DIRECTORATE GENERAL FOR INTERNAL POLICIES · 2012. 3. 2. · Mr. Dirk Aerts Mr. Jos Verstraten Mr. Nico Bogaerts Mr. Michael Van de Velde RESPONSIBLE ADMINISTRATOR ... 4.6.5 Feasibility

DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY

Implementation of the Modernised Customs Code

STUDY

Content The aim of this study is to examine the challenges and conditions relating to the implementation of the Modernised Customs Code. The study identifies and assesses the legal, IT technical and operational issues in view of the implementation of the Modernised Customs Code.

IP/A/IMCO/ST/2011-11 February 2012 PE 475.094 EN

This document has been requested by the European Parliament’s Committee on Internal Market and Consumer Protection AUTHORS

PwC Belgium / PwC the Netherlands1 Mrs. Ine Lejeune Mr. Ruud Tusveld Mr. Dirk Aerts Mr. Jos Verstraten Mr. Nico Bogaerts Mr. Michael Van de Velde RESPONSIBLE ADMINISTRATOR

Mr. Mariusz Maciejewski Policy Department A - Scientific and Economic Policy European Parliament B-1047 Brussels E-mail: [email protected] LINGUISTIC VERSIONS

Original: EN ABOUT THE EDITOR

To contact the Policy Department or to subscribe to its monthly newsletter please write to: [email protected] Manuscript completed in February 2012. Brussels, © European Union, 2012. This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER

The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

1 ‘PwC’ is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these member firms form the PwC network. Each member firm in the network is a separate and independent legal entity and does not act as an agent for PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms, nor can it control the exercise of their professional judgment or bind them in any way.

mailto:[email protected]:[email protected]


CONTENTS

LIST OF TABLES 7

LIST OF FIGURES 7

EXECUTIVE SUMMARY 8

1 GOAL, SCOPE AND BACKGROUND OF THE STUDY 12 1.1 Goal and scope of the study 13 1.2 The Modernised Customs Code (“MCC”) 14

1.2.1 Main reasons for adopting the MCC 14 1.2.2 Modernised customs legislation required 19 1.2.3 Modernised Customs Code Implementing Provisions (“MCCIP”) 20

1.3 The MCC – main changes introduced 20 1.3.1 Main changes 20 1.3.2 Centralised customs clearance 22

1.4 MCC as part of the Commission’s strategy 22 1.4.1 MASP 23 1.4.2 IT plan for MCC [& eCustoms] 24

1.5 The recast of the MCC 24 1.5.1 The deadline of 24 June 2013 24 1.5.2 The impact of the Lisbon Treaty on the MCC 26 1.5.3 Other changes 27

2 METHODOLOGY: STARTING POINT, ASSESSMENT FRAMEWORK, DATA COLLECTION AND ITS ASSESSMENT 28 2.1 Starting points 28

2.1.1 Assess current state of play in development of the implementing measures 28

2.1.2 Identification of legal, technical or operational problems jeopardising timely MCC application 29

2.1.3 Practical overview (‘checklist’) of the conditions to be met for application of the MCC 29

2.2 Methodology 30 2.3 Assessment framework 30 2.4 Questionnaires per stakeholder group based on assessment framework 31

2.4.1 EU authorities 31 2.4.2 National customs authorities 31 2.4.3 Trade 32 2.4.4 IT software solution providers 32 2.4.5 Development of questionnaires 32

2.5 Pilot for questionnaire validation 34 2.6 Data collection in selected Member States 35

2.6.1 Member State selection 35 2.6.2 Trade statistics 36 2.6.3 Date of accession 39

2.7 Stakeholder selection 39 2.8 Summary of responses 40

2.8.1 Feedback from stakeholders 40 2.8.2 Missing data 41

2.9 Assessment methodology 41

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Policy Department A: Economic and Scientific Policy

3 OUTCOME OF THE DATA COLLECTION 42 3.1 Legal 42

3.1.1 State of play 42 3.1.2 Legal issues 46

3.2 IT Technical 50 3.2.1 State of play 50 3.2.2 IT strategy and technical issues 53

3.3 Operational 66 3.3.1 State of play 66 3.3.2 Operational issues 68

4 ASSESSMENT 70 4.1 Recast MCC and implementing provisions 73 4.2 National legal requirements 74 4.3 Implementation – full or phased 74 4.4 Decisions on required IT 75

4.4.1 IT strategy required 75 4.4.2 Centralised IT approach 76 4.4.3 Use of new technologies 77 4.4.4 Harmonisation of interfaces 78 4.4.5 Future challenge: a Single Window 78 4.4.6 Gradual implementation 78

4.5 Operational assessment 79 4.5.1 Information and communication 80 4.5.2 Guidelines and training 81

4.6 Timing 81 4.6.1 Timing of legal implementation 82 4.6.2 Timing of technical IT implementation 83 4.6.3 Timing of operational implementation 88 4.6.4 Interdependences 88 4.6.5 Feasibility of the 24 June 2013 MCC-application deadline 89

4.7 Benefits and costs 90 4.7.1 Objectives and benefits of MCC application 90 4.7.2 Costs of bringing the MCC into operation 91

5 RECOMMENDATIONS AND MINIMUM REQUIREMENTS 93 5.1 Overall recommendation 93 5.2 More-detailed recommendations per workflow 94

5.2.1 Legal implementation 94 5.2.2 Technical IT implementation 95 5.2.3 Operational implementation 97

5.3 Minimum requirements 98

REFERENCES 100

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LIST OF ABBREVIATIONS

AEO Authorised Economic Operator

BPM Business Process Model

CCA Competent Customs Authorities

CCC Community Customs Code

CCN/CSI Common Communications Network/Common Systems Interface

COTS Commercial-Off-The-Shelf

DG AGRI European Commission’s Directorate-General for Agriculture and

Rural Development

DG TAXUD European Commission’s Directorate-General for Taxation and

Customs Union

EEC European Economic Community

EC European Community

ECS Export Control System

EFTA European Free Trade Association

EIS European Information Systems

ENS Entry Summary Declaration

EOS Economic Operators Systems

EU European Union

ICS Import Control System

ICT Information and Communication Technologies

IMCO European Parliament’s Committee on Internal Market and

Consumer Protection

IT Information Technologies

MASP Multi-Annual Strategic Plan

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MCC Modernised Customs Code

MCCIP Modernised Customs Code Implementing Provisions

MNC Multinational Company

NCTS New Computerised Transit System

OLAF European Anti-Fraud Office

SME Small and Medium-sized Enterprises

TARIC Integrated tariff of the Community

TCG Trade Contact Group

TFEU Treaty on the Functioning of the European Union (Treaty of Lisbon)

VAT Value Added Tax

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LIST OF TABLES Table 1: Share of imports per Member State 37 Table 2: Share of imports of country selection 37 Table 3: Share of exports per Member State 38 Table 4: Share of exports of country selection 38 Table 5: Summary of responses 40 Table 6: Answers per country for trade stakeholders 40 Table 7: National implementation of Trans-European IT Systems – time spans 58 Table 8: NCTS-implementation time span 85 Table 9: ECS-implementation time span 86 Table 10: ICS-implementation time span 86

LIST OF FIGURES Figure 1: Process for MCC implementation/application 10 Figure 2: Approach to the study 30 Figure 3: Assessment domains and stakeholder categories 31 Figure 4: Stakeholder groups 32 Figure 5: Assessment framework – linking stakeholders to assessment domains 33 Figure 6: Country selection 35 Figure 7: Recast MCC process flow 43 Figure 8: Alignment with Lisbon Treaty – process flow 44 Figure 9: Splitting the MCCIP – process flow 45 Figure 10: Diagrams indicating the openness to phased implementation 49 Figure 11: Positive attitude towards a centralised approach 56 Figure 12: Harmonisation of interfaces as key facilitation for trade 60 Figure 13: Business case for Trans-European IT Systems required 61 Figure 14: Availability of sufficient communication tools according to trade 68 Figure 15: Opinion of trade on supportive and collaborative attitude of the national

customs authorities 69 Figure 16: Possible timing for legal MCC-implementation 82 Figure 17: Possible timing for technical IT implementation for the MCC 87 Figure 18: Possible timing for operational MCC implementation 88 Figure 19: Complete MCC implementation process 89 Figure 20: Process for MCC implementation/application 93

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EXECUTIVE SUMMARY

The 1992 Community Customs Code, which is still applicable at present, is based on procedures involving paper documents. Although electronic customs clearance using national computerised systems is now the rule rather than the exception, there is still no obligation to use such systems under Community law. There are no general EU-wide IT applications for customs clearance, yet the new computerised transit system, NCTS, has successfully demonstrated that such systems are feasible and opened up new opportunities for similar applications under other customs regimes. It was felt by the Commission that ongoing development of the Community Customs Code had not kept pace with either changes in the environment in which international trade is conducted, particularly the rapid, irreversible growth in the use of information technology and the exchange of electronic data, or the changing focus of the customs function, including more and more aspects outside the traditional range of customs such as safety and security. The effect of this straggling is said to be compromising efficient customs clearance and risk-based controls within the internal market.

