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The European Union since its birth has aimed to be an institution with a supranational character, uniting 27 different countries into one body. The EU is founded on common and shared principles and values, such as peace, democracy, freedom and equality. The European family also started with a very simple aim, which was the one to strengthen the relations between the countries in order to increase each other’s economies.
The European Union is a unique example of a customs union. In 1968 the European Economic Community (EEC) existed, within which its six member countries began to tighten their relations by eliminating customs duties on imported goods so that cross-border trade would be free of cost.
The EU’s customs union from that time until today has undergone major evolutions, reaching the point today where goods move freely between countries within the EU without having to apply costs related to the country of import or export.
On 17th May 2023, the European Commission presented a proposal to proceed with a major reform of the EU’s customs union. The measures proposed by the European executive body aim to simplify and streamline all customs procedures. The reform also aims to improve the EU’s approach to risk management and customs controls through the sharing of data among European customs, which is now becoming more immediate and seamless thanks to digital evolution.
Customs procedures for businesses will be eased, with particular favor for traders found to be more reliable. The reform also aims to replace traditional declarations with a smarter approach to data-driven import surveillance. At the same time, customs authorities will have the tools and resources they need to properly assess and stop imports that pose real risks to the EU, its citizens and its economy.
The reform also fits coherently into the process of making the EU greener and more digital. Indeed, measures have been proposed in this regard that will help create a safer and more competitive single market. The reform simplifies and streamlines customs declaration requirements for traders, for example by reducing the time needed to complete import processes, providing a single EU interface, and facilitating the reuse of data.
A new EU customs authority will preside over a European digital customs center that will serve as the engine of the new system. Over time, the data center will replace the existing customs IT infrastructure in EU member states, saving up to €2 billion a year in operational costs. The new authority will also help improve the EU’s approach to risk management and customs controls.
Thanks to the reform of the EU customs union, businesses wanting to bring goods into the EU will be able to record all product and supply chain information in a single online form, namely the new European Digital Customs Center. With this system, data provided by businesses will be collected so as to produce a clear and all-encompassing picture of supply chains and the movement of goods.
Businesses will also find it easier to operate, as they will interact with a single portal to proceed with the submission of customs information and will only enter data once for multiple shipments. In the case of more trustworthy traders (“Trust and Check” operators) these will be able to move their goods within the EU without any active customs intervention.
Data sharing among European customs will therefore be central to the reform, whereby the so-called Eu Customs Data Hub will be the single online environment from which customs authorities will track all data related to the movement of goods. Any company intending to bring goods into the European Union will have to use the platform to record all information regarding their products and supply chain.
This platform will be managed by the European Union Customs Authority and will be able to collect data provided by businesses using all existing cutting-edge technologies such as machine learning, artificial intelligence as well as human intervention. The platform will be active from 2028 only for e-commerce companies, from 2032 only for other importers but on a voluntary basis, and from 2038 it will be mandatory for all operators.
Artificial intelligence will be used to analyze and monitor data and predict problems even before goods have begun their journey to the EU. This will also make it easier to prevent the entry of dangerous or illegal goods and enforce European laws prohibiting the introduction of goods that are contrary to European values into EU territory.
In addition, cooperation between authorities working in the field will be improved, as information exchange will be easier with these new reforms. This information exchange will also help member states prioritize relevant risks and coordinate controls and inspections, especially in times of crisis. Information and expertise will be pooled and evaluated at the EU level through the new EU Customs Authority, which will act on data provided through the European Digital Customs Center.
The reform will make online platforms responsible for ensuring compliance with all customs obligations. This is a major departure from the current customs system, which places responsibility on consumers and carriers. Platforms will be responsible for ensuring that customs duties and VAT are paid at the time of purchase, so consumers will no longer be hit with hidden costs or paperwork when the package arrives. At the same time, the reform aims to abolish the threshold for exemption of customs duties on goods worth less than €150, a rule that encourages scams: it is estimated that parcels entering the EU are currently undervalued by up to 65 percent in order to avoid import customs duties.
The reform also simplifies the calculation of customs duties for the most common low-value goods purchased outside the EU, reducing the rates to just four. This will make the calculation of customs duties for small parcels much easier, helping both platforms and customs authorities to better manage e-commerce. The new e-commerce regime is expected to bring in an additional €1 billion in customs revenue annually.
The reform of the European Customs Union is one of the biggest reforms that the European Union intends to implement and will produce significant changes for trade within and also outside the borders of the EU. This reform is in line with the digital transition that we are already experiencing and is therefore a new step to bring the EU and its citizens into a digitized and technological era, and in addition to that with the measures envisaged in the reform it will contribute to a growth in trade and strategic autonomy of the EU, but while still meeting the necessary security and anti-fraud requirements.
At the same time, the proposal aims to protect both entrepreneurs and consumers by providing them with guarantees and securities that do not affect their safety.
If the proposal receives the approval of the European Parliament and at the Council of the European Union, and if the European Economic and Social Committee after consultation also gives a favorable opinion, the first major reform of the customs union since it was born over fifty years ago will be implemented. Goods will move within the EU more easily and faster, but without harming the security of citizens because several measures will be taken that will make use of digital tools to monitor European trade even better and more effectively.