The e-excise era

The European Excise Movement and Control System (EMCS) will be switched on in 2010 and mandatory for relevant movements of goods by January 2011.  The overall objective of this new system is to prevent fraud and evasion, as a result of cross-border cooperation between varying European Customs organizations, particularly through the exchange of electronic information on ‘excisable’ products movements. It also aims to simplify procedures for operators (e.g. alcohol producers or distributors) by standardizing and harmonizing the entailed business activities and information flows between these operators and the Excise Authorities.  For all operators this project creates an opportunity to optimize their internal excise processes, save costs and speed up the time-to-ship.

An important step in the MASP program

In order to create a more efficient customs environment and to enable pro-active risk management, the European Government has set up a Multi Annual Strategic Plan (MASP) program to implement electronic customs in the European Union (EU).  In the next four to five years, we will gradually see the conversion of all paper-based customs procedures into streamlined, automated electronic processes. One step of that process is called Excise Movement and Control Systems (EMCS), and applies to excise goods in particular.

What is EMCS?

EMCS is a computerised system for monitoring movements of excise goods between European Member States under duty suspension.

The European commission decided to build EMCS, a trader-to-trader link, to follow the movement of excise goods between Member States for which no excise duties have yet been paid. The objective is to replace the paper document that currently has to accompany these movements, known as the Administrative Accompanying Document or AAD, with electronic messages from the consignor to the consignee via the administrations of the Member States.

Type of goods controlled by EMCS

Excise duties are indirect taxes on the consumption or the use of certain products. In contrast to the value-added-tax (VAT), they are mainly specific taxes, i.e. expressed as a monetary amount per quantity of the product.  Today, all EU countries apply excise duties on three product categories: on alcoholic beverages, manufactured tobacco products and energy products (motor fuels and heating fuels). The goods mentioned in these categories are subject to excise duties in the entire EU, and are therefore called community excise goods. Next to the community excise goods, there are also national excise goods, determined by a specific Member State. For instance, Belgian citizens also pay these kinds of taxes on coffee and soft drinks, while in the surrounding countries this is not the case. 

The rules for charging duty are set out in a number of EU Directives, which means that some member states have a higher excise duty rate than others.  The revenue from excise duties accrues entirely to the Member States.

Get Ready for the e-AAD

Key element of EMCS is the electronic Administrative Accompanying Document (e-AAD), also referred to as electronic Administrative Document (e-AD).

In a typical flow, this e-AAD is prepared by the consignor and submitted to his national administration. The administration validates the e-AAD against reference data (e.g. the registration number of the consignor and of the consignee). After validation, the e-AAD receives a unique reference code called ARC, or Administrative Accompanying Document Reference Code, and is automatically returned to the consignor who, only by that time, dispatches the goods.

When the goods arrive, the consignee establishes a report of receipt that he submits to the Member State of destination. Next, the administration matches the report according to the e-AAD and possibly to complementary information, if any. Finally, after validation, the report of receipt is returned to the consignee for confirmation and to all concerned Member States, including the Member State of dispatch which in turn automatically forwards it to the consignor.

SEED Database

A register of all traders involved in the movement of duty-suspended excisable products is maintained in each Member State. Each Member State maintains its own register and also shares the register with all other Member States, this is called SEED - System for the Exchange of Excise Data. All authorised traders must be registered on SEED and be issued with a 13 digit number which must include a country identifier as the first 2 digits. This 13 digit number must be quoted on all Administrative Accompanying Documents.

What are the benefits?

Introducing this system implies a simplification of procedures, paperless administration, effective use of modern IT tools and amounts to an important evolution for those who trade in alcohol, tobacco or oil products.

EMCS will significantly improve the functioning of the system to monitor the movements of excise goods which have not yet been released for consumption. More specifically, the movements of goods will:

  • Simplify under duty-suspension, by an electronic transmission of the accompanying document instead of the paper document
  • Offer possible integration with existing IT environment (e.g. ERP) of operators
  • Be more secure, by checking the traders’ data before the goods are dispatched and by ensuring a quicker and safer return of the evidence that the goods arrived at their destination;
  • Be monitored, by allowing real time information and checks during movements.

As a result, there will be:

  • No more handling of paper documents (creation, handling, archiving);
  • Immediate validation of the e-AAD, ensuring that the consignee is allowed to receive the goods and minimizing the risk of incorrect data;
  • Possible integration of the processing with existing computerized systems (e.g. with ERP software);
  • Faster release of the guarantee thanks to the timely discharge of the movement. 

Timing of the EMCS implementation

In the general planning, the reception of excise products under suspension will have to be managed electronically in the EMCS environment as of April 1, 2010. As of January 1, 2011, sending under suspension will have to go electronically by EMCS standards.

Depending on what Member State one has to deal with, there are some variations in that planning.   For instance, in Luxemburg and Austria, sending under suspension will be obligatory as of April 1st, 2010.

Why comply with this system?

EMCS affects operators from every organization involved in the management and trade of excise goods, from the large oil producing companies to the small wine detailers.

When EMCS takes effect, only compliant operators will be able to continue their day to day business. Authorized operators will get an “Excise Number”, which is an identification number issued by the competent authority in respect of the person or premises. Operators who do not have an Excise Number won’t be able to continue working in the EMCS environment. 

Act now!

The fact that an operator has to act now in order to be compliant with the new regulations, offers an excellent opportunity to optimize internal excise processes. Identifying the right partner and implementing an adequate solution is a guarantee for an optimal ROI.  By implementing a good and integrated solution, you get a 360° view on every step of the declaration process. You can easily measure and adapt your processes, control costs and optimize your cash flow. 

The right solution for your business?

 An adequate solution delivering the maximum return on your investment, should at least address the following criteria:

  • Guarantees European Compliancy An On demand solution, covering all Member States, allows immediate and permanent compliance. By centralizing know-how and overall control, you can create a genuine competency center and avoid expensive redundancy: you will no longer need similar resources on different locations
  • Integrated Implement a solution that integrates seamlessly with the existing environment enables a full view on your excise process and guarantees a quick and correct follow up of each declaration.  A link with your ERP system or warehouse management system (WMS) will make life much easier since the data coming out of those systems will be reused. Besides making the process quicker and easier, this approach also avoids typographical errors.
  • Supports the entire process

By using one integrated solution to automate the full process, costs will go down significantly.

Efficient EMCS Management in 3 steps

You can easily prepare your organization for the new excise system by taking the following steps:

  • Find the right organization to partner with
  • Implement a user friendly and flexible solution offering European compliancy
  • Centralize knowledge  and skills  and build up a European  Competency Centre
Written by Peter de Groot