Hence, the Modernised Customs Code (“MCC”) came into force in 2008 and is intended inter alia to cater for these trends, facilitate legitimate trade and govern the electronic environment for customs and trade. Although the MCC is already in force, it will only become applicable once the “MCC Implementing Provisions” come into effect. For this, a deadline of 24 June 2013 is set down in the MCC. However, the Commission has already indicated that the final deadline of 24 June 2013 cannot be met for a large number of activities relating to implementation due to new developments and for technical and practical reasons. Furthermore, with regard to the MCC itself, the Commission is envisaging postponing the implementation deadline, recasting the MCC to align it with the Lisbon Treaty and incorporating some other changes.

As regards most of its provisions, the MCC is not self-executive and needs further implementing measures and provisions, which are to be adopted by the Commission on the basis of empowerment given to this effect by the Code’s co-legislators (i.e. the Council and the European Parliament). However, implementation will involve more than simply adopting implementing rules. There will be a need for a series of coordinated actions (legal, IT and operational) to ensure that information on the new rules and procedures is widely available and that they can easily be managed on a day-to-day basis and are applied effectively and uniformly.

The goal of this study is to examine the possible challenges to implementing the measures and provisions required as well as the conditions that need to be met to do so. Special focus will also be given to whether the stated deadline of 24 June 2013 can or cannot be met.

Therefore, in order to assess the state of play of MCC implementation and the possible legal, technical and operational issues with a view to implementation, a stakeholder consultation has been organised to collect data from responsible authorities and trade (business organisations, MNCs and SMEs) at EU and national levels.

The outcome of this consultation provides feedback from a legal, IT and operational perspective.

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From a legal perspective, the implementation date will have to be revised. Furthermore, the recast MCC2 has to include alignment with the Lisbon Treaty plus other changes. The implementing provisions need to be split into an implementing act and a delegated act according to the powers given to the Commission by the Lisbon Treaty. At the time of collecting the data, insufficient information was available on the final texts of the recast MCC and MCCIP to say what changes might be needed to national legislation.

From an IT perspective, it has been emphasised that, for full implementation at all levels, it is “absolutely necessary to have the MCC, MCCIP, guidance, Business Process Models, user requirements and EU technical specifications in a fully agreed form”. When new IT systems are developed, stable legislation and concrete technical specifications should be ensured. Maintenance of the IT systems should be taken into account when they are developed. The time needed to implement the required systems depends on the software used. Commercial off-the-shelf software could allow fast, cheap implementation, enabling SMEs to step into such environments more easily.

More importantly, technical IT implementation should be part of an IT strategy needing to be developed and agreed by the Member States. Inter alia, this IT strategy should lay down the future IT architecture, allow for the possibility of moving to a centralised IT approach and permit the use of new technologies such as cloud computing. Furthermore, the harmonisation and standardisation of interfaces would appear to offer a key opportunity for cost reduction.

From an operational perspective, implementing the MCC mainly involves training people and providing correct, timely, adequate information.

The cost and timing of operational implementation greatly depends on legal and technical implementation of the MCC. The main issue for operational implementation of the MCC is inadequate transfer of information. Another operational issue might be budget constraints caused by the economic downturn. These may slow down or even jeopardise timely MCC implementation. These budget constraints apply to all stakeholders.

Based upon this outcome and our assessment of it (see chapter 4), a number of conclusions have been reached and, resulting from these, recommendations formulated (see chapter 5).

One of the main conclusions is that, in fact, implementation of the MCC largely depends on the IT strategy that should be followed for the next decade. Therefore, all the possible IT strategy options along with their respective impact assessments and cost-benefit analyses should be further researched. Furthermore, studies need to be carried out in this respect, including a study on an EU-(de)centralised IT approach, an impact assessment of the use of new technologies and commercial-off-the-shelf (“COTS”) products and a study on the harmonisation and standardisation of interfaces. Based on these analyses and stakeholder consultation, a final IT strategy for the next decade should be proposed to the European Parliament and Council. This IT strategy will then dictate the changes that need to be made in the recast of the MCC.

2 The MCC recast proposal has been adopted by the Commission on 20 February 2012.

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This approach would mean that approximately another 12 to 24 months would elapse before a final choice of IT strategy would be made. Further, it appears that the preparing for full implementation at one future moment in time, though having its advantages, will take so long that the MCC will not be implemented before 2020 or even later, thus also putting off all the potential benefits of the MCC concomitantly. However, it should be concluded that modernising customs is too important to put legal implementation off until all the IT systems are ready. Therefore and despite the fact that many stakeholders are not in favour of a phased implementation, a phased approach is recommended with simultaneous work streams for legal, IT and operational aspects and through which the MCC is gradually implemented. An evaluation should be done of the cost of postponing full MCC application; and an overall, integrated MCC-implementation action plan needs to be developed for a phased approach.

This approach would mean that approximately another 12 to 24 months would elapse before a final choice of IT strategy would be made. Further, it appears that the preparing for full implementation at one future moment in time, though having its advantages, will take so long that the MCC will not be implemented before 2020 or even later, thus also putting off all the potential benefits of the MCC concomitantly. However, it should be concluded that modernising customs is too important to put legal implementation off until all the IT systems are ready. Therefore and despite the fact that many stakeholders are not in favour of a phased implementation, a phased approach is recommended with simultaneous work streams for legal, IT and operational aspects and through which the MCC is gradually implemented. An evaluation should be done of the cost of postponing full MCC application; and an overall, integrated MCC-implementation action plan needs to be developed for a phased approach.

A phased approach would involve giving the Commission the task of laying down an overall implementation action plan. This task should be stipulated with the involvement of the European Parliament and Council. A deadline for this task should be set with a view to booking progress in fixing the IT strategy. It would also be advisable to include in the recast MCC an article obliging the Commission to submit a report to the European Parliament and the Council every year until full MCC application, and subsequently every two years, indicating developments in respect of the customs environment and MCC implementation (or more general the EU customs legislation), accompanied by any proposals to change legislation and/or the overall implementation plan. Reporting can be organised in the form of a progress meeting attended by representatives of the European Parliament, the Council and the Commission.

A phased approach would involve giving the Commission the task of laying down an overall implementation action plan. This task should be stipulated with the involvement of the European Parliament and Council. A deadline for this task should be set with a view to booking progress in fixing the IT strategy. It would also be advisable to include in the recast MCC an article obliging the Commission to submit a report to the European Parliament and the Council every year until full MCC application, and subsequently every two years, indicating developments in respect of the customs environment and MCC implementation (or more general the EU customs legislation), accompanied by any proposals to change legislation and/or the overall implementation plan. Reporting can be organised in the form of a progress meeting attended by representatives of the European Parliament, the Council and the Commission.

