Theresa May has split her cabinet into two groups to consider options for customs arrangements post-Brexit.
One group will consider a “customs partnership” whereby the UK would collect tariffs on behalf of the EU.
The other group will look at “maximum facilitation” – a solution based on using technology to minimise the need for customs checks after Brexit.
Ministers failed to agree on a future customs relationship with the EU at a cabinet meeting last week.
All EU members are part of the customs union which means there are no tariffs on goods transported between member states.
The UK government has said it wants to leave the customs union after the UK leaves the European Union in 2019 – but ministers have not yet agreed on an alternative.
The customs partnership proposal
Looking at the customs partnership proposal will be two Brexiteers, International Trade Secretary Liam Fox and Environment Secretary Michael Gove, and Remainer Cabinet Office Minister David Lidington.
A customs partnership would remove the need for new customs checks at the border.
The UK would collect tariffs set by the EU customs union on goods coming into the UK on behalf of the EU.
If those goods didn’t leave the UK and UK tariffs on them were lower, companies could then claim back the difference.
The customs partnership is thought to be the prime minister’s preferred option but Foreign Secretary Boris Johnson has described it as “crazy” and said it would create “a whole new web of bureaucracy”.
The “max-fac” option
The maximum facilitation proposal – also known as “max-fac” – would employ new technologies and trusted trader schemes to remove the need for physical customs checks.
Trusted trader schemes would enable companies to pay duties every few months rather than every time they crossed the border.
Considering this option will be Remainers Business Secretary Greg Clark and Northern Ireland Secretary Karen Bradley and the pro-Leave Brexit Secretary David Davis.
The EU customs union explained
The customs union ensures EU member states all charge the same import duties to countries outside the EU.
It allows member states to trade freely with each other, without burdensome customs checks at borders, but it limits their freedom to strike their own trade deals.
The UK government has said it wants to leave the EU customs union in order to strike its own trade deals with other countries.
Ministers are under pressure to have made progress on the issue before next month’s EU summit.