Proposal for the new Union Customs Code on e-commerce

3 July 2023

New Union Customs Code

On 17 May 2023 the EU Commission has published a proposal for the new Union Customs Code (the ‘Proposal’), which is aligned with several other legislative proposals like ViDA (‘VAT in the Digital Age’) and proposal on simplified tariff treatment for the distance sale of goods.

Among other changes, some changes related to e-commerce are introduced, which are potentially effective from 2028. 

Background

From the VAT perspective, ‘deemed importer’ is a person who is involved in the simplified ‘distance sales’ (‘IOSS’) regime for B2C transactions for VAT purposes. The IOSS is currently applicable to transactions not exceeding EUR 150. 

Since July 2021, all B2C consignments, imported into the EU from non-EU based digital platforms, are subject to VAT and are covered by a digital customs declaration according to the IOSS regime. B2C consignments below EUR 150 are not subject to customs duty.

According to the EU Commission, due to a sharp increase of low value shipments for e-commerce, the customs authorities are currently experiencing difficulties in controlling the EUR 150 threshold. 

New rules for digital platforms and abolishment of customs duties relief for consignments under EUR 150

The Proposal abolishes the EUR 150 low value consignment relief for customs duties and creates a new customs regime for digital platforms, who in the future will be considered as a ‘deemed importer’. This is also in line with the pending ViDA (‘VAT in the Digital Age’) proposal, under which the use of the IOSS also will be mandatory for all non-EU distance sales, irrespective of their value.

According to the Proposal, digital platforms (deemed importers) will be liable for all customs formalities and payments instead of consumers. They will charge the customs duties at the moment of sale to the customers and pay customs duties to the respective Member States as they already do for VAT. 

Deemed importers shall provide the information on distance sales of goods to be imported into the EU at the latest on the day following the date when the payment was accepted and in any event prior to the release of the goods. 

To minimize the compliance burden, simplified procedures will be available for the deemed importers:

• Possibility to calculate the customs duty due by applying one of the new bucket tariffs in the Combined Nomenclature:
  • 0% (e.g., for books, printed materials, works of art)
  • 5% (e.g., for toys, games, houseware articles)
  • 8% (e.g., for silk products, carpets, glassware)
  • 12% (e.g., for cutlery, electrical machinery) 
  • 17% (e.g., for sugar confectionary, footwear).

The simplified tariff treatment is not applicable to some goods, e.g., those subject to excise duty.

Additionally, in terms of tariff simplifications, deemed importer is required to provide only the firsts 6 digits of the HS-code before the goods are brought into free circulation inside EU. This means that less efforts in terms of customs classification are required. 

• Customs value should be the net purchase price without VAT but including the total transport costs until the final destination of the product.
• No origin should be required.

If the deemed importer wishes to benefit from preferential tariff rates by proving the originating status of the goods, that person can do so by applying the standard procedures.

Further simplifications (e.g., reporting and payment of the customs debt by the end of the current month) are provided to deemed importers.

Recommendations

The following is recommended for businesses dealing with B2C, where the goods are imported into the EU:

• Monitoring development of the Proposal 
• Reviewing your supply chain in terms of VAT and customs duty consequences arising for digital platforms under the Proposal 
• It is also valuable to review the supply chain in terms of VAT and customs duty compliance in terms of compliance with the effective regulations, such as ViDA and proposal for the new Union Customs Code.

Reach out to us if you would like to discuss further on how the changes might impact your e-commerce.