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UCC - The Union Customs Code

Each country within the European Union (EU) has its own laws based on EU laws and directives.

Currently for the UK customs law is contained in the Customs and Excise Management Act 1979 (CEMA).   It has always been the case that CEMA has to be read in conjunction with a variety of Finance Acts that govern VAT for example.     In common with the law in many other EU countries CEMA was written before business and life in general was transformed by computers and the internet and it has therefore become more and more out of touch with the way modern business is conducted.  

It became obvious across the EU that modernised laws were required to prevent confusion and disputes between the old law’s view of the way business was conducted and reality.   

This new law is called the Union Customs Code (UCC).  It comes in three parts :

1. The law itself (the high level rules)

2. The Delegated Acts (the ‘what’ has to happen or be done)

3. The Implementing Acts (the ‘how’ it should happen or be done)

This completely new set of rules comes into force across the EU for all Customs procedures on 1st May 2016.   Many changes will be immediate but some will be phased in with an end date of 2020.  There will be significant immediate changes for everyone involved in any part of an import or export.

The new view will be ‘risk based’ instead of based on inspections of goods at the port/airport.   Companies in the supply chain can expect more attention to be given to their overall company activities and standing rather than to physical inspections of the goods.

Customs audits will be more frequent and in greater depth, taking a holistic approach to a business rather than concentrating on just one aspect of trade. Compliance with all the taxation elements of a business (VAT, Corporation Tax and National Insurance for example) will be checked not just compliance with import and export rules governing import duty.

Some examples of the changes:

Inward Processing Relief (IP) is going to be merged with Processing Under Customs Control (PCC).    This will mean a change in approach in that it will not be necessary to state at the time goods are entered to the new ‘IP’ whether or not the intention is to process and re-export them or to process and then import to the EU.

Importers can choose what they want to do with the goods when processing is complete.

IP drawback is being abolished.  Compensatory interest is being abolished.

There are significant changes to transit and transfer procedures.

Military End Use will no longer be available, IP will need to be used instead.   Other forms of End Use will now require the equivalent of the ‘Bill of Discharge’.

Customs valuation rules are changing with for example the end of the ‘First Sale’ option and alterations to royalties that mean they will need to be included in the customs value.

There will no longer be an option for paper submissions to Customs – electronic submission will be required.

In addition the UCC brings with it greater benefits for Traders and other supply chain companies who hold Authorised Economic Operator Status (AEO).   These companies will gain access to simplifications e.g. fully authorised IP, which other traders will no longer be permitted to use unless they can prove they have processes, controls and systems in place which are equivalent to those used by AEO’s.

Under CEMA holding a deferment account along with being permitted to operate most Customs procedures including IP has always required a guarantee.  However, the UK authorities have been content to waive this requirement for Customs procedures other than deferment accounts most of the time.   From May 2016 this will no longer be the case, guarantees to operate most kinds of Customs procedures will be required. 

Companies holding AEO ‘C’ or AEO ‘F’ status will be able to benefit from a 70% reduction in the reference amount for deferment accounts and reduced guarantee requirements or complete waivers for other customs procedures.  All other companies will have to lodge a full guarantee for each procedure that they wish to use or obtain a comprehensive guarantee unless they can prove they meet certain criteria which amount to operating as an AEO(C) without having gained the certificate.  This will have a significant financial impact for many companies.

The Union Customs Code alters all aspects of customs law in some way.   Make sure you are ready to leverage advantage from the changes rather than being hit by problems, costs and delays.  

If you need practical help or advice get in touch.