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New Union Customs Code (UCC)

María Jesús Gómez Arriba*

 

The Union Customs Code (UCC) entered into force in its entirety in Europe on 1 May 2016. Its implementation will be completed at the end of 2020, when all the European Union (EU) countries have the required information systems. In the meantime, it will be supplemented by two Commission Delegated Regulations and a Commission Implementing Regulation.

It is designed to modernise, simplify and streamline customs rules and procedures, and enable a shift to a paperless/fully electronic environment, so as to:

  • facilitate trade
  • safeguard the financial and economic interests of the Union and Member States
  • ensure safety and security of goods transiting or moving in or out of the Union

Some of the most relevant changes in the UCC are set out below.

SUBMISSION OF DECLARATIONS

The current Single Administrative Document (SAD) shall be replaced by completely automated submissions, based in a “Dataset” aimed to create a Customs Common Database. Actually, the information content will be very similar to de SAD, still in force until end of 2019 when the information systems are scheduled to be fully implemented.

The oral declarations will be still operational for individual persons.

From now on, any economic operator can submit its own declarations without requiring Customs Agent. They can also appoint a Customs Representative through either of the two forms of representation:

  • Direct, in which case the customs representative shall act in the name of and on behalf of another person or company.
  • Indirect, in which case the customs representative shall act in his or her own name but on behalf of another person or company.

A mayor innovation of UCC is that the Customs Representatives can be established anywhere within the Customs Territory of the European Unión and not only in the country of the company giving the proxy.

AUTHORISED ECONOMIC OPERATORS (AEO)

These are traders (any of the supply chain actors) who voluntarily meet a wide range of criteria work in close cooperation with customs authorities to assure the common objective of supply chain security and are entitled to enjoy benefits throughout the EU. This status granted by one Member State is recognised by the customs authorities in all Member States.

The AEO could be authorised for customs simplification (AEOC), security and safety (AEOS) or a combination of the two.

Conditions and criteria AEOC AEOS
Compliance with customs legislation and taxation rules and absence of criminal offences related to the economic activity. X X
Appropriate record keeping. X X
Financial solvency. X X
Proven practical standards of competence or professional qualifications. X
Appropriate security and safety measures. X

 

Benefits for the AEO AEOC AEOS
Easier admittance to customs simplifications X
Fewer physical and document-based controls

  • related to security & safety
  • related to other customs legislation
X X
Prior notification in case of selection for physical control (related to safety and security) X
Prior notification in case of selection for customs control (related to other customs legislation) X
Priority treatment if selected for control X X
Possibility to request a specific place for customs controls X X
Indirect benefits:
(Recognition as a secure and safe business partner, Improved relations with Customs and other government authorities; Reduced theft and losses; Fewer delayed shipments; Improved planning; Improved customer service; Improved customer loyalty; Lower inspection costs of suppliers and increased co-operation etc)
X X
Mutual Recognition with third countries X

According to UCC, the current AEO authorization must be reevaluated.

VALUE FOR CUSTOMS PURPOSES

The primary basis for the customs value of goods shall be the transaction value, that is the price actually paid or payable for the goods when sold for export to the Customs Territory of the Union, adjusted, where necessary. The transaction value of the goods sold for export to the customs territory of the Union shall be determined at the time of acceptance of the customs declaration on the basis of the sale occurring immediately before the goods were brought into that customs territory.

Some of the positive adjustments which should be made are the royalties and licence fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, even if they are not included in the price actually paid or payable.

De Customs Value Declaration (DV1) will be required for the goods above 20.000€, instead of 10.000€ so far.

CUSTOMS PROCEDURES

Non-Union goods in temporary storage shall be placed under a customs procedure or re-exported within 90 days. Now the time was established in 20 days for good arriving by aircraft and 45 for the rest of the goods.

Now it is possible the Centralised clearance that is, a customs declaration for goods which are presented to customs at another customs office. In case of certain AEOs without requirement of previous authorization.

The customs procedures had been simplified as follows:

1. RELEASE FOR FREE CIRCULATION, shall confer on non-Union goods the customs status of Union goods after the collection of duties and other charges. After the payment of the local taxes such as VAT, the goods are released for consumption.

2. SPECIAL PROCEDURES

2.1 TRANSIT

Where goods are moved from one point in the customs territory of the Union to another in accordance with the TIR Convention, the ATA Convention / Istanbul Convention, under cover of form 302 or under the postal system, the customs territory of the Union shall, for the purposes of such transport, be considered to form a single territory.

2.1.1 Internal transit. Union goods may be moved from one point to another within the customs territory of the Union, and pass through a country or territory outside that customs territory, without any change in their customs status. For instance, if the goods travel from Spain to Austria through Switzerland.

2.1.2 External transit. In this case non-Union goods may be moved from one point to another within the customs territory of the Union without being subject to import duties and other charges neither commercial policy measures. For instance, good entering from Holland, traveling through France and Spain to reach Marruecos.

