EU Customs Reform

The EU Commission has published its EU Customs Reform plan on 17 May 2023 with a view to adopt the changes that the e-commerce boom brought.

The unprecedent number of parcels arriving to the EU, precipitated by Covid19, have triggered a change in the form of an EU wide e-commerce VAT Reform package that came into life in 1 July 2021. Since the VAT Reform package was introduced, the revenues on VAT collection through the Import One Stop Shop (‘IOSS') platforms have increased significantly.

Since the change was limited to VAT, the EU Commission wishes to achieve the same through its Customs Reform package. As a first step, the abolishment of the existing €150 duty exemption has been proposed, to be effective as of 1 March 2028. This will mean that the platforms that operate on a distance-sales basis will no longer benefit from such duty exemption and must pay the customs duties on goods entering the EU regardless of the value of their goods.

The duty that will be applicable to the products will be determined through a bucket system where each bucket contains its own product portfolio. As things stand, only a small range of products will avail of nil duties, whereas others will attract rates of 5%, 8%, 12% and 17%. The Platform operators will have to conduct due diligence on their product portfolio and determine if their products will be affected and what ‘bucket’ they will fall into.

The platform operators will be “deemed importers” which is a new concept. The platforms will be liable to declare and pay the import duties as well as ensure product safety and quality measures are met.

The EU Customs Reform rules will be monitored by a new entity – The EU Customs Authority. Monitoring will take place through a proposed new online interface – The EU Customs Data Hub. Within the Hub, all EU wide customs data will be stored, monitored, and audited.

This change will require the establishment of a new EU-wide IT system and it is not expected to be fully operational until 31 December 2037.

The EU Customs Data Hub will be initially launched in 2028 but at that stage will be limited to e-commerce businesses. Wider participation by other businesses eventually being voluntary by 2032 and then mandatory for all applicable businesses by 2038.