Counting Down Toward the 1 May 2016 Deadline
The UCC is one of the more important changes to trade regulations across the EU. As part of an overall modernization effort, the initiative will provide a new framework for customs procedures and synchronize multiple processes across member states.
Many businesses are watching as the clock ticks toward the 1 May 2016 deadline when the UCC-related Commission acts (Delegated and Implementing Acts) are adopted and come into force. Since EU Customs handles over €3,400 billion of goods per year and two billion tons of cargo annually, the regulation is anticipated to have a substantial impact on global trade.
As the UCC will also significantly change many customs-related procedures, leading companies are taking steps now to move toward compliance.
1. What do I need to know about the new UCC in Europe?
Simply stated, the UCC will help to:
- Standardize customs processes
- Modernize trade
- Provide companies with more clarity on tariff classifications
- Reward compliant businesses
- Reduce paperwork
Enacting these goals in practice will take some time. As a result, the UCC will need to be implemented in phases. For example, although the use of electronic customs declarations and systems is a vital component of the UCC, not all IT systems will be ready by May 2016. This means that the regulation will need to be applied gradually.
2. What is the impact of the UCC for economic operators?
Long established procedures will change. For example, with the implementation of the UCC, it will no longer be possible to use an earlier sale for duty calculation. Instead, the emphasis will be on the last sale only. The UCC will also remove procedures such as Type D Customs Warehousing and the Inward Processing Relief (IPR) drawback process.
Beyond this, all customs licenses and authorizations will need to be re-evaluated under new UCC criteria. Binding Tariff Information (BTI) will become mandatory and valid for a period of 3 years. Special procedures, such as bonded warehouse and temporary storage, will require a financial guarantee. Details will need to be clearly defined by every member state.
There is also an impact on electronic customs processes, although specifics will need to be further refined in detail. Existing electronic systems will change, and new electronic procedures will be introduced.
One example of such an impact will be the electronic system for the proof of union status. Another example is the introduction of a multiple filing system for safety and security. The multiple filing initiative extends the current Import Control System (ICS) and related Entry Summary Declaration (ESD) to parties other than the carrier including freight forwarders, postal and express operators and, potentially, importers.
It is also important to note that despite common European components and interconnections between countries, each participant is required to translate the changes into its own IT systems. There will be differences, as some member states are already closer to the UCC requirements than others.
Each country can choose to modify its existing technology or take the opportunity to transition to the complete system. Timelines will also vary since countries can decide to implement changes earlier than the EU deadline, as long as no common components are involved. For international businesses that operate in multiple countries, keeping pace with the changes poses a substantial challenge.
3. What are the benefits for businesses?
Companies can benefit from the new UCC by using simplified procedures such as Entry in the Declarant’s Records (EIDR), self-assessment and centralized clearance. In order to take advantage of many of these benefits, participants will need to be an Authorized Economic Operator (AEO). AEO status will also help reduce the impact of the new guarantee requirements.
To be an AEO and make use of simplified procedures, it is important to have full control of processes and ensure that quality data is used in the declaration and exchanged with third parties such as brokers. Making use of the correct classifications, as well as applying compliance checks such as Denied Party Screening (DPS), is essential.
4. How can businesses prepare for the UCC?
It is important to assess how the UCC changes will impact your business since companies will be impacted differently. As electronic procedures play a central role, it is also essential to evaluate the effect on current systems. Some key questions include:
- Do you already have the required level of competence to make the transition to the UCC in-house, or do you require additional expertise?
- Do you need to move to a new solution, or do you need to modify your software in cases where you have developed the technology yourself?
- Have you contacted your software provider to discuss potential changes in interfaces or systems on-boarding?
It is clear that the UCC will influence the electronic customs systems landscape for years to come. Businesses are strongly encouraged to prepare for potentially sweeping procedural modifications.
Descartes is monitoring the UCC closely and will keep our customers up-to-date on the changes that have impact IT systems. As a leader in regulatory compliance in the EU, we will be able to better evaluate the differences between member states and the effect of the UCC on each country.