Latest edition of EY Belgium’s Customs and Excise update

CBAM EU Parliament plenary vote

On 22 June 2022 the European Parliament adopted the proposal for a revised Emission Trading System (ETS) and the proposals for the establishment of a Carbon Border Adjustment Mechanism (CBAM), after initially rejecting these proposals on 8 June 2022. Compared to the Commission’s proposal on the establishment of a CBAM, the Parliament calls for a broader scope and faster implementation. In addition to iron & steel, aluminum, cement, fertilizers and electricity the Parliament calls to extend the scope to also cover organic chemicals, plastics, hydrogen and ammonia. The CBAM should in the Parliament’s view also cover indirect emissions, i.e. emissions deriving from the electricity used by manufacturers, to better reflect CO2 costs for European industry. The Parliament also suggests that the transition period should last from 1 January 2023 until the end of 2026 (instead of 2025) and that phasing out of the free allowance under the ETS is fast-tracked ending by 2032 (instead of 2035). Other changes to the Commission’s proposal relate to the need for a centralized EU CBAM authority and the Parliament’s request to grant the most efficient EU installations under certain conditions an export adjustment mechanism to receive free allocations in the EU ETS. As a next step the Parliament will now enter into negotiations with the Member States.

EU adopted 6th package of sanctions against Russia/Belarus

EU Commission President Ursula Von der Leyen already announced a sixth sanctions package against Russia and Belarus on 4 May 2022, including a compete import ban on all Russian oil - seaborne and pipeline, crude and refined.

After a political agreement at the EU Summit, held on 30-31 May in Brussels, the Council formally adopted the sixth package of sanctions against Russia and Belarus. In contrast to the initial proposal, the import ban will now only cover crude oil, as well as petroleum products, delivered from Russia into the EU, with a temporary exception for crude oil delivered by pipeline. The final compromise means that only two thirds of Russian oil will be banned by the end of the year. Moreover, there is no specific timeline for this temporary exception for crude oil delivered by pipeline.

On top of the import ban on Russian oil, the EU also decided in its sixth sanction package on additional individual sanctions against some high-ranking military officials, a SWIFT ban on an additional 3 Russian banks and one Belarussian bank, and a ban of three major Russian state-owned broadcasters from EU airwaves. The EU expanded the list of goods and technology that may contribute to the technological enhancement of Russia’s defense and security sector as well by adding 80 chemicals to the dual-use list. The regulations covering the 6th package of sanctions have been published in the EU Official Journal on June 3rd and have entered into force.

Russia excluded from Union general export authorisations

On 3 May 2022, the European Commission has published Commission Delegated Regulation 2022/699 amending Regulation 2021/821 of the European Parliament and of the Council. This regulation removes Russia as a destination from the scope of the Union general export authorisations EU003 (re-export of items after repair or replacement in the EU), EU004 (export of items for fairs or exhibitions) and EU005 (exports of telecommunications equipment) in order to prevent Russia from gaining access to critical technologies and dual-use items.

ECJ C-714/20: No liability of the indirect customs representative for import VAT

The European Court of Justice (ECJ) issued a preliminary ruling in relation to an Italian case regarding the liability of the indirect customs representative for import VAT. In the case at hand, the Italian authorities held the indirect representative jointly and severally liable for import VAT retroactively assessed against the indirectly represented business, which had gone into insolvency procedures. The Italian authorities cited articles 77 and 84 of the Union Customs Code (UCC) as the relevant legal basis.

The ECJ held that the joint and several liability stipulated in articles 77 and 84 UCC can only refer to customs duties and that import VAT is not included in the definition of customs duties.

The ECJ further pointed out that as far as liability for import VAT is concerned, the relevant provisions of EU law, especially article 201 of the EU VAT Directive, leave it to the member states to determine as to who is or can become liable. This would allow the member states to hold an indirect representative jointly and severally liable for import VAT, however only, if national legislation provides for a sufficiently clear and precise legal basis in that regard.

The ECJ therefore ruled that an indirect representative cannot be held jointly or severally liable on the basis of the UCC for import VAT but only on the basis of national provisions in line with article 201 of the EU VAT Directive, expressly and unambiguously designating or recognizing them as being liable.

ECJ issues two court rulings on the use of statistical values

On 9 June 2022, the European Court of Justice (ECJ) issued two court decisions on the use of statistical values to determine the customs value. According to the ECJ, a national database can be used by customs authorities to establish a customs value by means of the transaction value of identical or similar goods according to the ECJ in C-187/21 (Fawkes Kft.). They are in such cases not required to consult customs authorities from other Member States or institutions of the European Union, unless the information in the databases is not sufficient. In case of the latter, the customs authorities need to make a request for additional information to determine the customs value by means of the transaction value of identical and similar goods. In determining the customs value using above method, the national customs authorities may also decide to let the information from the databases take precedence over undisputed used transaction values by the importer. If they do so, the authorities should challenge the undisputed used transaction values or, in case the undisputed imports were made in other Member States, justify why these transaction values cannot be taken into account for determining the customs value under the transaction value of identical or similar goods method. In the case C-599/20 (Baltic Masters), the Court decided that a customs value under the fallback method can be based on information extracted from a national database on TARIC code level if the goods originate from the manufacturer, although cannot be regarded as similar in accordance with applicable customs law definitions. Both cases make it clear that statistical value databases become an important instrument for the validation and determination of customs value.

