News from customs and foreign trade

Since our first LinkedIn Live event on 28 February, we have received many questions and discussed many practical issues. The sanctions have also been tightened in recent weeks and there have been important changes. Currently, many practical details have not yet been finalised by the authorities. In addition, further sanctions must be expected. Due to the complexity of the issue, we have provided an update on the recently published tightening measures. You can find the full article here: https://www.linkedin.com/video/event/urn:li:ugcPost:6913917677203775488/

"How are the quantities of a tariff quota calculated and how can I achieve planning security for my company or carry out a risk assessment?" A member of my network asked me this question. Essentially, tariff quotas can currently be divided into three areas: 1️⃣. Tariff quotas for agricultural products2️⃣. Autonomous tariff suspensions/tariff quotas3️⃣. Tariff quotas for certain steel products As the question related to tariff quotas for steel products, I would like to focus on this area today. While applications for the granting of autonomous tariff suspensions/tariff quotas (AZZ) can be submitted twice a year for autonomous tariff quotas, the tariff quotas for steel products are protective measures taken by the EU to ensure the competitiveness of its own industry. Of course, the Commission also reviews the necessity on the one hand and the effectiveness of the measures on the other at certain intervals. If the EU Commission (COM) initiates an investigation, interested parties can comment on the procedure. The announcement on the current procedure can be found here. However, the deadline for comments has already expired. The current procedure will be completed by 30 June 2022 at the latest. (https://lnkd.in/dvSP7p2Q) In order to utilise an existing tariff quota to avoid import duties, the quota number listed in the Electronic Customs Tariff (ECT) must be stated in the customs declaration. The quota is allocated on a "first come, first serve" basis, unless the simultaneous applications (on one day) exceed the total quantity, in which case a percentage allocation is made between the applicants. Although the remaining quantities of a quota can also be viewed via an EU portal (see comments for link), it takes up to two days for the national authorities to transmit the applications for customs declarations to the EU. Therefore, there is little planning certainty as to whether the quota will ultimately be granted or whether customs duties (usually 25% in the case of steel products) will be levied.

