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Latest edition of EY Belgium’s customs and excise update

Local contact

Philippe Lesage

31 May 2024
Subject Tax alert
Categories Global Trade
Jurisdictions Belgium

ETS2 becomes fully operational in 2027

As part of the EU Green Deal and the 2023 revisions of the ETS Directive, a new emissions trading system named ‘ETS2’ was created, which will function separately from the existing EU ETS. This new system will cover and address the CO2 emissions from fuel combustion in buildings, road transport and additional sectors (mainly small industries that are not covered by the existing EU ETS). A significant difference from the existing ETS is the point of regulation. Under the existing ETS, end-users of fossil fuels must fulfill the ETS obligations, whereas under ETS2, it is the suppliers of fuel, natural gas, and coal (who release these energy products for consumption) who will be responsible. This means that fuel, natural gas, and coal suppliers, rather than end-consumers such as households or car users, will be required to monitor and report their emissions. These entities will be required to purchase these allowances at auctions and surrender sufficient allowances to cover their emissions. 

ETS2 will become fully operational in 2027, but regulated entities must already obtain a permit for greenhouse gas emissions by 1 January 2025. Also, these entities need an approved monitoring plan for monitoring and reporting their annual emissions in 2024.
 

Türkiye’s Ministry of Trade installs trade ban with Israel 

On 2 May 2024, Türkiye’s Ministry of Trade announced a total ban on import and export transactions with Israel, intensifying prior restrictions that began on 9 April 2024. The measure affects all products and restricts the lodgment of customs declarations in Türkiye where Israel is included as a country of dispatch, destination, or origin. This abrupt cessation of trade between Türkiye and Israel is set to have a substantial impact on businesses, particularly those with supply chains and trade links involving Türkiye and Israel.
 

Windfall tax in the oil sector: Belgian Constitutional Court seeks ECJ guidance

On 25 April 2024, the Belgian Constitutional Court referred 9 preliminary questions to the European Court of Justice ('ECJ') following the request for annulment of the Belgian law enacted on 16 December 2022, which mandates a temporary solidarity contribution at a rate of 33% on the profits of companies in the oil industry. This measure targets companies that have gained substantial profits due to the energy crisis. The referred questions relate to the law’s compatibility with EU Council Regulation 2022/1854 on emergency energy measures, the principle of equality, potential discrimination against certain industry participants, and whether the law constitutes an illegal tax or unauthorized state aid. 

The questions also address the fairness of the law's selective application to entities involved in crude oil, refining, and distribution, considering it excludes non-primary participants and companies in the coal and natural gas sectors. Furthermore, the Court is concerned about the law's retroactive charge on products released for consumption before its enactment, which raises issues of legal certainty. The ECJ’s judgment will be crucial in determining whether the Belgian law can be upheld or if it contravenes European law. The outcome will not only impact the oil sector but also set a precedent for assessing the validity of windfall taxes in other sectors (e.g., in the electricity sector).
 

TradeWatch issue 1, 2024 is out now

We are pleased to share TradeWatch Issue 1 2024 with you. This EY magazine highlights key legislative and administrative developments for customs and trade, featuring insights and tax alerts from our network of Global Trade professionals trade around the world, with links to other EY resources and contacts. 

In this year’s first edition of TradeWatch, we delve into the pressing issues shaping global trade, provide a recap of the EU and US measures addressing supply chain disruptions and explore the intricate relationship between customs valuation and transfer pricing, featuring insights from the recent EY Transfer Pricing Survey. We also highlight sustainability efforts, including the EU and UK's Carbon Border Adjustment Mechanisms (CBAM) and Thailand's electric vehicle incentives. Legislative reforms in Brazil and Japan are examined for their trade impact, alongside a look at how innovative technologies are transforming trade operations worldwide.
 

Guarantee Management System (GUM)

To cater for the rising need for guarantees for various customs procedures, the Commission has introduced the Guarantee Management System (‘GUM'). The new system will not only make it possible to have a valid guarantee for several member states, but it will also help increase traceability, expedite processes, and mitigate fraud. Guarantees for transit being an exception as this is handled by NCTS.

The system will be composed of two sections: GUM 1, a central component that manages comprehensive guarantees used in multiple Member States and monitors the reference amount, and GUM 2, a national component that manages the guarantee and facilitates the release of the amount. GUM 1 will be operated using the Customs Decision IT System, while each Member State will develop GUM 2 independently.
 

Updated MASP timeline

An updated version of the timeline for the rollout of new applications in the context of the Multi-Annual Strategic Plan for electronic Customs (MASP-C) has been published by Belgian Customs authorities and is now available here. This timeline provides an overview of the availability of the testing environment, the go-live of the Belgian applications and the final date for operators to start using the system (among other things, the timing for IDMS, the new import system, has been revised).
 

Commission introduces regulatory framework for the implementation of an electronic system for customs decisions relating to BVIs, BTIs and BOIs

On 15 April 2024, the European Commission introduced a new legislative framework to harmonize customs decisions across the EU with the publication of Commission Delegated Regulation 2024/1072 and Commission Implementing Regulation 2024/1071. These regulations, effective from 5 May 2024 and applicable from 1 December 2027, introduce a unified approach to Binding Tariff Information ('BTI'), Binding Origin Information ('BOI'), and the newly incorporated Binding Valuation Information ('BVI'). The regulations were introduced with the aim to enhance transparency, legal certainty, and uniformity in customs valuation for the benefit of economic operators and customs authorities.

This will be facilitated by a centralized electronic system designed to manage and store all binding information applications and decisions. The system will also streamline the process for extending binding information decisions and rectifying any errors or discrepancies. 

For more information, consult this alert.
 

