EU customs reform proposal embraces modern approach to e-commerce

• The European Commission has proposed reforms to the European Union's (EU's) customs regime, including the introduction of a single online data system.
  
  
• The changes aim to simplify customs obligations and processes and introduce EU-level risk management to better enforce EU standards.
  
  
• Ultimately, this should improve customs authorities' ability to collect the customs and tax revenues that help finance budgets and public services.
  
  
• The proposals seek to cut down on fraud in the e-commerce sector, while introducing more transparency and peace of mind for consumers.
   

Executive summary

The European Commission (Commission) has released a proposal (pdf) to reform the European Union's (EU's) customs regime, which will see the introduction of a new EU customs authority and a single online data system. Changes will also be imposed for online marketplaces and the duty exemption for goods valued under €150 will be abolished.

The legislative proposals will now be sent to the European Parliament and the Council of the European Union for agreement, and to the European Economic and Social Committee for consultation.

Further information

The Commission has reported that a new EU Customs Authority will oversee an EU Customs Data Hub, which will act as the "engine" of the new system. Over time, the Data Hub will replace the existing customs information technology infrastructure in EU Member States. This aims to save on operating costs and deliver an improved EU approach to risk management and customs checks.

Under the new regime, it is envisaged that businesses that want to bring goods into the EU will be able to log all the information on their products and supply chains into a single online environment: the new EU Customs Data Hub. This technology will compile the data provided by business and — via machine learning, artificial intelligence and human intervention — provide authorities with a "360-degree overview" of supply chains and the movement of goods.

Businesses will only need to interact with a single portal when submitting their customs information — and submit data once for multiple consignments. In some cases where business processes and supply chains are completely transparent, the most trusted traders ("Trust & Check" traders) will be able to release their goods into circulation in the EU without any active customs intervention. The Trust & Check category aims to strengthen the current Authorised Economic Operators (AEO) program for trusted traders.

Under the proposals, the Data Hub will open for e-commerce consignments in 2028, followed (on a voluntary basis) by other importers in 2032, which the Commission predicts will lead to immediate benefits and simplifications. It is envisaged that Trust & Check traders will also be able to clear all of their imports with the customs authorities of the Member State in which they are based, no matter where the goods enter the EU. A review in 2035 will assess whether this option can be extended to all traders when the Hub becomes mandatory as from 2038.

The proposed system aims to give customs authorities a "bird's-eye view" of the supply chain and production processes of goods entering the EU. All Member States will have access to real-time data and will be able to pool information to respond more quickly, consistently and effectively to risks. Artificial intelligence will be used to analyze and monitor the data and to predict problems before the goods have even started their journey to the EU. The goal is to allow EU customs authorities to focus their efforts and resources where they are needed most: stopping unsafe or illegal goods from entering the EU.

One of the key pillars of the reforms is taking a more modern approach to e-commerce. The proposals include plans to:

• Make online marketplaces responsible for ensuring compliance with EU customs obligations
  
  
• Deem online marketplaces as importers to ensure customs duty and VAT is paid at the time of purchase
  
  
• Abolish duty exemption on goods valued under €150

The reform will also simplify customs duty calculations for the most common low-value goods brought into the EU, reducing the thousands of possible customs duty categories down to only four.
 

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), Indirect Tax
 

• Gerard Koevoets, London
  
  
• Gaurav Patney, London

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.