Customs Union Reform: Deep Simplification

On May 17, the European Commission proposed a comprehensive reform of the Customs Union. The rapid growth of trade volumes, especially e-commerce, makes such reforms imperative. The Commission’s proposal features innovative use of databases and the adaptation of customs procedures to a digital format.

The reform is based on three fundamental pillars: i) cooperation with businesses and data platforms, ii) a new approach to implementing customs controls in cooperation with the new EU customs authorities, and iii) a framework more adapted to e-commerce.

In terms of working with businesses, the reforms aim to simplify procedures for businesses, both in terms of customs declarations and customs clearance:

• Companies will be able to register all information related to their products and supply chains on the EU’s new customs data platform. The platform will be able to compile all the data provided by companies and provide customs authorities with a cross-sectional view of trade. The will to simplify procedures is also reflected in the interaction with the single portal dedicated to customs operations.

• In addition, a “trust and check” system will be set up for the most reliable operators, enabling them to release goods into the EU without any active customs intervention, i.e. clearing all imports through the customs authorities of the member states, regardless of where the goods enter the EU from. The centralised customs clearance dreamed of in the 2016 EU Customs Code is now a reality with this revised proposal.

The innovative approach to customs supervision is reflected in the creation of a new EU Customs Authority to assess the information collected by the Customs Data Platform at EU level. In particular, this authority aims to help Member States coordinate their supervision and inspections. The reforms also seek to improve cooperation between the various public actors, namely national authorities, market surveillance agencies and national and European law enforcement agencies.

Finally, with regard to e-commerce, the Commission wants to give the Customs Union a more realistic approach.

Indeed, the EU needs to ensure that online sales comply with customs obligations. The 2021 reforms (the “VAT package”) mark an important but still insufficient step as national and global customs authorities consider how best to respond to the chronic undervaluation caused by e-commerce.

For this purpose, the selling platform will be considered a “constructive importer” and therefore responsible for ensuring that not only VAT but also customs duties are paid when products are purchased online.

Currently, these platforms are only responsible for collecting VAT. With the removal of the tax exemption, they will be responsible not only for collecting VAT but also for paying customs duties as they are considered “deemed importers”.

In addition, customs exemptions for goods with a value of less than 150 euros will also be abolished.

Finally, the reforms will reduce thousands of possible tariff categories to four to facilitate tariff calculations on low-value goods.

The Customs Union reform will bring structural and systemic changes to customs operations, such as the introduction of trade databases. Therefore, companies must adapt to these new mechanisms, which mainly depends on cooperation between companies.

DS Avocats Customs and International Trade team are on hand to provide you with any additional information.

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dscustomsdouane@dsavocats.com