What You Need to Know
- Key takeaway #1 The European Commission has proposed reforming the Union Customs Code to strengthen the legal framework for customs and bring it into line with recent changes in IT technologies and e-commerce while improving the harmonization of EU customs rules.
- Key takeaway #2 In principle, customs digitalization should be beneficial for all the stakeholders concerned. However, the roll-out of trans-European IT systems under the existing Union Customs Code largely depends on implementation by the Member States, and has already been subject to significant delay.
- Key takeaway #3 A newly proposed EU Customs Data Hub should make it easier for customs authorities and economic operators to handle customs formalities, by improving data management and increasing the quality of customs-related decision-making. However, the Data Hub will be fully implemented only by the end of 2037. It is hard to anticipate what technological developments will be introduced over the next decades, and this raises the question of whether the Data Hub will by then have become outdated.
On May 17, 2023, ten years after the EU adopted its Union Customs Code (UCC), the European Commission published a proposal intended to begin the complex journey of modernizing this crucial cog in the EU’s customs union.
The proposal includes numerous changes to the current rules, adding new elements and replacing outdated provisions, and attempts to take into account developments in multiple areas such as technology, e-commerce, and customs administration.
In this alert, we will focus on one of the major pillars of the proposal – the EU Customs Data Hub, which should upgrade customs processes from the technological point of view.
Key ideas behind the creation of the EU Customs Data Hub
IT technologies emerge and develop very rapidly and keeping up with the pace can be a challenge, especially in the context of the regulatory efforts of a large economic bloc. In an EU 2020 report (The Future of Customs in the EU 2040), the authors pointed out the need to manage increasing data flows and reach significant cooperation in data exchange both between Member States and with other authorities and economic operators. The authors suggested creating a fully integrated customs system based on shared databases in line with modern technologies, which would require the EU harmonization of operations across Member States and an equivalent level of IT capabilities.
A similar approach was suggested in the Report by the Wise Persons Group on the Reform of the EU Customs Union, published on 31 March 2022. The report advocated that a new approach to data should be achieved by creating a centrally managed common system that would be built on reliable customs information, provided by trusted operators (with a special status similar to Authorized Economic Operators), who would be liable for inaccuracies. Other key suggestions included improvements relating to data validation, data sharing and the development of advanced tracing systems in the supply chain.
The Commission has shown that it shares a similar vision on how customs-related data management should develop, and has largely followed these ideas in its proposal that puts forward the concept of a centralized system at the European level.
How would the EU Customs Data Hub work?
The EU Customs Data Hub is described as a secure and cyber-resilient set of electronic services and systems that handles data, both personal and commercial, for customs purposes. It is designed to fulfil the following functionalities:
- Electronic implementation of customs legislation.
- Ensuring the quality, integrity, traceability and non-repudiation of processed data, including the amendment of such data.
- Ensuring compliance with relevant regulations relating to the processing of personal data.
- Enabling risk analysis, economic analysis and data analysis, including through the use of artificial intelligence systems.
- Enabling the interoperability of those services and systems with other electronic systems, platforms or environments for the purpose of customs cooperation.
- Integration with the EU Single Window.
- Exchange of information with third countries.
- Customs surveillance of goods.
It would be the role of the Commission to develop, implement and maintain the EU Customs Data Hub. However, Member States may develop their own applications to connect to the Data Hub.
Alternatively, Member States may rely on the EU Customs Authority once it is established to develop connective applications at the Member State’s expense. Any application so developed would then be made available to all Member States.
When would the Data Hub become operational?
The proposal sets December 31, 2037 as the deadline for the complete implementation of the EU Customs Data Hub. Therefore, from January 2038 all traders would be obliged to use it for customs formalities, e.g., when submitting a customs declaration. However, the proposal provides for the possibility to use the Data Hub in e-commerce in 2028, while economic operators may make use of the EU Customs Data Hub from March 1, 2032.
Using the EU Customs Data Hub
The national customs authorities, the EU Customs Authority and the European Commission would all have to use the Data Hub when cooperating with other entities that have access to the Data Hub.
The Commission may set rules for interoperability and connection where authorities other than customs authorities or Union bodies make use of electronic means established by, used to achieve the objectives of, or referred to in Union legislation. If no electronic means are used, these authorities may use the specific services and systems of the EU Customs Data Hub.
