Brussels, 31 March 2022
Taking the EU Customs Union to the next level: innovative ideas for a modern and efficient Customs Union presented by Wise Persons Group
The Wise Persons Group on Challenges Facing the Customs Union (WPG) has today presented a report that will feed into a wide, inter-institutional debate on the future of the EU Customs Union. The WPG was appointed by Commissioner Paolo Gentiloni in September last year to propose innovative solutions for the most pressing issues faced by the Customs Union.
The report concludes that the Customs Union needs to be better prepared to address forthcoming challenges, such as growing trade volumes and new trade models, technological developments, the green transition, the evolving geopolitical context and security risks.
The WPG proposed 10 sets of measures to be implemented by 2030:
- A package of reforms, relating to processes, responsibilities, liabilities, and governance of the Customs Union.
- A new approach to data aiming to diminish reliance on customs declarations, obtain better quality data from commercial sources, and provide businesses with a single data entry point for customs formalities.
- A comprehensive framework for cooperation, enabling better data sharing across the Customs Union, with the involvement of market surveillance authorities, law enforcement bodies and tax authorities.
- Setting up a European Customs Agency to complement the role of the Commission and support the work of Member States.
- Reforming and expanding the Authorised Economic Operator scheme.
- A new framework of responsibility and trust, in which businesses would seek Authorised Economic Operators status to gain commercial access to the EU market. Small non-commercial consignments would continue to be sent through the usual processes, but without priority and subject to a level of control that reflects their “non-trusted” status.
- No more customs duty exemption threshold of €150 for e-commerce, together with simplified rates for low value shipments.
- A package of measures to green EU customs, digitalise procedures, ensure that prohibitions and restrictions related to sustainability are properly implemented on imported products, as well as possibly reform the World Customs Organization Harmonized System Nomenclature to allow for the proper classification of environmentally friendly products that the EU wants to promote in international trade.
- Properly resourcing, upskilling and equipping customs administrations, to ensure their full capacity to fulfil their missions.
- An annual estimate of the Customs Revenue Gap to better manage customs revenue collection.
Paolo Gentiloni, Commissioner for Economy, said:
“First the pandemic and now the invasion of Ukraine have highlighted the essential role played by EU customs in crisis management. Today, customs authorities are facilitating the provision of humanitarian support and ensuring that the sanctions imposed on Russia are properly implemented. Efficient customs clearance and controls are vital to protecting EU citizens and businesses, while at the same time enabling legitimate trade, which is crucial to growth and jobs. These proposals will be of great support in making our Customs Union ready for the challenges of the future.”
Arancha González Laya, Chair of the Wise Persons’ Group said:
“This report calls for an urgent structural change of the way European customs are organised and equipped. A strong Customs Union with a protective “one external border” is essential to Europe’s strategic autonomy, to its trade might and to its security and defence ambitions. Standing still would effectively mean less protection to European citizens, less competitiveness for European businesses and less security for the EU.”
The WPG’s report also identified the lack of a common list of prohibitions and restrictions legislation as a serious problem, as it leads to divergent approaches and practices across Member States. To address this issue, the Commission has today published a compilation of the existing prohibitions and restrictions at EU level. This should serve as a practical instrument for the EU institutions and national authorities, as well as other interested stakeholders.
Next steps
The recommendations of the WPG will now be discussed with the European Parliament and Member States. As announced in the 2020 Customs Action Plan, the Commission will set up a ‘Reflection Group’, involving Member States, to debate and operationalise the recommendations. Based on this input, and on broader consultations with stakeholders, the Commission will table a customs reform package by the end of the year.
Background
The Customs Union is a cornerstone of the Single Market. It keeps EU borders safe, protects our citizens from prohibited and dangerous goods such as weapons, drugs, dangerous toys and environmentally-harmful products, and facilitates business with the rest of the world.
The EU accounts for 15% of the world trade. In 2020, the value of the EU trade with other countries amounted to €3.7 trillion. To manage this volume of international trade in 2020, more than 2,000 EU customs offices, working 24 hours a day and 365 days a year, handled the import, export or transit of over 1,069 million articles. The amount of customs duties collected in 2020 reached €24.8 billion.
The WPG is an independent, high-level group, comprised of members from politics, industry, trade and academia. It prepared the report in full independence, having spent several months examining customs from all angles and consulting with stakeholders at EU, national and international level. The full list of members is available online.
For more information
Wise Persons Group (the webpage includes the report presented today)
Foresight report ”The Future of Customs in the EU 2040”
Questions and Answers on the Wise Persons Group report
What is “the Wise Persons Group on Challenges Facing the Customs Union”?
TheWise Persons Group(WPG) is an independent high-level group, comprised of members from politics, industry, trade and academia. It is headed by the former Minister of Foreign Affairs, European Union and Cooperation of Spain, Arancha González Laya. Thefull list of membersis available online.
