The EU Customs reform: A new path for enforcing the Union’s product regulations and key challenges for E-Commerce

The EU Customs Data Hub

One of the cornerstones of the planned UCC reform is the launch of an EU Customs Data Hub – a centralised digital platform designed to unify and modernise customs procedures across the EU. Set to become both the “face and engine” of the Customs Union, this platform shall replace today’s fragmented system consisting of 27 Member State customs authorities and their IT infrastructures with one single cohesive infrastructure, operated by a newly established EU Customs Authority. The Customs Data Hub shall serve as a single access point for all data required in customs procedures, and shall ensure quality, traceability, and integrity of information. This approach is not only intended to ensure that customs duties are levied correctly. Rather, this data-based approach is intended to help better pursue the EU’s non-financial interests such as product safety, protection of human, animal and plant health, and of the environment. With an ever-increasing number of e-commerce consignments, including in particular low-value consignments, and more and more product-related regulatory requirements, national customs authorities are currently struggling with effective and uniform enforcement.

Going forward economic operators – including importers, carriers and customs representatives – will only need to submit data once, rather than filing separate declarations with each Member State. Each transaction will be logged into the Customs Data Hub, capturing key details such as:

• importer, seller, buyer and manufacturer of the imported products;
• responsible economic operator under the General Product Safety Regulation and the Market Surveillance Regulation;
• product value, origin, tariff classification, and description of the imported products;
• applicable EU product legislation.

If the information remains unchanged, it shall be possible to reuse this data for future imports, helping to streamline the process even further.

Based on this information, the EU Customs Data Hub will perform EU level risk analyses, including through the use of artificial intelligence, and then issue inspection instructions to national customs. Over time, it shall also integrate existing systems and interoperate with related EU platforms (e.g. the Single Window Environment, digital product passports and safety alert systems). This centralised risk assessment shall enable swift action against non-compliant products. For example, if a product fails EU standards in one country, the Customs Data Hub will alert authorities in other Member States, enabling coordinated enforcement. The long-term aim of this new data-driven concept is that the current system, where each consignment from outside the EU requires separate multiple customs declarations, shall be replaced by a system where customs authorities will base their decisions on data to be provided by the several actors involved in the supply chains as well as data available from other sources. In addition to customs authorities, also other national authorities, such as market surveillance authorities, shall get access to this data to fulfil their tasks.

With the new centralised approach of the EU Customs Data Hub, the EU specifically envisages to react to the increasing challenges of e-commerce both in terms of complexity of required customs procedures as well as ensuring compliance of the products with applicable laws. In view of the aim to improve the uniformity of compliance controls with respect to product regulatory requirements, the EU Customs Data Hub can help reduce competitive disadvantages for businesses that take on significant investments to comply with applicable legal requirements. The EU expects the centralised approach of the EU Customs Data Hub to significantly reduce the administrative costs associated with the import of goods for the economic operators involved in the import. On the other hand, however, particularly online marketplaces may face additional costs in the future in the context of the UCC’s new deemed importer concept.

Deemed importer

Particularly with respect to online sales from non-EU countries, online marketplaces shall play a central role in handling customs procedures. Under the proposed new rules, platform providers shall be treated as “deemed importers” for customs purposes. The EU expects this adjustment to help ensure that customs duties on goods from non-EU countries are collected effectively. This approach builds on the experience gained from involving online marketplaces in the collection of VAT.

For online marketplace providers, the classification as a “deemed importer” means that they will be responsible for customs declarations for non-EU goods sold on their platforms. They have to provide the required information to customs authorities one day after receipt of payment at the latest. To be able to fulfil this obligation, providers of online marketplaces will have to collect information from their sellers prior sales on the platform, such as on the manufacturers of the products, the EU responsible person under the General Product Safety Regulation and the Market Surveillance Regulation, the origin of the products and their tariff classification. However, following the concept of the EU Customs Data Hub provision of such information may be facilitated by the EU Customs Data Hub where such information is already available in the hub and can, thus, be reused.

