EU Customs Union and Its Challenges (Lesson 1) PDF

Customs Summery ***[Lesson 1]*** EU Customs Union and Its Challenges The EU Customs Union makes trade easier within the EU by removing customs taxes between member countries and using the same external tariff for trade with countries outside the EU.It also enforces health, environmental, safety,...

Customs Summery ***[Lesson 1]*** EU Customs Union and Its Challenges The EU Customs Union makes trade easier within the EU by removing customs taxes between member countries and using the same external tariff for trade with countries outside the EU.It also enforces health, environmental, safety, and security legislation. - **Article 3 TFEU**: Gives the EUws full control over customs rules, competition, and related areas. - **Article 28 TFEU**: Sets up the customs union, stops customs charges within the EU, and creates one shared tariff for non-EU trade. - **Article 29 TFEU**: Says goods from outside the EU can move freely if customs duties are paid. - **Article 30 TFEU**: Bans customs charges between EU countries. - **Article 32 TFEU**: Helps the EU make trade easier and keep competition fair. [**Customs Legislation**:]  The **Union Customs Code (UCC)** (Regulation No. 952/2013) is the main set of rules for customs in the EU.  It is supported by two additional laws: 1. The **UCC Delegated Act** (Regulation No. 2015/2446). 2. The **UCC Implementing Act** (Regulation No. 2015/2447).  The **Common Customs Tariff** (Council Regulation No. 2658/87) ensures the same tariffs are applied to goods traded with non-EU countries.  **Article 5 of the UCC** explains: - **Customs authorities** are national agencies responsible for enforcing customs rules. - These authorities follow both EU-wide customs laws and their own national rules. **[Organizational Framework]** 1. **DG TAXUD**: 1. Sets tax rules for all EU countries 2. Controls what comes in and out of the EU 3. Prevents tax cheating and collects customs fees 4. Makes tax and customs easier for everyone to us 2. **Customs Policy Expert Group**: - They discuss and provide expert opinions on customs issues - They help develop new customs policies - They work on making customs procedures more efficient - They share knowledge between different EU countries about customs practices 3. **Customs Code Committee**: - Reviews and helps implement the Union Customs Code - Solves problems related to customs tariffs - Makes decisions about how to classify goods for customs purposes - Helps interpret customs rules when there\'s confusion - Ensures customs rules are applied the same way across all EU countries 4. **Trade Contact Group (TCG)**: The Trade Contact Group (TCG) is a forum where business representatives and trade organizations meet with European Commission officials to discuss customs policies, procedures, and implementation of trade rules that affect EU businesses. **[Customs Challenges]** 1. **Integration and Uniformity**: - Making sure all EU countries follow customs rules the same way. 2. **IT Systems**: - Developing interoperable systems to enhance efficiency and reduce costs. 3. **Customs Competition**: - Preventing disparities among member states. 4. **Evolving Roles**: - Addressing e-commerce fraud, terrorism, and organized crime. 5. **Stakeholder Engagement**: - Maintaining dialogue with businesses to keep policies relevant. **EU Customs Main Goals** 1. Make trade easierwhile ensuring security and compliance. 2. Innovate through IT systems and shared solutions. 3. Work with other countries to stop fraud and protect borders ***[Lesson 2-4]*** **[Import ]** A diagram of customs and customs Description automatically generated Explanation of the Graph : 1. When goods are loaded onto a freight in the third country ,an **Entry Summary Declaration (ENS)** must be submitted. **ENS** is a document that provides information about the goods being transported. It ensures that customs authorities in the EU know what is arriving and can assess any risks (like security concerns) 2. When the goods arrive in the EU customs territory (e.g., at a port, airport, or border), they are placed in **temporary storage**. A **simplified declaration** must be submitted for temporary storage. This is a quick way to notify customs about the goods 3. Before the goods can be moved out of storage and into the EU market (or another destination), a **customs declaration** is required. Customs officials review the declaration to determine duties (taxes), ensure the goods comply with EU regulations, and approve their release. **[Export ]**  Explanation: 1. Registering the export declaration. The **declarant** submits an **export declaration** electronically to the customs system. This document provides details about the goods being exported, such as type, quantity, and destination. 2. Control of goods [ ] **(Office of Export).** There the customs officials may inspect the goods to ensure everything matches the declaration and that no illegal items are being exported. If everything is in order, the goods are released for export. 