The proposed customs agreement must ensure that as long as Ireland remains a member of the EU, Irish citizenship also confers EU citizenship, with all the rights that go with this, the paper said.
He said the document set out two main proposals - for customs arrangements and arrangements for the regulation of agri-food products.
"There should be no physical border infrastructure of any kind on either side of the border between Northern Ireland and Ireland", Prime Minister Theresa May said.
London said the exemption "would recognise the unique economic, social and cultural context of the land border and the fact that numerous movements of goods across it by smaller traders can not be properly categorised and treated as economically significant worldwide trade".
UK Government officials remain "confident" they will make sufficient progress by October to ensure Brexit trade talks begin, amid reports Cabinet ministers believe they could be delayed.
That means free movement across the border for British, Irish - and European Union - citizens.
Once this time expires, the government will hope to establish either a "highly streamlined" border with the European Union or a new "partnership" with no customs border at all.
A second option would be a new customs partnership " by aligning our approach to the customs border in a way that removes the need for a UK-EU customs border.
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The position paper stated that, if a hard border is to be avoided, a new customs border must likewise be ruled out.
In the first instance, the Government could seek a "highly streamlined customs arrangement," which would simplify existing arrangements, and put in place some new measures for reducing and removing barriers to trade.
The government in London said on Wednesday in a policy paper that there should be no border posts or immigration checks between the British province and Ireland.
Envoys need to show "flexibility and imagination" to devise post-Brexit arrangements on the island of Ireland that preserve free movement of people and goods across the border, the U.K.'s Brexit Department said Wednesday, laying out proposals to keep open what will the EU's only land frontier with the United Kingdom after Brexit. These goods would be subject to a tariff set by the British government.
The next round of Brexit talks to negotiate financial issues, the rights of European Union citizens and the Irish border, may be delayed to December. More than 1.8million cars cross the border each month but plans for CCTV cameras have been shelved amid fears the "symbolic significance" would break the Good Friday Agreement. "Peace funding in Northern Ireland is one of them".
"On Ireland, we would reiterate what [EU chief Brexit negotiator] Michel Barnier has said before.
FDF therefore welcomes the Government's commitment to preserve a seamless, frictionless, open border with the Republic", Ian Wright, the director general of the Food and Drink Federation, said.