Chapter 1 Customs System and Law

1.1 General principles

Upon the establishment of the Single Internal Market, on 1 January 1993, the customs control among the EU member states was abolished and the movement of goods and services was freely implemented, subject only to the value-added tax（VAT）liability control.

The intra-community trade is designated as purchases and sales, while the terms import and export refer only to the extra-community trade. VAT is a general, broadly based consumption tax assessed on the value added to goods and services. It applies to most goods and services that are bought and sold for use or consumption in the Union. The applicable EU legislation since 1 January 2007 has been Directive 2006/112/EC（VAT Directive）. This Directive provides exemptions for（ⅰ）intra-community supply of goods and for（ⅱ）exportation.

Article 146 of the VAT Directive provides an exemption for exports to countries outside the EU, since the goods are consumed outside the EU. EU legislation makes a very clear distinction between customs legislation, which applies to the importation phase, and sector-specific legislation, which regulates the placing of certain products on the EU market. The EU customs code covers all the customs matters relating to trade with non-EU countries. It ensures that customs procedures in all EU member states are consistent and transparent. The implementing provisions provide the rules and processes to enforce the Customs Code. The Union Customs Code（UCC）, adopted in Regulation No（EU）952/2013, will repeal the existing customs code on 1 May 2016.

The Union Customs Code was adopted on 9 October 2013 as Regulation（EU）No. 952/2013 of the European Parliament and of the Council. It entered into force on 30 October 2013 and repealed the Regulation（EC）No. 450/2008 of 23 April 2008 laying down the Community Customs Code（OJ L 145,4.6.2008, p.1）. Its substantive provisions will apply only on 1 May 2016, once the UCC-related Commission acts（Delegated and Implementing Acts）are adopted and in force and by not later than 1 May 2016.

The 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 UCC and the related delegated and implementing acts seek to:

·streamline customs legislation and procedures；

·offer greater legal certainty and uniformity to businesses；

·increase clarity for customs officials throughout the EU；

·simplify customs rules and procedures and facilitate more efficient customs transactions in line with modernday needs；

·complete the shift by Customs to a paperless and fully electronic environment；

·reinforce swifter customs procedures for compliant and trustworthy economic operators（Authorised Economic Operators）.

In line with the Articles 290 and 291 of the Treaty on the Functioning of the European Union（TFEU）, shaping of the provisions within the Acts is done through proper involvement of the member states and the business community.

1.2 Operator Registration and Identification number registration

The importer does not need to pre-notify the importation of his products into the EU, except for dualuse goods and goods that require a specific licence, nor must it get any kind of authorization to import those goods. The only obligation on the importer is to request a registration number, called the Economic Operator Registration and Identification number（EORI number）, which will be needed later on in the process.

This request is made to EU customs authorities. In most cases, the customs agent acting for the importer will in fact get an EORI number for the importer. Customs agents must also have an EORI number.

The EORI number is a unique identifier for every economic operator, company and individual, who engages in activities covered by EU customs legislation. Importers active outside the EU will be assigned an EORI number the first time the carrier of their goods lodges a customs declaration, an entry summary declaration（ENS）or an exit summary declaration（EXS）.

The EORI number is used for communication with the EU customs authorities and serves the following purposes：

· avoiding multiple registration within the EU. As an EORI number is valid throughout the EU, no additional registration is required when the person initiates a customs procedure in another member state；

· allowing for automated risk analysis with regard to persons mentioned in any declaration lodged with customs（e. g. carrier, consignee）；

· facilitating the verification of whether the person lodging a customs declaration（or on whose behalf it is lodged）holds any required authorisation or licence in the case of sensitive goods, such as medicines or agricultural products.

An importer established in the EU has to register in the member state where it is established（i. e. where it has its registered office, headquarters, or permanent business establishment）, while an importer not established in the EU（i. e. which does not even have a permanent business establishment in the EU）has to request an EORI number in the member state in which it intends to first lodge a customs declaration.

In sum, from a customs perspective, importers wishing to place a product on the EU market have no other obligation before goods reach EU territory.

That being said, they can benefit from trade facilitation measures later on in the process if they are registered as a so-called authorised economic operator（AEO）.

Importers established in the EU that meet specific qualifying criteria may apply for and receive AEO certification. The aim of bestowing AEO status is to enhance security in the international supply chain through granting recognition to reliable traders. In turn, such traders benefit from administrative simplification. Further, certain trade facilitation measures can be used if the imports take place on a regular basis.

