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EU customs legislation is undergoing some significant changes from 1 May 2016 with the implementation of the Union Customs Code (“UCC”). The changes implemented by the UCC will have significant practical and financial implications for businesses importing into or exporting from the EU. The three key changes under the UCC will be:

  • Changes to customs valuation rules;
  • Introduction of compulsory guarantees; and
  • Introduction of benefits for holders of the AEO Customs Simplifications (“AEOC”) status.

Key Changes Under the UCC

  1. Changes to Customs Valuation Rules Removal of earlier sales

The basis of customs valuation, which determines the amount of duty payable on import of goods into the EU, will change under the UCC. Currently, businesses can benefit from what is known as the ‘earlier sales’ rule, by which they may take the value of the goods at an earlier sale in the supply chain, which is generally a lower amount, as the basis of the customs valuation. Under the UCC, the earlier sales rule will be removed and replaced by a ‘last sale’ rule, which means that the customs value of imported goods will be determined on the basis of the sale occurring immediately before the goods are brought into the EU. This value is usually higher than that of the earlier sale. This change will therefore result in a higher customs value and more duty payable. The UCC does allow businesses to use the ‘earlier sales’ rule until 31 December 2017, provided that the ‘importer’ is bound by a contract concluded prior to 18 January 2016. Increase in dutiability of royalties and licence fees Currently, royalties and licence fee payments that the buyer of the goods makes are included in customs value calculations where the payments: (i) relate to the imported goods; and (ii) are paid as a ‘condition of sale’ of those imported goods.  The same basic rules will apply under the UCC.  However, the concept of ‘condition of sale’ is being broadened to incorporate more situations. This will result in an increase in circumstances where such payments will be dutiable. For further information on this significant change, please see our client alert on this topic, available here.

2. Introduction of Compulsory Guarantees

Many businesses benefit from special arrangements that suspend their obligations to pay import duty (e.g. bonded warehousing).  The UCC will make operating these arrangements more financially burdensome as they will have to provide a financial guarantee to cover the amount of the suspended duty. This change will result in additional costs for businesses.

3. Introduction of Benefits for Holders of AEOC Status or Those Meeting AEOC Criteria

AEO status is the international ‘gold standard’ for businesses as it recognises that a business’ international supply chain is secure and that its customs controls are efficient and compliant. To encourage more businesses to hold AEO status, the UCC provides important benefits to those who secure AEOC status or meet certain of its criteria. Notably, this will include a reduction or a full waiver for compulsory guarantees.



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