European Commission proposes reforms of EU customs legislation

• The European Commission has proposed significant changes to the Union Customs Code aimed at modernizing customs processing across Europe.
  
  
• This Alert highlights the substance and timing of the proposed changes.

On 17 May 2023, the European Commission (Commission) put forward proposals for what it says is the most ambitious and comprehensive reform of the European Union (EU) Customs Union since its establishment in 1968. The proposals are aimed at forming a new partnership with businesses, taking a smarter approach to customs checks and having a more modern approach to e-commerce.

This alert summarizes the highlights of the proposal.

Detailed discussion

Introduction

On 1 May 2016, the substantive provisions of the Union Customs Code (UCC)1 became applicable. Since that time, the Commission has recognized that an increasing number of customs provisions are no longer fit for purpose due to a significant increase in trade volumes, especially in e-commerce, a fast-growing number of EU standards that must be checked at the border and shifting geopolitical realities and crises.

The Commission's proposals should address these challenges by modifying existing information technology (IT) systems and introducing new IT systems, simplifications to the current customs legislation and a more uniform application of customs controls, and a fully-fledged analysis and coordination capacity at EU level.

The proposals are structured along the lines of three pillars:

1. A new partnership with business
2. A smarter approach to customs checks
3. A more modern approach to e-commerce

These pillars are discussed in greater detail below.

Pillar 1 — A new partnership with business

The Commission proposes a fundamental change to submitting and storing customs data and interaction between customs authorities and businesses. The reformed UCC will enable business to import their goods into the EU and log all pertinent information on their products and supply chains into a single online environment, the so-called "new EU Customs Data Hub." This automated system provides customs authorities with a 360-degree overview of supply chains and the movement of goods.

The establishment of a single window aims to reduce the administrative burden for businesses when interacting with the EU customs authorities. With "new EU Customs Data Hub," businesses will only have to submit data once for multiple consignments.

Furthermore, the current Authorised Economic Operators (AEO) program will be extended by adding a "Trust & Check" category for the most trusted traders operating in the EU market. Trust & Check traders will benefit from further reductions in the physical and document-based controls. Goods imported by Trust & Check traders may be cleared at the customs authorities in the trader's Member State, rather than at the customs authorities of the importer's Member State. Thus, these traders will have all their EU customs dealings with one customs authority. They will also be allowed to self-assess their customs duties payable and be able to receive goods without interference of the customs authorities.

Pillar 2 — A smarter approach to customs checks

The aim of the new system is to provide customs authorities with a better understanding of the goods entering the EU by utilizing real-time data and artificial intelligence to predict potential problems and risks before the goods are shipped from third countries. The new system will enable EU customs authorities to operate more effectively, freeing time and resources to turn attention toward safeguarding the EU market from illegal or unsafe goods. Additionally, it will facilitate the proper collection of duties and taxes by the authorities.

Pillar 3 — A more modern approach to e-commerce

The Commission intends to make the online platforms the key actors for ensuring that goods sold on the EU market comply with all customs obligations. Online platforms will be deemed to be the importer of record to ensure that customs duties and VAT are paid at the time the customer makes a purchase on the platform.

The Commission's reform also intends to remove the exemption of customs duties for goods valued at less than €150. Furthermore, the way customs duties are calculated will be simplified for most common low-value goods. These goods will be classified in four categories, as opposed to thousands of possible customs duties categories.

Timeline

The Commission intends to open the "EU Customs Data Hub" for e-commerce consignments in 2028 and for all other importers (on a voluntary basis) in 2032. The centralized clearance for imports of Trust & Check traders will also be implemented as of 2028. A review in 2035 will assess whether this can be extended to all traders when the EU Customs Data Hub becomes mandatory beginning in 2038. The EU Customs Data Hub will be managed by a new organization called the EU Customs Authority. The Commission stated the key function of this authority will be "to pool expertise and competence that are currently scattered across the EU to steer, coordinate and support national customs authorities in the EU." This will enable strengthened supply chain supervision with customs authorities at the EU and national level.

Other changes in the UCC

The Commission also proposes legislative changes in the UCC that include:

• Introducing the legal definition of "importer" while abolishing the notion of "declarant"
  
  
• Providing common provisions on customs infringements and noncriminal sanctions for those infringements
  
  
• Enhancing international cooperation between national customs authorities
   

Actions for businesses

In light of these proposals, businesses will want to consider:

• Assessing whether their current record keeping systems are suited the new way of exchanging data with customs authorities
  
  
• Evaluating whether the abolished customs-duty exemption and the new customs duties categories affect their importations
  
  
• Determining whether the new Trust & Check category could benefit their business

For additional information with respect to this Alert, please contact the following:

EY Global Trade practice

• Jeroen Scholten, Global leader, Netherlands
  
  
• Theresa Arlt, Austria
  
  
• Philippe Lesage, Belgium
  
  
• Christina Horckmans, Belgium
  
  
• Jakub Kasuba, Czech Republic
  
  
• Anne-Mette Høiriis, Denmark
  
  
• Marguerite Trzaska, France
  
  
• Nadine Grenouilleau, France
  
  
• Robert Boehm, Germany
  
  
• Frank-Peter Ziegler, Germany
  
  
• Richard Albert, Germany
  
  
• Nicoleta Merkouri, Greece
  
  
• Aron Nagy, Hungary
  
  
• Neil Byrne, Ireland
  
  
• Alessandra Di Salvo, Italy
  
  
• Walter de Wit, Netherlands
  
  
• Martijn Schippers, Netherlands
  
  
• Caspar Jansen, Netherlands
  
  
• Slawomir Czajka, Poland
  
  
• Mihai Petre, Romania
  
  
• Pedro Gonzalez-Gaggero, Spain
  
  
• Zoran Dimoski, Sweden
   

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.