The European Commission proposed May 17 what it called “the most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968.” The proposal will next go to the European Parliament and European Council for agreement.
According to the Commission, the EU Customs Union “is struggling to deliver effectively on all of its tasks” in the face of challenges like an exponential rise in low-value e-commerce shipments, a significant increase in the number of EU standards that must be enforced on imported goods, and evolving geopolitical changes and priorities. Further, the lack of a central EU customs database or supply chain supervision, and the fact that importers instead need to deal with 27 national customs administrations and more than 100 separate interfaces and information technology systems, leaves the EU vulnerable to a variety of economic, strategic, and safety risks.
In response, the Commission said, the proposed reforms would simplify customs processes for businesses, especially the most trustworthy traders; replace traditional declarations with a data-led approach to import supervision; and provide customs authorities with the tools and resources they need to properly assess and stop imports that pose risks to the EU, its citizens, and its economy.
E-commerce. Addressing e-commerce, and particularly the “sheer volumes” as well as the “huge levels of fraud” in this sector, is the focus of several provisions. One would make online platforms into “deemed importers” responsible for ensuring that goods sold online into the EU comply with all customs obligations, including payment of customs duties and VAT at purchase and compliance with environmental, safety, and ethical standards.
Another would abolish the de minimis threshold, whereby imports valued at less than €150 are exempt from customs duty, because up to 65 percent of inbound parcels “are deliberately undervalued … to benefit from this exemption.” While this means that “duty will be charged on every single product sold online into the EU” (and there were nearly one billion customs declarations filed for low-value goods in 2022), the Commission states that calculating those duties would be simpler. Specifically, operators would be able to choose between the traditional duty calculation method or a simplified method that has four buckets of 5 percent (e.g., for toys and umbrellas), 8 percent (e.g., for silk products and ceramics), 12 percent (e.g., for leather handbags and clothes), and 17 percent (e.g., for footwear).
Customs data. Improving customs authorities’ visibility into supply chains – and thus allowing them to shift from a declaration-based to a data-led system – is another aim of the proposed reforms. Importers and exporters would submit information to a single portal – the new EU Customs Data Hub – and others involved in moving goods such as transporters and warehouse operators would enter relevant information into this system as well. Information that doesn’t change in the short term could be provided once and reused for subsequent shipments.
Each consignment of goods would be linked to one business or person in the EU who is liable for compliance with duty payments and product rules. Importers and exporters would become solely responsible for paying the applicable duties and taxes and ensuring compliance of the goods with EU standards and legislation.
The Data Hub – overseen by a new EU Customs Authority – would use artificial intelligence to “analyse and monitor the data and to predict problems before goods have even started their journey to the EU.” Among other things, the Commission sees this system as helping to uphold a growing number of laws that restrict imports over climate change, deforestation, forced labor, and other concerns. The Commission adds that this system would also allow for information sharing and joint risk analysis between customs and non-customs authorities responsible for issues like market surveillance, law enforcement, border management, and taxes.
The Data Hub would open for e-commerce consignments in 2028, followed (on a voluntary basis) by other importers in 2032, and would become mandatory in 2038.
Trade facilitation. The proposed reforms offer some trade facilitation benefits as well. Upgrading the EU’s existing authorized economic operator program, a new Trust & Check category would be established in 2032 for “a small group” of traders that (1) comply with strict criteria, including a clean legal record, a high level of control of their operations and supply chains, and proof of financial solvency, and (2) provide real-time data through the Data Hub on the movement of their consignments and evidence of their compliance with all relevant requirements.
These companies would be able to (1) clear all their imports with the customs authorities of the member state in which they are based, no matter where the goods enter the EU (a benefit that could be extended to all traders in 2038), (2) import goods without any need for active customs intervention, (3) self-monitor their compliance (though customs authorities would be able to perform risk analyses and request inspections), and (4) pay duties periodically without submitting customs declarations for every consignment.
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