1.3 Lodging an entry summary declaration（ENS）

The carrier must lodge an ENS electronically before the goods are brought into the EU, according to timelines depending on the transportation mode. An economic operator other than the carrier may lodge an ENS, but only with the knowledge and consent of the carrier under contractual arrangements.

The purpose of the ENS is to allow the customs authorities to perform automated risk analysis and to target those consignments that will be controlled for safety and security purposes on arrival（road, rail and internal waterways traffic）or following unloading（sea and air traffic）. Customs authorities wish to target such consignments at an early stage.

The ENS must be lodged at the customs office of entry, that is, the customs office with jurisdiction over the place where the goods are first brought into the EU（i. e. a port, an airport, a land or river border crossing, or a railway station）. This customs office is responsible for performing risk analysis on the basis of the ENS prior to the arrival of the goods.

The carrier lodging the ENS is obliged to submit all data required for such declaration and is responsible for accuracy of the information given in the declaration, authenticity of the documents presented and compliance with all the obligations relating to the entry of the goods in question under the procedure concerned.

If the means of transport is diverted to a member state other than the member state where the declared customs office of first or subsequent entry is located, the operator of the active means of transport must lodge a“diversion request”with the member state where the declared customs office of first entry is located. In any other case of diversion, no action is needed, as the necessary exchange of data between the involved member states being arranged automatically. The specifications for that diversion process are made available by the member state concerned.

1.4 After the entry of a product in EU territory

The presentation of goods occurs when the customs office of entry is notified by the carrier that the goods have arrived and are available for controls. Two situations have to be distinguished：

· If the goods arrive by sea or air, this notification concerns only goods that are unloaded at that port or airport. Goods that are only unloaded temporarily to enable the unloading and loading of other goods are also exempted from such notification；

· For all other modes of transport, the notification must cover all goods on the means of transport.

Such notification must include all goods unloaded or, in cases other than air or sea, on the means of transport, including goods for which no ENS was lodged. From the moment goods have been presented, they are subject to a set of rules known as rules for temporary storage.

The presentation shall take place upon arrival of the goods into the EU customs territory. Where the legislation waives the requirement for goods to be presented, no presentation/temporary storage is needed.

The act of presentation can be made in the following ways：

· If the goods remain on the means of transport（primarily road and rail transport）but the goods enter the customs territory, the act of presentation can consist of immediately lodging a customs declaration with the customs office of entry；

· For sea and air transport, goods remaining on board are declared at the place of unloading or transshipment；

· If the goods are to be unloaded and stored at the customs office of entry（primarily air and maritime transport）, the person presenting the goods lodges a summary declaration with the customs office of entry.

1.5 Customs declaration

The importer also has certain additional obligations after the goods have entered EU territory but before they can be released for free circulation. These mainly consist of the filing of a customs declaration.

Once released for free circulation the goods can circulate freely within the European Economic Area（EEA）, including the 28 EU member states, once the customs duties and other charges have been paid and any rules or import restrictions have been satisfied.

All goods imported into the EU must be declared to the customs authorities of the relevant country using the Single Administrative Document（SAD）, which is the common import declaration form for all EU countries. The SAD can be presented to the customs authorities by the importer or a representative, either electronically（each EU country has its own system）or by delivery directly to the premises of the customs office. In the near future, SAD will only be processed electronically.

The main purpose of the SAD is to identify data about：

· the parties involved in the transaction（importer, exporter, representative, etc.）；

· the goods（tariff code, weight, units）, location and packaging；

· the means of transport；

· country of origin, country of export and destination；

· commercial and financial details（incoterms, invoice value, invoice currency, exchange rate, insurance etc.）；

· any documents associated to the SAD（import licences, inspection certificates, document of origin, transport document, commercial invoice, etc.）；

· declaration and method of payment of import taxes（tariff duties, VAT, excises, etc.）.

The SAD set consists of eight copies; the economic operator completes all or part of the sheets depending on the type of operation.

To export to the EU three copies of the SAD are used:the first is to be retained by the authorities of the EU country in which arrival formalities are completed; the second is used for statistical purposes by the country of destination; and the third is returned to the consignee after being stamped by the customs authority.

Overall, the customs declaration for release for free circulation includes the following steps:

1． The customs agent of the importer lodges a customs declaration for release for free circulation at the customs office where the consignment is available for any controls.

2． Through its IT system the customs office formally accepts the customs declaration. This means that it checks whether all required fields are filled in using the prescribed format. There is no material verification of the information provided.

3． Depending on each member state's risk management program, the customs office may then decide:

—to examine documents for those goods（e. g. invoice, airway bill, certificate of origin）；

—to physically examine the goods（e. g. to verify that the customs classification of the goods provided corresponds to the goods actually imported）；

—to refrain from any examination at this stage.

