Unfettered access for Northern Ireland goods to the UK internal market

The terms of the withdrawal agreement and its Ireland/Northern Ireland Protocol create a unique status for Northern Ireland. It remains part of the UK’s customs territory but will continue to apply the EU’s customs code, VAT rules and single market rules for goods after the transition period ends on 31 December 2020. A consent mechanism means that after an initial four-year period from the end of the transition period, these provisions can only continue to apply with the consent of the Northern Ireland Assembly.

The Government is committed to ensuring that Northern Ireland businesses enjoy “unfettered access” to the UK internal market although they are subject to the EU’s customs code and regulatory regime for goods. The concept of “unfettered access” dates back to a joint report agreed between the UK and EU negotiators in December 2017. This document stated that: “In all circumstances the United Kingdom will continue to ensure the same unfettered access for Northern Ireland’s businesses to the whole of the United Kingdom internal market”. The Northern Ireland Protocol itself states, in article 6(1) dealing with protection of the UK internal market, that:

Nothing in this protocol shall prevent the United Kingdom from ensuring unfettered market access for goods moving from Northern Ireland to other parts of the United Kingdom’s internal market.

The Government has said that “unfettered access” is based on several elements:

• The absence of customs and regulatory checks and processes for qualifying Northern Ireland goods moving from Northern Ireland to Great Britain, with only limited exceptions (such as when upholding international obligations such as those concerning the movement of endangered species).
• No additional authorisations or approvals required for placing qualifying Northern Ireland goods on the market in the rest of the UK (again with only very limited exceptions for very high-risk goods).
• That qualifying Northern Ireland goods should be recognised for sale on the UK market notwithstanding that the goods are made according to the rules applied by the protocol and not to be discriminated against by virtue of having to adhere to those rules.

The Government has committed to having legislation in place to “guarantee unfettered access for Northern Ireland’s businesses to the whole of the UK market” by 1 January 2021. This commitment was made as part of the New Decade, New Approach deal reached in January 2020 to restore devolved government in Northern Ireland.

The Government is seeking to carry out this commitment through the United Kingdom Internal Market Bill and the Definition of Qualifying Northern Ireland Goods (EU Exit) Regulations 2020.

United Kingdom Internal Market Bill

The bill includes provision for market access principles of mutual recognition and non-discrimination for goods and services to apply throughout the UK’s internal market. As introduced, the bill also sought to ensure unfettered access for qualifying Northern Ireland goods to the rest of the UK market by:

• applying the market access principles of mutual recognition and non-discrimination to qualifying Northern Ireland goods so they can be freely placed on the market throughout Great Britain (clause 11); and
• preventing new checks, controls or administrative processes on qualifying Northern Ireland goods moving directly from Northern Ireland to Great Britain, or existing ones being used for the first time, for a new purpose or to a new extent (clause 43).

Clause 43 was in part 5 of the bill as introduced. Part 5 was controversial because the Government acknowledged that the powers in some clauses within it would “break international law in a very specific and limited way”. The House of Lords voted at committee stage to remove clauses 42 and 44 and agreed without division to remove all the other clauses in part 5, including clause 43. Clause 11, the other clause that refers to qualifying Northern Ireland goods, remains in the bill. The Government intends to reintroduce the clauses the Lords removed when the bill returns to the Commons in December.

The bill’s original provisions are covered in more detail in the Library’s briefing for the Lords stages of the bill. A separate Library briefing covers what happened during the Lords committee stage.

As introduced, the bill would have applied market access principles and unfettered access to “qualifying Northern Ireland goods”. The Government stated in its command paper on its approach to the protocol, published in May 2020, that arrangements for unfettered access for Northern Ireland goods to the rest of the UK market “will not cover goods travelling from Ireland or the rest of the EU being exported to Great Britain”. It said that the UK’s customs and regulatory regime would apply to EU goods and businesses exporting to Great Britain, subject to any preferential terms agreed in a free trade agreement.

The House of Lords European Union Committee suggested in June 2020 it would be necessary to find a way to distinguish between qualifying Northern Ireland goods, and goods originating in Ireland or the rest of the EU. It said this would be needed “in order to avoid Northern Ireland becoming a back door for goods entering the UK market from the EU without checks”.

The bill says that the definition of “qualifying Northern Ireland goods” to be used will be set out in regulations made under section 8C(6) of the European Union (Withdrawal) Act 2018. The power to make these regulations was added to the 2018 act by the European Union (Withdrawal Agreement) Act 2020.

