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On 17 May 2023, the European Commission (the “Commission”) published a set of proposals that, according to the Commission, constitute the “most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968.” Please find our previous blogpost in which we anticipated the proposal here. The proposals now published aim to:

  • Increase duty revenue;
  • Avoid illicit and non-compliant products;
  • Align the current customs framework with the current e-commerce landscape; and
  • Uniformize the operational implementation of customs in the different EU Member States.

Additionally, the proposals also intend to change the EU VAT Directive to align VAT rules with the new customs framework. This will reduce complexity for e-commerce operators when selling goods from non-EU jurisdictions to EU consumers.

The Commission proposes to achieve this by introducing, among others, the following:

  • An overarching EU Customs Authority;
  • An EU Customs Data Hub;
  • A Customs-One-Stop-Shop;
  • The “Deemed Importer” fiction; and
  • “Trust & Check” traders.

The Commission also proposes to abolish the EUR 150 customs duty exemption for low-value consignments and the possibility for customers and carriers to be declarants in e-commerce transactions. Instead, liability for import VAT and customs duties will be shifted to online platforms. This will increase the burden on online platforms even more, after the introduction of the VAT deemed reseller rules effective 1 July 2021. On top of these new measures, the proposed regulation repeals the old Union Customs Code (“UCC“) and introduces a new UCC with a complete rearrangement of articles. It remains to be seen whether this will have more materials effects on EU customs law. 

Below we will provide a high-level summary of what the proposal entails. During the course of next week, we will publish a more detailed post including our commentary on the proposed changes.

EU Customs Authority

One aspect of the proposals is to create an EU Customs Authority. The EU Customs Authority will pool customs expertise from local customs authorities at a central level to benefit EU customs risk management. It will not have “boots on the ground” as mentioned in our previous blog post of 15 May 2023. Instead, it will provide control recommendations to national customs authorities. These national authorities will then have to apply these recommendations or justify not applying them. Additionally, the EU Customs Authority will coordinate operational crisis management and develop and maintain the EU Customs Data Hub.

With respect to operational crisis management, the EU Customs Authority will develop protocols and procedures for different crisis scenarios and ensure their application. It will also be the central customs actor to engage with for non-customs authorities tasked with preserving the integrity of the Single Market.

EU Customs Data Hub

The EU Customs Data Hub, managed by the new EU Customs Authority, will serve as a (at one point potentially mandatory) single point of access to centralize data provided by traders importing and exporting goods across the EU. The Commission expects that the current IT infrastructure will be greatly simplified with this new centralized tool. The new platform is supposed to facilitate the exchange and combination of information in a single central environment, but also to collect and process information for customs risk analysis and targeted controls. By this way, the EU Customs Data Hub aims to strengthen the capacity of the customs administration to supervise and control goods entering and leaving the EU, and have a more consistent and coordinated risk management approach at EU level.

Pan-EU Customs-One-Stop-Shop

Due to the proposed pan-EU Customs-One-Stop-Shop, operators will only have to deal with a single EU customs authority for its customs obligations. This means that companies will no longer have to engage separately with up to 27 national customs authorities, despite e.g. importing in several EU Member States. This will simplify the customs processes for businesses operating in different EU Member States and make it easier for them to comply with customs regulations.

Abolishment of the EUR 150 customs duty exemption for low-value consignments and impact on VAT

The Commission intends to abolish the EUR 150 customs duty exemption for low-value goods to avoid fraud, such as undervaluation. By introducing a new system to calculate duties for low-value goods, this exemption shall no longer deemed necessary.

In parallel, a change to the EU VAT Directive is envisioned that will abolish the EUR 150 intrinsic value threshold for consignments for the deemed reseller rules for platforms that facilitate distance sales. This would align customs and VAT rules in the EU. As a consequence:

  • online platforms no longer have to distinguish between consignments with a value below and above EUR 150, leading to reduced complexity; and
  • e-commerce operators can use the pan-EU Import One Stop Shop for B2C shipments, irrespective of intrinsic value, into the EU.

Deemed Importers

With respect to deemed reseller rules, the proposal entails a major departure from the current customs system, which puts responsibility for EU customs obligations for e-commerce transactions on the individual consumer and carriers. Instead, the proposal shifts the declaration responsibility to digital platforms by designating them as “Deemed Importers.” These Deemed Importers would be responsible for ensuring that customs duties and VAT are paid at purchase. This means that consumers would no longer be hit with hidden charges or unexpected paperwork when a parcel arrives.

“Trust & Check” Traders

The “Trust & Check” Traders scheme is a new form of partnership between businesses and customs administrations, aiming to balance between transparency and facilitation. This enhanced form of an AEO authorization promotes the concept of a trusted relationship between businesses and customs administrations. It grants authorities access to the business’ electronic systems which keep track of the movement of goods. In return, businesses will be able to release the goods on their own, without further consultation of the customs administration, and defer the payment of the customs debt. Trust & Check Traders will, e.g., be able to complete data on their release of goods at a later stage (especially in situations where not all elements of the customs value are known at the time of import), as these traders will constantly share data on their transactions with the customs administration and are therefore regarded as reliable.

Timeline

The proposals are planned to be rolled out within the next 10 to 15 years. The Commission suggests that the new regulations for the EU Customs Authority, the EU Customs Data Hub and the new rules for e-commerce will first go life in 2028. At the beginning, the EU Customs Data Hub will only be available for e-commerce transactions. As of 2032, all traders may start using it. An evaluation of the new rules will then take place in 2035 after which in 2038 use of the EU Customs Data Hub may become mandatory for all traders.

We will keep monitoring any developments regarding these proposals closely and update you accordingly. In the meantime, we look forward to providing you with more detail and commentary on the proposals in the coming week.

Author

Nicole Looks is a partner within the Amsterdam Tax Practice with more than 25 years of experience. She focuses on advising national and international companies in all value added tax and customs related matters. JUVE Handbook on Commercial Law Firms, International Tax Review, Chambers & Partners, Legal 500 and Handelsblatt in cooperation with Best Lawyers recommend her as leading individual in the area of Indirect Taxes since many years and praise her as " "very knowledgeable about German customs tax" and as “very good and practice-oriented“. Nicole heads the European Customs Practice.

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.

Author

Thijs van Luijt is an associate within Amsterdam Indirect Tax team. He joined the firm in 2019.

Author

Rik van Duijvenvoorde is a senior associate in the Indirect Tax Team of Baker McKenzie’s Amsterdam office. He joined Baker McKenzie in March 2017.

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