For any business that seeks to import goods into the European Union (EU), it is important to have an understanding of what the EU is, and how importing and customs clearance work across European country borders. The European Union is a political and economic union of 27 member states that forms one of the largest trading blocs in the world. This article explains the key aspects of import and customs clearance into the EU.
Table of Contents
What are the basics of EU import customs?
What is the EU Customs clearance process?
What parties are involved in the EU import process?
Types of Customs clearance for an import into the EU
Implications of EU customs compliance
EU customs impact on e-commerce and low-value imports
Key summary points
What are the basics of EU import customs?
Background on the EU customs union
The 27 member countries within the European Union have an internal single market, such that goods can enter the EU through one member country, and then travel freely across any other countries within the EU. The EU Commission proposes and monitors EU customs legislation, and then national customs services in each country work together to implement the day-to-day operations of the EU Customs union.
All goods circulate freely within the EU customs union, and this principle is essential for the proper functioning of the single market. A common tariff of customs duties is levied on goods from outside the EU, generally paid when they first enter the EU, and then there are no more customs checks or further customs duties levied across borders between EU countries.
Importance of EORI Number
What is an EORI number?
An EORI number is an “Economic Operators Registration and Identification number”, which is a common identification number used across the EU for economic operators and customs authorities.
The EORI number has two parts:
- the country code for the issuing Member State
- this is followed by a code that is unique in the Member State
Businesses and individuals wishing to trade with and across the EU must use the EORI number as an identification number for all customs procedures, when exchanging information with customs administrations.
Who needs an EORI number?
Any economic operator that is established within the customs territory of the EU must have an EORI number for customs purposes.
Any economic operators that are not established within the Customs territory of the EU must also have an EORI, for a number of different situations:
- to submit a customs declaration in the customs territory of the EU
- to submit an Entry Summary Declaration (ENS)
- to submit an Exit Summary Declaration (EXS)
- to submit a temporary storage declaration in the Customs territory of the EU
- to act as a carrier for transport by air, sea or inland waterway
- to act as a carrier who is connected to the customs system, and wishes to receive customs notifications regarding submitting or amendment of any entry summary declarations
Importance of VAT Number
Imports to the EU, by any person or business, are subject to Value Added Tax (VAT). EU VAT applies to all 27 member states and is also applied on the movement of goods across EU internal borders. So for companies operating across the EU, there may be a requirement to register their business with a VAT number in more than one EU country.
What is the EU customs clearance process?
Pre-Arrival / Pre-Departure Declarations
Where goods arrive into the EU by ocean freight, a pre-arrival declaration is required at least 24 hours prior to physical shipment arrival. For most other cases, prior notification can be submitted electronically up to 2 hours before goods arrival or departure, or up to 4 hours for paper submission. For goods departing the EU, the customs declaration is used as the pre-departure advice.
The owner of the goods, or a person acting on behalf of the owner, is responsible for lodging the customs declaration detailing the goods that are being imported or exported. However, this could instead be an individual or company having control over the goods (e.g. a freight forwarder), although as a rule these persons should be established in the EU.
The declaration should be lodged with the customs office at the port of entry into the EU upon importation. Declarations can be made electronically, although in some cases may be lodged in writing.
Customs clearance documentation
There are a number of important documents required for customs clearance:
- commercial invoice
- Authorised Economic Operator status
- proof of origin
- Binding Tariff Information
- Binding Origin Information
- relevant certificates or licenses
- VAT and export records
Depending on the means of transport, additional documents may also be required for clearance:
- Bill of Lading, Air Waybill or equivalent
- ATA Carnet (All Forms of Transport)
- TIR Carnet (Combined Road and Other Transport)
- Packing List
EU Customs transit
Customs transit is a customs procedure that is used to move goods between two locations within a customs territory, via another customs territory, or between two or more different customs territories. The customs transit procedure allows for temporary suspension of import measures that are typically applied at the point of entry into the EU, and instead allows for customs clearance formalities to take place at the destination.
There are different approved transit systems used in the EU:
- Union and Common transit
- TIR – International Road Transit
- ATA – Temporary Admission
- Rhine waterways
- Post–including parcel post
EU customs duties
The EU customs union calculates import customs duties based on the value of the goods, the associated tariffs to be applied, and the origin of those goods imported:
The customs value is the determination of the value of the goods as declared, and provides the basis for assessment of customs duty. Customs value is usually calculated as a percentage of the commercial value.
Although there are several methods for calculating value, the principal method is to base valuation on the total amount paid for the imported goods. If this transaction method is not applicable, then other valuation methods could be applied.
The EU applies the principle that its EU domestic producers should be able to compete fairly and equally with manufacturers’ imports from other countries and territories. To achieve this parity a customs tariff is applied to the goods on import.
A ‘Common Customs Tariff’ (CCT), common to all EU members, is applied at the point of import of the goods into the EU. However, although the CCT is common, different rates of duty can be applied to the goods depending on what commodity they are (classification of goods), and where they have come from (country of origin).
The customs tariff looks at a number of different criteria in calculating the due amount:
- Classification of goods
- Harmonized System – General information
- The Combined Nomenclature
- Binding Tariff Information (BTI)
- Tariff quotas
The TARIC, the integrated Tariff of the European Union, is a multilingual database that integrates all measures that relate to EU customs tariff, commercial and agricultural legislation. Having a single coding system across the EU allows for a single standard application by all EU members, and gives EU countries a consistent set of measures to apply when importing or exporting goods. It also allows for EU-wide data gathering and statistical analysis of goods in and out of the EU.