Commission directive on the definition of criminal offences and penalties for the violation of Union restrictive measures

The EU has established minimum rules to define criminal offenses and set penalties for violations to ensure the effective application of these measures. The directive stipulates that intentional breaches of EU restrictive measures, or serious negligence in adhering to them, be treated as criminal offenses. Member States have the discretion to exempt minor violations. Member states are required to implement the directive by 20 May 2025, and it is set to come into force on 19 May 2024.
 

Commission decision to reduce the additional customs duties to 0% on imports of certain product originating in the US

In 2018, the EU imposed an additional customs duty of 4.3% on sweetcorn, crane lorries, women's denim trousers, and frames and mountings of base metal originating in the US. This duty was imposed in response to the US's Continued Dumping and Subsidy Offset Act (‘CDSOA’), which had been declared by the WTO to violate international trade rules. The purpose of the additional customs duty was to counteract the unfair advantage granted to certain US companies. Furthermore, the duty was subject to an annual review, during which it was recently reduced to a negligible rate of 0.0002%. The Commission concluded that the duty had a minimal impact on trade while increasing the administrative burden and associated costs. As a result, the Commission has decided to eliminate the additional customs duty on the specified products originating in the US, effective 1 May 2024, thereby reducing it to 0%.
 

EFTA countries sign Trade and Economic Partnership Agreement (‘TEPA’) with India

On 10 March 2024, the European Free Trade Association (‘EFTA’) member states – Iceland, Liechtenstein, Norway, and Switzerland – signed a Trade and Economic Partnership Agreement (‘TEPA’) with India. The agreement marks an important milestone in the relationship between both parties and aims to bring significant economic benefits, such as stronger supply chains, new opportunities for businesses and individuals, increased trade and investments, job creation, and overall economic growth. The deal enhances market access and simplifies customs procedures, thereby making it easier for businesses to expand their operations.
 

EU-NZ FTA has entered into force on 1 May 2024

The recently concluded Free Trade Agreement (‘FTA’) between the European Union and New Zealand, which was published in the Official Journal on 28 February 2024, has officially come into effect as of 1 May 2024.
 

First investigation under the EU International Procurement Instrument (‘IPI’)

On 24 April 2024, the EU initiated the first investigation under the International Procurement Instrument regulation. The International Procurement Instrument ('IPI') came into effect in 2022 with Regulation (EU) 2022/1031 and aims to promote reciprocity by opening third-country markets and improving market access opportunities for EU economic operators. In the first instance, the regulation seeks to foster dialogue between competent authorities on removing discrimination in public procurement. Only if dialogue fails, the Commission might consider imposing IPI measures to restrict access to EU public procurement procedures for businesses, goods and services from the non-EU countries involved. This first investigation is launched against China, following evidence that its public procurement market for medical devices has gradually become more closed for European and foreign firms, as well as for products manufactured in the EU. Moving on, the EU will examine the discrimination further, go into dialogue with the Chinese authorities and publish a report of their findings and course of action within 9 months.
 

ECJ rules on the lawfulness of Germany’s additional tax on heated tobacco

The ECJ has ruled, in case C-336/22, that a national tax levied by German tax authorities on heated tobacco products in addition to the applicable excise duty is lawful and compliant with EU law. The additional tax complies with both conditions outlined in Article 1(2) of Directive 2008/118 for levying an additional national tax on goods subject to excise duties. Firstly, the tax serves a ‘specific purpose,’ and secondly, it aligns with EU rules on excise duty concerning the tax base, calculation, chargeability, and monitoring, as detailed in Directive 2011/64. 

Therefore, the concept of ‘other indirect taxes on excise goods for specific purposes’ covers and allows this supplementary tax applied to heated tobacco products by the German tax authorities.
 

AG Kokott challenges Commission's interpretation of non-preferential origin criteria in Harley-Davidson case (C 297/23 P)

In the context of trade disputes between the United States and the European Union, the EU has implemented safeguarding measures consisting of additional customs duties that apply to imports of motorcycles of USA origin. In reaction to this, Harley-Davidson relocated the production of some models destined to the EU market from the USA to Thailand, and subsequently obtained from the Belgian authorities two Binding Origin Information (‘BOI’) decisions confirming Thai origin. However, the European Commission, through Implementing Decision 2021/563, required the revocation of these BOIs. The Commission argued that the production processes in Thailand lacked economic justification, which is required for acquiring non-preferential origin. At first appeal, the EU General Court confirmed the position of the Commission (T‑324/21).

Harley-Davidson is now appealing before the Court of Justice, and Advocate-General (‘AG’) Kokott’s opinion challenges the General Court’s reasoning. AG Kokott explains that tariff avoidance is not circumvention, and that avoidance is a valid economic justification that can be considered when determining the non-preferential origin of goods. Circumvention entails actions that contradict the purpose of the additional duties, and an intention to evade customs duties through deceitful manipulation of a product’s origin. Finally, AG Kokott stated that the relocation of processing activities to another country is consistent with the objectives of the EU retaliatory tariff measures. She concludes by proposing that the ECJ sets aside the judgement of the General Court and annuls the European Commission’s Decision to revoke the Belgian BOIs.
 

New EU legislation enforces climate-friendly practices, human rights protections, and due diligence rules

The directive, introducing due diligence requirements for companies to address negative impacts on human rights and the environment from their operations, targets EU and non-EU companies with more than 1,000 employees or exceeding €450 million in turnover. It also includes franchises with over €80 million turnover, provided at least €22.5 million of that comes from royalties.

Under the legislation, companies must align with the Paris Agreement through climate-focused practices and integrate due diligence into their risk management strategies. Non-compliance may result in fines up to 5% of global net turnover and compensation to victims. Non-EU companies are required to appoint an authorized representative in the Member State where they operate to communicate with authorities regarding due diligence compliance.