Digital transformation drives EU customs reform

The EU customs reform aims to replace the traditional declarations system with a data-led approach to supervise goods imported into the single market. Under the newly proposed customs framework, online platforms will be given an instrumental role in ensuring that goods sold online into the EU comply with all customs obligations.

E-commerce platforms will have to make sure correct customs duties and VAT are paid at purchase, so consumers will no longer face hidden charges or unexpected paperwork when the parcel arrives. The current system, which puts the responsibility on the individual consumer and carriers.

According to the Commission, the reform is a response to an increase in trade volumes, especially in e-commerce; the growing number of EU standards that must be checked at the border, and the mounting pressures under which the current EU customs operates.

The reform is aimed at simplifying and rationalising customs reporting requirements for traders, including by reducing the time needed for businesses to complete import processes and by providing one single EU interface and facilitating data re-use. These changes are based on recommendations made by the Wise Person’s Group on the Future of Customs in 2022.

Technology law experts Dr Nils Rauer and Wouter Seinen of Pinsent Masons said that as the digital transformation is picking up momentum in the single market, the same digital transformation must be mirrored in the way the union deals with customs. They said that the Commission announced its idea of a digital single market some years ago and that the proposed customs reform is the logical continuation of the overall aim to further combine the domestic economies in one European ecosystem.

“An economic market cannot exist on the basis of harmonised rules and conditions facing to the inside alone. What is equally important is to speak with one voice and to apply the same set of rules to the outside, such as rules in respect to goods and services, capital and people coming from the outside. So, an effective toll and customs union is the simply the opposite side of the same medal,” said Rauer.

At the centre of the new ‘data-driven’ customs system is an EU Customs Data Hub, which will be overseen by a new EU Customs Authority. Following the reform, businesses bringing goods into the EU will be able to log all the information on their products and supply chains into the Data Hub. This means 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.

Seinen said: “Europe is catching up with economic realities and is acknowledging that the platform economy has enabled consumers to order goods from other parts of the worlds, without an importer or wholesaler being involved. The reform of the VAT regime was a big step, and was welcomed by e-commerce platforms as it allowed them to take care of tax compliance burdens for their customers”.

The reform is proposing to remove some exceptions, such as the current threshold whereby goods valued at less than €150 are exempt from customs duty. It will also simplify customs duty calculation for the most common low value goods bought from outside the EU, reducing the thousands of possible customs duty categories down to four. 

Rauer pointed out that the new customs authority and the new concept of a Data Hub are not about fending off third-country engagement, and instead, it is set to modernise regulation and boost trade.

“The EU is highly reliant on good relations with other countries and regions in the world. We need trade and we need trading agreements, but those need to be actioned by means of modern digital structures. Within all this, e-commerce has become the most important channel of trade. This requires modern and efficient regulation. This is what the commission has now announced,” said Rauer.

Under the reformed customs framework, online platforms are considered as ‘importers’ from a customs perspective. The platforms are responsible for ensuring that all duties have been paid and that their purchases are safe and in line with EU environmental, safety and ethical standards. However, the term ‘importer’, Seinen said, may cause confusion in light of other EU laws.

“The ‘importers’ referred to in the customs reform do not fall in scope of the ‘importer’ concept under product safety and product liability laws, such as the Market Surveillance Regulation and the revised product liability directive. The two concepts are not identical and should not be confused. It would have been more helpful if the law maker had avoided the word ‘importer’ and used a different definition,” suggested Seinen.

In the commission’s proposals, the Data Hub will open for e-commerce consignments in 2028, followed by other importers in 2032 on a voluntary basis. A review in 2035 will assess whether this can be extended to all traders when the Hub becomes mandatory from 2038.

The legislative proposals will be sent to the European Parliament and the Council of the European Union for agreement, and to the European Economic and Social Committee for consultation.