• Topic: law 

What is planned for European customs in 2023? Probably, everyone involved in international trade asks this question. Based on the materials we already know and signals that have been already given, let’s overview what changes and trends in the EU and the UK we can expect for international trade and customs at this stage.

Overview of upcoming developments of customs in the EU and the UK

Between late 2022 and the end of 2023 there will be several significant developments that are already foreshadowed. First, we are awaiting publication of two major documents – one in Europe, one in the UK – both purporting to detail plans for the development of customs. In the EU’s case, this is the European Commission’s plans for EU customs to 2030. There will be elements to be reached up to 2040. In case of the UK, the expected document is the UK Target Operating Model for its borders with implementation plan for the end of 2023 and thereafter. During 2023, there will be a lot of preparation arising out of the new Target Operating Model.

As promised, there will be some alterations of the Northern Ireland Protocol, which will have some significant implications not just for Northern Ireland and Great Britain but also for all of Europe because of the unique position of Northern Ireland. Some of us have argued for some time that this unique position should be availed of and should be of interest to importers and exporters throughout Europe. To a great extent, development has not been possible due to the political uncertainty that has characterised the Protocol up to now. Therefore, it is to be hoped that some stability will arise there.

There are reasons to seek greater co-operation between the UK and the EU on the Trade and Co-operation Agreement, particularly in handling of rules of origin, management of regulatory standards and other points, all of which could be of great benefit. We will be hoping for developments in 2023. 

We also will see maintained and enhanced sanctions against Russia and Belarus and possibly further sanctions against China, particularly in the line of some restrictions and perhaps anti-dumping duties. So, we continue to live in a sanctioned world that requires special attention and management. 

We will have a worsening business environment due to economic slowdown. There is no avoiding the conclusion that 2023 is going to be a year of slow growth at best, perhaps even negative growth in some economies, and generally an economic slowdown and cooling of the international environment. Learn more about customs trends in an economic slowdown in the article ‘What about customs trends in an economic downturn?’ published in the CCRM Issue 17 (2022).

We will see a lot of challenges for customs in preparing for new initiatives, and in adjusting and continuing to adjust the business model to the changing international environment. After a relatively quiet 2022 in terms of businesses looking to enhance their customs expertise, looking for additional trainings and so on, 2023 will be busier because business will refocus back on customs-related planning that perhaps they took a break from due to Covid-19.

The main customs trends in 2023

Many of the general directions apparent in the geopolitical attitude towards trade will increasingly manifest themselves. And they affect not just the top-level policy discussions but the day-to-day administration of customs and trade. 

So, there is a tendency to a greater control. This is shown particularly in the following:

  • The EC is required by regulation to apply quantitative monitoring to SPS goods from March 2023;
  • The Import One Stop Shop / One-Stop-Shop (IOSS /OSS) will see greater examination and compliance monitoring;
  • Focused auditing of sanctions operation;
  • Security-focused initiatives;
  • More emphasis on comprehensive and accurate data;
  • Greater differentiation between AEO and other traders.

The trend of increasing protectionism will continue:

  • More anti-dumping and countervailing duties are expected;
  • Non-tariff control will continue to increase, now often justified on climate-change grounds.

We also can speak about security of supply as a major political issue in the EU. There will be an emphasis on reducing reliance on external producers. And there will be a question raised about goods that have long transport journeys. Another issue in this area is unified trade defence as a stated aim of the EU. In this regard, the EU Customs Agency is proposed. That proposal should take a shape in 2023.

Enhancing Government information is a major focus as well, to give governments a better view of risk with less reliance on physical intervention at the borders. This will be achieved through:

  • Digitising and centralising data;
  • Applying ‘big data’ analytical techniques; 
  • Connecting information sources from different databases to form ‘intelligence’ to enable governments (EU and national ones) to focus more on what they perceive to be risky areas.

All of these changes and increased emphasis on this data collection of course create an additional pressure on business. 

