Reform of EU Customs needs to balance ‘simplification and reality’

The European Union (EU) is preparing a major overhaul of its Customs regulations with freight forwarding, logistics, and Customs service’s body, CLECAT, urging that reform consider “the realities of modern supply chains, which involve multiple parties.”

The Brussels-based lobby group, which represents the interests of more than 19.000 companies of all sizes, employing more than one million staff, calls for “a comprehensive approach” and one that “balances simplification with practicality and fairness.”

Roll-out from March 2028

The European Commission's proposals represent the most ambitious and comprehensive reform of the bloc's Customs Union since its inception in 1968 and focus on three key ambitions: a new partnership with business; a smarter approach to customs checks; and a more modern approach to e-commerce.

Poland, which holds the presidency of the EU Council for the first six months of 2025, will seek agreement on a Customs Reform Package, scheduled to be rolled out in March 2028, which would see the creation of a single Customs authority to strengthen policing of goods at the border; the establishment of a Customs data hub; and the abolition of the €150 customs duties and VAT threshold.

It would have responsibility for risk management and issue control recommendations to National Customs Authorities for implementation.

There would be greater uniformity of EU Customs rules, for example, setting out a minimum EU-wide penalty regime rather than giving Member States autonomy to set and implement fines.

The EU Customs data hub is designed to provide authorities with a 360-degree overview of supply chains and the movement of goods – a centralized IT structure instead of 27 separate systems and ultimately a single interface for traders dealing with Customs.

It would combine data from the Single Window, ICS2, and digital product passport to ensure central oversight of EU Customs data. It would center on traders and other stakeholders holding required Customs data to be able to provide first-hand, reusable data to simplify clearance.

Lastly, provision is made for an overhaul of Customs legislation to ensure e-commerce is dealt with in a simplified manner notably via the removal of the €150 low-value consignment Customs duty relief and new concepts of “importer” and “deemed importer” to align Customs rules with VAT rules on distance sales.

As an interim measure, the EU will next month (5 February) propose a Customs levy on imports to compensate for lost import taxes and flouting of goods standards.

E-commerce exposes ‘critical inefficiencies and complexities’

Arguably, it is the B2C cross-border e-commerce trade, notably from Chinese online marketplaces into the bloc, where Customs reform is perceived as most needed.

CLECAT notes that while e-commerce has revolutionized trade, making it easier than ever for consumers to access goods from around the world, the EU’s Customs framework has struggled to keep pace with its exponential growth, the sheer volume of goods generated by the segment having exposed critical inefficiencies and complexities in the existing framework.

This has been amply demonstrated at Liège Airport, in Belgium, which has emerged as a leading hub for cross-border e-commerce between China and Europe and where Cainiao, the logistics arm of Chinese e-commerce mastodon Alibaba, has built up a strong presence investing heavily in warehousing and handling space, and in developing a network of flights.

In the first nine months of last year, approximately 500 million customs declarations for e-commerce goods had been processed at the airport and it is safe to assume that the number swelled further in the final quarter of 2024.

Compliance issues, legal action

However, while e-commerce is booming at Liège Airport, it has also triggered compliance issues, notably about the undervaluation of goods and product conformity. This has led to Belgian Customs taking legal action against e-commerce logistics players.

One such company, ECDC Logistics, set up by a Chinese businessman, has won a total of 12 cases against the Customs authorities having been suspected of underestimating the value of imported goods from China, representing several million euros in unpaid duties.

Despite having not won a single case against Liège Airport-based-commerce firms over suspected Customs clearance infringements, they lodged an appeal against the decision concerning ECDC Logistics which has since been referred to the European Court of Justice in Luxembourg whose judgment is pending.

Level playing field, fair competition

Ecommerce Europe, an EU lobby group of European online traders and shippers, claims the segment is inadequately policed when it comes to the activities of their non-EU counterparts and has alerted decision-makers, enforcement authorities, and stakeholders to the urgent need to ensure a level playing field and fair competition.

Whether the tailor-made e-commerce regime proposed by the European Commission will respond to the demands and expectations of E-commerce Europe and CLECAT – it aims to remove the potential for fraud and bring additional Customs revenues to the tune of €1 billion per year – only time will tell.

Certainly, the regime is crafted to make Internet marketplaces key actors in ensuring that goods sold online into the EU comply with all Customs obligations – a major departure from the current system, which puts the responsibility on the individual consumer and carriers.

With the marketplaces having responsibility for ensuring that Customs duties and VAT are paid at purchase, this should guarantee that consumers will no longer be hit with hidden charges or unexpected paperwork when their parcel arrives and that their buys are safe and in line with EU environmental, safety, and ethical standards.

The reform also abolishes the current threshold whereby goods valued at less than €150 are exempt from Customs duty, which is heavily exploited by fraudsters. Up to 65% of such parcels entering the EU are estimated to be currently undervalued, to avoid Customs duties on import.

Customs duty calculation for the most common low-value goods bought from outside the EU is also simplified as well, reducing the thousands of possible Customs duty categories down to only four.

This is designed to make it much easier to calculate Customs duties for small parcels, helping platforms and Customs authorities alike to better manage the soaring commerce purchases entering the EU each year.

Joint AEO and ‘Trust and Check’ status

CLECAT also expressed concerns regarding the proposed ‘Trust and Check’ system for which provision is made in the Customs reform package.

This aims to streamline Customs processes by granting facilitations to compliant traders. However, it warned that the stringent criteria for achieving this status – such as integrated systems for real-time data tracking – pose insurmountable barriers for most small and medium-sized enterprises (SMEs).

According to CLECAT, projections that most traders will qualify for Trust and Check are overly optimistic and risk creating a two-tier system where large corporations benefit while smaller businesses are excluded.

The recent acknowledgment by the European Commission and Council that the Authorized Economic Operator (AEO) status will remain available alongside ‘Trust and Check’ was welcomed, it added.