New EU commission proposal to reform customs union

On May 17, 2023, the European Commission presented a proposal to reform the European Customs Union.

The Customs Union is unique in the world and is essential to the proper functioning of the EU's single market, as it allows for the establishment of a common customs tariff on imports from territories outside the EU. It acts as a single entity, greatly facilitating international trade.

However, the European Union's Customs Union is being called upon, today, to face many challenges, due to increasing trade volumes, digital developments, discrepancies that remain between member states, but also changing geopolitical forces. These are the issues that the Commission proposes to address.

Objectives and key elements of the proposals

The Commission describes its reform proposal as the most ambitious ever since the birth of the European Union's Customs Union.

The main objective è to reduce customs burdens by 25 percent while maintaining a high standard of security, as well as to maintain a transparent market for the citizens of the European Union.

One of the challenges that this proposal aims to address è relates to the trade landscape, particularly the increase in e-commerce, through simplifying customs procedures and improving the efficiency of controls.

It also aims to increase duty revenue and standardize the operational implementation of customs controls in different member states, facilitating the flow of trade while ensuring the control of illicit and non-compliant products. It is also proposed to establish a new European Union Customs Authority, with a mission to oversee the implementation of customs rules, manage and develop the European Union customs data hub, and coordinate operational crisis management.

The Customs Authority will, also, be able to centralize customs expertise at the European level to provide recommendations i control matters to national customs authorities, which will be obliged to apply them or justify their non-application. Since the European Union has recently been criticized for the difficult practical implementation of international sanctions against Russia, the Customs Authority will have the capacity to develop protocols and procedures for different crisis scenarios, ensuring better prioritization of high risks and coordination of controls and inspections.

The EU customs data hub, managed by the new Customs Authority, would act as the engine of the new system. In fact, the reform aims to replace existing customs IT infrastructures in member states (there are more than 100 different ones) with a single centralized system.

The new Customs Authority would be the driving force behind the new system.

The Commission estimates that this system could save up to 2 billion euros a year in operational costs, as well as greatly facilitate customs processes. The Data Hub would act as a single interface for the European Union for any importation, harmonizing, streamlining and reducing customs declaration time for operators and facilitating data reuse. The proposed reform timetable envisages the gradual implementation of these changes over the next 10 to 15 years. The new rules, as well as the jurisdiction of the EU Customs Authority and the Data Hub, would be implemented by 2028 for e-commerce only, and then extended to all importers by 2032, but only on a voluntary basis. After an assessment of the situation in 2035, the goal è to make the use of the Data Hub mandatory for all traders by 2038.

The pillars of the reform

These proposals are based on three pillars:

In conclusion, we would like to reiterate that this very ambitious reform è is currently only a legislative proposal of the Commission, and therefore has not yet come into force.

The proposals will be sent to the European Parliament and the Council of the European Union for discussion and possible agreement, as well as to the European Economic and Social Committee for consultation.

• A new partnership with business
  . The Commission aims to reduce burdens on businesses and facilitate the international flow of imported goods by establishing trust with importers. The main idea è to enable them to access the EU's single market easily, less expensively and with less time, provided they meet the requirements. Therefore, the Data Hub è designed as a key tool to automate the process. Importers will be able to record all their information in one online environment, reusing it easily. In addition, this “Pan-European Union Customs-One-Stop-Shop” would greatly simplify tasks for businesses who will finally be able to relate to a single European customs authority, rather than 27 national customs authorities. Collaboration between customs administrations and so-called "Trust and Check" traders would go even further. Traders "Trust and Check" would grant authorities access to their electronic system that tracks the movement of goods, ensuring that their processes and supply chains are fully transparent. In return, the "Trust and Check" traders would be able to complete the data at a later stage, put their goods into circulation without any active customs intervention and defer payment of customs obligations.
• A smarter approach to customs controls
  . By centralizing real-time data, the Data Hub would provide immediate surveillance to supply chains and production processes of goods entering the European Union. Member states would still have access to information and it would be easier to respond efficiently to any crisis, or even prevent one. In fact, one of the goals of the reform è is to use artificial intelligence to analyze and monitor data and predict possible problems. By focusing the attention of EU customs authorities on more pressing issues, such as handling unsafe and illegal goods or implementing the growing number of EU standards, the Commission hopes to reduce any dangerous situations. Digital data management can also help customs authorities to properly collect taxes and duties, thus reducing fraud, and to improve overall cooperation between the European Union and member states, especially through information sharing.
• A more modern approach to e-commerce
  . Today, due to the increase in electronic commerce (i.e., goods sold online), it is becoming increasingly difficult to ensure that electronic importers comply with EU customs duties and obligations. Currently, the responsibility falls on individual consumers and carriers, who are often affected by hidden charges or unexpected paperwork. This reform aims to end this problem by making online platforms the official importers. Therefore, they become responsible for ensuring that imported goods comply with European Union customs regulations, that they are in line with European Union standards, but most importantly that customs duties and Value Added Tax (VAT) are paid at the time of purchase and not when the goods arrive. In addition, the reform proposed abolishing the current threshold of 150 euros in value for exemption of customs duties, as well as reducing customs categories to four, for common low-value imported goods. By making it simpler to calculate customs duties for small-value goods, the reform aims to better manage the multitude of e-commerce purchases that enter the European Union each year, eliminating the risk of fraud.