2.2 STORAGE

Under a storage procedure, non-Union goods may be stored in the customs territory of the Union without being subject to import duties and other charges neither commercial policy measures.

There shall be no limit to the length of time goods may remain under a storage procedure. Nevertheless, in exceptional circumstances, the customs authorities may set a time-limit by which a storage procedure must be discharged in particular where the type and nature of the goods may, in the case of long-term storage, pose a threat to human, animal or plant health or to the environment.

2.2.1 Customs warehousing. Non-Union goods may be stored in premises or any other location authorised for that procedure by the customs authorities and under customs supervision.

Public customs warehouse may be available for use by any person for the customs warehousing of goods

Private customs warehouse are just for the storage of goods by the holder of an authorisation for customs warehousing.

Goods placed under the customs warehousing procedure may be temporarily removed from the customs warehouse. Such removal shall, except in case of force majeure, be authorised in advance by the customs authorities

A different concept is the “temporary storage”, meaning Non-Union goods stored temporary under customs control during the period between the presentation to the customs authorities and the placement under a customs procedure. Goods in temporary storage could only be warehoused in Temporary Storage Facilities (TSF), or when justified in other places designated or authorized by customs authorities.

2.2.2 Free zones [1] Member States may designate parts of the customs territory of the Union as free zones. The Member State shall determine the area covered and define the entry and exit points. According to UCC, these zones should be enclosed and under customs supervision. The construction of any building in a free zone shall require the prior approval of the customs authorities.. Subject to the customs legislation, any industrial, commercial or service activity shall be permitted in a free zone, with previous notification to the customs authorities. The good of a free zone could be exported or re-exported to third countries or included in the Union zone.

2.3 SPECIFIC USE

2.3.1 Temporary admission In this case, non-Union goods intended for re-export may be subject to specific use in the customs territory of the Union, with total or partial relief from import duty, other charges and commercial policy measures. For instance, non consumables imported for a trade exhibition or goods that enter in the Union territory to be repaired.

The customs authorities shall determine the period within which goods placed under the temporary admission procedure must be re-exported or placed under a subsequent customs procedure. Such period shall be long enough for the objective of authorized use to be achieved. In general the maximum period will be 24 months, that could be extended to 10 years under certain conditions.

2.3.2 End-use According to this procedure, goods may be released for free circulation under a duty exemption or at a reduced rate of duty on account of their specific use. The Customs authorities will supervise their compliance.

Where the goods are at a production stage which would allow economically the prescribed end-use only, the customs authorities may establish in the authorisation the conditions under which the goods shall be deemed to have been used for the purposes laid down for applying the duty exemption or reduced rate of duty.

Where goods are suitable for repeated use and the customs authorities consider it appropriate in order to avoid abuse, customs supervision shall continue for a period not exceeding two years after the date of their first use for the purposes laid down for applying the duty exemption or reduced rate of duty.

Whereas the guaranties were facultative, UCC consider them mandatory.

Waste and scrap which result from the working or processing of goods according to the prescribed end-use and losses due to natural wastage shall be considered as goods assigned to the prescribed end-use.

Waste and scrap resulting from the destruction of goods placed under the end-use procedure shall be deemed to be placed under the customs warehousing procedure.

2.4 PROCESSING

The rate of yield or average rate of yield shall be determined on the basis of the actual circumstances in which processing operations are, or are to be, carried out.

2.4.1 Inward processing: non-Union goods may be used in the customs territory of the Union in one or more processing operations without such goods being subject to import duties and other charges neither commercial policy measures.

The inward processing procedure may also be used for goods intended to undergo operations to ensure their compliance with technical requirements for their release for free circulation.

The customs authorities shall specify the period within which the inward processing procedure is to be discharged. The customs authorities may grant an extension of this period.

Upon application, the customs authorities may authorise some or all of the goods placed under the inward -processing procedure, or the processed products, to be temporarily re-exported for the purpose of further processing outside the customs territory of the Union.

2.4.2 Outward processing: Union goods may be temporarily exported from the customs territory of the Union in order to undergo processing operations. The processed products resulting from those goods may be released for free circulation with total or partial relief from import duty upon application by the holder of the authorisation. Outward processing shall not be allowed for goods the export of which gives rise to repayment or remission of import duty, or whose export gives rise to the granting of export refunds. Nor the goods that prior to export, were released for free circulation under a duty exemption or at a reduced rate of duty by virtue of their end-use, for as long as the purposes of such end-use have not been fulfilled, unless those goods have to undergo repair operations.

Under the Outward processing when the goods return to the Union territory the import duties are paid just for the valued added outside.

Special cases:

– Goods repaired free of charge

Standard exchange system, where an imported product (‘replacement product’) may replace a processed product. The provisions which would be applicable to the processed products shall apply to the replacement products.

Prior import of replacement products, substitutes of defective goods.

