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An analysis by Flick Gocke Schaumburg, Taxand Germany
The EU Commission is planning significant reforms in customs procedures for imported goods, aiming to simplify the process by leveraging digitalisation and data-driven methods. The reforms propose the establishment of an EU customs data platform, managed by a new EU customs authority, where importers can input relevant information about goods and supply chains.
This platform, powered by artificial intelligence, aims to increase transparency and enable targeted customs controls. The reforms also focus on identifying “trustworthy traders” who adhere to regulations, allowing them to import goods with minimal customs involvement.
Furthermore, responsibility for customs duties and VAT in e-commerce would shift to online platforms. The overall goal of these reforms is to reduce bureaucracy, enhance security, and streamline the customs process. However, these proposals are still undergoing discussions and debates in the EU Parliament and Council.
Rainald Vobbe, Partner at our German firm, Flick Gocke Schaumburg, analyses these reforms in more detail below…
EU plans customs reform
When importing goods into the EU, companies are known to grapple with complicated customs declarations and lengthy clearance procedures. This is why the EU Commission wants to introduce comprehensive reforms. Smart, data-driven procedures should make life easier for traders and customs authorities alike. The aim? To significantly reduce EU red tape.
Elsewhere, plans are being drawn up to combat fraud. This would be achieved by scrapping duty relief for goods with a value of less than EUR 150.
Background and why reforms might work
The European single market increasingly contends with an array of challenges. In addition to a surge in international trade, where the EU accounts for around 15%, there are a multitude of regulations within the EU, not to mention numerous geopolitical conflicts and circumstances. What would be the biggest reform to the Customs Union since its foundation in 1968 is aimed at ensuring a competitive internal market and the security of EU citizens. This, despite the unrelenting pace of the economy – due not least to almost borderless e-commerce.
Digitalizing customs procedures as a reaction to shifting behaviors aims to replace and simplify traditional methods. Especially when it comes to ‘trustworthy traders’. Import procedures should be possible without or with only minimal involvement of the customs authorities in some cases. This would undoubtedly result in significant time savings. Yet, it is not only the companies that would benefit from this; the customs authorities would also be equipped with new tools. In particular, the improved exchange of real-time data across the EU is intended to bolster the defense against trafficking drugs, weapons or other illegal goods.
New EU customs data platform at its core
The new system’s engine room would be the EU customs data platform. This would be run by a newly created EU customs authority, replacing existing IT infrastructure in the EU customs area. Projections show this would save up to EUR 2bn in operating costs.
Importers would be told to input all relevant information on imported goods and supply chains into the EU customs data platform. This would be the only means of communication between the customs authority and trader. This approach would drastically minimize bureaucracy. It would also be possible to transmit data from several deliveries at the same time. The platform would then process the information partly using artificial intelligence. This would ensure the entire movement of goods could be viewed transparently by the customs authorities, allowing risks to be quickly identified. EU member states would also be able to access the data in real time in order to carry out more targeted customs controls in the future.
If ratified, the data platform will initially be available to traders engaged in electronic trading from 2028. From 2032 all importers would be able to access it – initially on a voluntary basis. In 2038, however, the use of the platform would become mandatory.
More advantages for ‘trustworthy traders’
Companies have already been allowed to participate in the Authorized Economic Operator (AEO) program under certain conditions in order to enjoy privileges when importing goods. They have been required to prove compliance with various criteria, including all customs and tax regulations, showing they have kept sufficient accounts and that they are solvent. This ‘trust and check’ method would be maintained and strengthened with the new system.
Those completely transparent about their supply chains, consistently complying with all regulations can be classified as a ‘trustworthy trader’ (in other words, a ‘trust and check trader’). They are then allowed to import goods into the EU partly without the active involvement of customs authorities. If ‘trust and check traders’ are based in an EU member state, they would also be able to clear all their imports with the customs authority of that member state, regardless of where the goods arrive in the EU. In 2035, an evaluation would be carried out to determine the feasibility of extending this to all companies in time for the platform becoming mandatory from 2038.
Online platforms’ responsibility in e-commerce
At present, traders are mostly responsible for customs payments. However, where doubt exists, responsibility often lies with the individual consumer. It is not uncommon for them to be surprised by hidden costs for non-European deliveries which may not have been correctly stated in advance. They also have to often deal with unexpected formalities connected to customs.
To safeguard consumers and avoid distortions of competition, reform proposals entail shifting responsibility to online platforms engaged in e-commerce. This means they would be responsible for paying customs duties and VAT as official importers. This is to ensure that any corresponding fees would already be in the stated purchase price from the outset.
Additionally, the extensive number of customs categories would be reduced to four. This would make it easier for platforms and customs authorities to be able to calculate customs duties.
Further, one of the most important proposals is of particular note. The duty relief for goods with a value of less than under EUR 150 would be eliminated. Investigations show that scammers often undervalue goods when wishing to evade customs duties.
The EU Commission’s proposals still require more debate (in the EU parliament and by the Council). However, many will argue that reform is long overdue.
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