Reforming European customs union: facing new challenges

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New Commission’s legislative proposals reveal a new vision for the EU-wide customs union. New draft puts in place an updated and modernised framework based on three interlinked areas of action: a) providing greater simplifications for businesses, especially EU importers; b) facilitating more active collaboration between customs authorities at the EU-wide level, in order to pool resources and expertise, and exchange information; and c) bringing much-needed clarity and transparency to the customs treatment of e-commerce parcels entering the EU.   

   European common tariff-system of customs duties is being used on imports from outside the EU; there are no customs duties levied at the borders among the EU-27 states. Customs duty on goods from outside the EU is generally paid when they first enter the EU: from then on, there are no more customs duties to pay and no more customs checks will apply- i.e. all goods circulate freely within the EU Customs Union. The EU Customs Union is essential for the proper functioning of the single market. In practice, national customs services in all EU countries shall work together as a one entity to manage the day-to-day operations of the EU-wide Customs Union.

    More information in the latest publication on the matter in: https://op.europa.eu/en/publication-detail/-/publication/98af8cf1-93fa-11ea-aac4-01aa75ed71a1/language-en?WT.mc_id=Publicationdetail&WT.ria_c=51677&WT.ria_f=6844&WT.ria_ev=permalink&WT.URL=https%3A%2F%2Ftaxation-customs.ec.europa.eu%2F

   As soon as customs regulations are the exclusive EU competence, it is the European Commission which proposes the EU-wide customs legislation and monitors its implementation. The EU is one of the largest trading blocs in the world. The EU is one of the largest trading blocs in the world, alongside the United States and China. There are about 2 thousand customs offices in the EU states managing the EU-wide international trade; they handle import, export and/or transit of over 1 178 million articles (data from 2021).
Source: https://taxation-customs.ec.europa.eu/customs-4/eu-customs-union-facts-and-figures_en

   The amount of customs duties collected in 2021 reached € 24.8 billion. EU’s customs union facilitates trade with the rest of the world worth €4.3 trillion in 2021 – 14% of global trade; almost 83.000 customs officials in the EU-27 are on the frontline of ensuring the safety and security of EU citizens and protecting the EU’s financial revenues. Thus, yearly contribution of customs duties to the EU budget has been at the level of about €18 bn during last three years.
Reference to: https://taxation-customs.ec.europa.eu/customs-4/eu-customs-union-facts-and-figures/customs-duties-mean-revenue_en

New vision for the EU Customs Union
The following three proposals constitute the present pace of customs’ reform:

First, import procedures at customs can represent one of the main administrative hurdles for traders. So, using cutting-edge technology, today’s reform will provide massive simplifications for businesses, especially EU importers. Under the new regime, importers will be able to log all the information on their products and supply chains into a single online portal: the new EU Customs Data Hub. The Hub will provide authorities with a complete overview of existing supply chains, the origin and provenance of goods and their movement. Gradually, all importers will be able to make use of the Data Hub to take care of all their customs needs, with reduced declaration obligations depending on how much data they enter into the system. This will save them time and money, i.e. about €2.7 billion a year overall, the amounts that can instead be used for innovation and investment. Besides, the Data Hub will eventually replace 111 national IT systems; in this way the EU member states will also save up to €2 billion a year in operational costs.
The reform also creates a new category of EU importers, so-called “trust and check” traders – whose supply chains are most transparent, stable and compliant with EU rules. Trust and Check traders will only need to interact with one single portal when submitting their customs information and will only have to submit data once for multiple consignments.

   Second, the proposals ensure that customs authorities can supervise supply chains and monitor goods much more effectively, to protect the safety and security of citizens and uphold EU product standards. Importantly, they will also help customs to implement the growing number of EU laws that support EU-wide common values and implementation of global challenges, including new approaches to varied growth aspects, such as deforestation and sustainability, forced labour and firearms, circular economy and energy…
Present proposals put in place an EU-wide approach to such customs elements as consignments, the work of custom-operators and global supply chains, risk management and control purposes. It allows for a common and coordinated EU approach to evaluating the risk of fraudulent or non-compliant imports, which can pose a threat to the health of consumers and harm both the EU and national budgets. Besides, the drafts will contribute to increase revenues by addressing the existing customs gap.
Most vital, the draft will facilitate more active collaboration between customs authorities at the EU-wide level, allowing them to pool resources and expertise and exchange information in real-time, as well as focusing national inspections on most urgent issues.
At the same time, a new EU Customs Authority will analyse the data on existing risks and will create a truly common external border for exported/imported goods. The Authority will analyse the data through Artificial Intelligence, machine learning and human intervention; new technologies will benefit customs simplifications. For example, goods can be released into circulation without any customs declarations or customs intervention at all, rather than creating gaps in customs’ over viewing such data. This novice will enhance the EU capacity to react to worrying or suspicious consignments and to monitor supply chains for their compliance with the EU rules. This data-led approach is a first of its kind world-wide in the customs affairs. The EU hopes that this arrangement will inspire and spur the global reform for which the EU has been strongly advocated in the relevant international organisations.

   Third, the proposals are bringing much-needed clarity and transparency to the customs treatment of e-commerce parcels entering the EU. Around one billion small online purchases enter the EU every year – two thirds of them from China, and the numbers are expected to grow.
Presently, the e-commerce parcels represent over 73% of all customs declarations; the reform will make online platforms such as Alibaba, Amazon and Zalando key actors in ensuring that goods entered online into the EU comply with all customs obligations, rather than putting the burden on the final consumer as is currently the case.
These platforms will need to provide evidence of their actions through the EU Customs Data Hub. In more good news for EU consumers, platforms will also have to charge customs duties and VAT at the time of purchase and remit them to national authorities. That means consumers will no longer be hit with hidden charges or unexpected paperwork when the parcel arrives.
At the same time, the reform abolishes the current exception whereby goods valued at less than €150 are exempt from customs duty – aligning the rule to VAT where exception does not exist. Up to 65% of such parcels entering the EU are currently undervalued, so they can avoid customs duties on import. To facilitate even further customs’ ability to process the huge number of parcels, the new reform also introduces vastly simpler rules for classifying small packages for the purposes of calculating customs duty. Overall, the new, tailor-made e-commerce regime is set to bring additional customs revenue worth €1 billion per year.

General source and citations from Commission’s press release (17.05.2023) in: https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_23_2812

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