Information and communication

Guidelines and training

Approval of the proposal of the

recast MCC by the Parliament and

Council

MCC recast proposal

Execution of IT implementation

action planIT implementation

action planDecisions on IT

strategy

Alignment of national legislation

Delegated and implementing act

MC

C im

plem

enta

tion

actio

n pl

an

Periodical status report to the European Parliament and Council on the progress of MCC implementation

Adaptation of national IT systems

Estimated earliest start Estimated deadline

Legal implementation Best case March 2012 December 2013

Worst case March 2012 March 2017

IT technical implementation

Best case March 2012 December 2017


Operational implementation

Best case June 2017 September 2017


Total implementation

Best case March 2012 December 2017


Figure 1: Process for MCC implementation/application

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While the overall, integrated MCC-implementation plan is developed, work should continue on finalising the recast MCC. The implementing provisions should be adopted by the Commission in an implementing act and a delegated act. Although national statutory amendments may be limited, the national parliaments need to adopt such changes as are required to align national laws to the MCC.

Based on the IT strategy, an MCC IT-implementation action plan needs to be developed within two years of the decisions on the IT strategy being taken. This action plan should be integrated with the Multi-Annual Strategic Plan (“MASP”) as defined in the eCustoms Decision.3 Therefore, cost-benefit analyses should be done for all (Trans-European) IT systems in order to allow the relevant projects to be prioritised. The move towards a “Single Window” should be taken into account at all times and a study is recommended on the integration of other domains in the IT systems that is/will be used for customs purposes and vice versa.

In view of the MCC IT-implementation action plan, sufficient resources should be made available to the Commission and the Member States to develop the required IT systems. All policy options listed in FISCUS 2014-2020 should be evaluated by all stakeholders, as should the consequences of the proposed MCC IT-implementation action plan for trade.

At all times, DG TAXUD and the national customs authorities should ensure sufficient communication with a broad trade audience. Further, guidelines should be drawn up and applied to achieve uniform MCC application throughout the EU. These guidelines should be made publicly available. The guidelines should be implemented in national working instructions and training provided.

After (or even in the course of) MCC implementation, it is recommended requesting a report from the European Court of Auditors to evaluate the operational effectiveness achieved through MCC implementation.

3 Decision No. 70/2008/EC of the Parliament and of the Council of 15 January 2008 on a paperless environment for customs and trade, OJ L 23 of 26 January 2008.

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1 GOAL, SCOPE AND BACKGROUND OF THE STUDY

SUMMARY

The goal of this study is to assess the state of play of the current MCC implementation process, identify the problems that jeopardise the MCC application deadline of 24 June 2013 and list the minimum requirements for the MCC to become applicable.

The Community Customs Code dates from 1992 and has been subject to various changes to date.

The role of customs has expanded significantly as a result of both evolutionary factors and occurrences related to safety and security in the last decade. It is shifting away from a main focus on the collection of customs duties, to now focus more on the application of non-tariff measures, including in particular those related to security and safety, the fight against counterfeit goods, money laundering and drugs, and the application of sanitary, health, environmental and consumer-protection measures, as well as the collection of VAT and excise duties on importation or the exemption from such taxes on exportation.

Progress in the area of information and communication technology is creating an opportunity to increase the effectiveness and efficiency of customs services: effectiveness through improved controls, eliminating illegal imports; efficiency in the form of simplification and limiting the administrative and financial burden such controls pose for both authorities and business. Flexibility and facilitation of trade in an electronic environment is a key challenge and even more important in times of economic crisis. It is essential in creating a competitive internal market.

The MCC was adopted in 2008 as an answer to these changes and developments. It includes new concepts for trade facilitation such as centralised customs clearance. It was stipulated in the MCC that it will become applicable by 24 June 2013 at the latest, setting a clear deadline for the customs reform.

To apply the MCC, implementing provisions need to be adopted. Further, IT support is needed for the MCC to become applicable.

The Multi-Annual Strategic Plan and the IT plan for MCC [& eCustoms] are planning tools to develop the required IT support.

Changes in legislation, such as adoption of the Lisbon Treaty, impact the MCC. The MCC now will have to be aligned with the Lisbon Treaty. DG TAXUD intends to submit a recast MCC to the European Parliament and Council, including a new application deadline, alignment of the recast MCC to the Lisbon Treaty and the introduction of certain other changes.

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1.1 Goal and scope of the study In 2008, the Modernised Customs Code came into force (hereinafter “MCC”). However, the Code will only become fully applicable once its implementing provisions, the so-called MCC Implementing Provisions (hereinafter: “MCCIP”), become applicable. For this, a deadline of 24 June 2013 has been set in the MCC. The goal of this study is to examine the challenges that exist and the conditions that need to be met to implement these provisions, especially considering the deadline of 24 June 2013 as stipulated in the MCC (Regulation EC 450/2008).4 Above all, the Commission has already indicated that the final deadline of 24 June 2013 will not be met for a large number of activities related to implementation owing to new developments and for technical and practical reasons.

To obtain an independent assessment of the challenges and conditions relative to the provisions for implementing the MCC in view of the deadline of 24 June 2013, the European Parliament has requested that a third party should:

1. assess the current state of play on development of the implementing measures for the MCC by means of an implementing regulation, and do so in the context of legislators’ objectives as regards: standardisation, computerisation and simplification, as well as newly introduced concepts such as ‘central clearance’, ‘paperless customs’ and

the ‘one-stop shop’; 2. identify among the stakeholders the legal, technical (e.g. ICT, business process

modelling) and/or operational (e.g. training, communication, information) problems that could jeopardise timely adoption of the implementing provisions as indicated under 1;

3. provide a practical overview (‘checklist’) of the conditions the implementing provisions have to comply with to be effective, in particular as regards the large ICT projects involved, and provide technical guidelines for the Parliament with regard to its right of scrutiny.

In order to meet its objectives, the study covers the implications of the MCC’s implementation taking into account new developments and trends in IT solutions and IT infrastructure as far as of relevance.

However, before describing the methodology (Chapter 2), the data collected (Chapter 3) and the assessment made (Chapter 4), for a good understanding of the present issues and challenges it is necessary to review the relevant facts, background and circumstances.

In particular, it is necessary to:

define and describe the background and circumstances that led to development of the MCC and some of the background to the implementing provisions (1.2);

describe the main changes that will be introduced by the MCC (1.3); describe the position of the MCC within the Commission’s strategy (1.4); discuss the recast of the MCC in view of postponement of the deadline for the

MCC implementation, alignment with the Lisbon Treaty and other changes (1.5).

4 Regulation (EC) No. 450/2008 of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code), OJ L 145/1 of 4 June 2008.

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1.2 The Modernised Customs Code (“MCC”) The drivers and reasons for introducing the MCC were gleaned from a reading of the literature and documentation on the MCC. They are set out below.

1.2.1 Main reasons for adopting the MCC Looking at the present customs environment, the main legislation of importance is the common tariff and the Community Customs Code (hereinafter “CCC”) and its implementing provisions. For the purposes of the Customs Union and the concept of the internal market, it should contain the general rules and procedures to ensure implementation of the tariff and other common policy measures introduced at Union level in relation to trade in goods between the Union and countries or territories outside the customs territory of the Union, taking into account the requirements of those common policies.5

However, the CCC did come into force in 1993 and not all its aspects are suited to the conditions of today and the future. Therefore, the EU Commission concluded: “It is in the interests of economic operators and the customs authorities in the Union, to assemble current customs legislation in a modernised Union Customs Code.”6 On that basis, the MCC was developed and adopted in 2008; it is not yet applicable, however.7

More detailed background on this and other circumstances that have made it necessary to adopt the MCC is given in the next few paragraphs.

1.2.1.1 The Community Customs Code (“CCC”)

The CCC, introduced on 1 January 1993,8 was the true foundation of the single market for customs in the European Union. The CCC implementing provisions were published in July 1993 and became applicable on 1 January 1994. All procedures contained in the CCC and its implementing provisions were based on the processing of paper documents, as was common at that time.

Creation of the Customs Territory of the Community relieved companies in the 12 Member States involved at that time of the need to complete customs declarations for shipments of goods moving in free circulation in the EU.

