On Wednesday 17 May, the European Commission presented an in-depth reform of the Customs Union, “the most ambitious and comprehensive reform of the EU Customs Union since its creation in 1968”.
This reform is based on three pillars: - a new EU Customs Data Hub; - a new authority, the EU Customs Authority; - a more modern framework for online trade.
“We are all aware of the impact that recent international security and public health challenges have wrought on world trade, our economies and on our daily lives”, stressed Commissioner for Economy Paolo Gentiloni at a press conference. “During these crises, customs have been on the frontline, making sure that safe, secure, and sometimes life-saving goods get to where they need to go”, he continued.
According to the Commissioner, the customs union has facilitated trade with the rest of the world to the tune of €4.3 trillion in 2021, or 14% of world trade. Around 83,000 European officials work in customs to ensure the security of citizens and protect the EU’s financial revenues.
“It is our duty as policymakers to make sure that EU Customs has the tools it needs to continue performing these and a growing list of tasks”, Mr Gentiloni added.
A new EU Customs Data Hub
This new tool should establish a more cost-effective and efficient framework for cooperation. It is to replace the 111 IT systems currently in use in the 27 Member States. It will allow companies wishing to bring goods into the EU to register all their product and supply chain information in a single online interface. Other actors involved in the movement of goods, such as transporters or warehouse operators, will also enter useful information on the movement of these goods. These simplifications are expected to reduce compliance costs for businesses by €2.7 billion per year.
Customs will then have all the necessary information in real time about the goods that are being transported. They may intervene on a given consignment according to their risk analysis and at any time: before loading, on entry, during transport within the EU or after arrival at the final destination. This system will allow them to target and monitor more accurately possible safety and security risks, fraud or circumvention of legislation relating to goods subject to prohibitions and restrictions, regardless of where the goods enter the EU.
This system will be implemented from 2028 for online trade and will be extended to the rest of the players in 2038. In 2032, the Authorised Economic Operator (AEO) programme for trusted traders will be reinforced with the ‘Trust and Check’ designation. It will be awarded to the most trusted traders and will give them the possibility to release their goods into circulation without any active customs intervention.
EU Customs Authority
This authority will be responsible for overseeing the EU Customs Data Hub and will thus help Member States to prioritise relevant risks and coordinate their checks and inspections. It will continuously analyse the data and issue recommendations on which goods present a risk and should be stopped by Member States at the border. The authority will analyse the data using artificial intelligence, machine learning and human intervention. “This will create a truly common external border for goods”, Mr Gentiloni said.
As of 2028, it will take the form of a decentralised agency. The Member States and the Commission will sit on the Management Board of this new Authority. The Customs Authority will also coordinate crisis management. It will develop and enforce protocols and procedures for different crisis scenarios, such as public health emergencies, disruption or interruption of supply chains, or for the enforcement of EU sanctions. In addition, it will be the central customs contact point for non-customs authorities responsible for safeguarding the integrity of the single market.
A new framework for online trade
In recent years, due to online trade, the number of small parcels of low-value goods entering the EU has increased considerably. The current exemption from customs duties for goods worth less than €150 also represents a risk of fraud. It is estimated that 65% of parcels entering the EU are deliberately undervalued in their customs declaration to benefit from this exemption to the detriment of EU businesses, particularly SMEs, who find it difficult to compete with the resulting lower selling prices.
Starting in 2028, online shopping platforms such as Amazon, Alibaba or Zalando will have to ensure that customs duties and VAT are paid at the time of purchase. Consumers will no longer be confronted with hidden costs or unforeseen administrative formalities when the package arrives. With online platforms becoming the official importers, EU consumers will have the assurance that all duties have been paid and that their purchases are safe and comply with EU environmental, safety and ethical standards.
The reform also simplifies the calculation of customs duties for the most common low-value goods purchased outside the EU by reducing the thousands of existing duty categories to just four. The new regime is expected to generate around €1 billion per year in additional customs revenue.
For more information: https://aeur.eu/f/6y9 (Original version in French by Anne Damiani)