15 January 2025

E-commerce has revolutionized trade, making it easier than ever for consumers to access goods from around the world. Yet, in the European Union, the customs framework struggles to keep pace with this exponential growth, particularly in countries like the Netherlands, where online spending at foreign webshops increased by 16% to €2.3 billion in just one year. This surge has exposed critical inefficiencies and complexities within the EU's customs system. Calls for simplification have grown louder, but any Customs reform must be grounded in the realities of modern supply chains, which involve multiple parties. A comprehensive approach is needed - one that balances simplification with practicality and fairness.

The Need for Simplification in EU Customs

Red tape is a persistent challenge for businesses across the EU, stifling innovation and undermining the potential of the single market. While the Customs reform proposal addresses some challenges posed by e-commerce, it fails to reduce bureaucracy. National Customs Administrations in the EU are tasked with controlling compliance for over 350 regulations governing goods crossing the EU border, with additional non-fiscal rules in the pipeline. Instead of alleviating complexity, these additions threaten to further erode EU competitiveness.

At a recent event on the reform in Brussels Kristian Vanderwaeren, Director General of Belgian Customs, aptly questioned, "When did you last see a rule that simplified something?" He warned that overregulation could stymie innovation and emphasized that e-commerce should be seen as an opportunity, not an enemy. Reform must simplify procedures, reduce redundancies, and prioritize efficiency to truly benefit EU businesses.

Addressing E-Commerce Challenges

The growth of e-commerce has amplified pressure on EU customs systems. In the Netherlands, purchases from foreign online stores grew by 6% to 20.3 million transactions in the last year alone, with Chinese platforms dominating. This means that currently the Dutch administration handles over 4 million customs clearances daily. Substandard goods entering the EU market create significant, albeit often unquantifiable, costs.

Simplification Without Overburdening SMEs

The proposed 'Trust and Check' framework aims to streamline customs processes by granting facilitations to compliant traders. However, the stringent criteria for achieving this status - such as integrated systems for real-time data tracking - pose insurmountable barriers for most small and medium-sized enterprises (SMEs).

Projections that most traders will qualify for Trust and Check are overly optimistic and risk creating a two-tier system where large corporations benefit while smaller businesses are excluded. The recent acknowledgment by the European Commission and Council that the AEO status will remain available alongside Trust and Check receives support. Retaining the Authorized Economic Operator (AEO) status alongside Trust and Check offers a fairer alternative, but it is also essential that customs intermediaries can continue to extend facilitations so that SMEs can continue to access benefits like deferred duty payments and simplified declarations. AEO retention is not a viable alternative to Trust and Check, as it remains difficult to obtain and is largely limited to intermediaries rather than SMEs. The current proposal offers no alternative for those unable to secure Trust and Check or AEO status, leaving transaction-based clearance as their only option. Restricting intermediaries' roles would significantly undermine the current facilitation structure, which enables simplifications through intermediary authorisations regardless of client status.

Recognizing the Role of Intermediaries

Customs intermediaries, including freight forwarders and customs brokers, are vital to the smooth functioning of international trade. However, the reform's emphasis on importer and exporter responsibility overlooks the complexities of supply chains. Assigning importer-level liabilities to intermediaries - including freight forwarders and warehouse operators - is counterproductive and ignores the collaborative nature of modern logistics.

Responsibility should align with data ownership. For example, a warehouse operator should not bear the same compliance burdens as an importer. The framework must clearly differentiate between fiscal and non-fiscal responsibilities to avoid ambiguities and unintended consequences.

The Promise and Pitfalls of the EU Customs Data Hub

The EU Customs Data Hub has the potential to centralize and streamline data management. However, its success depends on inclusivity and transparency. Intermediaries must have access to relevant data to promptly correct inaccuracies and effectively perform their roles. Questions remain on how the Data Hub will determine authoritative data when conflicting information is submitted by multiple parties. Equally important is ensuring that outdated or incomplete data does not lead to errors. The Hub must also manage situations where overlapping data is provided by different parties. Addressing these challenges requires practical solutions that involve all stakeholders in the design and implementation process, ensuring the system simplifies customs operations for all actors in the supply chain.

Transitional Provisions and Consistency

The reform's ambition to modernize customs operations is commendable, but practical challenges cannot be ignored. Transitional provisions should allow for thorough testing of new systems and procedures before full implementation. Lessons must be learned from past implementation challenges under the Union Customs Code (UCC).

For example, the abolition of self-assessment during the transition, only to reintroduce it for Trust and Check traders, demonstrates a lack of foresight. Maintaining self-assessment options during the transition would enable a smoother implementation process and ensure continuity.

CLECAT's Call for Action

The Polish Presidency will continue advancing the reform of the customs union, with a focus on establishing the EU Customs Authority. The goal is to secure a Council position and adopt a mandate for negotiations with the European Parliament. Both the European Commission and the European Parliament, led by its new Rapporteur Dirk Gotink, have expressed a strong desire to expedite this process.

In this context, CLECAT urges policymakers to adopt a practical and inclusive approach to customs reform. Key priorities include addressing challenges related to the Trust and Check framework, clarifying the role of intermediaries, and ensuring effective implementation of the Data Hub. For the reform to succeed, it must simplify customs procedures without imposing undue burdens on SMEs or intermediaries, align responsibilities with data ownership and supply chain roles, and actively involve all stakeholders in the design and implementation of new systems. CLECAT remains steadfast in its commitment to working collaboratively with stakeholders to shape a customs framework that promotes trade facilitation, competitiveness, and sustainable economic growth across the EU.

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