Single Window System in the EU and UK 

The immediate examples of expected changes mentioned above are the Single Window projects running in the EU and the UK. The Single Window concept aims to facilitate international trade and enhance the efficiency of data exchange between business and government, and between government agencies. 

How does the EU Customs Single Window Certificates Exchange System (EU CSW-CERTEX) work in the context of government-to-government interaction (G2G)? Economic operators continue to apply for the non-customs formalities they need, but the documents are linked to the customs declarations. All the documents including customs declarations are lodged into an EU database. There is electronic exchange of documents and information required for the good’s clearance, particularly certificates. If everything is good with those certificates and other documents then authorities can clear goods digitally and more swiftly.

B2G cooperation, i.e., interaction between business and government, is based on the G2G one. Economic operators apply for non-customs formalities as well as for customs formalities (import, export, etc.), and lodge documents, including customs declarations, into the EU database. The non-customs formalities are managed by various Directorates using different systems (TRACES NT, ODS Licensing System, F-GAS Portal etc.) but all the information lodged must be precisely matching. It is a challenging prospect indeed.

In the UK, there is the same idea to replace the current model of trader’s interaction with different agencies (HMRC, DEFRS and home office) with the model of cooperation with them through the UK Single Trade Window. It is expected that completion of the Single Window System will take 9 years in the EU and 5-7 years in the UK. 

The problem with this approach is that government benefits are front-loaded. The government will get better information. In order to coordinate all of the different agencies and different regulations, the first requirement is that all the data is much improved, errors in declarations and documents are eliminated and the data is matched. The government will then have improved and centralised databases on controlled goods.

The benefits for traders, on the other hand, are back-loaded. Eventually, after traders go through all the costs, various operations and adjustments required, the entire process will be administratively simpler. And one hopes (and it is promised) that the base regulations, the non-tariff regulations, will be much better harmonised and will march in step. 

In the meanwhile, major change is needed by traders to eliminate error messages. The example of a sample survey conducted by Irish customs showed that up to 50 % of all customs declarations contained errors. So, the challenge in eliminating errors is not a small one.

Digitalisation, harmonisation and more benefits for AEO status

Electronic data is now widely accepted and this will be extended for the benefit of all. That is, instead of paper certificates and paper signatures, electronic ones will be accepted. It will be even extended further to such documents as veterinary certificates and that is much to be desired.

In addition, harmonisation of practices of customs administration across the EU is much to be desired. It is a longer-term goal. There will be a good deal of discussion on that in 2023 with some precise proposals. However, there seems to be no consensus on the form of harmonisation that must take place. The precise shape of harmonisation remains to be seen.

Stronger incentives for traders to obtain AEO status are envisaged. The application for AEO is very much undersubscribed across Europe because many companies feel that they have to put themselves through what is equivalent to an audit to obtain AEO status. And they don’t see tangible, quantifiable benefits in many cases. Those benefits have to be clarified. There has to be a situation where an AEO coming to a port is subject to less checks in practice. At the moment, particularly if the AEO is handling controlled goods, that is often not the case. The question arises; what is the point of having gone through all the pain to become an AEO? Incentivising AEO will tie in with the movements towards better quality, more comprehensive data, and reduced reliance on one-off declarations.

Unfortunately, 2-track customs administration is envisaged. There should be clarification on this in 2023 and it is worth watching. A sophisticated digital monitoring for AEOs, with little or no physical intervention is foreseen. Basically, the customs authorities will have an access to AEO’s entries and will know what is going on all along the supply chain. Therefore, physical intervention will be only occasional, just for quality checking.

On the other hand, the second tier of administration will be for smaller and occasional traders who do not have the sophisticated systems of the larger companies. And for them what is envisaged is a traditional, slow and intensive checking process to counter what is perceived to be a higher risk of security breaches and various undesirable practices.

Concluding remark

Overall, 2023 is going to see the first major steps in implementing a new attitude towards the management of trade. Customs management is likely to become rather more restrictive, much less focused on enhancement and facilitation of trade and much more focused on control and protection.

 

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