A "model of close association with the EU customs union for a time-limited interim period" would benefit both the UK and EU member states, the government has said in a white paper laying out two potential customs arrangements.
The paper confirms that "as we leave the EU we will also leave the EU customs union". However, an interim deal would minimise disruption and provide certainty for businesses and individuals if it is agreed early in the process, it said.
While the UK will pursue new trade negotiations with other countries after leaving the EU, it would not make any new arrangements with third countries "which were not consistent with the terms of the interim agreement", the paper said.
The paper looks at two potential approaches to creating "the freest and most frictionless trade possible" between the UK and the EU, while allowing the UK to create new trade relationships both in Europe and elsewhere.
The first approach involves what the government has called a "streamlined customs arrangement" with as few additional requirements on EU trade as possible.
The aim would be to continue some existing arrangements between the UK and the EU but to put in place new and potentially unilateral agreements to reduce or remove barriers to trade. Technology would be used to make it easier to comply with customs procedures, the paper said.
This approach would use the UK’s existing third country processes for UK-EU trade, "building on EU and international precedents, and developing new innovative facilitations to deliver as frictionless a customs border as possible", it said.
The second proposed approach is a new customs partnership that would remove the need for a UK-EU customs border. This could involve, for example, the UK mirroring the EU's requirements for imports from the rest of the world.
"This is of course unprecedented as an approach and could be challenging to implement and we will look to explore the principles of this with business and the EU," the paper said.
The ultimate arrangement will of course depend on negotiations with the EU, it said.
The government will work with the Scottish and Welsh governments and the Northern Ireland executive on the practical impact of new customs arrangements and on specific issues such as ports and the land border between Northern Ireland and Ireland, it said.
Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said: "The EU has indicated that there must be agreement on three core issues – the exit bill, the rights of citizens and Ireland – before there can be negotiations on wider issues, including the shape of the UK’s future trading relationship with the EU. By raising now the very important issue of the future customs arrangement between the EU and the UK, the UK government is hoping to advance discussions on this issue; whether the EU negotiators choose to engage at this stage remains to be seen."
Five of the UK's major business organisations signed an open letter to the government in June calling for continued access to the EU single market until the UK's departure is agreed and implemented.
The British Chambers of Commerce, the Confederation of British Industry, the manufacturers' organisation EEF, the Federation of Small Businesses and the Institute of Directors called on the government to “engage continuously” with UK business interests as negotiations take place.
The organisations called for a tariff-free goods trade agreement between the UK and EU, regulatory equivalence and mutual recognition of standards on an ongoing basis to ensure continued mutual access for both goods and services, and a flexible system for the movement of labour and skills.
A number of other organisations have also warned of the impact of leaving the single market. Last July the head of the Financial Conduct Authority said the country should push for continued access to the single market for financial institutions, while think tank the Institute of Fiscal Studies said the move would depress tax receipts and impact gross domestic product.