Customs procedures

Definition | Intra-community exchanges | Agreements with third countries | Exchanges with countries outside the EU | Customs procedures | Going through customs | Placing the merchandise in customs warehouse | Customs declaration | Determining customs duties | Customs clearance procedures | Customs procedures system plans

Customs play an essential role in all international trade operations. As a fact, its goal is to control the regulations of foreign trade. In Europe, the signing of the Single European Market Act in 1993, suppressed all customs controls within the borders of the community. Today, customs regulations, in imports as well as in exports (except in some exceptional cases), apply only to trade exchange with third countries (outside the European Union). The customs barrier outside the EEC will be intensified due to the competitiveness of the European market. In order to benefit from the facilities offered and to develop their presence in an international scale, companies must be interested in mastering customs regulations and acquiring a good knowledge of customs services and customs clearance procedures.

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Intra-community exchanges
The single European Market Act established a free circulation of persons, merchandises, capitals and services among the member states.

Companies that ship goods to other companies located in another member state do not have to establish a shipping declaration and their shipments are exempt from VAT (value added tax). In the same way, companies that receive goods coming from another member state, do not have to perform a receiving declaration anymore and do not pay VAT charges until the moment the goods enter into their country. The VAT is paid to the General Tax Authorities, in the same conditions as the domestic VAT.

The intra-community exchanges imply the concept of delivery/acquisition. As a matter of fact, the delivery replaces the export and the acquisition the import. The VAT is due at the destination country. There is no customs formalities, the merchandises can freely circulate with the exoneration of customs duties. However, this free circulation presents certain limits. Some products do not circulate freely within the European Union territory. Food products, for example, are subject to national regulations in conformance with public health protection or consumption bans. These regulations are not totally harmonized. Other products are also subject to technical standards and regulations. As a fact, the free circulation has improved due to the creation of the brand CE which certifies conformity with the European Directive. However, some states can be against the introduction of certain products in their territory which could be declared to be an infraction to their national regulations.

At last, a certain number of products are still subject to specific regulations and customs controls in the intra-community exchanges, such as those that are subject to phytosanitary controls, medicines, arms, artworks.

Within the framework of the European Union, the customs offices recognize certain countries with which they have privileged relationships. In the framework of the associated countries, customs duties for certain products are withdrawn or reduced (see the Preferential Treaties Chart).

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Agreements with countries outside the EU (third countries)
The European Union has signed customs cooperation treaties and mutual administration assistance in the domain of customs with Canada, Korea, the United States, Hong Kong, India, China and Japan in order to promote global trade and to assist the international fight against customs fraud.

The European Union has also concluded partnership and cooperation agreements with many Western European countries, the Southern Caucasus and Central Asian countries. Russia and Ukraine; these treaties deal with customs cooperation and they include a protocol concerning mutual administrative assistance.

Consult the website of the European Commission to obtain more information about the international agreements of customs cooperation and mutual administrative assistance in the domain of customs signed by the European Union.

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Exchanges with countries outside the EU
Within the framework of the « SAFE » standards recommended by The World Customs Organisation (WCO), the European Union has implemented a new control system for imports, the «Import Control System» (ICS), which aims to insure the safety of the flows of merchandises from the moment when they enter into the customs territory of the European Union. This control system, which is registered in the community program eCUSTOMS has been enforced since January 1st, 2011. Starting this date, it is mandatory for the operators to submit an “Entry Summary Declaration (ENS) to the customs office of the country of entry, before the actual introduction of the merchandises into the customs territory of the European Union.

Consult our procedures file The Import Control System ICS for more information.

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Customs procedures
Customs procedures consist of presenting the merchandises at the customs office and allotting customs duties. The customs administration only allows certain persons to perform the customs clearance, these can be:
  • The merchandise holder;
  • The professional declarant: the authorized customs agent who is in charge of fulfilling the customs clearance formalities for his client. The forwarding agents can often act as customs agents;
  • Other declarants who have been entitled with an authorisation to perform the customs clearance.

«The status of Authorized Economic Operator (opérateur économique agréé (OEA): this status allows the advantage of facilitating the formalities of customs controls. It is recognized in all the customs territories of the communities and it can be granted by any of the state members to any operator established in the European Union and who meets certain criteria (financial solvency, law respect, efficiency in managing systems…) Consult the website of the European Commission to obtain more information about the status of an Authorized Economic Operator

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Going through customs
When importing, regardless of the means of transport, a summary declaration of the merchandises must be presented (the manifest of air or sea transportation, the routing sheet, the section of the carnet TIR for road transportation), the unloading (placing the merchandise in storage) and placing the goods under customs procedures.