The European Commission invited this group to reflect on the challenges facing customs today, examine current rules, procedures and governance and consider how these could be improved. Their recommendations will feed into the customs reform package, which the Commission will present by the end of this year.
The WPG prepared its report in full independence, based on terms of references agreed with Member States’ customs administrations, focusing on four priority areas: (1) E-commerce, (2) Risk management, (3) Effective management of customs’ increasing range of non-financial tasks, (4) Future governance structure.
What challenges is the EU Customs Union facing today?
The WPG concluded that the EU Customs Union needs urgent structural change. In its report, the WPG identifies three root issues: (1) major developments in trade and technology, (2) changing expectations in customs in promoting the European Way of Life, (3) lack of unity in applying customs-related rules and procedures.
The last decade has witnessed major changes in trade and technology. The volume of trade has significantly increased, and the nature of trade has changed with the rapid expansion of e-commerce, in the form of millions of small packages to be processed at the EU’s borders.
Moreover, the role of customs has evolved from simple revenue collection to ensuring that the values EU citizens care about – such as sustainability, safety, human rights, health and security concerns – are upheld in all customs transactions. This role will be greatly expanded as new environmental and social legislation comes into force, such as a ban on products made by child and forced labour.
This situation is also compounded by the lack of uniform implementation of customs measures, different control practices across border entry points, both within and across Member States, differences in control priorities and differences in sanctions for non-compliance. The poor availability and quality of the data submitted to customs and the insufficient level of data-sharing across customs and with other administrations makes it extremely difficult to properly manage financial and non-financial risks at both national and EU level. Moreover, investments in customs capacity are seen as not proportionate to the increasing requirements placed on national authorities.
What has the European Union done so far?
The European Commission launched a Customs Action Plan in 2020 setting out a series of measures to make EU customs smarter, more innovative and more efficient.
Many of the actions have already been implemented, including a new financial instrument to provide Member States with state-of-the-art customs control equipment to carry out better and more effective controls. Moreover, the Customs ‘Single Window’ will allow legitimate businesses to complete border formalities in one single portal, saving them both time and money.
In addition, Member States are currently engaged in an IT transition following the 2019 amendment of the Union Customs Code, which will be concluded by 2025.
However, although these reforms have led to positive improvements, they are not sufficient to ensure that customs are ready to take on the challenges of the 21stcentury, and adapt to the many and increasing roles they must now fulfil.
What did the WPG suggest?
The WPG believes that the EU Customs Union needs urgent structural change. Their recommendations aim to ensure that the Customs Union is fit for a more geopolitical world in which revenue is secured, trade is made easy, fair, sustainable and safe, and citizens are protected against security risks.
The WPG is therefore advocating the need for:
- Apackage of reform proposals, relating to processes, responsibilities, liabilities, and governance of European Customs.
- Anew approach to datathat diminishes reliance on customs declarations, focusses on obtaining better quality data from commercial sources, and provides businesses with a single data entry point for customs formalities.
- A comprehensive framework for cooperation, including data sharing between European Customs, but also with market surveillance authorities, law enforcement bodies and tax authorities, for a comprehensive management of risks at EU level.
- Setting up aEuropean Customs Agencyto complement the role of the Commission and support the work of Member States.
- Reforming and expanding the Authorised Economic Operator scheme.
- Anew framework of responsibility and trust, in which businesses would seek Authorised Economic Operators status to gain commercial access to the EU market. Small non-commercial consignments would continue to be sent through the usual processes, but without priority and subject to a level of controls that reflects their “non-trusted” status.
- No more customs duty exemption threshold of€150for e-commerce, together with simplified rates for low value shipments.
- A package of measures to green EU Customs, todigitalise procedures, ensure that prohibitions and restrictions related to sustainability are properly implemented on imported products, as well as possibly reform the WCO Harmonized System Nomenclature to allow for the proper classification of environmentally friendly products that the EU wants to promote in international trade.
- Properly resourcing, upskilling and equipping customs,to ensure their full capacity to fulfil their missions.
- Anannual estimate of the Customs Revenue Gapto better manage customs revenue collection.
Does the Commission have to follow the recommendations of the Wise Persons Group?
No, the group has a consultative status. It has prepared its report in full independence and the report does not commit the EU institutions to a particular course of action.However, given the in-depth examination they did and the level of expertise of the WPG, the recommendations and insights in today’s report will provide valuable input into the Commission’s preparatory work for the reform package it intends to present by the end of the year.
When will the Commission propose the reform of the EU Customs Union, and what will it encompass?
The Commission aims to propose a comprehensive reform of the working and governance of the EU Customs Union before the end of the year.