Dear customs community, The Wise Parsons Group recently published its report on how to take the EU Customs Union to the next level. The group concludes that the customs union is in urgent need of structural change to cope with modern challenges such as new trade models and growing trade volumes, technological developments, environmental change, the new geopolitical context and security risks. The group is in favour of more fundamental and far-reaching reforms than the changes planned in the Customs Action Plan adopted in September 2020. It has made the following 10 recommendations to be implemented by 2030: 1. the European Commission shall present a package of reforms, including the Union Customs Code, by the end of 2022, implementing the recommendations contained in this report in relation to procedures, responsibilities and liabilities and the governance of the European Customs Union. 2. introduce a new approach to data, focussing on obtaining better quality data based on commercial sources and ensuring that it is cross-checked along the chain, better shared between administrations and better used for EU risk management. Clarify which private actors - including e-commerce platforms - are required to provide data and the costs of non-compliance. Provide a single data entry point for customs formalities and a single window/portal for businesses. Data to be stored and properly managed in a centralised data warehouse. 3. establishing a comprehensive framework for co-operation, including data exchange between European customs authorities, market surveillance authorities, other law enforcement authorities and tax authorities for comprehensive risk management at EU level. 4. a European Customs Authority should be established to provide added value to the Commission and the Member States. Its management should correspond to the existing division of competences. 5. introducing a systems-based approach centred on a reformed Authorised Economic Operator (AEO) system that is broader in scope, more multi-layered and more effective in facilitating trade with confidence. 6. introduction of a new ABC model (Authorised, Bonded or subject to greater Control) where economic operators seek Authorised Economic Operator status in order to gain commercial access to the EU market. If this is not the case, market access can be granted through an authorised economic operator bond, against which the EU authorities can levy a substantial fee in the event of false declarations or breaches of the rules. Small non-commercial consignments would continue to go through the usual procedures, but without priority and with a level of control commensurate with their "untrusted" status. 7. abolition of the duty exemption threshold of EUR 150 for e-commerce and simplification of the application of duty rates for low-value consignments. 8. implementation of a package of measures to green the EU customs system. 9. adequate equipment, qualifications and facilities for customs to fulfil their tasks. 10. introduce an annual customs revenue report based on an agreed methodology and data framework to better manage the collection of customs revenue. Business requirements for a reform of the customs union - my personal TOP3 I agree with the "Wise Persons" that a reform of the customs union is absolutely necessary. However, for the most part I do not agree with the 10-point plan, so I would now like to address my agenda item 3 and look forward to discussing it with you. 1. no customs union without an IT union I fully agree with the Wise Persons on this point. Data should only be collected once and there should only be a single interface between the customs administration(s) and the economic operator (single window). However, in a customs union based on 27 different IT systems with national characteristics, this will remain a pipe dream. To achieve this urgently needed goal, the customs union must become an IT union! It must be possible for me as a German company, with an IT system that communicates with the German customs administration, to submit customs declarations in all other member states without having to connect to the national systems of all member states. That is a real "single window". If the EU and the Member States do not want to implement an EU-wide IT system, this must not be at the expense of the economy. The national systems of the Member States will then have to be networked with each other. At present, even with new IT implementations (e.g. INF portal), this gap is passed on to the economy by having to provide identical information multiple times. This makes "customs procedures with economic significance" - which they still are, even if they are no longer labelled as such - uninteresting for the economy, as they cannot be carried out procedurally. 2. process-related instead of transaction-related customs controls for AEOs I see no need for a reform of the AEO. Here I completely disagree with Wise Parsons. The instruments are basically there, they just need to be used correctly. An AEO is subject to annual monitoring. In addition, there are the usual company audits. The AEO system already provides for an AEO to be largely exempt from shipment-related controls, as procedural controls are regularly carried out in the company. A practical (negative) example of this is the description of goods in customs declarations. According to the ATLAS procedural instruction, this must now be so precise that every customs officer is not "only" able to derive the correct customs tariff number from the goods description, but also possible export control issues arising from it. An AEO that is put through its paces as part of the annual monitoring process, whose product range is known to the authorities, whose internal control system, which ensures compliance with customs regulations, has been checked and, last but not least, whose catalogue of goods is precisely specified in the authorisations for customs simplifications, must now nevertheless provide a description of goods that any customs official who is not familiar with the product can understand. Why? 3. collect data only where it is necessary AEOS are already supposed to benefit from reduced data requirements in customs declarations. However, if you look at the annexes to the Delegated and Implementing Act, you will find virtually no areas in which an AEO has to provide less data than a non-AEO. In addition, practice shows that the individual contexts of each individual company cannot be standardised. For reasons of complexity, I do not want to go into the topic of data protection in this article. In short, every company has developed an excellent system for managing, archiving and using company-related data. It is therefore better to keep a large amount of data and information within the company than to distribute it disjointedly to customs offices in the Member States. The procedural controls described above, which an AEO undergoes in the company, also make the data accessible to the authorities and the correlations and processes easier to check than in the individual customs declaration itself. It is therefore imperative that these simplifications for AEOs are also comprehensively implemented. The legal basis for this is also largely in place. The only thing that is lacking is implementation, especially a standardised approach within the Member States. Customs clearance within the European Union must finally be raised to a new level. I say finally because the legal framework for this has largely been created by the UCC since 2016, but has not been implemented. The frequently cited instrument of the "single window" in conjunction with centralised customs clearance was created back in 2008 and - according to my forecast - will still not be applicable in 2028, 20 years after its development. The EU must remind itself of the idea of economic customs if we do not want to be at the bottom of the global league. Now we need your opinion! What are your TOP3 for a reform of the customs union? I look forward to your comments. Sincerely Yours, Patrick Nieveler

