European Commission proposes major reform plan for the EU Customs Union

EU proposes reform plan for Customs Union

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The European Commission (hereinafter referred to as the “Commission”) has proposed a major reform of the European Union Customs Union, which will affect a wide range of stakeholders, including EU traders, consumers, and national customs authorities. On May 17, 2023, the Commission released its proposal, calling it the “most ambitious and comprehensive reform” since the establishment of the Customs Union. The Commission also released a timetable for the implementation of these reforms, with the earliest changes planned for 2028.

The Commission’s press release pointed out that the Customs Union of the European Union is facing increasing pressure due to the surge in e-commerce and the increase in bans and restrictions related to certain goods. The proposed measures aim to improve the efficiency of the customs process and cooperation between member states to enhance the security of the Customs Union. These reforms are included in draft regulations and a draft directive, which will repeal and replace the current EU customs code.

The reforms proposed by the Commission include the following main aspects:

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Introducing a new EU customs agency – a decentralized agency that shares the expertise and resources of member states;

Introducing an EU customs data center – a centralized customs information center that provides more transparency for customs authorities and simplifies customs procedures for businesses;

Introducing “One-stop-shop” customs services;

New provisions for “Deemed importers”;

The “Trusted Trader” program for “Trust and Verify” traders (an enhanced version of the Authorized Economic Operator system).

Abolish the exception of exempting tariffs for goods valued below 150 euros.

These proposals are important for simplifying customs procedures for enterprises and keeping the EU in sync with digital transformation. These measures are also aimed at enhancing the risk management and customs inspection tools of customs authorities. The proposals are divided into the following three pillars:

1. Cooperation with enterprises

The Commission’s proposal includes the establishment of a new EU customs data center, which will centralize the data provided by enterprises into an online environment. The EU customs data center will be managed by the EU customs agency and will gradually replace the existing customs information technology infrastructure of member states. The Commission points out that this will simplify the relevant procedures for enterprises when submitting customs information, and at the same time, enable customs authorities to better understand the supply chain and movement of goods. By cooperating with enterprises on the EU customs data center, the Commission aims to reduce customs interventions on imported goods while enhancing the supervision and risk management capabilities of customs authorities.

2. Customs inspection

The new EU customs agency will be a decentralized agency that brings together the expertise and resources of member states. The EU customs agency will assist member states in customs inspections by providing real-time data from the shared information of the EU customs data center. Member states will be able to coordinate inspection work and cooperate to respond to risks in order to efficiently address problems. Artificial intelligence will also be used to monitor data to free up customs resources and address issues in a timely manner. According to the Commission, the EU customs agency will play a key role in addressing “border shopping” by leveraging the centralized and real-time data from the EU customs data center.

3. E-commerce

As mentioned, the proposal aims to abolish the current rule of exempting tariffs for goods valued below 150 euros. In order to ensure the consistency of tariff rules and value-added tax rules, the Commission also proposes revising the EU value-added tax directive to abolish the inherent value threshold of 150 euros in the provision on imported goods sold through certain online platforms being “deemed as resellers”.

Compared to the current situation, the rules proposed by the committee require online platforms that sell goods to the EU from outside the EU to be responsible for calculating tariffs and value-added tax at the time of purchase, regardless of the value of the goods. These online platforms will be considered “importers”, and EU consumers will no longer bear the risk of hidden import fees when the package arrives.

In terms of timing, the EU customs agency is planned to be operational from January 1, 2028. The committee stated that the EU customs data center will provide services for e-commerce goods in 2028, and then open to other importers in 2032. Overall, the committee expects these reforms to require a transitional period of 10 to 15 years to take effect, to ensure the smooth introduction of new measures and not to disrupt customs operations.

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