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EU unveils landmark customs reform proposals

Author: ICAEW Insights

Published: 02 Jun 2023

Unwieldy sprawl of administrations and IT links to be replaced with single authority in charge of unified data hub, under measures tabled as friendlier to traders.

An artificial intelligence (AI)-fuelled data hub that would save member states €2bn a year is the centrepiece of proposals described as the “most ambitious and comprehensive” EU customs reform since the dawn of the customs union 55 years ago.

Unveiled on 17 May, the proposed package of measures seeks to rationalise an unwieldy infrastructure for the bloc’s import and export processes under a new EU Customs Authority. Pending legislation, that body would oversee an overhauled system with aims to be not just friendlier to business, but greener, more digitally driven and better equipped to manage the effects of geopolitical crises.

In a Q&A on the proposals, the European Commission notes that in 2021 the total value of EU trade with other countries came to €4.3trn – 14% of world trade – and that each year the EU customs system collects €80bn in duties and VAT. However, EU importers must currently grapple with 27 different customs administrations, comprising 111 separate interfaces and IT setups.

The EU Customs Authority would be responsible for managing and maintaining a new EU Customs Data Hub that would centralise the functions of the current system under one roof, saving member states billions in annual operating costs.

Major departure

Under the proposals, the reforms would unfold across three work streams – two of which would emphasise particular benefits for the commercial world:

A new partnership with business 

In what the commission describes as a world first, the new hub would enable companies bringing goods into the EU to log all the information on their products and supply chains into a single, online environment. With that data in hand, the hub’s AI and machine learning functions – along with its human operators – would provide authorities with a real-time, 360-degree view of supply chains and the movement of goods.

In addition, the hub would ensure that businesses would only need to submit data once for multiple consignments. And in cases where business processes and supply chains are fully transparent, the most trusted entities – known as ‘Trust and Check’ traders – would be able to release goods into circulation in the EU without any customs intervention at all.

A more modern approach to e-commerce

In a major departure from the current system – whereby consumers and carriers must ensure that goods sold online into the EU meet key customs obligations – the reforms would shift that responsibility to e-commerce platforms. Those vendors would also be required to ensure that duties and VAT are paid at purchase, so consumers will no longer face hidden charges or unexpected paperwork when parcels arrive.

At the same time, the reform would abolish a threshold that exempts from customs duty any goods valued at less than €150 – a loophole heavily exploited by fraudsters: to avoid import duties, up to 65% of such parcels entering the EU are currently undervalued.

A smarter approach to customs checks 

The hub’s AI would analyse and monitor the data that companies enter to flag up problems before goods even start their journey to the EU. That would enable authorities to focus their efforts and resources where they are needed most: to prevent unsafe or illegal goods from entering the union.

The AI would also boost authorities’ powers to uphold a growing number of laws banning goods that contravene common EU values – for example, in the fields of deforestation, climate change and forced labour – and help to ensure a proper collection of duties and taxes, to the benefit of national and EU budgets.

A proposed timeline for the reforms would grant e-commerce companies access to the hub in 2028, then invite all businesses to join the facility on a voluntary basis in 2032. It will finally become mandatory in 2038.

Unwavering support

European Commissioner for Economy Paolo Gentiloni said the proposed reforms represented “the most ambitious and comprehensive reform since the creation of our customs union in 1968”.

“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,” Gentiloni said. “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. They have also played a key role in enforcing our sanctions on trade in goods with Russia, upholding our unwavering support for Ukraine and fighting sanctions circumventions.”

Gentiloni added: “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 – especially in view of an unpredictable geopolitical and economic landscape, our strategic autonomy ambition as well as the need for all public sectors to contribute to the green and digital transitions.”

ICAEW Technical Manager, VAT and Customs, Ed Saltmarsh said: “We welcome the EU’s proposals for revising the Union Customs Code – particularly the proposed new partnership with business. Enabling companies to log all information on goods entering the EU into a single online environment should reduce the administrative burden for UK businesses trading with the EU.”

• The commission has opened an eight-week feedback round on the reform legislation. Saltmarsh invites ICAEW members to email their thoughts on the proposals to him at Ed.Saltmarsh@icaew.com

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