3. Pre-departure message. After the goods are released, a **pre-departure message** is sent to the **Office of Exit** (the last customs office before the goods leave the EU). This message lets customs officials at the border know that the goods are on their way. 4. Transport and printed documents. 'Result of exit'. The declarant receives **printed transport documents**, which accompany the goods as they travel to the exit point. 5. Security check (Office of Exit). At the **Office of Exit**, customs perform a **security check** to ensure the goods comply with export regulations. The goods are also **registered in the Export Control System (ECS)**, a system that tracks exports leaving the EU. 6. Confirmation of exit. Once the goods have exited the EU, an **electronic message** is sent back to confirm that the export is complete. 7. Final export document. The declarant receives a **printed export document with confirmed exit**, which serves as proof that the goods have officially left the EU. **[Airfreight process ]** A diagram of a freight process Description automatically generated Explanation : 1. Shipper (Starting Point). The shipper prepares the goods for transport and creates an **invoice and packing list**. 2. Origin Freight Forwarder. Prepares documents like Air Waybill, House Manifast. And also handls **export customs clearance**, which involves submitting the **Export Goods Declaration** and getting customs approval to export the goods. 3. Cargo Acceptance and Carrier (Airline). Airline checks the Invoice and packing lis, Air Waybill, House Manifast, House Waybill. The goods are then loaded onto the airplane, and the airline creates a **Flight Manifest** (a list of good shipped ) 4. Destination Airport and Freight Forwarder. The freight forwarder receives the shipment. And then Import customs clearance begins. This involves: Submitting the **Import Goods Declaration** to customs amd Getting approval for the goods to enter the country (**Customs Release Import**). 5. Consignee **[Customs procedures]**  **Release for Free Circulation**: Goods are cleared for use in the EU after duties and taxes are paid.  **Transit**: Allows goods to move through the EU or other countries without paying duties until the final destination.  **Customs Warehouse**: Goods are stored without paying duties or VAT until they are moved.  **Temporary Import**: Goods brought in temporarily (e.g., for exhibitions) with partial or no duties.  **Re-Exportation**: Goods leave the EU after temporary storage or processing.  **Inward Processing**: Raw materials imported for processing and then re-exported without duties.  **Outward Processing**: EU goods exported for processing and re-imported with reduced duties.  **Temporary Export**: Items like artwork sent out temporarily (e.g., for exhibitions). **[Transit Procedures (Detailed)]** - **External Transit (T1)**: - Used for non-EU goods. Example: Goods from Australia transit through Rotterdam to Ghent. - Duties are suspended during transit. - **Internal Transit (T2)**: - For EU goods moving through non-EU countries. Example: EU goods transported through Switzerland. ***[Lesson 5]*** 1. **[Harmonised System (GS)]** A worldwide system that helps countries use the same names and codes for products in international trade. It\'s like having one common language that all countries understand when trading goods. 2. **[Combined Nomenclature (GN)]** The EU\'s version of product classification that adds extra details to the worldwide system. It includes more specific information needed for trade within Europe. 3. **[Integrated Tariff (TARIC)]** A complete list of EU import taxes and rules. It tells you exactly how much tax you need to pay and what rules to follow when bringing goods into the EU. 4. **[Belgian Customs Tariff (TARBEL)]** Belgium\'s own set of customs rules that work alongside the EU systems. It includes specific requirements that only apply in Belgium. **Harmonized System (HS)** uses these stages to help classify products in international trade. - **Raw Materials**: Basic, unprocessed goods like ores or agricultural products. - **Unworked Products**: Slightly processed goods, such as untreated wood or crude metals. - **Semi-Finished Products**: Intermediate goods used for further manufacturing, like steel sheets or fabric. - **Finished Products**: Fully manufactured goods ready for consumption, such as cars or clothing. **Composition of HS Codes** - HS codes structure: - **First 4 digits**: General category (e.g., grains like oats or rice). - **6 digits**: More specific subcategories. - **10 digits (TARIC)**: EU-specific extensions for tariffs and trade measures. **[Binding Tariff Information (BTI)]**  BTI is a **tool offered by customs authorities** that gives businesses an official and legally binding decision about how their goods should be classified under the **Harmonized System (HS)** or tariff codes.  Tariff classification determines the **customs duty rate**, **import/export restrictions**, and **requirements** for goods. **[Anti-Dumping Duties]** **Dumping** happens when a company exports a product to another country at a price that is **lower than the price in its own domestic market** or even below the cost of production. 