An article by Cesar Guerra, Chair of the Trade Policy Committee
The European Commission published on 17 May this year its proposal to reform the way customs operate in the 27 Member States of the European Union. This is the most ambitious reform since the customs code was established in 1968. According to the European Commission, the proposal seeks to establish a new partnership with businesses, a smarter approach to customs checks and a modern approach to e-commerce.
The Commission's proposal builds on 10 recommendations made on 31 March 2022 by an ad hoc group of 12 high-profile experts (Wise Persons Group on the Challenges Facing the Customs Union) who were appointed to seek solutions on e-commerce, risk management, effective management of customs' increasing range of non-financial tasks, and future governance structure. The expert group's proposals fall into five areas to improve the functioning of the single market:
- one external border,
- promoting the EU way of life,
- ensuring proper collection of customs duties and taxes at the border,
- greening of customs, and
- a new approach to responsibility and trust.
Among the most relevant proposals is the creation of a new EU Customs Agency that will be in charge of an EU Customs Data Hub, which will be the engine of the new system. It is envisaged that over time, the Data Hub will replace the IT infrastructure in the EU Member States. However, given the complexity of such a project, implementation would not be straightforward, so it is envisaged that by:
- 2028 E-commerce companies would have access to the EU Customs Data Hub,
- by 2032 all companies would start using the Hub on a voluntary basis, and
- by 2038 the use for all companies importing into the EU would be mandatory.
The new EU Customs Agency is created to coordinate cooperation between Member States in risk management, support uniform implementation of rules and criteria at every entry point of the EU single market, and manage customs programmes.
Of course, the creation of the new agency is a controversial issue that touches on the competence that now belongs to national customs authorities and that, in the interests of strengthening the single market by standardising the functioning of customs, the Commission would now absorb.
Another element that has provoked much discussion is the proposal to eliminate the EUR 150 threshold that exempts distance-sold goods imported below this value (de minimis) from paying tariffs. According to the European Commission, up to 65% of imports under the current scheme are undervalued. Instead, a simplified import scheme would be established where goods are grouped at the HS Chapter level - i.e. at the two-digit level - into five tariff categories (0%, 5%, 8%, 12% and 18% for most sensitive, such as meat, sugar, dairy and cereals). This system is very similar to the one Canada has had in place for some years. It should be remembered that Canada has commitments in the USMCA so it maintains more comfortable de minimis provisions for shipments it receives from the US and Mexico, even if they do not comply with the origin provisions. There are some voices arguing that this measure proposed by the Commission could be inconsistent with the EU's international trade commitments, e.g. in the WTO and goes against simplification. However, it should be recalled that the provision on maintaining a de minimis clause in the WTO Trade Facilitation Agreement is not binding.
First impressions by Member States on the Commission's reform proposal were given at the meeting of the Customs Union Working Group under the Swedish Presidency in the last week of June. The majority of Member States warmly welcomed the proposal, recognising that it is necessary. However, there is a long way to go to analyse each of the Commission's proposals, but it’s likely that the establishment of the Customs agency and de-minimis will be two of the most prominent issues. It is expected that the first general review of the proposal would be completed during the Spanish Presidency. Nonetheless, it is expected that it will take more than a year to reach a consensus within the Member States.
On the European Parliament side, IMCO will be the committee leading the discussion and the INTA committee will follow this issue closely because of the implications for international trade. Given the complexity of the issue and because of the elections next year, it is estimated that this issue will also take at least 12 months to cook in the Parliament.
From the day of publication of its proposal, the Commission opened a new 8-week comment period until 30 August this year if anyone is interested in contributing to the discussion in this way.
In conclusion, this issue, which will impact trade and the EU single market, will be the subject of much discussion in the coming years, and BritCham's Trade Policy Committee will be following it up at its meetings and organising an event on the topic in October 2023 (Date TDB).
Please contact Trade.officer@britcham.eu if you would like to remain up to date with the developments of the legislation and our upcoming event.