Prime Minister Theresa May's office insisted Friday (Oct 12) it would not "trap" Britain in an endless customs union with the EU after Brexit, amid reports some ministers could quit if this is the price of a divorce deal.
Such an arrangement would all but end May's chances of securing free trade deals with other countries.
Asked whether she thought the Democratic Unionist Party - a Northern Irish group whose 10 members of parliament she depends on to pass legislation - might withdraw their support over the border issue, May said: "The DUP will do what the DUP will do".
BBC political editor Laura Kuenssberg said it was understood that the EU was prepared to accept the idea of the whole of the United Kingdom remaining in the customs union if no trade deal can be done by the end of 2020, the so-called "transition period".
Leader of the House Andrea Leadsom and Work and Pensions Secretary Esther McVey are said to be opposed to the plan.
The DUP is propping up Mrs May's minority government and on Wednesday they threatened to vote down the budget and move to topple the government if the Prime Minister breaches their Brexit "red lines".
Negotiations in Brussels have stepped up ahead of a high-stakes European Union summit next week, and May briefed selected members of her cabinet late Thursday on how she intends to get an agreement.
Britain is leaving the European Union on March 29 and the possibility of there being no deal on trade and future relations is worrying businesses and politicians.
One complicating factor is that keeping Northern Ireland in the single market would have to be agreed by the Stormont Assembly, which has not met since collapsing in January 2017.
With the negotiations coming to a head, the central focus of the discussions is thought to have been the issue of the Northern Ireland "backstop" meant to ensure there is not return of a "hard border" with the Republic.
Asked whether the United Kingdom could stay indefinitely in a customs union, Hammond said: "We're not going to remain in anything indefinitely, we're very clear this has to be temporary".
This, however, would raise the prospect of increased regulation checks between Northern Ireland and the rest of the UK.
The head of the Democratic Unionist Party, Arlene Foster, said May "could not in good conscience" back an European Union proposal for checks on goods being imported to Northern Ireland from Britain after Brexit.
Numerous problems are now being solved on a step by step basis "but there are, of course" several big issues which we really need to get to grips with, ' the prime minister said.
During the meeting work and pensions secretary Esther McVey pointedly refused to endorse the PM's Chequers plan while global development secretary Penny Mordaunt and the leader of the Commons Andrea Leadsom also made it clear they held deep concerns.
Boris Johnson, the former Foreign Secretary, said: "This is an important moment".
Some pro-Brexit cabinet ministers reluctantly signed up to the Prime Minister's Chequers Brexit plan and did not expect her to make so many further concessions to the bloc.