January 2014

Changes to the Customs law affecting international traders

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On 9 October 2013 the European Council has approved Regulation n° 952/2013/EU adopting the long awaited Recast of the Union Customs Code (hereafter, UCC).

The adoption of the UCC marks an important step towards the adaptation of the EU Customs regulatory framework to the evolution of the technology.

Even if the UCC entered into force on 1 November 2013 most of the changes will apply only in later years, giving time to the businesses to adapt their procedures and systems accordingly.

In addition, 1 January 2014 has marked the enforcement of some of the more relevant provisions laid down by Regulation n° 978/2012/EU which reduces significantly the list of countries for which the tariff preferences can be applied, leading possibly to an increase of the applicable Customs duties.

It is important for international traders to be aware of the upcoming changes and opportunities given by the Customs legislation for mitigating the economic and administrative burden connected with transfers of goods between European Member States and non-EU countries.

Recast Union Customs Code - Background

Trading with goods flowing in and out of the European Union implies to comply with the EU and local Customs regulations and with the related procedures.

As far as the EU is concerned, the general framework is provided by the Customs Code and by the related implementing rules which date back to almost 20 years ago.

As both of them were partially outdated, the EU decided to adopt a recast Customs Code – Regulation n° 450/2008/EU – whose implementation was originally scheduled for 24 June 2013.

However, due to the fast pace of the technology evolution the European Commission decided to abrogate Regulation n° 450/2008/EU before its entry into force and to substitute it with a new Customs Code.

Main changes brought by the Recast Union Customs Code

The Recast Customs Code involves the shift to a paperless, fully electronic environment. These changes will require the use of electronic data-processing techniques for the exchange of data, documents, decisions and notifications between economic operators and Customs Authorities.

Furthermore, the UCC increases the harmonization of the rules on Customs decisions regarding the tariff (Binding Tariff Information or BTI) or the origin (Binding Origin Information or BOI) of the goods.

Additional provisions reinforce the benefits for reliable traders to whom it has been granted the certification as Authorized Economic Operator, providing for fewer physical and documental controls for their deliveries and allowing a “centralized clearance” for them.

This will enable AEO certified businesses to declare goods electronically and to pay their Customs duties at the Customs office where they are established, irrespective of the EU Member State through which the goods are physically imported or exported.

Other relevant measures of the new UCC are:

  • The merger of Inward Processing Relief, Processing under Customs Control and destruction. This will imply that the holder of the authorization will now be able to decide after importation whether to re-export the goods imported, process, destroy or enter the goods for free circulation into the EU
  • For the temporary storage the allowed period will be extended to 90 days and it will also be possible to move goods under temporary storage to another temporary storage facility held by the same or another person, without the use of a transit procedure. However, if the goodsare moved to another EU Member State, the authorization holder needs to be an AEO certified business
  • The reinforcement of the principle of “good faith”, to be taken into account when applying the Customs rules
  • Based on the principles laid down by the European Court of Justice, the penalties for failure to comply with the Customs rules remain the competency of each EU Member States but the UCC lays down that they must be in any case effective, proportionate and dissuasive

Generalised tariff preferences – Reduction of the entitled countries

The European Union has granted trade preferences to developing countries under a generalised tariff preferences scheme withvthe aim of supporting them in sustainable growth.

This scheme allows the flows of goodsoccurring between the EU Member States and the third countries not to be subje ct to Customs duties or to reduced ones, if some conditions are met.

As in recent years many of the eligible countries have significantly increased their economic conditions, the EU has adapted the list of the countries whose flows can benefit of the Customs beneficial regime accordingly.

Large countries are now excluded, such as Brazil, Russia, India, South Africa, Argentina, etc.

Affected businesses need, therefore, to analyze their current flows of goods and understand the impact of the changes on their business, identifying possible alternative routes.

Some of the opportunities provided by the Customs law for international traders

Even if the Customs legislation is usually perceived as merely linked to the payment of duties it offers nonetheless some beneficial regimes which can be used by international traders for reducing their burden.

Some of those beneficial regimes are the:

  • Inward Processing Relief which allows to import raw materials or semimanufactured goods for being processed in the EU and then re-export them without paying Customs duties and VAT on same goods
  • Processing under Customs Control which allows the importation of goods which are processed into products subject to a lower Customs duty rate before being put into free circulation
  • Customs warehouse which allows to suspend the payment of Customs duties up to when the goods are physically inside the warehouse or to avoid the payment of these duties if the goods are re-exported or delivered to another EU Member State

How can we help?

EY with its multidisciplinary, integrated approach can assist you in understanding the changes brought by the new Customs legislation which may impact your business activities and in identifying opportunities that might be created thereby.

By discussing together the current flows of goods and the related existing Customs procedures we can help you in identifying the best solution for an efficient management of these transactions on goods, mitigating as far as possible the related economic and administrative burden.


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