In these court cases the ECJ also sheds light on the concept of goods exported "at the same time or approximately at the same time" as the goods to be valued and the concept of "related parties". The ECJ ruled in the Fawkes-case that "at the same time or approximately at the same time" allows customs authorities, for the purpose of identifying identical or similar goods, to in principle limit the period to 90 days of which 45 before and 45 after customs clearance of the goods to be valued. The concept of "related parties" is further clarified by the ECJ in the Baltic Masters-case. The ECJ decided that legally, parties cannot be regarded as related parties if documents establishing such relationship are absent. If, however, other objective elements indicate that one of the parties can exercise power over the other, parties can still be considered related parties.

ECJ - Payment of interest on export refunds, reimbursed customs and anti-dumping duties unduly imposed

The ECJ has ruled in 3 joint cases regarding incorrect decisions of German Customs Authorities (C-415/20 on the late payment of export refunds for agricultural products and the reimbursement of wrongly assessed financial penalties in connection with such refunds, C-419/20 on interest on account of reimbursement of anti-dumping duties and C-427/20 on the reimbursement of unlawfully paid import duties). As per the Union Customs Code, Member States are not required to pay interest on duties or other indirect taxes. The ECJ, however, decided that when duty has been collected in breach of EU law, the taxpayers are entitled to interest on those duties from the date that these duties were incorrectly levied.

Anti-dumping and countervailing duties in the EEZ

On 23 May 2022, the European Commission introduced Regulation (EU) 2022/806 imposing a definitive anti-dumping and countervailing duty on fabrics of woven and/or stitched continuous filament glass fiber roving and/or yarns with or without other elements originating in China and Egypt. Although this is not a new concept, the European Commission clearly stated in this Regulation that the duty also applies to products that are re-exported to or received on an artificial island, a fixed or floating installation, or any other structure in the exclusive economic zone (EEZ) of a member state.

2018 marked the year where the EU was allowed by Regulation (EU) 2018/825 to impose anti-dumping or countervailing duties on products being imported into the Exclusive Economic Zone of EU member states if the Union industry would be injured by the imports in question. According to the UCC, the geographical scope of application is up to the external border of the member state’s territorial waters. Therefore, enforcing trade defense measures in the EEZ is a fairly new phenomenon.

Germany’s proposal on EPR regime for single-use plastic items

The German Federal Ministry for the Environment circulated a first draft of legislation regarding the implementation of an extended producer responsibility (EPR) regime for certain single-use plastic items. This would come into effect as of 1 January 2024.

The legislative scope intends to cover all goods mentioned in Appendix E of the EU Directive. The amount of the levy will be defined in the secondary legislation, which is to be published by the end of 2022. Based on the current proposal, businesses will be able to register and request classification rulings for single use items as of 1 January 2023. The levy and corresponding compliance obligations would apply as of 1 January 2024.

A penalty scheme will be introduced for cases of non-compliance and the authorities will be qualified to seize the goods on the market. For a detailed read of this topic, please consult this trade alert.

BREXIT: UK Government introduces Northern Ireland Protocol Bill

The British government introduced a bill on 13 June 2022 designed to partially and unilaterally suspend or modify the application of the Northern Ireland Protocol (“the Protocol”) as agreed between the EU and the UK (including certain provisions of the Withdrawal Agreement).

The draft provides, among other things, for the repeal of certain provisions of the Protocol (and the disapplication of the Union Customs Code in that regard) relating to the movement of goods between Northern Ireland and Great Britain and vice versa, in particular as far as customs duties and procedures, regulatory restrictions (especially on Sanitary and Phytosanitary Standards (SPS)) and customs controls on the movement of goods are concerned. It also removes the powers of the European Court of Justice to rule on the applicability of the Northern Ireland Protocol in the UK, including the possibility for the UK courts to refer questions to the ECJ for a ruling.

Furthermore, the British government is given the competence to impose further restrictions on the Protocol (e.g. also in the area of VAT and excise duties) by means of ministerial ordinances.

The bill – if passed – would have no direct impact, though, on the free movement of goods between Northern Ireland and the Republic of Ireland or on the movement of goods between the EU and Northern Ireland.

The UK Government has justified this course of action claiming that the current application of the Protocol is posing significant problems for Northern Ireland, including the socio-political conditions, therefore leaving them with “no other way of safeguarding the essential interests at stake” than through the bill as presented. The EU Commission has contested the UK Government’s right for such far-reaching unilateral action. It has therefore initiated formal infringement procedures against the United Kingdom for breaches of the Withdrawal Agreement, whilst also making proposals for streamlining customs and regulatory procedures.

Even though it is not certain that the bill will become law in its present form – the political pressure from Brussels, Dublin, the non-Unionist quarters in Northern Ireland and Washington, as well as from within the ruling Conservative Party, being considerable – this latest development has already put considerable strain on EU/UK-relations, with EU leaders and institutions questioning the UK’s willingness to constructively approaching issues resulting from the Protocol or the post-Brexit trading framework in general. It has to be noted that “retaliatory” measures by the EU could go as far as a suspension of the Trade and Cooperation Agreement (EU/UK FTA).

EY TradeWatch, first issue of 2022

The latest edition of our Trade Watch can be found here. TradeWatch is EY’s Global Trade quarterly communication that outlines key legislative and administrative developments for customs and trade around the world. This TradeWatch covers, amongst others, the following topics: an update on the sanctions in response to the war in Ukraine, the issues for e-commerce sellers to consider for imported goods (in BE and DE), a special focus on the valuation aspects under the transitional PEM rules of origin, UK Trade negotiations in 2022 and articles related to sustainability topics.