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On 31st of March 2022, the Wise Persons on Challenges Facing the Customs Union (WPG) released its report on the future of the EU customs union.

The WPG has been appointed by the Commissioner Gentiloni to reflect on the development of innovative ideas and concepts. This report aims to contribute to a general inter-institutional debate on the future of the customs union.

With the complexification of supply chains, the digitisation of the economy and the boom of e-commerce, the customs union faces multiple challenges, while customs authorities are tasked to ensure proper duty collection and protection of the single market.

Data quality and availability are certainly one of the main issues, as good data is key to perform robust risk analysis to identify problematic consignments and tackle fraud.

The European Commission and Member States has already initiated a vast plan of digitisation of customs procedures and processes aiming to eventually removed any use of paper (via the Multi-Annual Strategy Plan). This will improve the access to better data and enhance the way customs authorities will be able to target risky consignments. The recent go-live of the new Import Control System (ICS 2) reflects this ambition.

In this context, the WPG comes with 10 key measures for an implementation by 2030:

  1. Reforming the customs union, by changing its governance and overhauling processes, responsibilities, liability. This could mean amongst others that other persons than the declarant would be liable to customs.
  2. A new approach to data from the cumbersome transactional approach to a system-based approach to reduce the reliance on customs declarations, obtain better quality data from commercial sources, and create single data entry point for customs formalities (e.g. Single Window environment for customs).
  3. A comprehensive framework for cooperation between authorities, enabling better data sharing across the customs union, with the involvement of market surveillance authorities, law enforcement bodies and tax authorities.
  4. Setting up a European Customs Agency to complement the role of the European Commission and support the Member States.
  5. Reforming and expanding the Authorised Economic Operator (AEO) scheme to encourage businesses and traders to partner with customs and enhance their customs processes.
  6. A new framework of responsibility and trust, in which businesses would seek AEO status to gain commercial access to the EU market. Small non-commercial consignments would continue to be sent through the usual processes, but without priority and subject to a level of control that reflects their “non-trusted” status. It is expected that traders would be incentivised to share quality data if they benefit from facilitation.
  7. No more customs duty exemption threshold of 150€ for e-commerce, together with simplified rates for low value consignments.
  8. A package of measures to green EU customs, digitalise procedures, ensure that prohibitions and restrictions related to sustainability are properly implemented on imported products, as well as possibly reform the World Customs Organisation (WCO) Harmonised System to allow for the proper classification of environmentally friendly products that the EU wants to promote in international trade.
  9. Properly resourcing, upskilling and equipping customs authorities.
  10. An annual estimate of the customs revenue gap to better manage customs revenue collection.

DG TAXUD is also preparing a report for the summer on overhauling the rules on import e-commerce from third countries, that is expected to converge to similar conclusions.

With these initiatives, we expect dramatic changes to come in the way customs operations will be conducted in the near future. We will certainly see customs declarations being eventually removed as well as the classical transaction-by-transaction approach to control and duty collection.

In the years to come, economic operators will have to be prepared to approach customs differently with more facilitation but tighter controls on duty collection and meeting products’ standards.”

Author

Jennifer Revis is a partner in Baker McKenzie's London office and co-leads our EMEA Customs Team.
Jennifer focuses her practice on the public regulation of international trade, particularly in a wide range of customs compliance issues. She regularly advises clients on import matters, including customs valuation, rules of origin, and classification. She has worked with clients designing and implementing their compliance programs, policies, procedures and risk assessments, and assisting them in customs audits. She has significant experience in managing global customs projects and disputes, particularly in the area of customs valuation (transfer pricing; assists; royalties). Jennifer also advises on FTAs and trade remedies matters.
Jennifer has been consistently recognised as a "Leading Individual" for Customs & Excise and “Next Generation Partner” for Trade, WTO Anti-Dumping And Customs. Clients describe her as "an outstanding customs lawyer and litigator with fantastic experience. She is also easy to work with and leads her team with aplomb", "without a doubt, one of the best customs lawyers in the business (…) with an exceptionally deep knowledge of customs valuation concepts, as well as considerable experience applying those concepts in a variety of jurisdictions."
Jennifer has been on secondment to the UK customs authorities (Her Majesty's Revenue and Customs) in their tax and excise litigation department and to the Firm's European Law Centre in Brussels.

Author

Sylvain Guelton is a senior associate in the Tax Practice Group in the Brussels office. He joined Baker McKenzie in 2022. He was previously a senior manager at PwC Belgium for six years and a lawyer in a French law firm based in Paris and Brussels.

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