Rules of Origin
Rules of origin specify where the goods have been produced or manufactured, not from where they have been shipped, and a distinction is applied between preferential origin and non-preferential origin. Origin, together with tariff classification and value of the goods, are the determining factors for which customs tariff treatment is to be applied.
A preferential origin is a country for which special arrangements and agreements apply, which would make that country’s goods eligible to be imported at a lower or zero duty rate.
A non-preferential origin country would qualify for most-favoured nation treatment (MFN), although a number of commercial policy measures would apply. These may include implementation of measures such as anti-dumping and countervailing duties, safeguard measures, trade embargoes, quantitative restrictions, or tariff quotas.
Who are the parties involved in the EU import process?
The key parties involved in an import process can be summarized as:
- Shipper/Manufacturer/Consignor: the party sending the goods from origin
- Receiver/Buyer/Consignee: the party to whom the goods are being sent
- Importer of Record: the party that is legally responsible for submitting complete and accurate documentation to EU customs
- Customs Broker: A third party licensed by EU customs to support/act on behalf of the importer in importation
Types of Customs clearance for an import into the EU
When importing goods into an EU member country, goods can be imported in one of four ways: into free circulation, for special use, for inward processing, or for storage.
The principle of free circulation applies not only to goods made in the EU, but also to imported goods which have been released for free circulation, after payment of any liable import duty. Once goods are customs cleared at the port of entry, they are released for free circulation throughout the territories of the EU, so that they can be sold in the EU market, as with any product made in the EU.
Goods can be cleared for ‘temporary admission’ with total or partial relief from import duty, for example when the goods have been imported for exhibiting at a trade fair and then re-exported.
‘End-use’ is a customs procedure that promotes the import of certain goods under favorable import duty rates if such goods are destined for certain specific purposes, such as construction of ships, aircraft for civil aviation or drilling platforms.
Inward processing means that non-EU goods are imported in order to be used in the EU in one or more processing operations, for example, for manufacturing or repair.
The inward processing procedure can also be used for goods which have to undergo standard forms of handling to preserve them, to improve their appearance or marketable quality, or prepare them for distribution or resale.
Storage includes both customs warehousing and free zones, and is intended to give businesses the flexibility to buy and import non-EU goods even before they have decided what to do with the goods. As long as the non-EU goods are in storage they will not be subject to import duties or other charges.
‘Customs warehousing’ means that non-EU goods may be stored in any premises authorized by the customs authorities (‘Customs warehouses’), for unlimited periods. While in warehouses, the goods are under customs supervision and are not subject to import duties, or other import charges or licenses.
EU member countries may designate parts of the customs territory as ‘free zones’. ‘Free zones’ are enclosed areas within the customs territory of the EU where non-EU goods can be imported free of import duty or other charges.
EU goods may also be entered into or stored, moved, used, processed or consumed in free zones. Such goods may afterwards be exported or brought into other parts of the customs territory of the EU.
Implications of EU Customs compliance
One of the most common challenges for importers is the way in which VAT is charged on imported goods, especially when moving goods across EU member state borders. VAT is charged on importation at the port of entry. Selling or moving goods from one EU country to another does not incur any VAT charges, providing some important criteria are met:
- Both parties to the transaction must have a valid VAT number.
- The importer must check their foreign customer’s VAT number with the EU VIES system.
- The importer must note their customer’s VAT number on their sales invoice.
- The importer must have documentation (e.g. goods transport documentation) showing the movement of the goods across the border.
- The goods then must leave the import country within a set time – typically three months.
Customs penalties are likely to be due if one or more of these conditions are not met. In such cases, then irregularities may arise and the importer may be liable for any missing VAT. If the end customer does not have a valid VAT number, or the importer is selling to individual consumers, then the importer must charge their customer the VAT rate of the country of dispatch.
EU Customs impact on E-Commerce and low-value imports?
In 2021, the EU changed its VAT rules on cross-border B2C e-commerce activities, to overcome some of the barriers to cross-border online sales by implementing One Stop Shop (OSS). It specifically sought to simplify VAT application on distance sales of goods, and for the import of low value consignments.
One Stop Shop covers three special schemes that are available to taxable persons established in and outside the EU:
- the non-EU scheme
- the EU scheme
- the import scheme
These special schemes allow a taxable person who is registered for an OSS scheme in an EU Member State to electronically submit OSS VAT returns detailing the supplies to be declared and the VAT due. The VAT returns are submitted quarterly in the EU and non-EU schemes, and monthly in the import scheme.
Taxable persons established in the EU can use both the EU scheme and the import scheme, whereas taxable persons who are not established in the EU can use all three schemes.
Without these three OSS schemes, a supplier would be required to register in each Member State in which he supplies goods or services to his customers. Once opting into the scheme, it applies for all supplies to consumers in all EU Member States, so the taxable person cannot use the OSS scheme just for supplies in some Member States, and not for others.
Key summary points
The European Union of 27 member countries established an internal single market to simplify the process of import into the EU while allowing easy movement within the EU once goods are customs cleared.
The importer should understand the basic processes of EU customs clearance, and the implications of clearance into the port of entry as well as for the destination country. This is to ensure that goods that are cleared at port of entry are also allowed in the destination country. Likewise, any duty, tariffs and licenses that are applied on entry must meet the requirements of the destination member state.
When arranging your international shipment, you can also seek assistance from professional service providers including customs brokers and freight forwarders.