1. Anti-dumping duties are a **defense mechanism** against unfair trade practices. 2. They ensure that imported goods are priced fairly, protecting local industries from unfair competition. 3. These duties are temporary and are reviewed regularly to ensure they remain justified. [**Quota System**:] Limits the quantity of specific goods imported into the EU. Can be preferentia, some countries get special treatment, like **lower duties** on a limited amount of goods. **Box 39**: Records quota numbers on customs declarations. **[Sanitary and Phytosanitary (SPS) Controls]** - SPS measures ensure imported goods meet EU health and safety standards. - Example: Inspections of food products to prevent pests or diseases. ***[Lesson 6]*** **[Customs Value]** is the **total value of goods** declared to customs when importing into the EU. It determines the **duties and taxes** you need to pay. The customs value includes the cost of the goods, transportation, insurance, and other charges. **Valuation Methods (Used in Order of Priority)** 1. **Transaction Value of Imported Goods (Most Common):** - The **actual price paid** for the goods during their sale for export to the EU. - Example: If you paid €10,000 for the goods, this is the customs value. 2. **Transaction Value of Identical Goods:** - If the exact price isn't available, customs uses the price of **identical goods** imported at the same time. - Identical goods = same quality, characteristics, and reputation. 3. **Transaction Value of Similar Goods:** - If no identical goods are available, the value of **similar goods** is used. - Similar goods = not identical but have the same function and are interchangeable 4. **Unit Price in the EU Market:** - Customs looks at the price the goods are sold for in the EU to unrelated buyers. - They subtract costs like transport, profit margins, and taxes to estimate the value. 5. **Computed Value:** - Based on the **cost of manufacturing** the goods + **profit** + **transport costs** to the EU. - Example: If making the product costs €5,000, profit is €1,000, and transport is €500, the customs value is €6,500. 6. **Reasonable Means (Last Resort):** - Used when no other method works. - Customs calculates the value using flexible but fair methods based on available data. [**Key Value Adjustments** ] *Additions (+) - These must be added to the base price:* - Sales commissions: Fees paid to sales agents - Packaging costs: Cost of containers and packing - Freight costs to EU border: Transportation expenses - Buyer deliveries: Goods/services provided by buyer for the production - Intellectual property rights: Royalties and license fees *Reductions (-) - These can be subtracted:* - Financing interests: Interest costs for payment arrangements - Installation costs: If shown separately on invoice - Duties and taxes within EU: Including VAT - Freight cost within EU: Transport costs after entering EU - Buying commission: Fees paid to purchasing agents **[Incoterms ]** **For All Transport Types:** 1. **EXW (Ex Works):** - Seller\'s Responsibility: Provide goods at their location (factory, warehouse). - Buyer\'s Responsibility: Handles everything else (transport, insurance, customs). - Example: The buyer picks up goods from the seller's factory. 2. **FCA (Free Carrier):** - Seller\'s Responsibility: Delivers goods to the carrier chosen by the buyer. - Buyer\'s Responsibility: Takes over after the goods are handed to the carrier. - Example: Seller delivers goods to a truck or warehouse. 3. **CPT (Carriage Paid To):** - Seller\'s Responsibility: Pays for delivery to the destination. - Buyer\'s Responsibility: Covers insurance and risks once goods are handed to the carrier. - Example: Seller arranges transport to the buyer's country. 4. **CIP (Carriage and Insurance Paid To):** - Seller\'s Responsibility: Pays for delivery and insurance to the destination. - Buyer\'s Responsibility: Takes over risks after goods are handed to the carrier. - Example: Similar to CPT but includes insurance**.** 5. **DAP (Delivered At Place):** - Seller\'s Responsibility: Delivers goods to a specified location. - Buyer\'s Responsibility: Handles customs duties and import taxes. - Example: Seller delivers to the buyer's warehouse. 6. **DPU (Delivered at Place Unloaded):** - Seller\'s Responsibility: Delivers goods and unloads them at the specified location. - Buyer\'s Responsibility: Handles customs and import duties. - Example: Seller unloads goods at the buyer's dock. 7. **DDP (Delivered Duty Paid):** - Seller\'s Responsibility: Handles everything (transport, insurance, customs duties). - Buyer\'s Responsibility: Simply receives the goods. - Example: Seller delivers fully cleared goods to the buyer's warehouse. **For Sea Freight Only:** 1. **FAS (Free Alongside Ship):** - Seller\'s Responsibility: Delivers goods beside the ship at the port. - Buyer\'s Responsibility: Loads goods onto the ship and pays for everything after. - Example: Seller delivers goods to the dock next to the ship. 2. **FOB (Free On Board):** - Seller\'s Responsibility: Loads goods onto the ship at the port. - Buyer\'s Responsibility: Covers costs and risks after loading. - Example: Seller ensures goods are safely on board. 