Definition of Qualifying Northern Ireland Goods (EU Exit) Regulations 2020

The Government laid a draft of these regulations before Parliament on 7 October 2020 under the draft affirmative procedure. This means that they need to be approved by both Houses of Parliament before they can come into force. The draft Definition of Qualifying Northern Ireland Goods (EU Exit) Regulations 2020 define “qualifying Northern Ireland goods” as goods which:

• are present in Northern Ireland and are not subject to any customs supervision, restriction or control which does not arise from the goods being taken out of the territory of Northern Ireland or the European Union; or
• are Northern Ireland processed products.

In its explanatory memorandum on the regulations, the Government said the first category applied to goods that “are lawfully present in Northern Ireland and are not subject to customs control (other than customs procedures arising on export)”. The second category “seeks to ensure that goods that have undergone processing in Northern Ireland can qualify for the definition even where they have been moved under customs control”. The Government explained it covers “any good that has undergone processing operations in Northern Ireland incorporating either domestic goods or goods not under customs supervision, restriction or control at the time of processing”.

The Government acknowledged in the explanatory memorandum that this is a “broad definition”. It argued this “best ensures continuity and avoids any disruption from the end of the transition period, in line with the broader approach being taken for goods arriving into Great Britain from the EU for the first half of next year”. In June 2020, the Government announced that it would introduce full border controls on goods arriving in Great Britain from the EU in three stages between 1 January 2021 and 1 July 2021.

Further legislation planned

The Government has plans to legislate further in this area. It has identified there could be an issue if businesses seek to “inappropriately re-route goods” through Northern Ireland in order to avoid import formalities. Brandon Lewis, the Northern Ireland Secretary, said the Government will bring forward separate legislation containing anti-avoidance provisions so it could take action against any businesses doing this. He said this legislation would be in place by the end of 2020.

The Government has also indicated it could change the definition of “qualifying Northern Ireland goods” in future. Mr Lewis said this initial approach “is only intended to be a bridge to a longer-lasting regime, to be developed in discussion with Northern Ireland business, which will follow during the course of 2021”. The explanatory memorandum to the regulations said further proposals on defining qualifying status would follow.

Parliamentary scrutiny of the draft regulations

The House of Lords Secondary Legislation Scrutiny Committee drew the draft regulations to the special attention of the House:

The instrument is politically significant as it underpins the [United Kingdom Internal Markets] Bill which is to deliver the broader elements of the unfettered access policy. While the definition provides a framework, the full impact of the regulations will not be known until further instruments are brought forward to apply the definition to specific sectors and to set out measures to prevent potential abuse of the new arrangements. The draft regulations are drawn to the special attention of the House on the grounds that they are politically or legally important and give rise to issues of public policy likely to be of interest to the House.

The Joint Committee on Statutory Instruments did not raise any concerns about the regulations.

The draft affirmative regulations cannot come into force unless they are approved by both Houses of Parliament. In the House of Commons, a delegated legislation committee debated the regulations on 10 November 2020. Paul Blomfield, Shadow Minister for Brexit and EU Negotiations, said that Labour supported unfettered access for Northern Ireland businesses to the rest of the UK market, so it would not oppose the instrument. However, he raised a number of concerns about it. He said the breadth of the definition of qualifying Northern Ireland goods was “problematic” and would need further clarification in subsequent legislation. He suggested it could leave Northern Ireland open to becoming a “back door into the UK internal market, with the risk of counterfeit goods, or, less likely, lower standard goods flowing into the UK”.

On the other hand, he suggested that “the combination of the protocol, the SI and the internal market bill make it very hard to see how Great Britain’s standards could ever exceed EU standards in matters such as environmental protection”. This is because under the Northern Ireland Protocol, goods that complied with EU single market regulations would be allowed to be sold in Northern Ireland. If those goods were qualifying Northern Ireland goods, they would be covered by the mutual recognition principle in the bill and could lawfully be sold anywhere else in the UK. Mr Blomfield argued this would make it impossible, for example, for Wales to enforce higher standards than the EU’s standards in areas such as vehicle emissions.

Penny Mordaunt, the Paymaster General, emphasised that the regulations were “no more than a stopgap to a longer lasting regime”. She said they would be accompanied by further anti-avoidance measures that would be introduced “in a timely manner”. Ms Mordaunt also sought to reassure Mr Blomfield that the Government was working closely with the devolved administrations.

The Commons formally approved the regulations on 16 November 2020. The House of Lords will debate them on 30 November 2020.

Cover photo by Rinson Chory on Unsplash.