Software and customs clearance? A colleague from my network asked me the following question, which I would like to address: "Is there anything that needs to be considered when software (especially without hardware) is delivered abroad? This question is interesting from two points of view: From a customs perspective, software does not constitute goods. No customs declaration is therefore required for the import and export of software, provided it is sent via the internet, cloud, download, etc. However, if the import/export takes place on hardware (DVD, EProm, control unit, laptop, etc.), a customs declaration is required for the hardware. It should be noted that the value of the software must be added to the value of the hardware. From an export control perspective, software is a technology whose export may well be subject to authorisation if the software is to be considered dual-use goods or is otherwise subject to country-specific sanctions. Caution is therefore advised here! So you can see that the topic of software is definitely relevant in the context of customs and foreign trade. Have you ever been in a similar situation? You are also welcome to write me a message.

What options are there for AEOs to reduce the securities for customs procedures? I recently received this question from my network. A basic distinction must be made between two types of collateral: 1️⃣ Collateral for customs debts already incurred A classic example of this is the current deferment of payment. The customs debt is already incurred on the day of import, but as the import duties are not paid until the following month, security must be provided for the deferred payment 2️⃣ Collateral for customs debts that may arise This form of security is usually known from the transit procedure, the customs warehouse or other special procedures. As long as the goods are in the respective customs procedure, no customs debt has yet been incurred; it could possibly arise, e.g. through the release for free circulation or through an offence such as a withdrawal from customs supervision. Why is this distinction important when we talk about reduction? An AEO can be completely exempted from providing a security for any customs debts that may arise (reduction to 0% of the reference amount). However, this is not provided for in the case of security for customs debts already incurred. This can be reduced to a maximum of 30 % of the reference amount. For this reason, it is important to differentiate between these two types! Two/three stages are provided for the reduction/exemption of the security deposit: 1️⃣ Reduction to 50 % of the reference amount2️⃣ Reduction to 30 % of the reference yield3️⃣Für Any customs debts that may arise: Exemption from the provision of security The extent of the reduction depends on the conditions that the economic operator fulfils (see Art. 84 UCC-DA) An AEO fulfils the requirements for exemption or reduction to 30%. In practice, however, customs authorities often only grant the exemption in stages, e.g. reduction to 50 % after one year, further reduction after 3 years, exemption after 5 years. In my opinion, however, there is no legal basis for this step-by-step procedure! If the economic operator has an AEO certificate and sufficient liquidity, the conditions for immediate exemption are met. What is your experience regarding the granting of the reduction/exemption? I look forward to your comments!

It's time to answer another question from my network: "Why can't I just select the "cheaper" customs tariff number and what exactly is binding tariff information (BTI)?" Each product can be assigned a customs tariff number. This harmonised (classification) system of the WCO - the World Customs Organisation - is used to determine the correct import duty rates and other measures such as import restrictions. It is precisely for these reasons that I cannot simply choose the "more favourable" tariff number, as this could result in import duties being withdrawn or other measures being circumvented. For the correct classification in the customs tariff, some basic rules have therefore been laid down, the so-called "general rules" numbers 1 to 6. The application of these rules is intended to rule out the possibility of there being several or different tariff numbers for one and the same product. If there are any doubts or uncertainties about the correct classification, you can apply to the customs authorities for binding tariff information. This officially determines which tariff number applies to the goods in question. It is generally valid for three years and, once issued, is binding for both parties, i.e. the economic operator and the customs authorities throughout the Union. In practice, however, some classification decisions are not always comprehensible and sometimes very surprising. I look forward to hearing about your experiences and examples. Feel free to write me a comment!

