Union Customs Code
The Union Customs Code (UCC) is part of the modernisation of customs and will serve as the new framework Regulation on the rules and procedures for customs throughout the EU. The European Commission have said the UCC will:
- streamline customs legislation and procedures
- simplify customs rules and procedures and facilitate more efficient customs transactions in line with modern-day needs
- complete the shift by customs authorities to a paperless and fully-electronic environment; and reinforce swifter customs procedures for compliant and trustworthy economic operators
The substantive provisions of the UCC com into force on 1st May 2016.
HMRC has stated that there should be a seamless transition for the majority of operators currently transacting business under the Community Customs Code between the EU and non-Member States. The Revenue says they’ll be contacting businesses who hold customs authorisation or approval directly.
What main changes does the UCC make?
The main changes from the previous Customs Code (Council Regulation EEC No 2913/92) and its implementing regulation (Commission Regulation EEC No 2454/93) are:
- the mandatory requirement for a guarantee to cover potential and/or actual debts
- the requirement to be financially solvent, have a good compliance record and have a good record keeping system in order to hold an authorisation
- changes to the process for examining the economic conditions when an economic test is required for processing procedures
- a requirement for a Bill of Discharge (BoD) for end use is introduced
- new prefixes for customs warehouse authorisations
- a provision to undertake retail sales remotely under the customs warehousing procedure is introduced
- the removal of the requirement to re-export the goods under inward processing unless specifically laid down
- the removal of IP drawback, type D customs warehouses and processing under customs control
Further background on the main changes from 1st May 2016
1. Financial guarantees for temporary storage and other procedures
Financial guarantees (known as Customs Comprehensive Guarantees) will be mandatory to cover the annual amount of potential duty that could be due if you operate any of the following regimes or procedures:
- customs warehousing
- inward processing
- outward processing with prior importation or under the Standard Exchange System
- temporary admissions where the UCC doesn’t provide for an outright guarantee exemption
- end use
- temporary storage
This is not currently a UK requirement and only applies to new authorisations. The guarantees against a customs authorisation or approval (eg customs warehouse) must be enough to cover the maximum amount of customs duty applicable to the goods held in the regime or procedure at any time. This would probably be the most significant change if you use duty relief or suspension and you will need to assess your liability and the amount of the guarantee required unless a financial waiver guarantee applies (point 2 below).
2. Waiver of financial guarantee
Businesses subject to the financial guarantee can get the requirement waived if they fulfil the criteria for Authorised Economic Operator (AEO). This is a supply chain security accreditation, approved by Customs for companies that demonstrate that their internal processes fully support customs compliance. If AEO authorisation is required, the application should be started as soon as possible as it can take up to six months to obtain.
Some or all of the customs simplifications AEO certificate criteria must be met for many authorisations and simplifications. It is up to you whether an AEO certification is for you and whether it is sufficient for you to prove that you meet the AEO standards. However, it is mandatory to become an AEO if you wish to be authorised for:
- moving goods in temporary storage between different member states
- centralised clearance (to be introduced at a later date)
- waiver of the presentation of goods requirement when making declarations in your records
- self-assessment (to be introduced at a later date)
- deferment accounts – reduced guarantees for customs duties payable
Obtaining an AEO certificate makes you eligible to benefit from the waiver referred to above (point 1) for potential debts and a reduction to 30% guarantee for the deferment account.
3. Customs valuation changes
Customs valuation from May 2016 will be based on the final sale before import. Before May 2016, an importer could simply attest to the value of an earlier sale in a chain of sales leading to import.
Analysts say this change could increase customs duty costs significantly.
There will be a transitional measure by which any binding contracts containing a reference to an earlier sales agreement may be used until 31st December 2017.
4. Duty liability of royalty payments
Customs duty currently applies to royalty payments only where they relate to imported goods, but are payable as a condition of sale of those goods. From May 2016, that restriction will be lifted so that royalties and licence fees will generally be paid as a condition of the sale of the goods and should be included in the customs value.
Analysts report many more royalty payments will be subject to customs duty. If you have any agreements which include royalty payments, it would be a good idea to review them to consider negotiating amendments to manage the increased exposure to a future duty cost.
5. Temporary Storage changes
The UCC introduces 4 main changes for temporary storage:
- mandatory guarantees (point 1)
- ability to move goods under temporary storage (rather than transit)
- new data sets for temporary storage declarations
- maximum of a 90-day storage period
Summary of substantive changes
- Drawback will no longer be allowed in Inward Processing (IP)
- Processing under Customs Control (PCC) will be merged with the IP suspension procedure
- Compensatory Interest in relation to the IP procedure is being removed
- Type II Free Zones will no longer exist
- Comprehensive Guarantees and Guarantee Waivers will be more widely available
- One new criteria will be added for Authorised Economic Operator (AEO) status
- Temporary Storage period of discharge will be increased
- Increased harmonisation of rules relating to customs decisions
- Level 1 Air/Sea Simplified Procedure for transit will no longer be available
- Level 2 Air/Sea Simplified Procedure for transit will be replaced with the use of an electronic transport document as a customs transit declaration
- New harmonised datasets for all declarations/notifications
- Applications for the Temporary Admission procedure will be made electronically