1.2.1.2 Continual changes to the Community Customs Code The CCC incorporated a number of specific Community customs procedures as applicable before that time plus harmonised additional customs procedures as applied separately in the Member States during the 1980s. It has repeatedly and substantially been amended since its introduction in order to address specific matters such as protection for economic operators acting in good faith, and security.

5 Regulation (EC) No. 450/2008 of the European Parliament and of the Council of 23 April 2008, laying down the Community Customs Code (Modernised Customs Code),OJ L 145/1 of 4 June 2008, recital 1. 6 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, recital 1. 7 Please note that, in fact, one article in respect of customs fees, charges and costs (article 30(1) of the MCC) and the articles providing that the implementation measures will be adopted are already applicable. 8 Council Regulation (EC) No. 2913/92 of 12 October 1992 establishing the Community Customs Code, OJ L 302 of 19 October 1992, pp. 0001–0050.

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Following the 2003 Communication entitled ‘A simple and paperless environment for customs and trade’ (hereinafter: the Communication),9 information and communication technologies have become the rule. Common information systems enable data exchange between customs authorities and compliance with data-protection provisions. In particular these systems are concerned with:

formalities carried out by economic operators;

customs procedures (centralised clearance in particular)10 and the registration/approval of economic operators (identification and registration of economic operators: EORI;11 grant of the status of authorised economic operator – ‘customs simplification’ and/or ‘security and safety’: AEO);12

risk management through a common framework between the Commission and Member States. This risk management framework will enable customs authorities to carry out controls based on national, EU and international analyses.

Based upon these ideas, in 2005 the Community Customs Code was amended to create a basis for such measures. These 2005 amendments aimed at a number of points:13

tightening security requirements for movements of goods across international frontiers. Economic operators are now required to provide the customs authorities with detailed information on goods before they are imported into the EU or exported from it;

introduction of the concept of authorised economic operator (AEO) with the aim to simplify trade. The Member States may grant AEO status to any economic operator meeting common criteria. These criteria concern control systems, financial solvency and the operator's track record in complying with the rules. The Member States are required to use risk-analysis methods. Uniform EU guidelines have been introduced for identifying risks for control purposes;

introduction of a basis for a one-stop shop for importers and exporters.

9 Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee of 24 April 2003, ‘A simple and paperless environment for Customs and Trade’, COM(2003) 452 final, OJ C 96 of 21 April 2004. 10 See 1.3.2. Centralised Customs Clearance. 11 Economic Operators Registration Identification is a unique registration and identification number for economic operators in the EU as laid down in Regulation (EC) 312/2009. 12 Authorised economic operator status (as defined in Regulation (EC) 648/2005) grants trusted traders easier access to simplifications of customs procedures and facilitations in terms of controls. 13 http://europa.eu/legislation_summaries/other/l11010_en.htm.

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1.2.1.3 Need for a reform of customs Customs faces a rapidly changing environment: evolving production and consumption patterns, increasing international trade, global threats such as terrorism, organised crime, climate change and new hazards like trade in dangerous goods.14

In this context, the Commission has indicated that the role of customs is significantly expanding beyond the collection of customs duties, to now focus more on the application of non-tariff measures, including in particular those related to security and safety, the fight against counterfeit goods, money laundering and drugs, and the application of sanitary, health, environmental and consumer-protection measures, as well as the collection of VAT and excise duties on importation or the exemption from such taxes on exportation.15 It is stressed by the European Parliament that “efficient prevention of irregularities and fraud in the customs field, through proper controls, not only secures the protection of the EU's financial interests but also has important consequences for the internal market, eliminating the unfair advantage held by economic operators who underpay duties or understate the values declared to customs over honest and compliant economic operators who do not engage in such practices”.16

1.2.1.3.1 Trade requirements In an enlarged EU and an electronic trading environment, customs should be able to collect taxes at the most appropriate place, which is where the trader is established (centralised clearance).17 At the same time, it is essential to safeguard common standards, including those for risk analysis and customs penalties. That can only be achieved through a common EU framework.

Furthermore, the changing expectations of the international trading community are based on the commercial realities of their own operating environment. They are looking for the simplest, quickest, cheapest and most reliable way of getting goods into and out of a country. They seek certainty, clarity, flexibility and timeliness in their dealings with government. Driven by commercial imperatives, they are also looking for the most cost-effective ways of doing business.

It is also necessary to improve consistency with other EU policies, such as those relating to indirect taxation, agricultural, commercial, environmental, health and consumer-protection policy. This requires a revised division of tasks between border and inland customs offices.18

Business expects more efficiency, better services and higher productivity from customs. Since customs administrations should facilitate trade transactions, business has an interest in forming a partnership with customs. Simple, predictable, uniform customs controls will ensure rapid deliveries. Traders also need a uniform EU regulatory framework

14 Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee of 1 April 2008, Strategy for evolution of the Customs Union, Brussels, COM(2008)169 final. 15 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, Context of the proposal, p. 3, Commission Communication ‘towards an integrated management of the external borders of the member states of the European union’, COM(2003)233 final, 7 May 2002, and Commission Communication concerning the security of the external frontiers, COM(2003)452 final, 24 July 2003. 16 European Parliament, Resolution of 1 December 2011 on the modernisation of customs, ‘Report on modernisation of customs’, 1 December 2011, 2011/2083(INI), p. 12, no. 51. 17 Centralised clearance will allow economic operators to manage all their clearance formalities from one single point with one responsible customs authority for the entire EU. This concept is further elaborated on under 1.3.2. 18 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, General context of the proposal, p. 3.

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and similar customs practices that place economic operators on an equal footing. So that businesses can avoid wasting time when they introduce products in the single market, a single point of entry is needed for customs declarations and other formalities for all requirements related to imports and exports. Lastly, there is a need for the burden of controls to be reduced and for legislation to be more coherent in order to facilitate trade, reduce error and increase compliance.

The Communication therefore proposes to make procedures and controls more efficient by simplifying customs legislation and making better use of electronic tools in customs procedures.

Ensuring security in the movement of goods requires that risk-related data be shared in real time between the customs administrations of the Member States and between those administrations and other bodies such as the police and veterinary authorities. This enables customs authorities to decide which consignments they will carry out physical checks on at the border. To achieve this, the legislation must be simplified at EU level to overcome the problems linked to differences in national laws.

As regards simplifying legislation, the Communication stresses the following objectives:

to make electronic declarations and electronic exchange of data the rule; to reduce and simplify customs procedures and regimes; to align and adjust procedures to the needs of electronic processing, and extend

their scope and use; to redefine the role of inland and frontier customs offices; to redefine the rights and responsibilities of trade and freight forwarders; to introduce new tools and methods.

Such modernisation and simplification of customs legislation will reduce the cost for business and increase legal certainty for citizens.

1.2.1.3.2 Focus on facilitation For several decades now, there has been mounting pressure from the international trading community to minimise government intervention in commercial transactions, and a growing expectation for customs authorities worldwide to place increasing emphasis on facilitating trade.

This is in no small part due to the changing environment in which customs authorities operate. For example, the emergence of wide-bodied aircraft, shipping containers, e-commerce and the increasing complexities of international trade agreements have all impacted how regulatory authorities fulfil their responsibilities, and customs administrations worldwide have seen a dramatic increase in workload across all areas of activity, fuelled by the advent of the global marketplace and the technological advances that have revolutionised trade and transport.

For centuries, the customs role has been one of a ‘gatekeeper’, with customs authorities representing a barrier through which international trade must pass, in an effort to protect the interests of the nation. Such a role is sometimes perceived as manifested by regulatory intervention in commercial transactions simply for the sake of intervention: Customs has the authority to do so, and no one is keen to question that authority. In this day and age, however, social expectations no longer accept the concept of intervention for the sake of it. Rather, the current catch-cry is ‘intervention by exception’, that is, intervention when there is a legitimate need, based on identified risk.

