EU COMMISSION PROPOSAL FOR CUSTOMS UNION REFORM

On 17 May 2023, the European Commission presented a proposal to reform the European Customs Union. The Customs Union is unique in the world and is essential for the proper functioning of the EU single market, as it allows for the establishment of a common customs tariff on imports from territories outside the EU. It acts as a single entity, greatly facilitating international trade. However, the EU Customs Union today faces many challenges, due to increasing trade volumes, digital developments, remaining discrepancies between Member States, but also changing geopolitical forces. These are the issues that the Commission proposes to address.

Objectives and key elements of the proposals

The Commission describes its reform proposal as the most ambitious ever since the birth of the EU Customs Union. The main objective is to reduce customs burdens by 25 per cent while maintaining a high standard of security and maintaining a transparent market for EU citizens. One of the challenges that this proposal intends to address relates to the commercial landscape, in particular the increase in e-commerce, by simplifying customs procedures and improving the efficiency of controls. It also aims to increase duty revenues and to standardise the operational implementation of customs controls in the different Member States, facilitating the flow of trade while ensuring the control of illicit and non-compliant products. It is also proposed to establish a new EU Customs Authority, with the mission to supervise the implementation of customs rules, to manage and develop the EU customs data hub, and to coordinate operational crisis management. The Customs Authority will also be able to centralise customs expertise at European level to provide control recommendations to national customs authorities, which will be obliged to apply them or justify their non-application. As the EU has recently been criticised for the difficult practical implementation of international sanctions against Russia, the Customs Authority will have the capacity to develop protocols and procedures for different crisis scenarios, ensuring better prioritisation of high risks and coordination of controls and inspections. The EU customs data hub, managed by the new Customs Authority, would act as the engine of the new system. The reform aims to replace the existing customs IT infrastructures in the Member States (there are more than 100 different ones) with a single centralised system. The Commission estimates that this system could save up to EUR 2 billion per year in operational costs, as well as greatly facilitating customs processes. The Data Hub would act as a single interface for the European Union for all imports, harmonising, rationalising and reducing the time taken by operators to complete customs declarations and facilitating the re-use of data. The proposed reform timetable envisages the gradual implementation of these changes over the next 10 to 15 years. The new rules, as well as the jurisdiction of the EU Customs Authority and the Data Hub, would be implemented by 2028 for e-commerce only, and then extended to all importers by 2032, but only on a voluntary basis. After an evaluation of the situation in 2035, the aim is to make the use of the Data Hub mandatory for all traders by 2038.

The pillars of the reform

These proposals are based on three pillars:

• A new partnership with business
The Commission intends to reduce burdens on business and facilitate the international flow of imported goods by establishing a relationship of trust with importers. The main idea is to enable them to access the EU single market in a simple, cheaper and less time-consuming way, provided they meet the requirements. Therefore, the Data Hub is designed as a key tool to automate the process. Importers will be able to register all their information in one online environment and reuse it easily.
Furthermore, this 'Pan-European Union Customs-One-Stop-Shop' would greatly simplify the tasks for businesses, which will finally be able to deal with one European customs authority, rather than with 27 national customs authorities.
Cooperation between customs administrations and so-called 'Trust and Check' traders would go even further. Trust and Check' traders would grant the authorities access to their electronic system that tracks the movement of goods, ensuring that their processes and supply chains are fully transparent. In return, 'Trust and Check' traders would be able to complete the data at a later stage, put their goods into circulation without any active customs intervention and defer the payment of customs debts.

• A smarter approach to customs controls
By centralising real-time data, the Data Hub would provide immediate surveillance of the supply chains and production processes of goods entering the EU.
Member States would still have access to information, and it would be easier to respond efficiently to, or even prevent, any crisis. In fact, one of the aims of the reform is to use artificial intelligence to analyse and monitor data and predict possible problems. By focusing the attention of EU customs authorities on more pressing issues, such as the management of unsafe and illegal goods or the implementation of the growing number of EU standards, the Commission hopes to reduce any dangerous situations.
Digital data management can also help customs authorities to collect taxes and duties correctly, thus reducing fraud, and to improve overall cooperation between the EU and Member States, especially through information sharing.

• A more modern approach to e-commerce
Today, due to the increase in e-commerce (i.e. goods sold online), it is increasingly difficult to ensure that e-importers comply with EU customs duties and obligations. Currently, the responsibility falls on individual consumers and carriers, who are often affected by hidden charges or unexpected red tape. This reform aims to put an end to this problem by making online platforms the official importers. Therefore, they become responsible for ensuring that imported goods comply with EU customs regulations, that they are in line with EU standards, but most importantly that customs duties and Value Added Tax (VAT) are paid at the time of purchase and not upon arrival of the goods.
In addition, the reform proposed to abolish the current EUR 150 value threshold for exemption from customs duties, as well as to reduce customs categories to four for low-value common imported goods. By making the calculation of customs duties for low-value goods simpler, the reform aims to better manage the multitude of e-commerce purchases entering the EU each year and eliminate the risk of fraud.
In conclusion, we would like to reiterate that this very ambitious reform is currently only a legislative proposal from the Commission, and therefore has not yet entered into force.
The proposals will be sent to the European Parliament and the Council of the European Union for discussion and possible agreement, and to the European Economic and Social Committee for consultation.
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Bologna – May 30th 2023

Edited by Dr. Solene Vercelletto – De Capoa and Associates Law Firm – Bologna