Building on the Union Customs Code evaluation and the WPG recommendations, as well as the European Court of Auditors report on customs controls, this customs reform package will not only revise EU customs legislation but also the governance of the Customs Union.
The reform package, which should be implemented by 2030, will envision new, more modern customs rules to ensure the security and integrity of the Single Market, reduce opportunities for fraud, and facilitate legitimate trade. It will also increase synergies within customs, and with other authorities, for better border controls and trade facilitation so that EU Customs act as one.
The proposal will also assess whether a new EU customs structure, with appropriate powers and supported under the next multiannual financial framework (MFF), could allow a better and more coordinated operational response to the challenges facing the Customs Union.
Wise Persons Group on Challenges Facing the Customs Union (WPG)
The primary role of the Group will be to reflect on the development of innovative ideas and concepts and deliver a report that contributes to a general inter-institutional debate on the future of the Customs Union.
The deadline for sharing your views was until 31 January 2022. Thank you all for your contribution.
The EU is the largest trading block in the world, followed by the United States and China, and accounts for over 15% of the world trade. Imports from third countries into the EU reached over EUR 2 trillion in 2019, rising from about EUR 1 trillion in 2004 and EUR 1.5 trillion in 2008. In recent years, a large proportion of these imports comes from e-commerce. In 2019, more than 2 000 EU customs offices, working 24 hours a day and 365 days a year to manage this volume of international trade, handled the import, export or transit of over 868 million items. The departure of the United Kingdom from the EU Customs Union has further increased the workload of EU customs authorities, leading to a significant rise in customs declarations to be processed.
Still, during the COVID-19 pandemic, customs acted swiftly and played a critical role in speeding up the delivery of urgent and vital goods and controlling dangerous goods at any point of the EU external border. They prioritised the delivery of personal protective equipment, medical devices and medicines and the supply of urgent food supplies and livestock when shortage in several EU countries were reported. EU customs also jointed efforts to control export of COVID vaccines.
Despite its successes, our Customs Union is facing multiple growing challenges that call for its modernisation to accelerate the twin green and digital transition. The explosion of e-commerce presents customs with an inflow of small consignments with new financial, counterfeit, compliance, safety and security risks. The EU Green Deal means additional stringent environmental legislations and harmonised and strengthened standards. The mission of customs is expanding and brings Member States control capacities to its limits. On the other hand, there is an increasing demand for greater facilitation and acceleration of legitimate trade to be accommodated without neglecting the protection against financial and non-financial risks of EU citizens as well as against the unfair level playing field between EU companies and their international competitors.
In order to stimulate “thinking outside the box” in the EU debate on the future of the Customs Union, the Commission calls on external expertise and establishes a “Wise Persons Group on Challenges Facing the Customs Union” (WPG).The primary role of the Group will be to reflect on the development of innovative ideas and concepts and deliver a report that contributes to a general inter-institutional debate on the future of the Customs Union. The report should identify ideas forcustoms reforms that would benefit the EU Member States, the EU as whole and society at large. The Group will prepare its report in full independence.
WPG Tasks
The Wise Persons Group has been invited to reflect on the following key topics:
- E-commerce
- Risk management
- Effective management of customs’ increasing range of non-financial tasks
- Future governance structure
The Wise Persons Group might also, in the course of its discussions, identify other challenges that the Customs Union could face in the future. When identifying solutions to deal with these issues, it should be noted that the EU is not alone and that many trading nations around the world are confronted with similar challenges.
Working Methods and Reporting of the WPG
The Group will keep the Member States and the Commission regularly informed about the progress of its work. The information provided to Member States and the Commission should focus in particular on e-commerce and risk management given the urgent need for solutions in these two areas.
The Group may conduct hearings with public and private sector experts.
The Group will be informed about, and should take into account, the work already being carried out by existing project groups and subgroups, and studies such as the outcome of a foresight exercise on “The Future of Customs in the EU 2040” launched by the Commission in 2018.
The Group will finalise a report by Spring 2022 that will be presented to Commissioner Gentiloni in charge of the Customs Union, to the Council, to the European Parliament, to the Customs Policy Group and to the Reflection Group once established.
Membership
The group is composed of 12 members. Members are appointed in a personal capacity, thus acting independently and in the public interest. The Director Generals of Customs have been invited to propose names of independent persons for the Wise Persons Group to the TAXUD Director General. The participants in the Wise Persons Group were selected with a view to ensuring where possible an adequate geographic, gender and professional balance. The Members of the Group have experience in either the public or the private sector, and in customs matters, e-commerce, risk management, the international supply chain, IT systems and data analytics internal market legislation and international trade law. Members are appointed for a period of nine months.
Final Report
On 31 March, the Wise Persons Group published theirlandmark reporton how to bring the EU Customs to the next level.