4． If the goods are subject to import duties and other charges, they must be paid or guaranteed.

5． If there are no prohibitions or restrictions preventing the release of the goods, the customs office then releases the goods for free circulation, which means that the goods can be placed on the EU market.

Importers wishing to place chocolate products on the EU market have no other obligation towards customs authorities before goods can be released for free circulation in the EU.

1.6 Possible outcomes:Customs destinations

Once goods arrive at the customs office of entry to the EU, they are placed into temporary storage under customs supervision for no longer than 45 days for goods carried by sea, or 20 days in any other case. This temporary regime is meant to give customs authorities some time to gather information to：

· carry out customs supervision; and

· levy import duties and taxes in case the goods disappear.

This temporary regime also helps the trader, who has additional time to decide what it wishes to do with the goods, e. g. schedule a pickup or opt for temporary storage in case a volatile market significantly shifts the prices of the goods. The trader can choose one of several possibilities, as listed below：

1.6.1 Release for free circulation

Goods are released for consumption once all the import requirements have been met：

· all applicable tariff duties, VAT and excise duties have been paid；

· all applicable authorizations and certificates（e. g. for quotas, health requirements, etc.）have been presented.

In practice, when a product is brought to the EU market, it is possible to declare it for release for free circulation immediately upon its arrival/presentation and thus avoid all the intermediate arrangements mentioned below.

1.6.2 Transit procedure

When goods are moved between customs offices in different EU countries, customs clearance formalities can be transferred to the customs office of destination.

1.6.3 Customs warehousing

Imported goods can be stored in specially designated facilities, and duties, taxes and formalities can be suspended until the goods are assigned another approved customs treatment.

1.6.4 Inward processing

Goods can be imported into the EU, without being subject to duties, taxes and formalities, to be processed under customs control and then re-exported out of the EU. If the finished products are not finally exported, they become subject to the applicable duties and formalities.

1.6.5 Temporary importation

Goods can enter the EU without payment of import duties, provided they are intended for re-export without undergoing any change. The maximum period for temporary import is two years.

1.6.6 Entry into a free zone or warehouse

Free zones are special areas within the EU customs territory where goods can enter without payment of customs duties, VAT and excise duties, and without other import formalities until they are either assigned another approved customs treatment or re-exported. Under this procedure, goods may also undergo simple operations such as processing and re-packing.

1.7 Classification of merchandise and assessment of duties

The classification of merchandise is a necessary element of the importation phase. The product to be imported is classified pursuant to specific rules and criteria, analysed below. The classification is primarily used to determine the duties due upon importation.

The Common Customs Tariff is the external tariff applying to goods being imported to the European Union. The rates of customs duties applying upon the imports of goods from third countries（countries outside the European Union）to the EU's customs territory are specified in the EU's Common Customs Tariff（Combined Nomenclature-Council Regulation No. 2658/87, as amended）. The aforesaid Common Customs Tariff is modified every year and it is published on the last day of October of the year preceding its effective date.

The amount of the customs duties charged for each commodity being imported to the European Union is determined upon the customs clearance by the competent customs office of import on the basis of“Tariff Classification”of the commodity in the aforesaid“Common Customs Tariff”, that is to say it is about finding the correct tariff subheading to which the commodity is subject and the customs duty rate corresponding to such subheading.

The Harmonised System（HS）is a nomenclature developed by the World Customs Organisation（WCO）comprising about 5,000 commodity groups, organized in a hierarchical structure by sections, chapters（2 digits）, headings（4 digits）and sub-headings（6 digits）.

The Combined Nomenclature of the EU integrates the HS Nomenclature and comprises additional 8-digit subdivisions and legal notes specifically created to address the needs of the Community.

Every product is classified under a tariff code that carries information on：

· duty rates and other levies on import and export；

· any applicable protective measures（e. g. anti-dumping）；

· external trade statistics；

· import and export formalities and other non-tariff requirements.

1.8 Valuation for customs purposes

Most customs duties and VAT are expressed as a percentage of the value of the goods being imported. Customs authorities define the value of merchandise for customs purposes based on their commercial value at the point of entry into the EU. This includes commercial price, transport, insurance and other costs. This value does not always correspond to the price stated on the sales contract and may be subject to specific adjustments.

A Customs Value Declaration must be presented to the customs authorities where the value of the imported goods exceeds EUR 10,000. The Customs Value Declaration must be drawn up using a prescribed form. This form must be presented with the Single Administrative Document.

The main purpose of this requirement is to assess the value of the transaction in order to determine the customs value（taxable value）and then to apply the tariff duties.

