexit deal announced on 17 October will inevitably be subject to close scrutiny, not least to determine whether it meets the UK government's undertaking to rule out the possibility of customs checks requiring infrastructure on the island of Ireland. It will also be closely examined from within the EU27 to establish whether it adequately protects the integrity of the EU single market and customs union. It may be that an error or omission in the published text of Article 5, together with the safeguard mechanisms in Articles 16 and 17, leaves those questions without a satisfactory answer.
The key word - unless?
The revised text states that Northern Ireland "is part of the customs territory of the United Kingdom", allowing Northern Ireland to be included in any future trade agreements that might be reached by the United Kingdom with third countries, or in any UK Schedules of Concessions annexed to the General Agreement on Tariffs and Trade 1994.
However, while Northern Ireland is part of the UK customs territory, special arrangements are needed to reflect the realities of trade and the movement of goods between Northern Ireland and the Republic of Ireland. In striving to strike a fair and workable balance between UK and EU interests, the revised text inevitably creates tests that must be met in order to ensure that goods are correctly treated for customs purposes. It also inevitably reserves rights to take any steps required to combat fraud, which must be taken to include smuggling, should post-Brexit experience prove such steps to be necessary.
The EU's essential protection rests on Article 5 of the revised text. Article 5(1) provides that:
No customs duties shall be payable for a good brought into Northern Ireland from another part of the United Kingdom by direct transport, notwithstanding paragraph 3, unless that good is at risk of subsequently being moved into the Union, whether by itself or forming part of another good following processing.
It goes on to deal with goods brought into Northern Ireland from elsewhere:
The customs duties in respect of a good being moved by direct transport to Northern Ireland other than from the Union or from another part of the United Kingdom shall be the duties applicable in the United Kingdom, notwithstanding paragraph 3, unless that good is at risk of subsequently being moved into the Union, whether by itself or forming part of another good following processing.
In each part of Article 5(1) the crucial word is "unless". Customs duties would be payable (and the EU would presumably seek evidence of payment) in relation to a good that is considered to be "at risk of subsequently being moved into the Union".
For goods moving into Northern Ireland from another part of the UK, that would mean payment of customs at the point of entry to Northern Ireland, with evidence of that payment being required before goods could move into the Republic. For goods moving into Northern Ireland from elsewhere in the world (other than the EU), that might mean that payment of UK customs duties would be insufficient, requiring EU duties being levied as well.
Establishing the correct treatment of goods would require evidence – and evidence might in turn require physical checks. This is because Article 5(2) also uses the crucial word "unless". It says:
For the purposes of the first and second subparagraph of paragraph 1, a good brought into Northern Ireland from outside the Union shall be considered to be at risk of subsequently being moved into the Union unless it is established that that good:
(a) will not be subject to commercial processing in Northern Ireland; and (b) fulfils the criteria established by the Joint Committee in accordance with the fourth subparagraph of this paragraph.
For this purpose, "processing" means "any alteration of goods, any transformation of goods in any way, or any subjecting of goods to operations other than for the purpose of preserving them in good condition or for adding or affixing marks, labels, seals or any other documentation to ensure compliance with any specific requirements". This range of permitted activities is extremely limited (similar, in fact, to those permitted in relation to the storage procedure for customs purposes). This restriction means that goods brought into Northern Ireland from outside the EU would fall outside the provisions of Article 5 if there is any element of assembly, processing or further manufacture. While this might initially be treated as a matter of document-based trust, it must also include the possibility of physical checks should any appreciable pattern of abuse or evasion be suspected.
The relevant criteria referred to in (b) are to be established before the end of the transition period (31 December 2020) by a Joint Committee. The Joint Committee must take into consideration factors including:
(a) the final destination and use of the good; (b) the nature and value of the good; (c) the nature of the movement; and (d) the incentive for undeclared onward-movement into the Union, in particular incentives resulting from the duties payable pursuant to paragraph 1.
As with the restriction on processing, it would be for the producer or seller of goods to establish that they fulfil the relevant criteria. Use of the word "unless" places a burden on the producer or seller, and in case of doubt or suspicion, that burden might be discharged only by physical inspection (for example, in relation to the "nature of movement" between Northern Ireland and the Republic).
An error in the text?
Strikingly, Article 5 provides that guidance on risk factors applies only in relation to goods brought into Northern Ireland from outside the EU. This may be a typographical error or omission in Article 5, as the opening words of Article 5(2) are:
For the purposes of the first and second subparagraph of paragraph 1, a good brought into Northern Ireland from outside the Union shall be considered to be at risk of subsequently being moved into the Union unless it is established that that good…
There is no reference in the first subparagraph to "a good being brought into Northern Ireland from outside the Union". The first subparagraph refers only to "a good brought into Northern Ireland from another part of the United Kingdom by direct transport".
Given that there is no reference in the first subparagraph to goods brought in from outside the Union, the tests set out in Article 5 to determine whether there is a risk cannot apply. The result is that no specific test is prescribed to determine whether goods brought in from another part of the United Kingdom are to be considered "at risk of subsequently being moved into the Union". As no test is prescribed, that possible error or omission leaves room for argument that risk would be assessed differently from the case of non-EU goods. If it is an error or omission, then it may simply reflect the pace and pressure of last minute negotiations. However, leaving open such crucial questions must create uncertainty as to the reliability and completeness of the deal.
Articles 16 and 17 also require close attention. Article 16 reads:
If the application of this Protocol leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade, the Union or the United Kingdom may unilaterally take appropriate safeguard measures. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this Protocol.
Article 17 reads:
The Union and the United Kingdom shall counter fraud and any other illegal activities affecting the financial interests of the Union or the financial interests of the United Kingdom.
Taken together, these provisions clearly leave open the possibility that if post-Brexit experience were to include extensive smuggling or other fraudulent activity, then physical checks and infrastructure might be required – with all the difficult historical resonances of Irish history.