3. EXPORT

Union goods to be taken out of the customs territory of the Union.

The export procedure shall not apply to any of the following Union goods:

  1. a) goods placed under the outward processing procedure;
  2. b) goods taken out of the customs territory of the Union after having been placed under the end-use procedure;
  3. c) goods delivered, VAT or excise duty exempted, as aircraft or ship supplies, regardless of the destination of the aircraft or ship, for which a proof of such supply is required;
  4. d) goods placed under the internal transit procedure;
  5. e) goods moved temporarily out of the customs territory of the Union.

4. RE-EXPORT

Non-Union goods to be taken out of the customs territory of the Union.

It shall not apply to any of the following goods:

  1. a) goods placed under the external transit procedure which only pass through the customs territory of the Union;
  2. b) goods trans-shipped within, or directly re-exported from, a free zone;
  3. c) goods in temporary storage which are directly re-exported from a temporary storage facility.

Goods placed under customs warehousing or a processing procedure or in a free zone may undergo usual forms of handling intended to preserve them, improve their appearance or marketable quality or prepare them for distribution or resale.

The goods that had not been placed under customs procedure within the set time limit may have two options: destruction or abandoned to the State.

GUARANTEES AND PAYMENT DEFERMENT

The guarantees used so far by the companies or customs representatives were retrieved as soon as the payment were made. There were no reductions. The guarantees may be increased by presentations of guarantors.

Formerly the deferment of 30 days should be guaranteed. According UCC, the reductions of the guarantees depends on the AEOs grade.

The UCC allows up to 99 guarantees within the Union Territory. AEOs could have guarantee exemptions up to 70% on existing debt and up to 100% on potential debt.

The guarantees could cover not only the duty payment but also VAT and excise duties.

The rules for special procedures should allow for the use of a single guarantee for all categories of special procedures and for that guarantee to be comprehensive, covering a number of transactions[1].

Provided that payment has been guaranteed, the customs debt corresponding to the total amount of import or export duty relating to all the goods released to one and the same person during a period fixed by the customs authorities may be notified at the end of that period. The period fixed by the customs authorities shall not exceed 31 days.

The guarantor shall be a third person established in the customs territory of the Union. The guarantor shall be approved by the customs authorities requiring the guarantee, unless the guarantor is a credit institution, financial institution or insurance company accredited in the Union in accordance with Union provisions in force.

EXPORT DECLARATIONS

Goods to be taken out of the customs territory of the Union shall be covered by a pre-departure declaration to be lodged at the competent customs office within a specific time-limit before the goods are taken out of the customs territory of the Union.

The pre-departure declaration shall take the form of one of the following:

  1. a) a customs declaration, where the goods to be taken out of the customs territory of the Union are placed under a customs procedure for which such declaration is required;
  2. b) a re-export declaration;
  3. c) an exit summary declaration, usually issued by the carrier. Customs authorities may allow the exit summary declaration to be lodged at another customs office, provided that the latter immediately communicates or makes available electronically the necessary particulars to the customs office of exit.

 IMPORT DECLARATIONS

Goods brought into the customs territory of the Union shall be presented to customs immediately upon their arrival at the designated customs office or any other place designated or approved by the customs authorities or in the free zone.

The goods could be presented by the importer, its representative or the carrier by a customs declaration, temporary storage declaration or entry summary declaration.

A customs declaration may be lodged up to 30 days prior to the expected presentation of the goods to customs.

The entry summary declaration shall be lodged at the customs office of first entry within a specific time-limit, before the goods are brought into the customs territory of the Union. Customs authorities may allow the entry summary declaration to be lodged at another customs office, provided that the latter immediately communicates or makes available electronically the necessary particulars to the customs office of first entry. It is usually lodged by the carrier.

KEEPING OF DOCUMENTS AND OTHER INFORMATION

The person concerned shall, for the purposes of customs controls, keep the documents and information at least three years, by any means accessible by and acceptable to the customs authorities. Where a customs control in respect of a customs debt shows that the relevant entry in the accounts has to be corrected and the person concerned has been notified of this, the documents and information shall be kept for three years beyond the time-limit.

Where the customs debt is incurred as the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the three-year period laid down in paragraph 1 shall be extended to a period of a minimum of five years and a maximum of 10 years in accordance with national law. No customs debt shall be notified to the debtor after the expiry of a period of three years from the date on which the customs debt was incurred.

Binding Tariff Information (BTI) and Binding origin information (BOI) – Under the UCC the statutory validity period for a decision has been reduced from 6 years to 3 years.

In conclusion, the new Union Customs Code seeks collaboration of all the parties in the Customs operations in order to prevent fraud. All of the receive more flexibility and transparency in return. Furthermore, for the AEOs and Customs representatives the possibility to operate in the whole Union Territory enables them to recover easier the investment in adaptation to the new regulations.

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* International Trade Consultant and MBA in International Business (ICEX)