A number of stakeholders will be able to access and process data in the EU Customs Data Hub depending on their status:
- Persons, including economic operators;
- National customs authorities;
- EU institutions and agencies which deal with customs matters – European Commission and EU Customs Authority;
- European Anti-Fraud Office (OLAF);
- European Public Prosecutor’s Office (EPPO) and Europol;
- National tax authorities of Member States;
- Competent authorities:
(a) central authorities of a Member State responsible for the organization of official controls and of other official activities;
(b) any other authority to which that responsibility has been conferred;
(c) where appropriate, the corresponding authorities of a third country;
- Market surveillance authorities;
- Other national authorities and Union bodies, including the European Border and Coast Guard Agency (Frontex).
Despite the fact that a broad list of entities would have access to the Data Hub, that access would be tailored to their particular needs and purposes. For instance, persons may have access to data, including personal and commercially sensitive data, that was transmitted by or on behalf of that person, or that has been addressed to or intended for that person, and only for the purposes of carrying out reporting obligations or proving compliance under customs legislation or other legislation applied by customs authorities.
The EU Customs Authority (once established) and the European Commission would have wide access to the EU Customs Data Hub, but the modalities of access for other bodies would depend on their function and be determined by the Commission in an implementing act.
Interaction with existing or developing electronic systems
Article 6(1) of the current UCC stipulates that electronic data-processing techniques should be used for all exchanges and storage of information, including declarations, applications and decisions, between customs authorities or between economic operators and customs authorities. The IT implementation to carry this out requires the deployment of 17 electronic trans-European systems, including three national systems: Notification of Arrival, Presentation Notification and Temporary Storage (AN, PN and TS), National Import Systems (NIS), and Special Procedures (SP). Despite this ambitious goal, the deadlines for implementation have been repeatedly postponed (to 2020, 2022 and 2025). According to the most recent Commission’s report, only nine systems were completed by the end of 2022.
In addition, in late 2022, the EU adopted the Single Window Regulation No. 2022/2399, which provides for the establishment of an electronic system for non-customs and customs formalities. The system was designed to replace different portals used by authorities for border checks, and ensure interaction and enhance exchange of information between customs and non-customs procedures. The UCC proposal is not intended to replace the Single Window, but to rely on it as a core component in the EU’s electronic customs infrastructure.
The Single Window should be connected to mandatory non-customs systems such as the TRACES system – relating to health entry documents for animals, products, feed and food of non-animal origin, plants and plant products; the import of cultural goods (ICG); and concerning ozone depleting license (ODS 2) and fluorinated greenhouse gases license (F-GAS). It should also be linked to voluntary non-customs systems such as FLEGT, CITES, dual-use goods, and access to Information and Communication System for Market Surveillance. Thus, the Single Window would be a key element of the EU Customs Data Hub, providing automated documentary check of certain certificates and exchange of information between customs and market surveillance authorities during customs clearance via ICSMS module, and providing data relating to non-customs formalities to the EU Customs Data Hub.
Although most of these systems should be available in the Single Window in early 2025, economic operators will only be able to use the Single Window for the fulfilment of customs and non-customs formalities from December 13, 2031.
As for the other electronic systems that have been or are being developed by Member States as part of implementing the current UCC IT obligations, the Commission would adopt an implementing act on how to maintain, employ and phase out these electronic systems.
The EU Customs Data Hub is designed to make the compliance with customs and non-customs formalities more efficient and less burdensome, both for customs authorities and economic operators. Instead of having to navigate different systems, customs and non-customs information would be collected in one place to ensure better data management and increase quality of decision-making at customs. If realized, the EU Customs Data Hub will be a key tool in risk analysis and risk management as a centralized data repository at the Union level.
At the same time, since the adoption of the current Union Customs Code only nine trans-European systems have been deployed, with others planned to be completed by the end of 2025. Therefore, EU progress will likely be stalled in practice by slow Member State implementation. Twenty-four Member States have officially requested derogations in implementing the systems at national level on various grounds, such as lack of finances or personnel, COVID-19, different priorities, Brexit and the war in Ukraine.
Therefore, despite its potential to benefit both national customs authorities and economic operators, it remains to be seen how quickly the proposed EU Customs Data Hub would be able to bring about improved digital customs harmonization across the EU.