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In this respect, account should also be taken of the EU’s trade-facilitation responsibilities in the context of the Doha Development Agenda19 and the requirements stemming from the need to address emerging security and safety threats by strengthening controls at the EU’s external border. The success of this agenda is heavily reliant on the ability of customs to raise the effort to achieve an effective balance between trade facilitation and regulatory intervention.

1.2.1.3.3 Electronic customs The CCC of 1992 was still based on procedures involving paper documents and, although the use of electronic customs clearance through national computerised systems had become the rule rather than the exception, there was still no obligation to use such systems under Community law. There are no EU-wide IT applications for customs clearance, even though the new computerised transit system, NCTS,20 has successfully demonstrated the feasibility of such systems and opened up new opportunities for similar applications in other customs regimes.21 Therefore, the CCC needed to be adapted to fit, and also to govern, the electronic environment for customs and trade.

Meanwhile, the e-Europe action plan sets the Member States a priority: to work online and be accessible electronically in order to improve the efficiency of customs procedures and controls. The aim of the customs union is to ensure a simplified and paperless environment for trade.

Member States currently use different IT solutions and have different approaches to the implementation of customs rules and procedures. Traders operating in more than one Member State have to comply with different conditions for electronic access to customs, which is costly and could jeopardise the functioning of the internal market. There is also a lack of common data requirements and differences in electronic communication between customs administrations. This situation is no longer tenable in an enlarged EU.

Using printed documents in customs procedures is not cost-effective and movements of goods across several Member States require common interfaces and databases. The Commission can act to ensure that the means for creating a simplified, paperless environment are provided and that interoperability between existing IT systems is achieved.

In order to rationalise business processes, once the information requirements have been harmonised and standardised, the customs interface should be presented to the trader in each Member State in the same form. Customs authorities should be inter-linked so as to be able to act as if they were a single customs authority. Traders should be able to lodge their declarations and notifications directly with customs from their own IT system using a standard interface. Customs declarations and notifications should be made available to small and medium-sized traders on the internet. There will also be a need for solutions to ensure secure internet payment systems. It is important for traders to have a single access point for customs clearance and information systems. They will have to provide the data only once.

19 The current trade-negotiations round of the World Trade Organisation (WTO). 20 The New Computerised Transit System is a Europe-wide system based on electronic declaration and processing that was designed to replace the paper-based Community transit system and provide better management and control of both Community and Common Transit matters. It involves all EU Member States and the European Free Trade Association (EFTA). 21 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, General context of the proposal, p. 3.

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Electronic customs is a contribution to the e-Europe programme22 and the e-Government programme23 (government on-line services).

1.2.1.3.4 Financial crisis According to the World Customs Organisation, during this time of economic and financial crisis, customs can play a central role in facilitating trade and hence be a driver of international trade by simplifying customs procedures, avoiding unnecessary physical inspection of cargo, and reducing the lead time between the lodging of a customs declaration and customs clearance of the goods, thus resulting in lowered business costs. It is stated that improvements in performance for some customs administrations have engendered motivation for improvement in other customs administrations and other border agencies.24

1.2.2 Modernised customs legislation required The foregoing makes it clear that the CCC is out of date and does not form a sufficient basis for present and future developments.

It is felt by the Commission that development of the CCC has not kept pace with either changes in the environment in which international trade is conducted, particularly the rapid, irreversible growth in the use of information technology and the exchange of electronic data, or the changing focus of the customs function. This has been said to compromise efficient customs clearance and risk-based controls within the internal market.25

Modernising the Customs Code is required to streamline customs procedures and processes and adopt the common standards for IT systems.

In the Commission’s vision, such extensive changes cannot be achieved by (further) continued amendment of the Community Customs Code, but can only be achieved by a complete overhaul, i.e. replacement by a new piece of legislation, the Modernised Community Customs Code.26 Economic operators and customs administrations have all backed this step, i.e. taking these developments as an opportunity to carry out a major overhaul of the customs rules in order to make them simpler and structure them better.27

To achieve the correct balance among the various demands, to modernise customs procedures and control methods and to reinforce cooperation among the various departments, the MCC was adopted in April 2008. However, as indicated, it has not yet become fully effective because implementing provisions are required. This is further explained in the next section.

22 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, ‘i2010: digital libraries’ {SEC(2005) 1194} {SEC(2005) 1195} /* COM/2005/0465 final */, Official Journal C 49 of 28.2.2008. 23 Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions , ‘The Role of eGovernment for Europe’s Future’ [SEC(2003) 1038] /* COM/2003/0567 final */. 24 WCO, Resolution of the customs co-operation council on the WCO’s continuing response to the global economic downturn, Communication on the Global Financial Crisis for the 2 April 2009 G20 Summit, June 2009. 25 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, Ground and objective of the proposal, p. 2. 26 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, General context of the proposal, p. 3. 27 Proposal No. 2005/0246 (COD) from the European Commission of 30 November 2005 for a regulation of the European Parliament and of the Council laying down the Community Customs Code (Modernised Customs Code), COM(2005)608, General context of the proposal, p. 3.

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1.2.3 Modernised Customs Code Implementing Provisions (“MCCIP”)

Most of the provisions of the MCC are not self-executive and need implementing measures, which are to be adopted by the Commission on the basis of powers given to that effect by the Code’s co-legislators (i.e. the Council and the European Parliament). In other words, the MCC is the general customs framework which should be decided by the European Parliament and the Council, while the MCCIP contains the necessary details on the different customs rules and procedures included in the MCC and enactment can be conferred to the Commission.

These implementing provisions (“MCCIP”) are being drafted by the Commission and discussed within the respective Committee with the representatives of the Member States. However, it should be noted that, through trade/customs working groups, trade representatives are assisting the Commission in preparing the implementing provisions. The Trade Contact Group (“TCG”), where the main professional organisations running major customs operations are represented, closely follows the process of drafting and adopting these provisions. Initially, the TCG was consulted on implementation of the eCustoms Decision,28 which provides for consultation mechanisms with economic operators at all stages of the preparation, development and deployment of the relevant electronic systems and services. Given this experience, the TCG’s involvement has been extended to the MCC implementation process. Hence, the TCG has been informed of progress in the MCC implementation process.

1.3 The MCC – main changes introduced As stated above, the Code has been modernised in response to a number of internal and external challenges faced by the EU, as well to the changing context in which customs authorities work. This paragraph highlights the main changes in general, and centralised customs clearance in particular.

1.3.1 Main changes The main changes made to customs legislation by the MCC are:

rationalisation of the legal framework and definition of customs rules and procedures;

greater standardisation of customs rules and their implementation, in particular as regards economic operators’ rights and obligations, decisions and guarantees:

o there are no longer national restrictions on customs representation, but possible conditions and common criteria are laid down requiring to be fulfilled by those wanting to act as representatives in other Member States;

o there are common rules for all types of decisions by customs authorities, including the right to be heard and appeal procedures;

o there is prohibition against customs fees, charges and costs not corresponding to a service actually rendered;

o binding information can possibly be extended to areas other than tariff classification and origin;

o there are common principles for customs penalties; o there are common rules on guarantees for potential or existing customs

liabilities, covering all procedures;

28 Decision No. 70/2008/EC of the Parliament and of the Council of 15 January 2008 on a paperless environment for customs and trade, OJ L 23 of 26 January 2008.

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o there are streamlined rules and procedures allowing debtors to benefit from non-recovery or repayment/remission of duties in certain situations;

o there are harmonised rules on time limits for customs to recover duties. simplification of customs procedures through computerisation of all declarations

and data exchanges plus interoperability of national customs computer systems:

o all customs formalities and exchanges of data between operators and customs are to be done using electronic data-processing techniques;

o unified simplified customs procedures. introduction of “centralised customs clearance” allowing economic operators to

lodge their electronic customs declarations at the customs office of the place where they are established and hold their records, irrespective of where goods physically enter or leave the EU customs territory or need to be presented to customs within the EU. See also 1.3.2 for more details.