Furthermore, providers of online marketplaces shall also be responsible for paying customs debts. Customs debts will incur at the time when the payment for a sale on the platform is accepted. Thus, platform providers will have to make sure that customs debts are already included in the price to be paid by consumers for goods purchased on their platforms. For consumers, the proposed rules shall increase transparency with regards to the prices to be paid for goods ordered on platforms.

However, it has to be noted that the classification as a “deemed importer” under the new EU Customs Code does not automatically mean that online marketplaces will also be considered as importer under harmonised EU product-related legislation. The deemed importer concept of the UCC reform applies for customs purposes only.

Removal of EUR 150 relief threshold

While the relief threshold for VAT purposes in e-commerce has already been removed a few years ago, until now the EUR 150 relief threshold still exists for customs purposes. The EU Commission believes the customs relief threshold leaves the door open for systemic abuse through undervaluation and splitting of consignments. In order to combat such abuse, the customs relief threshold shall be removed so that any and all consignments irrespective of their value will be subject both to VAT and customs duties. While the EU until now has apparently assumed that the administrative burden associated with levying customs duties on low-value consignments is disproportionate, the Union now seems to believe that with the data available within the digitalised customs environment to be created with the establishment of the EU Customs Data Hub such an assumption and exemption is no longer justified. This is supported by the fact that with the removal of the VAT relief threshold, a customs declaration is already mandatory for consignments with a value below EUR 150 since 2021. Based on the assumption that there is a significant number of low-value consignments among e-commerce imports this change is expected to result in a significant increase in overall customs revenues – which, obviously, comes at a price for e-commerce businesses as well as for consumers.

Simplification of tariff calculations

The removal of the customs relief threshold shall be complemented by a simplification of tariffs and calculation of customs duties for e-commerce consignments.

For e-commerce, importers – including deemed importers – shall be given the option to categorize goods in five different buckets. Specific simplified tariff rates shall apply depending on the applicable bucket. The proposal includes the following buckets:

• Bucket A: 0% (e.g. printed books, newspapers, paper and paperboard and works of art);
• Bucket B: 5% (e.g. toys, games and sports requisites, musical instruments);
• Bucket C: 8% (e.g. silk, wool, wood and articles of wood, plastic products);
• Bucket D: 12% (e.g. leather articles, textiles, handbags);
• Bucket E: 17% (e.g. coffee, tea, cereals, footwear, glassware).

This bucketing system will release importers from the need to use the eight-digit code of the Combined Nomenclature (CN) to determine the applicable customs duty. However, this simplified bucketing system shall not be available for products that are subject to excise duties (e.g. alcoholic beverages and tobacco products), anti-dumping measures, anti-subsidies measures and safeguard measures, as well as certain products such as iron and steel products.

Importers who want to make use of this simplified system shall also not be obliged to prove the origin of the goods concerned towards customs authorities. Furthermore, calculation of tariffs shall be further simplified by including the whole transport costs in the calculation of the customs value of the goods; costs for the transport incurred after the entry into the EU customs territory shall not be deductible if the simplified system is used.

It remains to be seen whether these changes will actually result in the desired simplifications. Since the simplified bucket system shall not apply to products subject to certain trade measures, economic operators will likely still have to classify products using the “classic” eight-digit CN system to determine whether the goods are subject to one of the exempted trade measures and, therefore, require a standard customs declaration. Under the simplified procedure of the bucket system the customs rates for certain goods may be higher than under the traditional system, so that importers might still want to apply the lower customs tariffs. However, if they refrain from using the simplified bucketing system the simplifications regarding calculation of customs value as well as proof of non-privileged origin will no longer be available.

Next Steps

Especially with respect to e-commerce, the EU legislators are apparently considering to introduce further measures. For example, a handling fee for e-commerce products shipped directly to consumers in the EU has recently been proposed by the EU Commission and the EU Parliament to involve online retailers and marketplaces in the costs associated with the supervision of such consignments (for further information see here). Given the significant impact and ongoing developments regarding additional measures, in particular e-commerce businesses should closely monitor and keep track of these changes.

Authored by Dr. Christiane Alpers and Dr. Hanns-Thilo von Spankeren.

The authors would like to thank legal research assistant Julius Gottschalk for his active and valuable contribution to this article.