The coronavirus pandemic and the war in Ukraine have led to a massive increase in freight costs for all types of transport. As freight costs are part of the customs value, this also leads to an increased tax burden when importing goods. Many companies do not realise that there are design options here. I would like to discuss these today: The transport costs incurred in the third country must be added to the customs value. In the case of sea freight, these are the costs up to the first port of call in the EU.It is now often customary to add the total sea freight costs, e.g. from India to the port of Hamburg, as these can easily be taken from the freight invoice or the B/L. However, if you take a closer look, you realise that many ships head for a port in Greece, for example, as their first port of call in the EU. If you now look at the distances, the sea route India ➞ Hamburg is around 7,000 nautical miles. The distance to the first port in the EU, in our example India ➞ Greece, is around 3,500 nautical miles. As a result, the customs duties that apply to the freight costs can be reduced by 50 per cent thanks to this option, as only half of the freight costs have to be added. In the past, freight costs may not have had a significant impact on customs duties. However, due to the significant increase in freight costs, this structuring option takes on a completely different significance. How are the increased freight costs impacting your business and are you already utilising this option? I look forward to your comments!

In the current Atlas-Info 0352/22 (see link below), the customs administration points out that a large number of export customs declarations are cancelled because the follow-up procedure known as follow-up is not used by the exporter/declarant or their representative. This can lead to negative consequences for the declarant/exporter in many respects. The so-called exit note of a duly completed export procedure serves as proof of a tax-free export delivery under VAT law. If this proof is missing, VAT is incurred for this delivery. If everything goes smoothly, the export declaration is completed electronically at the customs office of exit and the declarant automatically receives the electronic exit endorsement. If this electronic completion is not successful, the follow-up procedure is initiated. In my newsletter of 23 February, I go into detail about the follow-up procedure. You can find the link to the newsletter here: https://lnkd.in/ei2FDA9E How do you ensure that the export procedure is completed retrospectively? What is the rate of transactions that are not completed automatically? Link to the Atlas-Info 0352/22: https://www.zoll.de/SharedDocs/Downloads/DE/Links-fuer-Inhaltseiten/Fachthemen/Zoelle/Atlas/2022/info_0352_22.pdf?__blob=publicationFile&v=3]

In this post I would like to give you more information on the new requirements of air freight forwarders and express courier services regarding the transmission of the 6-digit HS code and the EORI number of the consignee. The background to this requirement is the Import Control System 2 (ICS2) created by the EU, which comes into force in various stages. An Entry Summary Declaration (ENS) must already be submitted for every import consignment destined for the EU. In Germany, this is also known as the ESumA (entry summary declaration). From 1 March 2023, the extended ICS2 data ring for the ENS/ESumA must be used for air freight consignments, which now also includes the 6-digit HS code and the EORI number of the consignee. Some carriers are therefore already asking companies to submit this data. Who has to provide the data The ENS/ESumA must be submitted by the carrier, i.e. the air carrier/air freight forwarder. However, the carrier is dependent on the data of the consignor or consignee for certain information. While the 6-digit HS code could generally also be provided by the sender, the recipient's EORI number can of course only be transmitted by the recipient. I consider the requirement for the EORI in the ENS/ESumA to be problematic. Many importers do not hand over their EORI to the freight forwarders, as this information can be used to submit an import customs declaration without a power of attorney having been issued. This has already led to problems for all parties involved on several occasions in the past. In my opinion, the customs administration is required to map the issuing of a power of attorney electronically in order to better prevent misuse. If the administration requests certain sensitive data from an economic operator, it is also responsible for ensuring that it cannot be misused.

The EU Commission has updated its FAQs regarding sanctions against Russia. The document was published on 13.07.2022. As always, you can find the link to the document here. The Commission would like to point out that this document does not constitute a legal act. It is intended as a tool to help national authorities and EU economic operators to apply the regulations correctly. The new questions that have been included in the document can be found at the very end. What is your experience of dealing with the national authorities? Are there any procedures in your area that differ from the Commission's FAQs? I look forward to your comments! Link: https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/faqs-sanctions-russia-consolidated_en.pdf