Interoperability of national customs computer systems is envisaged, facilitating trade while ensuring tight control through common management of risks and easier cooperation between customs authorities.

Furthermore, the basis is laid for new facilities such as self-assessment by operators and single interfaces or one-stop-shop services, giving rise to the concepts of a single window and a one-stop shop.

“Single window” means a concept:29

o allowing standardised information and documents to be lodged with a single electronic entry point for fulfilment of all import, export and transit-related regulatory (customs or other) requirements. If information is electronic, then individual data items need only be submitted once;

o making available standardised information to customs and other authorities involved in import, export and transit movements delivered to one single portal by electronic means.

“One-stop shop” means:30

o carrying out (customs or other) controls and physical examination for different international trade-related measures in respect of the same goods, at the same time and in one place as far as possible (one stop);

o structured, coordinated organisation of these controls and physical examinations irrespective of the administrations involved.

29 Presentation of the European Commission, ‘The Modernised Customs Code: why, how, what and when?’, 1 November 2008, slide 13, http://ec.europa.eu/taxation_customs/resources/documents/customs/procedural_ aspects/general/community_code/pres_mccc_en.pdf. 30 Presentation of the European Commission, ‘The Modernised Customs Code: why, how, what and when?’, 1 November 2008, slide13, http://ec.europa.eu/taxation_customs/resources/documents/customs/procedural_ aspects/general/community_code/pres_mccc_en.pdf.

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1.3.2 Centralised customs clearance The simplified procedure considered to be the flagship of the MCC is centralised customs clearance.

This means that, when an “authorised operator” lodges its customs declaration at the customs office where it is established, that office then carries out any documentary risk analysis. This office (the “office of import/export”) forwards the results of its analysis to the border customs office in that Member State or in another Member State where the goods actually enter or leave the EU (the “office of entry/exit”). That border office carries out any physical checks on the goods being imported or exported that either of the offices involved deems necessary on the basis of the result of risk analysis. The frequency with which compliant, trusted traders are selected for inspection at the place of entry or exit should generally be minimal. Provided that there is no irregularity and the customs liability has been secured at the office of import, the goods then can be released directly into free circulation in the EU or for export. Under this procedure, the goods do not have to be moved to the office of import or export but can be delivered direct to the point of sale, including in another Member State or third country. This allows multinational companies to conduct all of their EU business with a single customs office.31

Many discussions have already taken place at Ad-Hoc High Level Steering Group meetings on the practical implementation of centralised customs clearance.32

1.4 MCC as part of the Commission’s strategy The MCC fits into the Commission’s strategy of completing the reform process to modernise customs working methods, develop staff competences and re-allocate resources efficiently and effectively.33

The Commission proposes setting out a strategic framework for customs with common strategic objectives covering aspects such as:34

protecting society and the EU’s financial interests by developing effective measures against illicit trade, restricted and prohibited goods and developing effective risk assessment as part of the fight against terrorist and criminal activity;

supporting the competitiveness of European companies by modernising customs working methods and developing new EU standards for customs;

facilitating legitimate trade by designing and improving control systems to reduce interference in the flow of goods, and reducing the administrative burden on businesses;

controlling and managing the supply chains used for the international movement of goods by enhancing effective, systematic sharing of risk information;

developing and enhancing cooperation between customs authorities and with other governmental agencies and the business community.

31 http://ec.europa.eu/taxation_customs/customs/procedural_aspects/general/centralised_clearance/index_en.htm 32 Inter alia: European Commission, DG TAXUD, ‘Summary Record of the 2nd meeting of the Ad-Hoc High Level Steering Group (preceded by a joint meeting with representatives of the indirect tax administration)’, Brussels, 08 November 2010, Working Document TAXUD/R4(2010) 708555 and ‘Summary Record of the 8th meeting of the Ad-Hoc High Level Steering Group, Brussels, 20 July 2011, Working Document taxud.a.3 (2011) 881453. 33 European Commission, Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee, ‘Strategy for the evolution of the Customs Union’, Brussels, 1 April 2008, COM (2008) 169 final. 34 http://ec.europa.eu/taxation_customs/customs/policy_issues/customs_strategy/index_en.htm.

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1.4.1 MASP The vision of a modern customs service communicating electronically with trade35 was already endorsed in 2003 by the Council Resolution36 that called for a Multi-Annual Strategic Plan37 (“MASP”) for the creation of a European electronic environment, consistent with the operational and legislative projects and developments already scheduled or underway in the areas of customs and indirect taxation.

As an example, DG TAXUD38 considers “Single Window” an important contribution to trade facilitation by exploiting the opportunities offered by electronic customs IT-tools available in other areas related to the importation and exportation of goods.39

The MASP is intended to provide interested parties with a short overview and background information on projects and key issues related to the evolution of the electronic customs initiative and the present state of play.

The MASP on eCustoms has been broken down in the following categories:40

Legal changes and simplification:

The use of IT for the benefit of customs authorities and economic operators has required changes to the Community Customs Code to bring it in accordance with the electronic environment. It also offered an opportunity to simplify and harmonise customs processes across the EU. This resulted in the modernisation of customs legislation and introduction of the MCC.

Operational convergence:

In many areas, common legal rules do not, by themselves, ensure a level playing field for economic operators or efficient management of the Customs Union. Along with the legal changes, therefore, common guidelines and working methods are required.

Computerisation of customs processes:

Computerisation of the customs business process is thought to be beneficial to both customs administrations and traders. It should allow effective risk analysis, efficient monitoring of trade flow that is of interest to customs administrations and appropriate selection of consignments to be checked. It should reduce costs for economic operators doing business in the EU, accelerate the movement of goods and get rid of unnecessary formalities. In order to maximise the added value to the EU, the Commission suggests organising computerisation activities along two parallel threads: interoperability between Member States and accessibility to eCustoms for traders.

Probably the most challenging aspect of this initiative is that regulatory and operational changes and the computerisation of customs processes will have to be tackled in tandem, in order to enable customs to face the new challenges efficiently. Action undertaken at EU and national levels will have to be aligned.41

35 Draft eCustoms vision statement and multi-annual strategic plan, 20 October 2003, TAXUD/477/2004 – Rev. 3, p. 2. 36 Council Resolution of 5 December 2003 on creating a simple and paperless environment for customs and trade – OJ C 305/1 of 16 December 2003. 37 Electronic Customs Multi-Annual Strategic Plan 2008 Yearly Revision (EC), 22 September 2008, TAXUD/477/2004 – Rev. 9. 38 DG TAXUD is the European Commission’s Directorate-General responsible for taxation and the customs union. 39 European Commission, DG TAXUD, ‘Single Window Road Map’, Brussels, TAXUD.A.1/B.1/MMC/EK D(2011)359494. 40 European Commission, Electronic Customs Multi-Annual Strategic Plan 2008 Yearly Revision (EC), 22 September 2008, TAXUD/477/2004 – Rev. 9. 41 European Commission, Draft eCustoms vision statement and multi-annual strategic plan, 20 October 2003, TAXUD/477/2004 – Rev. 3, p. 3, and European Commission, Electronic Customs Multi-Annual Strategic Plan 2008 Yearly Revision (EC), 22 September 2008, TAXUD/477/2004 – Rev. 9.

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1.4.2 IT plan for MCC [& eCustoms] As part of the MCC implementation, an IT plan for MCC [& eCustoms] is being developed by the Commission. This IT plan has been discussed at various Ad-Hoc Steering Group meetings.

With a view to preparing this plan, a country consultation42 was organised by the Commission to identify the status of the IT systems in the Member States and gather more information for use in developing the IT plan.

The main conclusions from this country consultation are:

the analysis of the changes introduced by the MCC should be organised per functional area to avoid repeated, incremental changes to existing systems;

the Member States visited consider external domain harmonisation43 and access for trade to their national systems essential for trade facilitation;

certain Member States are open to replacing specific national systems with centrally operated systems; other Member States would opt to keep their national systems. Central development and national integration of systems can be considered;

There was/is a need to clarify certain functional and implementation aspects (e.g. regarding centralised customs clearance, temporary storage, guarantee management, entry into declarant’s records).

