The Increasing Role of E-commerce in EU Customs Planning

The tremendous increase in e-commerce in recent years has ensured that it features prominently in the EU’s customs forward planning. Successful international commerce in any jurisdiction relies on public authorities’ recognition of the need to strike the right balance between compliance assurance and revenue protection on the one hand, and economic growth sustaining trade facilitation on the other. Grow the economy, grow the tax revenue. It is important therefore that innovation in commerce brings forth appropriate innovation in public administration at the border.
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The high number of low value goods transactions involved in online retailing makes it difficult for customs administrations to properly supervise the trade flows and for the companies involved to comply with the many reporting requirements for each package. Whilst the low value duty exemption available is believed to incentivise the splitting of consignments into smaller packages and valuation abuse, to the detriment of public revenue, market performance and the environment.

Moreover, the duty exemption for consignments of up to €150 in value is widely believed to favour third country e-commerce operators over traditional trade and EU retailing, which must pay customs duties when importing in bulk, and to encourage the establishment of e-commerce distribution centres outside the EU.

Therefore, the EU’s e-commerce proposals, previously, and going forward are aimed at addressing issues around control, uncertainty, fraud, market competition and complexity. The main solution, that of making the online marketplaces / platforms used, responsible for ensuring that goods sold online into the EU market comply with applicable market standards and customs / tax requirements, is to become firmly ensconced through such measures, in the not-too-distant future. This will take a burden away from other parties such as carriers and, most notably, consumers. It will also mean the demise of the duty exemption for such goods (valued at up to €150), aligning with similar earlier action taken in respect of VAT.

The proposed arrangements have evolved from and build on the perceived success of the EU’s earlier VAT e-commerce package and extend key concepts therein covering all distance sales. Especially the notion of online marketplaces / platforms becoming the official or deemed importer / supplier. Responsible for ensuring that customs duties and VAT are paid upfront at purchase, and that EU market standards are met, in respect of all distance sales of goods imported from third countries / territories, irrespective of their value.

Innovations
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• Confirmation of the significance of the relatively new concepts of deemed importer and deemed supplier.
  
  Deemed importer – an Import One-Stop Shop (IOSS) authorised party involved in the distance selling of goods to be imported into the EU from third countries / territories, taking responsibility and accounting for the customs debt arising when the payment for the distance sale is accepted.
  
  Deemed supplier – a taxable person who is deemed to receive goods from the underlying supplier and to supply the goods to the final consumer, through the use of an online electronic interface (website, portal, gateway, marketplace, application program interface (API), etc.).
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• Elimination of value thresholds determining the customs treatment of imported goods and their administration. That is, the current threshold whereby goods valued at up to €150 are exempt from customs duty, will go. This is similar to previous developments in respect of VAT. In future all third country commercial goods imported into the EU, regardless of value will be subject to VAT / duty, as applicable.
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• Simplified customs duty calculation. It is proposed to simplify the customs duty calculation for the most common low-value goods bought from outside the EU, reducing the many possible customs duty categories down to just four. Under such simplified tariff treatment, the deemed importer can elect to apply what is referred to as, the ‘bucket’ tariff, for the relevant category to the customs value established for the goods being imported.
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• Import One-Stop Shop (IOSS). It is proposed to extend this facility, which provides single EU VAT registration for authorised distance sales traders of eligible imported goods, to cover all such goods (excluding excise goods), irrespective of their value (currently there is a €150 value threshold qualification for IOSS use). This is a simplification tool for the declaration and payment of VAT due upfront at the time of supply on distance sales of imported goods. Consideration is also to be given to the collection of customs duty along similar lines.
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• Single EU VAT Registration is said to be brought closer to being a reality by these arrangements, by further limiting the instances in which a taxable person is required to register for VAT in another EU Member State.
  
  Also, the proposals extend the existing special arrangements (excludes excise goods) for VAT collection and payment, conditionally available to operators such as postal services, fast parcel couriers, customs agents, and other companies declaring goods at import on behalf of customers, getting rid of the customs value threshold for these.
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If implemented as currently envisaged, it seems likely that these proposals will bring useful clarity and commercial predictability to the EU e-commerce sector, whilst easing certain administrative burdens and improving market efficiency, and returns, possibly stimulating investment.‍

Curious About EU Customs Changes and Their Impact on Your E-commerce Business?

Navigating the evolving EU customs landscape can be challenging, especially with upcoming regulations impacting e-commerce, duty exemptions, and VAT requirements. Whether you're a marketplace platform, a retailer, or an importer, staying informed and compliant is crucial to avoid fines and maintain competitive advantage.

Our expert advisors are here to help you understand the latest proposals and prepare your business for a seamless transition.
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‍‍This article was written by Christopher Starns, Customs & Trade Advisor (BKR Consultants Limited).