In certain cases the transaction value of the imported goods may be subject to an adjustment, which involves additions or deductions. For instance：

· commissions or royalties may need to be added to the price; and

· the cost of internal transport（from the entry point to the final destination in the Community Customs Territory）must be deducted.

The customs authorities must waive the requirement of all or part of the customs value declaration where：

· the customs value of the imported goods in a consignment does not exceed EUR 10,000, provided that the goods do not enter EU territory as split or multiple consignments from the same consignor to the same consignee; or

· the importations involved are of a non-commercial nature; or

· the submission of the particulars in question is not necessary for the application of the Customs Tariff of the European Communities or where the customs duties provided for in the Tariff are not chargeable pursuant to specific customs provisions.

1.9 Country of origin marking

1.9.1 The EU Generalised Scheme of Preferences and the Rules of Origin

The EU Generalised Scheme of Preference（GSP）defines the Rules of Origin that address the special needs of developing countries. This preferential treatment is non-reciprocal, which means that developing countries do not have the same obligations towards the EU. That said, the GSP schemes offered by the various donor countries and their rules of origin differ fundamentally. Goods complying with the conditions of the GSP of the USA, for example, will not necessarily comply with the EU GSP.

Products originating from specific countries are, in principle, eligible for the GSP rules of origin. This means that such products will be subject to a preferential duty compared to the default duty payable under erga omnes obligations.

To qualify for preferential duty rates, products originating in the beneficiary countries of the EU's GSP must be accompanied by proof of origin. This can be either：

·a certificate of origin form A issued by the competent authority in the beneficiary country. The exporter applying for the certificate should be prepared to submit documents proving the originating status of the products concerned. The certificate should be made available to the exporter as soon as the export has taken place（or is ensured）. Nevertheless, exceptionally, a certificate can be made after exportation, under some conditions; or

·an invoice declaration drafted by the exporter for consignments valued at EUR 6,000 or less. When filling out an invoice declaration, the exporter should be prepared to submit documents proving the originating status of the products.

The exporter must sign the invoice declaration by hand. Any proof of origin remain valid for 10 months after issue.

These Rules follow the applicable provisions included in Articles 97k to 97v and in Annexes 17 and 18 of Regulation（EEC）2454/93 implementing the Community Customs Code.

Rules applicable for certification of origin took effect after the 1 January 2017. As of this date, the proof of origin will be brought in the form of a statement on origin issued by exporters, who will be registered in the country of exportation.

1.10 Customs and security

The 2005 amendments are aimed at tightening security requirements for movement of goods across international frontiers. Economic operators are now required to provide the customs authorities with details of goods before they are imported into or exported from the EU. This will entail the setting up of a one-stop shop for importers and exporters.

The new concept of AEO simplifies trade. A member state may grant AEO status to any economic operator meeting common criteria. These criteria concern control systems, financial solvency and the operator's track record in complying with the rules.

Member states are required to use risk-analysis methods. Uniform Community criteria have been introduced for identifying risks for control purposes.

In November 2005 the Commission adopted a proposal, as part of the implementation of the Lisbon Strategy, aimed at modernising the Community Customs Code. This proposal is aimed at simplifying the legislation and administrative procedures governing imports and exports. Facilitating customs operations in this way reduces costs. In addition, the Commission proposed：

· streamlining structures and making terminology more consistent；

· streamlining the system of customs guarantees；

· extending the use of single authorisations（whereby an authorisation issued by one member state on completion of a procedure would be valid throughout the Community）.

1.10.1 Key terms used in the act

· Binding origin information（BOI）and binding tariff information（BTI）:They are written notices issued by the customs authorities. BOI notices concern the preferential or non-preferential origin of goods and are issued to a specific importer or ex-porter. BTI notices concern the classification of goods in the Combined Nomenclature or a secondary nomenclature such as TARIC.

· Customs value:the value of goods used to calculate the amount of customs duties.

· Customs declaration:an act whereby a person expresses the wish to place goods under a customs procedure.

· Customs warehousing: the customs procedure permitting the storage of goods.

· Processing:inward processing permits the import of goods for working and subsequent re-export. Outward processing permits Community goods to be exported for working and then subsequently re-imported with total or partial relief from duties.

· Processing under customs control:processing under customs control permits import duties to be suspended on goods imported for working and these goods to be released for free circulation at a lower rate of duty.

· Free zone and free warehouse:free zones and free warehouses are part of the Community customs territory, but import duties on non-Community goods are suspended there. Community products are eligible for measures conditional, in principle, on their being exported.