EU Customs Reform: A Centralised Future for Trade Compliance

In a global economy marked by a substantial increase in trade volumes and intricate compliance requirements of evolving EU standards, the pressure on EU customs authorities has never been greater. The European Commission recognized these challenges and proposed a comprehensive customs reform package on May 17, 2023. This reform introduces an EU customs authority and an EU customs data hub, aiming to streamline customs processes, enhance digitalization, and mitigate fraud. In this blog, we will guide you through the context, changes, and timeline of the EU customs reform.

The complexity of current EU customs

Cumbersome customs processes: Despite the customs union being one of the EU's oldest milestones, importing goods into the EU remains a complex endeavor. Traders often face a multi-step reporting process, involving pre-load filings, arrival notifications, presentation notifications, temporary storage declarations, and final customs declarations. This complexity complicates tracking goods and quick compliance checks, while different entities handling various stages can lead to inconsistencies and inefficiencies.

Fragmented digitalization efforts: Although the EU customs union has increasingly embraced digitalization, progress remains uneven across Member States. The current landscape features 27 distinct national IT systems, creating a fragmented digital environment that frustrates traders and impedes seamless operations. According to a 2022 impact assessment, an economic operator would need to interface with 189 different national IT systems to complete all customs formalities across the EU, highlighting the pressing need for a unified digital approach.

Decentralized governance: National customs authorities develop and implement risk management strategies independently, often leading to inconsistencies in detecting and addressing customs fraud and non-compliance. This decentralized governance structure allows for 'border shopping,' where fraudsters exploit the weakest points of entry. The EU Court of Auditors highlighted these issues in 2021, stressing the need for a more harmonized approach.

The rise of e-commerce: The surge in online sales has transformed consumer behavior, with a significant portion of EU e-shoppers purchasing goods from non-EU sellers. In 2022, about 20% of EU e-shoppers bought or ordered goods and services from outside the EU, adding layers of complexity to customs procedures and increasing the potential for fraud and non-compliance.

Fraud in tariff calculations: The EU's complex tariff classification system, encompassing over 1,000 codes, poses significant challenges for businesses and customs authorities. The current method for calculating customs duties is cumbersome, contributing to frustration and administrative burdens. Furthermore, the €150 threshold for customs duties on imported goods has become a notable source of fraud, with traders undervaluing goods to evade duties.

Below are the key provisions of the EU customs reform: 

Establishment of an EU customs authority

The EU customs authority is slated for establishment in 2026, becoming operational by 2028. This new body will oversee the development, operation, and management of the EU customs data hub. It will focus on coordination between national customs administrations, capacity building, data management, and risk coordination. The authority aims to centralize risk management, develop common EU risk criteria, and create crisis management mechanisms to enhance the overall efficiency and integrity of the customs union.

💡 Would you liek to know more about the European Customs Authority? Then read our article: The Role of the EU Customs Authority after the Customs Reform

Creation of the EU customs data hub

The proposed EU customs data hub will serve as a centralized IT environment, eliminating the need for traders to interact with multiple national IT systems. This hub will enhance data integrity, traceability, and non-repudiation, bolstering customs control and combating fraud and smuggling. The hub's implementation will be gradual, initially focusing on e-commerce in 2028, with full adoption by 2038.

💡 Would you liek to know more about the Customs Data Hub? Then read our article: EU Customs Dat Hub: the Engine of the New Customs Union

Trust and Check traders scheme

Starting in 2032, traders can apply to the Trust and Check Traders scheme, offering a 'green lane' for their goods. In exchange for real-time access to their electronic systems, authorized traders can release goods without active customs intervention. This initiative aims to reduce administrative burdens and enhance business efficiency.

💡 Want to read more about the Trust and Check Traders scheme? Then read our article: What are the benefits of the Trust and Check Traders Scheme?

Simplified tariff calculation for distant sales

The customs reform introduces a simplified five-bucket system for tariff duties, exclusively for low-value distance goods. This voluntary system, effective from March 2028, aims to streamline tariff calculations and align VAT and customs treatment by removing the €150 exemption threshold.

📦 Want to know more about the e-commerce customs & vat reform? Then read our article: EU E-commerce Customs & VAT Reform: Everything You Must Know

Current status of the customs reform

As of March 2024, the European Parliament adopted its position at first reading, with ongoing negotiations in the Council. The proposal has seen significant analytical work under the Belgian Presidency in the first half of 2024. Member States recognize the potential of the EU customs data hub but acknowledge the need for further discussions and analyses. The proposal is currently under the ordinary legislative procedure, with the European Parliament and the Council deeply involved in shaping its final form.

The EU customs reform represents a significant step towards a more efficient, digitalized, and fraud-resistant customs union. By establishing a centralized customs authority and data hub, the reform aims to lower compliance costs, streamline processes, and enhance the overall integrity of the customs system. As negotiations continue, the final shape of this ambitious reform will determine its impact on the future of trade and compliance in the EU.

Gateway Software Services will continue to follow the EU customs reform closely, ensuring our customs software solutions remain compliant with the latest regulations and guidelines.