3. **CFR (Cost and Freight):** - Seller\'s Responsibility: Pays for shipping to the destination port. - Buyer\'s Responsibility: Handles insurance and risks once goods are loaded. - Example: Seller arranges sea transport, but the buyer insures the goods**.** 4. **CIF (Cost, Insurance, Freight):** - Seller\'s Responsibility: Pays for shipping and insurance to the destination port. - Buyer\'s Responsibility: Takes over risks once goods are loaded. - Example: Similar to CFR but includes insurance. **Practical Impact: **The final customs value depends on: - Which valuation method is used - What adjustments need to be made - Which Incoterm is used in the contract - Additional costs that might need to be included ***[Lesson 7]*** **[Main categories of Control ]** **Security** - [Weapons and dual-use:] Items that could be used for both civilian and military purposes (like certain chemicals or technology) - [Public security:] Measures to protect society from dangerous goods - [Control of explosive materials] - [Diamond trade control] - [Radioactive/nuclear material control] - [Prevention of illegal immigration] **Health** - [Drugs and medications]: Controls on pharmaceuticals to ensure safety and prevent illegal drug trade - [Health certificates for imports] - [Food sefety controls ] - [Health product regulations] **Economy** - [Quality control requirements] - [Protection of cultural goods] - [Financial trade measures] - [Product safety standards] **Environment** - [Chemical product control] - [Flora and fauna protection] - [Waste management] - [Biological product regulation ] - [Wildlife trade restrictions (CITES)] [MORE IN DETAILS ABOUT EACH OF THESE IN PPT (not that important)] **CITES (Wildlife Protection) Convention on International Trade in\ Endangered Species of Wild Fauna and Flora ()** - Think of it as a passport system for endangered animals and plants - Protection levels: - Annex A: Most protected (like pandas) - no commercial trade - Annex B: Trade allowed but controlled (like some parrots) - Annex C & D: Monitored but less restricted **Required Certificates** - Phytosanitary: For plants (like fruits, vegetables, wood) - Veterinary: For animal products (meat, dairy, eggs) - Product Safety: CE marking shows product meets EU standards **[International Sanctions ]** **1. Main Features** - Sanctions come directly from European regulations - Have direct impact (no need for additional national rules) **2. Types of Sanctions:** - Embargo on arms (includes weapons, protective clothing, army vehicles) - Embargo on import/export of certain goods, programs and technology - Financial sanctions (freezing assets, ban on financial services) - Entrance and visa denials (visa ban) for certain persons **3. Exceptions Possible For:** - Diplomatic travel - Delivery and financing of humanitarian goods - Crisis management operations **4.** **Documentation:** - Must be declared in customs documentation - Specific codes required in Box 44 of declaration ***[Lesson 8 ]*** **[Customs Declaration and Administration]** **[Introduction]** [-] Customs declarations involve a single document used across the EU, with 54 boxes for information. \- It supports tax collection on imports and VAT exemption for exports. \- Applies to EU member states, EFTA countries, and others with transit agreements (e.g., UK, Turkey). **[Key Boxes in Declarations]** [Box 1 (Declaration): ] [ ] - Indicates type of declaration (e.g., export, import, transit). \- Includes sub-boxes for goods status and declaration type. [Box 37 (Customs Procedure): ] [ ] - Specifies requested customs procedure (first two digits) and previous procedure (last two digits). [Box 44 (Special Entries): ] \- Lists additional documents, certificates, and authorizations required for customs. **[Important Information in Boxes]** [Box 2 (Exporter):] Exporter's name, address, and EORI number. [Box 14 (Declarant):]Declarant's name, address, EORI, and representation type (e.g., direct or indirect). [Box 20 (Incoterms):] Specifies trade terms (e.g., EXW, FOB) and agreed delivery location. [Box 30 (Location of Goods):] Indicates where goods can be examined. **[Goods and Value Details]** [Box 33 (Commodity Code): ] \- Export: Minimum 8 digits. \- Import: Minimum 10 digits. [Box 35 & 38 (Weight):] \- Gross weight (with packaging) and net weight (without packaging). [Box 42 (Price of Goods):] Invoice price in currency specified in \*\*Box 22\*\*. [Box 47 (Tax Calculation):] \- Customs value, tariff codes, and total payable amounts (duties, VAT). **[Customs Control]** [Customs validate declarations and assign a status: ] \- Green: Release approved. \- Orange/Red:Requires document or physical checks. \- Sampling:Customs may take samples for verification. **[Emergency Procedures]** [- Implemented during system outages or technical issues. ] [- Requires documentation of issues and records to be kept for two years. ] [IN PPT THERE ARE MORE CODES, BUT SINCE WE DON'T NEED TO FOCUS ON NUMBERS, I PUT ONLY THE MOST IMPORTANT ONES. ] [Customs Declaration Document ]