The EU’s Union Customs Code: New Opportunities for Greater Efficiency, Transparency, and Simplicity
On May 1, 2016, traders in the European Union (EU), North American companies that trade with the EU, and North American companies with operations in the EU, witnessed the beginning of the largest change to European customs procedures in the past 20 years with the introduction of the Union Customs Code (UCC).
The UCC brings an overhaul to the EU’s current customs framework, the Community Customs Code. The new legislation aims to facilitate legitimate trade, increase safety and security, and rationalize, harmonize, and standardize the application of customs controls and decision-making processes across Europe. Moreover, under the UCC, all communications between customs authorities and businesses will have to be electronic, with the goal of creating a completely paperless customs environment across the EU.
“Simplicity, Service and Speed” is the phrase the EU has adopted to describe the goal of the UCC.
Many traders are only just becoming aware of the implications of the new customs framework. This is largely due to the fact that final details were only negotiated and approved with the adoption of the Delegated Act and the Implementing Act in July and November 2015 respectively. As a result, many national customs authorities were clearly not going to have all of the systems in place to implement the changes immediately; therefore, in March 2016, a Transitional Delegated Act (TDA) was also released. This gives customs authorities and traders a phased implementation timeline that runs through 2020.
This means that, as of May 1, many existing procedures may continue normally with changes implemented as national systems are updated or authorizations are reissued or reassessed. In other instances, businesses may want to take advantage of a number of new immediate or longer-term facilitations, such as:
- The ability to make remote retail sales in a customs warehouse
- Greater use of equivalence in all special procedures
- Greater flexibility to move goods under Temporary Storage
- Introduction of Entry Into the Declarant’s Records (EIDR)
- Reduction in the Customs Duty guarantee for a Duty Deferment account
- Centralized clearance across the EU
- Self assessment
Mandatory guarantees are also now required for new authorizations for special procedures involving the suspension of customs duty and temporary storage. To be authorized for special procedures or benefit from the majority of these facilitations, a business needs to achieve Authorized Economic Operator (AEO) status, specifically for customs simplification (AEOC) or, in some cases, at least meet key AEOC criteria. An internationally recognized quality mark, AEO status indicates that a trader’s role in the international supply chain is secure, and that the organization’s customs controls and procedures are efficient and compliant.
With an increased demand for AEO status and guarantees, visibility and information are critical to ensuring compliance. A key element of AEO status is a clean compliance record, without which the potential loss of AEO and its impact on authorizations and facilitations could be costly.
With the transitional period, UCC changes will be implemented at varying times across member states, which will create challenges for any businesses operating customs procedures across the EU. One thing, however, is clear: All exchange of information between customs authorities and economic operators will eventually become electronic. An updated work program for major EU IT changes has just been finalized and there is, of course, the expectation that economic operators’ systems will also need upgrading.
The eventual impact of the UCC is not to be underestimated, even if there appears to be little change now for some. The legislation will affect North American companies in different ways depending on the nature of their business operations in the EU (i.e., processing or end use of goods). While the next few transitional years will bring some degree of uncertainty, however, the opportunities for greater efficiency, transparency, and simplicity are substantial, with technology having a tangible role to play.
For organizations looking to understand how the UCC might affect their business, visit the EU UCC Resource Center.