Labour supports remaining in a customs union post-Brexit, Sir Keir Starmer has said.
The shadow Brexit secretary warned it was now "crunch time" for Theresa May over her approach to the customs union, and said it would be "better" to reach "bold" new trade agreements by working with the EU.
Sir Keir said Labour had "long championed being in a customs union with the EU and the benefits".
Not only does Sir Keir's announcement clarify Labour's position, but it also means that there is likely a majority in Parliament in favour of the UK staying in some kind of customs union with the EU post-Brexit, whether the Government agrees or not.
A customs union would mean no tariffs on trade between the UK and the EU and would solve the issue of the border between Northern Ireland and the Republic.
However, a customs union would also mean that the UK would be unable to negotiate its own trade deals with other countries around the world, something the International Trade Secretary branded as a "betrayal" of Leave voters.
Speaking to ITV News, Liam Fox said Sir Keir announcement on a customs union showed that "the Labour Party is largely clueless on this issue, and when they tell us what sort of customs union they want, we'll get an idea of quite how much they've betrayed the voters who voted to leave the European Union".
Yet Labour argues the UK can both leave the EU and be in a customs union with it, in the same way that Turkey is not a member of the EU, but is part of a customs union.
The former director of public prosecutions' announcement came just hours after more than 80 senior figures within the Labour Party signed a letter to Jeremy Corbyn warning that key anti-austerity policies would be unaffordable if the UK leaves the single market.
As well as hitting funding for schools, hospitals and social care, leaving the single market would also raise the prospect of a hard border between Northern Ireland and the Republic of Ireland that would threaten the Good Friday Agreement, the letter from the Labour Campaign for the Single Market said.
The statement - signed by 37 MPs, 12 peers and a number of union leaders - demands that Labour commits to maintaining access to the single market by remaining part of the European Economic Area.
The letter, published in The Observer, states: "Given the parliamentary arithmetic and the numbers of parliamentarians from other parties - including Conservative backbenchers - who have indicated they will join us in this endeavour, our country's continued participation in a customs union and the single market is now in the Labour Party's hands.
"For the sake of building a better Britain and safeguarding those our party was founded to protect, we must grab this chance before it is too late. We will never be forgiven if we fail to do so."
The letter is signed by MPs such as Chuka Umunna, Heidi Alexander and Alison McGovern, and peers Baroness Lawrence and Lord Kinnock, former leader of the Labour party.
Appearing on BBC One's The Andrew Marr Show on Sunday, Sir Keir said that remaining in a customs union was "the only way to realistically get tariff free access, it's really important for our manufacturing base and nobody can answer the question how you keep your commitment to no hard border in Northern Ireland without a customs union."
He continued that the UK would be more likely to get more trade agreements with countries outside of the bloc "if we do them with the EU...
"We all want to do bold new trade arrangements, but we'd be better off doing them with the EU, and that a "cost/benefit analysis" points to this stance.
- ITV News Political Correspondent Carl Dinnen believes that Sir Keir's announcement is "an important moment in the Brexit process"
Appearing on Peston On Sunday, deputy Labour leader Tom Watson agreed that it would be "reckless" of the Government to rule out any form of customs union.
The West Bromwich East MP continued that Labour has "always said" it wants a customs union, as well as the benefits of the single market in order to protect jobs.
"What we want is a UK model that benefits UK citizens and UK businesses," he continued.
Mr Watson added that a customs union is the only way a "decent border" could exist between Northern Ireland and the Republic.
Sir Keir continued that Labour had had "many weeks of discussion unanimously" and had agreed to develop their policy, to be announced by the Labour leader Jeremy Corbyn on Monday.
"The customs arrangements at the moment are hardwired into the membership treaty so I think everybody now recognises there's going to have to be a new treaty - it will do the work of the customs union.
"It's a customs union, that's what the CBI are saying now, it's what the various amendments are now all saying - there's going to have to be a new agreement, but will it do the work of the current customs union? Yes, that's the intention."
Sir Keir said Britain was more likely to strike new deals if it works "jointly with the EU", adding: "We all want to do bold new trade agreements but we would be better off doing that with the EU."
Jeremy Corbyn is expected to formally unveil Labour's approach to Brexit on Monday, when he is expected to say that life outside the bloc does not necessarily mean the UK is "doomed" and that the situation is "what we make of it together".
Sir Keir also signalled support for cross-party amendments on the customs union to the Trade Bill.
He said: "The Labour front bench put down a number of amendments paving the way for the option of a customs union - they went down a few weeks ago.
"Now these cross-party amendments have gone down essentially saying the same thing and to put it bluntly crunch time is coming for the Prime Minister.
Asked whether Labour would back the cross-party amendments, he said: "We haven't made a final decision on that but they are so close to our amendments ... but whether it's our amendments or cross-bench amendments, crunch time is now coming for the Prime Minister because the majority of Parliament does not back her approach to a customs union and the majority in Parliament needs to be heard and it will be heard sooner rather than later."
Speaking on Peston On Sunday, Mr Watson agreed that Labour was yet to come to a final decision on whether or not to back the cross-party amendment on the customs union but added that the Conservative rebels' "position is very close to our position".
Also appearing on The Andrew Marr Show, Cabinet minister Liam Fox said that the UK would leave the customs union post-Brexit as "people voted to take control of our money and our borders".
The International Trade Minister also urged Tory Remainers to keep an "open mind" after they threatened to rebel over the Government's approach to membership of a customs union.
The International Trade Secretary suggested the Brexit "war cabinet" on Thursday has agreed proposals that would deal with their fears.
Former minister and leading Tory rebel Anna Soubry had warned she had cross-party support for a new amendment to the Government's trade bill that would mandate the UK to form a customs union with Brussels after Brexit.
Mr Fox told Mr Marr: "I would say to my colleagues that Theresa May has kept a broad range of views on the European issue for a reason.
"We sat down with those differing views, we set out the issues, we looked at the options and we came to an agreement that we are all happy with."
He added: "I hope that they will have an open mind and listen to what the Prime Minister says because I think that what the Prime Minister will set out will deal with a lot of the reservations that they have."
Asked if legislation was being delayed because the Government would lose, he replied: "We want to persuade our colleagues of the merits of our argument before we take the bill forward."