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EU’s Modernised Customs Code Enters into Force

Hong Kong traders should be aware that on 1 May 2016, the new Union Customs Code (UCC) entered into force. The UCC is intended to modernise the Community Customs Code, which dated back to 1992 and has now been repealed.

The aim of the modernised legal framework is threefold: (i) simplifying the European Union’s customs procedures; (ii) enhancing protection of consumers against illegal goods, or goods which do not respect European environmental, health and safety requirements; and (iii) enhancing cooperation between customs administrations with the use of new IT systems, resulting in a fully electronic environment.

The new legal framework consists of three legal acts: Regulation 952/2013 laying down the Union Customs Code (UCC Regulation); Delegated Regulation 2015/2446 (UCC Delegated Act); and, Implementing Regulation 2015/2447 (UCC Implementing Act).

Some of the main changes brought about by the UCC, which may be relevant to Hong Kong traders, are the following:

  • The abolishment of the “First Sale for Export valuation” rule, and the introduction of the “Last Sale for Export rule”. As a result of this new rule, importers must use the value of the sale occurring immediately before the goods are brought into the customs territory of the EU.
  • The broadening and clarification of situations in which royalties and licence fees for intellectual property (IP) and other intangible rights will be dutiable under EU customs law.
  • Substantial reforms to the system of Binding Tariff Information (BTI). These reforms concern the conditions to obtain a BTI decision, the period of validity of a BTI decision (which is reduced from six to three years), and new mechanisms to ensure consistency in the issuance of BTI decisions by the customs authorities of the different EU Member States.
  • Revisions to the status of Authorised Economic Operators (AEOs). On the one hand, stricter criteria will be introduced in order to obtain the status of AEO. On the other hand, additional benefits will result from this status.
  • Reforms to the procedures currently referred to as “Customs Procedures with Economic Impact” (CPEI). Moreover, these procedures will be renamed “Special Procedures” under the UCC.
  • The introduction of more detailed rules for the determination of the non-preferential origin of products. In particular, the criterion of where a product “underwent its last, substantial, economically-justified processing” has become subject to more precise rules. The list of “qualifying operations” has been extended. In addition, a general residual rule has been introduced for products which are not covered by the aforementioned list of “qualifying operations”. And, finally, the list of “minimum operations”, considered insufficient to obtain non-preferential origin based on that activity, becomes applicable to all goods (as opposed to only textile products).

Another important change, introduced by the UCC, is the shift to a paperless, fully electronic environment, in which new IT systems link the EU Member States’ customs administrations. However, it became clear that these new IT systems would not be fully operational by 1 May 2016. As a result, the European Commission adopted another Delegated Regulation (UCC Transitional Delegated Act), which suspends the applicability of the relevant provisions of the UCC Delegated Act, and lays down the transitional rules on the exchange and storage of data. This means that the use of existing systems, or of paper-forms, will temporarily still be allowed. The UCC is intended to be fully implemented by 2020, following which these transitional rules will extinguish.

Furthermore, the Commission is now considering the adoption of guidelines concerning the UCC, which, if and when adopted, should enhance legal certainty for Hong Kong traders.

Those wishing to consult the legal texts can click on the following links:

UCC Regulation
UCC Delegated Act
UCC Implementing Act
UCC Transitional Delegated Act

Content provided by Picture: HKTDC Research
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