1.5 The recast of the MCC As a final point to be addressed to understand the reason for this study and its goal, it is necessary to explain the present process with respect to the recast of the MCC. One of the main drivers for this is postponement of the deadline of 24 June 2013, which has already been briefly mentioned above. Other points that are being discussed in this respect are the impact of the Lisbon Treaty and other changes to be made to the MCC.

1.5.1 The deadline of 24 June 2013 For the purposes of this study, it is important to know that, as the MCC is presently worded, all the MCC provisions shall, be applicable no later than 24 June 2013.44 This date indicates a clear timeframe for the customs reform endorsed by the European Parliament and the Council in the MCC, and expresses the legislators’ determination at the time the MCC was drafted and adopted to have the reform completed by that date.

The MCC entered into force on 24 June 2008, following publication in the Official Journal.45 In general, the applicability of its provisions is linked to the adoption and applicability of implementing provisions. This is due to the difficulty – at the time the MCC was adopted – of setting a precise date for its application, in particular given the need to develop/adapt IT systems before the new computerised customs procedures could become operational.

42 The visited Member States were: the UK, Italy and Sweden. 43 External domain harmonisation means harmonisation and standardisation of data exchange of the authorities’ customs IT systems with economic operators’ IT systems. 44 MCC, Article 188 - Application: 1. The [list of Articles] shall be applicable from 24 June 2008. 2. All other provisions shall be applicable once the implementing provisions adopted on the basis of the Articles referred to in the paragraph 1 are applicable. The implementing provisions shall enter into force on 24 June 2009 at the earliest. Notwithstanding the entry into force of the implementing provisions, the provisions of this Regulation referred to in this paragraph shall be applicable on 24 June 2013 at the latest. 3. Article 30(1) shall apply from 1 January 2011. 45 Regulation (EC) No. 450/2008 of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code), OJ L 145/1 of 4 June 2008.

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The only provisions in the MCC that have become applicable in the meantime are those empowering the Commission to adopt the MCC implementing measures (committee procedure) and one article in respect of customs fees, charges and costs (article 30(1) MCC). In the interim, the CCC and its implementing rules have not been repealed and continue to apply.

In a first instance, the date from which other provisions of the MCC would become applicable would have to be determined in the Commission Regulation laying down the implementing provisions. However and in any case, the MCC has set a final deadline for all provisions to become applicable, i.e. 24 June 2013.46 The idea was to ensure that the MCC would be applied by this deadline. Therefore, the initial plan was that the implementing rules should be adopted, published and brought into force a sufficient time in advance.

However, implementation involves more than simply adopting the implementing rules. There is a need for a series of coordinated actions to ensure that information on the new rules and procedures is widely available and that they can be managed easily on a day-to-day basis and applied effectively and uniformly. These coordinated actions include developing and adapting IT support systems, drafting guidelines, training people and ensuring communication with and consultation of trade.

The Commission, DG TAXUD, has already indicated that the final deadline of 24 June 2013 will not be met for a large number of the activities related to implementation, due to a number of new developments and owing to specific technical and practical reasons. Business representatives have also expressed concerns that implementation within the timeframe as laid down in the MCC will not take sufficient account of the time needed for business to adapt to the changes to be introduced and therefore they are also requesting postponement of the implementation deadline of 24 June 2013. They feel that “the deadline of 24 June 2013 was an impossible target. This assertion was based on the experience of implementing new security systems, which demonstrated that it took six years to fully implement new IT systems for customs in the EU”.47

Furthermore, Member States have expressed concerns that budgetary pressure following the economic crisis is making it difficult for them to create the necessary IT infrastructure in time.

Commissioner Šemeta intends to present a recast MCC proposal to the European Parliament and the Council with the primary goal of postponing the date of MCC application. He stresses that implementation of a major part of the processes to be introduced depends on a wide range of electronic systems being defined and developed by the Commission, national customs administrations and economic operators. That is particularly the case for the concept of centralised customs clearance.

46 Regulation (EC) No. 450/2008 of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (Modernised Customs Code), OJ L 145/1 of 4 June 2008. 47 Information paper, ‘Explaining AmCham EU’s position on the Modernised Customs Code’, Brussels, 5 August 2011, p. 2.

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As indicated in the minutes to the 7th meeting of the Ad-Hoc High Level Steering Group,48 this proposal will have three aims:

“Postponing the date of application of the MCC with a deadline more adapted to the current economic conditions, thus allowing a phased, binding but realistic implementation of new, electronic-based processes. TAXUD services are undertaking, together with Member States and representatives of economic operators, an assessment of the actual time needed to deliver the necessary electronic systems. That postponement shall be introduced before the ultimate deadline of 24 June 2013, currently laid down in the Code for its application;

Aligning the MCC with the requirements of the Lisbon Treaty, as regards the use by the Commission of either delegated or implementing powers to allow the MCC to be applied, in accordance with articles 290 and 291 of the Treaty on the Functioning of the European Union and the new Comitology Regulation (EU) No. 182/2011;

Correcting some provisions which are either no longer in line with changes introduced, since the adoption of the MCC in 2008, in the current customs legislation or have revealed difficult to implement through sound measures and workable processes. The objective is nevertheless to limit such changes to what is absolutely necessary to ensure coherence in the processes.”

1.5.2 The impact of the Lisbon Treaty49 on the MCC Another development having an impact on the present status of the MCC is the Treaty of Lisbon, which entered into force on 1 December 2009. Based upon the Lisbon Treaty, the powers of the co-legislators and the Commission are redefined in articles 290 and 291 of the Treaty on the Functioning of the European Union50 (“TFEU”), i.e. delegated and implementing powers are granted to the Commission and there is scrutiny of the Commission’s exercise of these powers.

1.5.2.1 Delegated powers Article 290 of the TFEU allows the EU co-legislators to delegate to the Commission power to amend or supplement certain non-essential elements of legislative acts. So-called “delegated acts” cover almost the same type of measures as have thus far been adopted under the “regulatory procedure with scrutiny” (as introduced by the Council through the Comitology Decision in 2006).51

Subject to the delegation conditions, the Council and the European Parliament may revoke a delegation or object to a delegated act. The specific objectives, content, scope and duration of a delegation must be defined in each basic act.

As article 290 of the TFEU has been applicable since the Lisbon Treaty entered into force on 1 December 2009, the European Parliament and the Council may no longer provide for “regulatory procedures with scrutiny” in new basic acts.

48 European Commission, DG TAXUD, Report of 7th Meeting of the Ad-Hoc High Level Steering Group for the Governance of the Implementation of the MCC, Brussels, 18 May 2011, TAXUD/A2/2011/004. 49 Treaty of Lisbon of 13 December 2007 amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, OJ C 306 of 17 December 2007. 50 Consolidated version of the Treaty on the functioning of the European Union, OJ C 115/47 of 9 May 2008. 51 Council Decision 2006/512/EC of 17 July 2006 amending Council Decision 1999/468/EC laying down the procedures for the exercise of implementing powers conferred on the Commission, in statistics proposals, OJ L 200/11 of 22 July 2006.

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1.5.2.2 Implementing powers According to article 291 of the TFEU, EU legislation (“basic acts”) can confer on the Commission power to adopt implementing acts where uniform conditions are needed for the Member States when implementing legally binding EU acts.

On 1 March 2011, Regulation (EU) No. 182/2011 establishing rules on the control of the way in which the Commission exercises its implementing powers entered into force.52 It defines how Member States control the way in which the Commission uses its implementing powers. This regulation establishes new procedures (advisory and examination) that replace consultation, management and regulatory procedures introduced by the Council decision of 1999 (the Comitology Decision).53 The procedures involve committees composed of Member States’ representatives and chaired by the Commission. The Commission must ensure the widest possible support within these committees.54, 55

1.5.2.3 Impact on the MCC Owing to explicit reference being made to the regulatory procedure with scrutiny, to the regulatory procedure and to the management procedure in several provisions of the MCC and because the implementing provisions still have to be adopted and directly linked to the MCC, the Commission (DG TAXUD in close cooperation with the legal service) has decided to recast the MCC to align it with the Treaty of Lisbon and Regulation (EU) No. 182/2011.56 In this respect, all references in the MCC will be updated to refer to the new system of delegated and implementing acts.

