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On 28 September 2020, the European Commission unveiled an ambitious Action Plan with 30 concrete actions intended to make the EU customs union smarter, more effectively digital, and more agile by end 2025. Key aims (once again…) are to ensure the uniform application and enforcement of EU customs rules throughout the EU and create a Single Window customs environment. While this should be an overall business-friendly plan, e-commerce platforms may face increased reporting obligations. The controversial idea of a central EU customs agency is also being revived, as are attempts to harmonise penalties for customs infringements.
Introduction
On 28 September 2020, the European Commission published a Communication entitled "Taking Customs to the Next Level: a Plan for Action".1 Political Guidelines published in July 2019 by Commission President Ursula von der Leyen called for "a stronger framework that will allow us to better protect our citizens and our single market" and "an integrated European approach to reinforce customs risk management and support effective controls by the Member States."2 The new Action Plan outlines concrete steps to try to achieve those objectives.
Thirty actions scheduled for 2020-20253 seek to address the challenges faced by the EU Member States customs authorities. This includes more efficient management of their ever-increasing roles, to ensure, for example, that import duties, excise duties, and VAT are paid correctly4 and that goods are checked at import/export at the EU border and unsafe/fake goods or controlled items are identified and handled appropriately, taking account of the major increase in e-commerce and risks related to that. In addition, the expected Brexit-related increase of customs declarations and the COVID-19 crisis highlight the clear need for improved management of the EU customs union.
The Action Plan acknowledges that there are weak links in the system and that greater availability and use of data and data analysis and more robust risk management tools are required, as well as more EU financing for customs equipment and IT systems. By end 2025, the Commission wants to complete a modern, interconnected and fully paperless customs environment, covering the implementation of the Union Customs Code (which has been in place since 2016). While a sensitive 2013 Commission proposal aimed at harmonizing penalties for customs infringements has recently been withdrawn for lack of progress, the Action Plan again aims to come up with guidelines first, and then possibly a new legislative proposal. Another controversial idea, the creation of a central EU Customs Agency, has courageously been proposed again by the Commission.
Key pillars of the Action Plan
The Action Plan is built around the following four pillars:
- Risk Management — Actions focus on ensuring that the existing EU risk framework is implemented in the same way in every corner of the EU, based on exchange of risk information and robust electronic risk analysis. Upgrades to IT systems are already ongoing and a new Risk Management Strategy focusing on security, safety and financial risks is planned for adoption in Q2 2021.
- Managing e-commerce — While acknowledging that e-commerce brings significant benefits to businesses (including SMEs), the Commission notes serious difficulties in ensuring tax and customs compliance of goods purchased online. While the 2017 VAT e-commerce package should, as from July 2021, reduce VAT-related risks while new reporting obligations for postal services should ensure safe and secure e-commerce imports, the Commission is looking for improved international cooperation in this area. In addition, the Commission is exploring the imposition (in early 2023) of customs reporting obligations on e-commerce platforms. This may not involve customs clearance, but hold useful information on entire sales chains, such as original seller, transaction value and final end-buyer. The Commission sees this as an important source of data that could significantly enhance actions against undervaluation, misclassification, false origin declarations, and customs and VAT fraud.
- Strengthening and facilitating compliance — The Commission wants better management of "trusted trader schemes" offering benefits for authorised economic operators while ensuring that the simplifications and facilitations granted actually work in practice. Closer monitoring of the application of origin rules in preferential trade arrangements and the aim of addressing violations more swiftly is an important element of the proposal. International customs cooperation (particularly with China) will also be an increased focus. The Commission is working on a proposal for an EU Single Window environment for customs that would ultimately allow all border formalities (customs or other) to be completed in one electronic action. A new interface between customs and market surveillance authorities will be set up at the EU level to strengthen product compliance checks.
- Customs authorities acting as one — It is clear that the system cannot work without sufficiently trained staff and modern customs control equipment at the Member State level. Customs authorities’ performance will be measured through a more formal version of the Commission’s Customs Union Performance tool. While interoperability between Member State systems is a key focus area, the Commission ventures to state that "it may be time to consider a more operational framework for customs activities" and that "an agency structure could be explored". An impact assessment would first take place (in 2022-2023) to determine whether an EU customs agency would allow a better and more coordinated response to crises, monitoring, and data availability and analysis. Depending on the pros and cons, the Commission could then potentially propose the creation of an EU customs agency under the next Multiannual Financial Framework. This would be a major change for business, but will likely meet significant resistance from the Member States.
Next steps
The Action Plan has been submitted to the Council and the European Parliament. In due course, Council Conclusions and a European Parliament Resolution will reveal the level of support for some or all of the actions proposed by the Commission.
Meanwhile, the Commission will put in effect the Action Plan by starting impact assessments and drafting proposals for legislation, guidelines and communications. Based on the Appendix to the Action Plan, the Commission intends to submit a legislative proposal for the Single Window still this year, and also wants to launch a new strategic framework with China. Some of the more controversial initiatives (e.g., penalties for customs infringements, an EU Customs Agency) will follow later in the process.
The Action Plan should generally bring welcome benefits for businesses. E-commerce platforms should keep a close watch on proposals, however, as they may have to meet further obligations.
1 See "Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee – Taking the Customs Union to the Next Level: a Plan of Action" (COM(2020) 581 final).
2 See "Political Guidelines for the Next European Commission 2019-2024", at page 16.
3 The Action Plan was drawn up with input from the so-called "Foresight Project" which took place in 2019 on "The Future of Customs in the EU 2040", in which various stakeholders from the EU institutions, the Member States and the business community worked to discuss challenges and develop a general vision for how EU customs should look twenty years from now. See here for more information on that project.
4 The example of a €5 billion undervaluation of imports of textiles and footwear from China in the period 2013-2016 in one EU Member State is noted in the Action Plan. Origin fraud is listed as another major issue leading to significant losses to the EU budget.
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