Michel Barnier has given Boris Johnson “one last chance” to settle on a plan for the Irish border that will prevent a hard border, protect the all-Ireland economy and avoid the creation of a backdoor into the single market for smugglers and fraudsters. EU leaders will gather in Brussels on Thursday to sign off on such a plan, or start talking about a Brexit extension.

What is the UK’s current proposal?

Johnson conceded to the taoiseach, Leo Varadkar, last week that a deal involving the redrawing of a customs border between Northern Ireland and the Republic was not on the cards as it would lead to checks, controls and infrastructure on the island of Ireland.

The latest plan from Downing Street, albeit one first revealed by the Guardian as being in the government’s top draw in March 2018, is for a customs border in the Irish Sea – but only for goods travelling from Great Britain via Northern Ireland and on to the rest of the EU, including the Republic of Ireland.

Northern Ireland would be part of the UK’s customs territory, but there would be a channel system at the region’s two main ports and airport: a green channel for goods from Great Britain destined only for sale in Northern Ireland and avoiding the need for checks or constraint on their movement; and a red channel for goods destined for beyond the region that would undergo checks and controls.

There would be “draconian penalties for noncompliance” and goods would be tracked. There would be extra spot checks in the market to provide assurance that goods sold in the Republic Ireland met all the necessary requirements. Customs paperwork would be done ahead of time to allow those selling products in Northern Ireland to reclaim any differential in tariffs between the UK and the EU.

What does the EU say?

The European commission regards the dual customs plan as untested and a threat to the single market owing to the danger of fraud and smuggling. Barnier has raised the example of sugar entering Northern Ireland on a lower tariff but then being sold on as part of a fizzy drink in the Republic. He also argues that the technology could not possibly be in place by the end of the transition period at the end of 2020.

Barnier has suggested that any solution involving checks in the Irish Sea should be more based on the Irish backstop first proposed by the EU in February 2018: Northern Ireland stays in the EU’s customs territory and single market in goods. But he does appear to be open to some tweaking this to win over the UK parliament.

Northern Ireland could in legal theory be outside the EU’s customs territory as long as the full customs code was enforced at the border: there would be no exemptions, derogations or channels. But a British rebate system could ensure that those selling only into Northern Ireland were not financially hit by tariffs. A hard sell to the Democratic Unionist party. But, as Barnier likes to say, the clock is ticking.