Their conclusion is that EU Customs need an urgent structural change which, building on the reforms of the last decade, take European customs to the next level and prepare them to address modern challenges, such as new trade models and growing trade volumes, technological developments, the green transition, the new geopolitical context and security risks.
The Group recognises important changes to customs legislation and IT in recent years and commends the reform plans set out in the Customs Action Plan adopted by the College in September 2020. However, it advocates for more fundamental and wide-ranging reforms, expressed in 10 recommendations to be implemented by 2030. These include revised and simpler customs legislation, a new framework of responsibility and trust, streamlined procedures and reduced administrative burden, a new approach to data, a more effective governance. Particular emphasis was put on the need for a paradigm shift, to ensure that EU Customs contributes to Europe’s security and defence and act as a Union-wide system, rather than the sum of Member States’ individual efforts. Customs are essential in managing crises at the European borders and protecting citizens, businesses and revenues.
The Wise Persons Group recommendations focus on five main areas which, taken together, would provide for a modern and resilient Custom Union:
- A strong Customs Union with a protective “oneexternal border” is essential to the solidity of the EU’s trade might and single market and thus to Europe’s strategic autonomy and to Europe’s security.
- EU Customs that play their role inpromoting the EU way of life, by making surethat sustainability, safety, human rights, health, and security concerns are upheld in all customs transactions with better cooperation between customs, market surveillance authorities and law enforcement bodies.
- EU Customs that strengthens their capacityto ensure proper collection of customs duties and taxes at the borderto contribute to much needed public spending capacities.An annual estimate of the Customs Revenue Gap should be introduced.
- Greening of customsso that they play their role in the green transition, starting by making its own operations more sustainable, EU Customs should also make green customs a priority at global level in the World Customs organisation.
- EU Customs must have anew approach toresponsibilityandtrustwith simpler procedures for economic operators in exchange for the assumption of greater responsibilities on their side, including for e-commerce platforms; it should be centred on a new vision for data gathering, sharing and use for EU-risk management; and with a reformed authorised economic operator scheme to better facilitate trade with trust.
You can read the full report: Report by the Wise Persons Group on the Reform of the EU Customs Union – Brussels March 2022 – Download
Members of Customs Wise Persons Group
Chair: Mrs. Arancha González Laya, former Minister of Foreign Affairs, European Union and Cooperation of Spain.
Vice chair: Mrs Mateja Vraničar Erman, Adviser to the Slovenian Minister of Foreign Affairs and former Minister of Finance of Slovenia.
Member: Mr Emmanuel Barbe, Préfet at French Ministry of the Interior and former Deputy Secretary General for European Affairs at the French Prime Minister´s office.
Member: Mrs Manon van Beek, CEO of TenneT.
Member: Mr Kevin Cardiff, non-executive Director at KBC Bank Ireland, former Member of the European Court of Auditors and former Secretary General of the Finance Department of Ireland.
Member: Mr Martti Hetemäki, Professor at the Helsinki Graduate School of Economics and former Secretary of State at Ministry of Finance of Finland.
Member: Mrs Vendulka Holá, former Deputy Director General of the Czech Customs.
Member: Mrs Katarina Kaszasová, Managing Director of the Auditing Oversight Authority of Slovakia and former Director General at the Slovak Ministry of Finance.
Member: Mrs Gerda Koszinowski, Head of Directorate at the German Central Customs Authority.
Member: Mr Kris Peeters, Vice-President of the European Investment Bank (EIB) and former Deputy Prime Minister of Belgium.
Member: Mr Sérgio Vasques, Professor at Universidade de Lisboa and former Secretary of State for Tax Affairs in Portugal.
Member: Mr Vincenzo Alfonso Visco, President of Nuova Economia Nuova Società (NENS) and former Minister of Finance of Italy.
2ndmeeting of the Wise Persons Group 7-8 October 2021
3rdmeeting of the Wise Persons Group 10-11 November 2021
4thmeeting of the Wise Persons Group 16-17 December 2021
5thmeeting of the Wise Persons Group 20-21 January 2022
6thmeeting of the Wise Persons Group 17-18 February 2022
7thmeeting of the Wise Persons Group 10-11 March 2022
- Agenda
- Minute (tbc)
More information about the members of the Group
The members of the Group, as well as invited experts, are subject to the obligation of professional secrecy, which by virtue of the Treaties and the rules implementing them applies to all members of the institutions and their staff, as well as to the Commission’s rules on security regarding the protection of Union classified information, laid down in Commission Decisions (EU, Euratom) 2015/443*]and 2015/444**.
*Commission Decision (EU, Euratom) 2015/443 of 13 March 2015 on Security in the Commission (OJ L 72, 17.3.2015, p. 41).
**Commission Decision (EU, Euratom) 2015/444 of 13 March 2015 on the security rules for protecting EU classified information (OJ L 72, 17.3.2015, p. 53).