EU Customs Union: Questions and Answers on the Wise Persons Group report
What is “the Wise Persons Group on Challenges Facing the Customs Union”?
The Wise Persons Group (WPG) is an independent high-level group, comprised of members from politics, industry, trade and academia. It is headed by the former Minister of Foreign Affairs, European Union and Cooperation of Spain, Arancha González Laya. The full list of members is available online.
The European Commission invited this group to reflect on the challenges facing customs today, examine current rules, procedures and governance and consider how these could be improved. Their recommendations will feed into the customs reform package, which the Commission will present by the end of this year.
The WPG prepared its report in full independence, based on terms of references agreed with Member States' customs administrations, focusing on four priority areas: (1) E-commerce, (2) Risk management, (3) Effective management of customs' increasing range of non-financial tasks, (4) Future governance structure.
What challenges is the EU Customs Union facing today?
The WPG concluded that the EU Customs Union needs urgent structural change. In its report, the WPG identifies three root issues: (1) major developments in trade and technology, (2) changing expectations in customs in promoting the European Way of Life, (3) lack of unity in applying customs-related rules and procedures.
The last decade has witnessed major changes in trade and technology. The volume of trade has significantly increased, and the nature of trade has changed with the rapid expansion of e-commerce, in the form of millions of small packages to be processed at the EU's borders.
Moreover, the role of customs has evolved from simple revenue collection to ensuring that the values EU citizens care about - such as sustainability, safety, human rights, health and security concerns - are upheld in all customs transactions. This role will be greatly expanded as new environmental and social legislation comes into force, such as a ban on products made by child and forced labour.
This situation is also compounded by the lack of uniform implementation of customs measures, different control practices across border entry points, both within and across Member States, differences in control priorities and differences in sanctions for non-compliance. The poor availability and quality of the data submitted to customs and the insufficient level of data-sharing across customs and with other administrations makes it extremely difficult to properly manage financial and non-financial risks at both national and EU level. Moreover, investments in customs capacity are seen as not proportionate to the increasing requirements placed on national authorities.
What has the European Union done so far?
The European Commission launched a Customs Action Plan in 2020 setting out a series of measures to make EU customs smarter, more innovative and more efficient.
Many of the actions have already been implemented, including a new financial instrument to provide Member States with state-of-the-art customs control equipment to carry out better and more effective controls. Moreover, the Customs ‘Single Window' will allow legitimate businesses to complete border formalities in one single portal, saving them both time and money.
In addition, Member States are currently engaged in an IT transition following the 2019 amendment of the Union Customs Code, which will be concluded by 2025.
However, although these reforms have led to positive improvements, they are not sufficient to ensure that customs are ready to take on the challenges of the 21st century, and adapt to the many and increasing roles they must now fulfil.
What did the WPG suggest?
The WPG believes that the EU Customs Union needs urgent structural change. Their recommendations aim to ensure that the Customs Union is fit for a more geopolitical world in which revenue is secured, trade is made easy, fair, sustainable and safe, and citizens are protected against security risks.
The WPG is therefore advocating the need for:
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-A package of reform proposals, relating to processes, responsibilities, liabilities, and governance of European Customs.
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-A new approach to data that diminishes reliance on customs declarations, focusses on obtaining better quality data from commercial sources, and provides businesses with a single data entry point for customs formalities.
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-A comprehensive framework for cooperation, including data sharing between European Customs, but also with market surveillance authorities, law enforcement bodies and tax authorities, for a comprehensive management of risks at EU level.
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-Setting up a European Customs Agency to complement the role of the Commission and support the work of Member States.
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-Reforming and expanding the Authorised Economic Operator scheme.
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-A new framework of responsibility and trust, in which businesses would seek Authorised Economic Operators status to gain commercial access to the EU market. Small non-commercial consignments would continue to be sent through the usual processes, but without priority and subject to a level of controls that reflects their “non-trusted” status.
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-No more customs duty exemption threshold of €150 for e-commerce, together with simplified rates for low value shipments.
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-A package of measures to green EU Customs, to digitalise procedures, ensure that prohibitions and restrictions related to sustainability are properly implemented on imported products, as well as possibly reform the WCO Harmonized System Nomenclature to allow for the proper classification of environmentally friendly products that the EU wants to promote in international trade.
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-Properly resourcing, upskilling and equipping customs, to ensure their full capacity to fulfil their missions.
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-An annual estimate of the Customs Revenue Gap to better manage customs revenue collection.
Does the Commission have to follow the recommendations of the Wise Persons Group?
No, the group has a consultative status. It has prepared its report in full independence and the report does not commit the EU institutions to a particular course of action. However, given the in-depth examination they did and the level of expertise of the WPG, the recommendations and insights in today's report will provide valuable input into the Commission's preparatory work for the reform package it intends to present by the end of the year.
When will the Commission propose the reform of the EU Customs Union, and what will it encompass?
The Commission aims to propose a comprehensive reform of the working and governance of the EU Customs Union before the end of the year.
Building on the Union Customs Code evaluation and the WPG recommendations, as well as the European Court of Auditors report on customs controls, this customs reform package will not only revise EU customs legislation but also the governance of the Customs Union.
The reform package, which should be implemented by 2030, will envision new, more modern customs rules to ensure the security and integrity of the Single Market, reduce opportunities for fraud, and facilitate legitimate trade. It will also increase synergies within customs, and with other authorities, for better border controls and trade facilitation so that EU Customs act as one.
The proposal will also assess whether a new EU customs structure, with appropriate powers and supported under the next multiannual financial framework (MFF), could allow a better and more coordinated operational response to the challenges facing the Customs Union.
For more information
Wise Persons Group (the webpage includes the report presented today)