British Prime Minister Theresa May will propose a new plan tomorrow to ease trade and give the UK more freedom to set trade tariffs after Brexit.
It is a last-ditch attempt to unite her divided government on how to leave the European Union.
Mrs May’s office said that she would outline the "facilitated customs arrangement" to her ministers at tomorrow's cabinet meeting, trying to secure an agreement to push on with Brexit talks.
Even if she succeeds, she must then struggle to reach a deal with the EU, or risk the UK crashing out of the bloc without one which businesses say could be economically disastrous.
Mrs May is under increasing pressure from EU officials, companies and some lawmakers to move faster with the negotiations to leave the bloc, a departure that will be the UK's biggest trading and foreign policy shift in half a century.
The new plan would see the UK closely mirror EU rules, use technology to determine where goods will end up and therefore which tariffs should be applied, and hand it the freedom to set its own tariffs on incoming goods.
Aides suggest it offers "the best of both worlds".
A spokeswoman for Mrs May dismissed concerns the proposal would prevent the UK from striking trade deals with countries outside the EU.
"It is categorically untrue to suggest that we will not be able to strike a trade deal with the US," she said.
"The PM has always been clear that we will seek a comprehensive and ambitious trade deal with the US".
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Tomorrow's cabinet meeting will not be plain sailing.
On the eve of the talks, Brexiteer ministers held their own private talks in Westminster.
Boris Johnson, Mr Davis, Michael Gove, Liam Fox, Esther McVey, Penny Mordaunt and Andrea Leadsom were involved.
A cabinet source confirmed there was a "private meeting".
International Trade Secretary Dr Fox then spent 50 minutes in 10 Downing Street with Mrs May.
He left on foot, ignoring questions from reporters about his political future if the Brexit deal hampered the UK's ability to strike trade deals.
Dr Fox was understood to be happy with the reassurances he had been given by Mrs May at the meeting.
Chief Whip Julian Smith, in charge of party discipline, insisted "the prime minister will have a great day" at Chequers.
Those wanting a clean break from the EU fear being kept in the EU's customs union, seeing it as a betrayal of Brexit that would curtail the UK's freedom to negotiate deals with non-EU countries.
"We would be out of Europe but still run by Europe," said Conservative MP Owen Paterson.
UK business minister Greg Clark said he was confident that ministers would reach an agreement on future customs plans, with the government focused on supporting jobs.
Even if she finds agreement at home, Theresa May still faces the hard task of winning the support of the EU, which poured cold water on her previous suggestions for customs arrangements.
Germany tells UK to negotiate with Brussels
Mrs May's spokesman said that she met German Chancellor Angela Merkel in Berlin today and restated her wish to negotiate a deep trade and security partnership after Brexit.
Ms Merkel again stressed it was the European Commission leading the Brexit negotiations, rather than member states which may have dampened Mrs May's hope of winning support from Germany before tomorrow’s meeting.
With the clock ticking towards a March departure date and passions running high, she needs to thrash out an agreement with Brussels urgently.
Mrs May was forced to ditch her preferred option for a customs partnership, which would have seen the UK collecting tariffs on goods entering on the EU's behalf, under pressure from Brexit campaigners in her government.
They had backed a streamlined customs arrangement now known as "max fac", which would see "trusted traders" allowed to cross borders freely with the aid of automated technology.
The "facilitated customs arrangement" is described by her aides as a way to use the best bits of both options.
Mrs May's plan suggests there will be a type of customs union for physical goods, something that should please manufacturers.
But based on the detail offered so far, there is little on how the UK's much larger services sector would trade with the EU.
Several ministers suggested they would read over the plan today, ready for tomorrow’s meeting.
Health Secretary Jeremy Hunt called for the cabinet to "get behind our prime minister".
EU will be 'flexible' if UK reviews its Brexit position
The Irish permanent representative to the EU has said the bloc's position in Brexit negotiations will be flexible if the UK "revisits" some of its red lines.
Speaking on the RTÉ News 'Brexit Republic' podcast, Ambassador Declan Kelleher said: "The EU at heads of government level said earlier in the year, and they said last Friday in the [EU Council summit] conclusions, that if the British positions were to evolve, the EU would be prepared to reconsider matters in accordance with its core principles that have been stated".
Ambassador Kelleher outlined the conditions under which the EU might respond positively to a change in position by the British government.
"The single market, the customs union, which are of immense benefit to Ireland as a member, those principles must be fully respected. It means that the UK is going to have to revisit some of what are called its 'red lines'.
"But if the UK does evolve its position, then the EU will be flexible in return. But essentially we're waiting to see what the UK comes up with".
