EU customs reform: a data-driven vision for a simpler, smarter and safer Customs Union

Last Updated on Tuesday, 14 November, 2023 at 10:07 am by Andre Camilleri

Daniel Debono is the EU Affairs manager and head of the Brussels Operations at the Malta Business Bureau (MBB). The MBB is the EU-business advisory organisation of The Malta Chamber and the Malta Hotels and Restaurants Association. It is also a partner of the Enterprise Europe Network

The EU Customs Union is a key pillar of the EU integration project. It regulates trade between EU member states and the rest of the world and collects important revenue for the EU and national budgets. However, international developments require the EU Customs Union to continue evolving to address several challenges, including a surge in e-commerce transactions, more sophisticated EU standards for consumer protection and the need to respond to geopolitical changes.

Customs processes need to be effective in addressing risks to avoid abuse that would result in a loss of public revenues, criminal activity, fraud and dangerous products being placed on the market; yet simple enough not to stifle trade activity with red tape and unnecessary administrative burdens. In recent years, major reforms have been implemented to the Customs Union to adopt modern trade models and communication tools as part of the Union Customs Code.

This project is not an end in itself, and earlier this year, the European Commission proposed another ambitious and comprehensive reform that aims to make the current system more efficient, effective and fit for the digital age. It will simplify processes for businesses, while giving customs authorities the tools and resources they need to protect the EU from the risks referred to above. The reform is expected to save businesses money and make the Single Market safer.

The EU Customs reform will introduce a new partnership with business through the EU Customs Data Hub. This cutting-edge platform will allow businesses to log all the information on their products and supply chains into a single digital space. Customs authorities will then be able to use this data to get an all-round overview of supply chains and the movement of goods. The reform will also simplify customs processes for businesses. For example, businesses will only need to interact with one single portal when submitting their customs information and will only have to submit data once for multiple consignments. It will also be possible for businesses to obtain a “trusted trader” status that enables them to release their goods into circulation within the EU without any active customs intervention at all.

The EU Customs Data Hub will allow customs authorities to focus their efforts and resources to identify and stop unsafe or illegal goods from entering the EU single market. It will make use of artificial intelligence to analyse and monitor data and predict risks before the goods have even started their journey to the EU. This way customs authorities can be more proactive and effective in their work.

The EU Customs reform will also offer a more modern approach to e-commerce by having key online platforms ensure that goods sold online into the EU comply with all customs obligations. This is a major departure from the current system, which puts the responsibility on the individual consumer and carriers. Platforms will be responsible for ensuring that customs duties and VAT are paid at purchase, and in line with EU environmental, safety and ethical standards, so that consumers will no longer be hit with hidden charges or unexpected paperwork when the parcel arrives.

According to the European Commission, in 2022, almost one billion customs declarations for low-value goods were filed. It argues that the current customs duty exemption for goods with a value under €150 has made e-commerce more susceptible to fraud. Some traders are deliberately undervaluing their packages to avoid paying taxes and putting EU businesses at a disadvantage. The exemption also sees sellers splitting larger consignments into smaller packages, which increases packaging waste and emissions. To remedy this, the European Commission is proposing a reform of the customs framework in the EU that would abolish the €150 de minimis threshold exemption from customs duty. This would mean that duty would be charged on every single product entering into the EU, regardless of value. The €150 threshold would result in a level playing field between foreign sellers and domestic retailers as well as reduce the incentive for undervaluation. 

The EU is set to implement this reform over a period of time. By 2028, it is aimed that all e-commerce companies have access to the EU Customs Data Hub. By 2032, it is targeted that all businesses will begin using the hub on a voluntary basis, and by 2038, the use of the hub will become mandatory for all businesses importing goods into the EU.

The Commission proposal for Customs Code reform is currently being negotiated in the EU Council and Parliament and therefore changes are expected as part of this process. It is important that at this early stage businesses become aware of the proposed reforms and how this may affect their business in view of future changes.

The EU Customs reform is a complex and ambitious undertaking, but it is essential to ensure that the EU Customs Union is able to meet the fast-evolving digital challenges of this century. In principle, the reform is welcome as it is expected to benefit businesses and consumers by making the EU Single Market safer, more competitive and more efficient.

One augurs that the necessary digital solutions are implemented on time and it is ensured that they meet the expectations of delivering more efficient processes.

- Advertisement -