Furthermore, as a consequence of the new rules, it has been decided to split the MCCIP into two acts, depending on the powers exercised by the Commission:

an implementing act a delegated act

1.5.3 Other changes Besides the postponement of the application deadline and the alignment with the Treaty of Lisbon, the introduction of other changes is envisaged. More detailed information on those additional changes is presented in 3.1.1.1.1.

52 Regulation (EU) No. 182/2011 lays down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers, OJ L 55 of 28 February 2011. 53 Council Decision No. 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission, OJ L 184 of 17 July 1999, pp. 0023–0026. 54 http://europa.eu/lisbon_treaty/index_en.htm. 55 Council of the European Union, Factsheet: Entry into force of new comitology rules, Brussels, 28 February 2011, PRESS 42, 7070/11. 56 Regulation (EU) No. 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission’s exercise of implementing powers – OJ L 55/13 of 28 February 2011.

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2 METHODOLOGY: STARTING POINT, ASSESSMENT FRAMEWORK, DATA COLLECTION AND ITS ASSESSMENT

SUMMARY

An assessment framework has been used to group data requests and structure them into stakeholder groups.

Data collection has taken place in a sample set of Member States and at European level, after a pilot run in one Member State.

In general, SMEs are not really informed about the process of implementing the MCC and their interest in knowing more about it is low or non-existent. When the European organisation for SMEs was consulted, the same observation was made. SMEs seem not to be interested in the MCC at this time.

In this chapter, the data-collection methodology and the assessment made is described. However, before explaining the actual methodology, it is necessary to define a number of starting points.

2.1 Starting points

2.1.1 Assess current state of play in development of the implementing measures

2.1.1.1 Cut-off date for assessing the implementation process The data gathered for this study reflects the status of the implementing process on 15 September 2011. Certainly, the implementation process has evolved since that time. Nevertheless, to provide a comprehensive view of the action that is being taken and the action required going forward, a cut-off date had to be set.

Where appropriate and applicable, documents published after 15 September 2011 are added to confirm the findings in this study.

2.1.1.2 State of play As this study aims to identify the legal, technical and operational issues with a view to implementation of the MCC, a clear view of the current situation in these fields is required.

Therefore, the assessment of the state of play is conceived as the mirror image of these issues.

The state of play of the legislation needed for implementation of the MCC has to be evaluated not only on an EU level but also taking into account the required changes to national laws. The information on the progress that has been made in the action taken has been provided up to the cut-off date of 15 September 2011.

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The same applies to the technical and the operational aspects of implementation. When dealing with the technical requirements, the process of describing the Business Process Models (‘BPM’)57 is key as they will be the basis for defining technical user requirements.

2.1.2 Identification of legal, technical or operational problems jeopardising timely MCC application

2.1.2.1 Stakeholder consultation The problems that jeopardise timely implementation of the MCC have been identified by means of stakeholder consultation. The stakeholders were selected ensuring a representative cross-section by geographical location, industry and size. The selected stakeholders include public bodies, such as the EU Commission’s DG TAXUD and national customs authorities, and also European and national industry associations. In addition, both multinational companies (“MNCs”) and SMEs were invited to give their views on the implementation process.

2.1.2.2 Legal, technical and operational problems Potential problems that jeopardise timely implementation of the MCC have been divided into three categories:

legal issues;

technical issues; and

operational issues.

Legal issues can be changes to legislation that are required or legislation that needs to be adopted before the MCC is implemented. These changes may concern the alignment of national legislation to the MCC. They can also be a consequence of unfinished procedural steps that are required to enable the new/changed legislation (i.e. get it into force).

The implementation process includes the definition of user requirements, alignment with the Commission’s IT strategy and technical development of the required IT systems. These IT systems can be such that they need to be developed on an EU level, a national level and/or on the level of economic operators.

With respect to operational issues, the focus should be with the practical requirements for the implementation process. Here, attention will be given to requirements for training, guidelines, budget and timing.

2.1.3 Practical overview (‘checklist’) of the conditions to be met for application of the MCC

Further to assessment of the collected data, an overview is presented of the minimum conditions that need to be fulfilled to achieve effective implementation of the MCC. These minimum requirements relate to the legal, technical and operational aspects of MCC application.

57 Business process modelling (BPM) is the activity of representing processes of an organisation so that a current process may be analysed and improved. BPM is typically performed by business analysts and managers who are seeking to improve process efficiency and quality. The process improvements identified by BPM may or may not require information technology involvement. However, when IT systems need to be developed, BPM provides a sound basis for determining the relevant technical specifications and requirements.

PE 475.094 29


2.2 Methodology The methodology for conducting the study consisted of three main phases:

definition of assessment framework (2.3);

collection of data (2.4–2.8); and

analysis of the data and information collected (2.9).

These three phases are illustrated in the figure below and are described in more detail in the following sections. At the bottom of the figure is indicated the chapter in which each phase is described.

1) Def ining the assessment f ramework

Phase 1 – Assessment Framework

Legal

Technical - IT

Practical implementation

Trans European IT systems

General

Phase 2 – Findings from data collection

3) Pilot for questionnaire validation – the Netherlands

Phase 3 – Assessment

Method: interviews, questionnaire, document study

2) Questionnaires per stakeholder group based on assessment f ramework

3) Data collection in all selected Member States – Belgium, the Netherlands, Germany, Italy, Austria, UK, Poland, France

Method: questionnaire, document study

1) Data collection in all selected Member States – Belgium, the Netherlands, Germany, Italy, Austria, UK, Poland, France

Method: questionnaire, document study

2) Data collection at EU level

Method: interviews, questionnaire, document study

Legal assessment

IT technical assessment

Minimum requirements

Operational assessment

Chapter 4Chapter 2

Stru

ctur

ere

port

Chapter 3

Figure 2: Approach to the study

2.3 Assessment framework The objective of the first phase was to define a clear, comprehensive assessment framework to serve as the foundation for the study, based on publicly available documentation and information and the issues listed by the European Parliament in the tender specifications.

The assessment framework structure also included establishing a typology of stakeholders to be involved in the study. The stakeholder categories were defined based on an analysis of their respective stakes in the customs process. The stakeholder categories cover EU authorities (EU Commission and the European Court of Auditors, OLAF), the national customs organisations of the selected Member States, a wide range of different organisations including business organisations (at an EU and national level), trade (MNCs and SMEs)58 and IT software solution providers.

58 The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises that employ fewer than 250 persons and have annual turnover not exceeding EUR 50 million and/or an annual balance sheet total not exceeding EUR 43 million. Within the SME category, a small enterprise is defined as one that employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million. Within the SME category, a microenterprise is defined as one that employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million (article 2 Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises, OJ L 124/36 of 20 May 2003).

30 PE 475.094


The figure below presents the assessment domains and stakeholder categories identified: Assessment domains Stakeholder categories

EU authorities

National business organisations

Multinational companies (MNCs)

Small and Medium-sized Enterprises (SMEs)

EU business organisations

National customs authoritiesLegal

Technical - IT

Practical implementation

Trans European IT Systems

General

Targeted questionnaires

IT solution providers

Figure 3: Assessment domains and stakeholder categories

Specific questions were formulated for each assessment domain, which were then allocated to the different stakeholder categories. This allowed targeted questionnaires to be created containing questions relevant to each group of s

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DIRECTORATE GENERAL FOR INTERNAL POLICIES · 2012. 3. 2. · Mr. Dirk Aerts Mr. Jos Verstraten Mr. Nico Bogaerts Mr. Michael Van de Velde RESPONSIBLE ADMINISTRATOR ... 4.6.5 Feasibility