When exporting, the declaration of the merchandises must be registered at the arrival of these at the assigned place or at the customs service office. The customs handling procedures is performed by registering the export declaration in its detailed or simplified form.

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Placing the merchandise in customs warehouse
After the goods have been presented to customs, the merchandises are either cleared or they will be forwarded to a storage customs clearance area. For this procedure, there are two different types of merchandises:

The merchandise on hold
  • When importing: the operators are required to assign, within one day, a customs regime to the merchandises that have arrived at customs. Considering that this time limit is so short, there are storage and temporary customs clearance areas where the merchandise can be stored temporarily. (Magasins et Aires de Dédouanement Temporaires - MADT).
  • When exporting: in complement to the MADT, there are storage and export areas (Magasins et Aires d'Exportations -MAE).

Pending Merchandise:
There are warehouses that concern merchandise under special inspection. These warehouses are public and they generate inherent fees on the merchandise. The maximum storing time is 4 months and the owner is responsible for the risks and hazards of its manipulation.

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Customs declaration
Even if customs formalities have been waived at the community country borders. The Unique Administrative Document (DAU) is kept as a mean of support for customs declarations with third countries.

To perform this declaration, the companies must imperatively:
Customs Declaration
Know the customs tariffs for their merchandises Customs nomenclature  
Acommplish certain fomalities Have a license for exporting or importing merchandise
Import or Export Declaration
Administrative document concerning the circulation of the products allowance
The Single Administrative Document (SAD or DAU) is presented as a stack of 8 sheets provided by the Chamber of Commerce or the Customs Office. It can be split up depending on the formality functions that the operators wish to accomplish.

Example: for a single export, only the sheets 1, 2 and 3 are required. Other documents will be presented at the time of clearing customs, such as:
  • the commercial invoice
  • the transport and transit tickets
  • the certificates of circulation and origin (to be examined by the customs service)
  • the certificates of circulation: EUR1, EUR2, ATR1
  • The document T2L (sheet # 4 of SAD or DAU for the DOM-TOM)

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Determining customs duties
Customs duties are determined depending on the customs value. The elements needed to determine their taxation are: the value, tariff classification and origin.

Customs Value
Most of imports are taxed at "ad valorem", which means that the tax is calculated on a standard base reference which is the transactional value of the merchandise at its first port of entry into the European Union. The importer must also learn about price limits or tariff suspensions or the eventual qualification for tariff quotas.

Tariff Classification
The imported or exported merchandises are classified according to their international nomenclature of the “harmonized commodity description and coding system” (code of 12 digit numbers + 1 letter). This is going to establish the duty fees, the VAT taxes and any other additional taxes, the quota application, the standards and sanitary controls. The classification of a product can sometimes be very complex since it is important to know the exact composition of the product. In case of any doubts, the company can request a Binding Tariff Information (BTI) application form from the customs office.

The Origin
It refers to the country from which the merchandise is considered to have originated, it is not to be confused with the country where it is coming from. The country of origin is the country where the merchandise was manufactured. If the manufacturing of the merchandise involves several countries, the certificate of origin should be from the country where the merchandise had its last transformation performed.

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Customs procedures system plans
The goods that circulate or stay at one place, are subject to the application of different customs system plans. These customs plans will allow determining the itinerary of the merchandise and the customs duties that will be applied. Some merchandises will be liable to customs duties, others are on suspension. There is a total of 16 different customs procedures plans.

The general plan

• The introduction plan. It consists of exporting or importing merchandises with the intention of leaving them in a foreign country. In this framework, customs duties are waived; the payment of VAT is done at the importing country. If the importer is not a country member of the community, customs duties and VAT must be paid, unless the country in question has signed an agreement of preferential rates.

• Release into free circulation. This plan allows merchandise that has been imported directly from a third country to circulate as community merchandise after having been cleared from customs at any place within the territory of the community. There is a payment of the customs duties and VAT between the countries of the European Union and the third countries. Payment of VAT in the case of community transit (cf. transit regime systems).

• Release for consumption. The purpose of this plan is the free movement of the imported merchandise in the national territory.

Customs procedures with economic impact

• Customs warehousing. This plan allows the storing of foreign merchandises after having been imported from a third country. It allows to stock the merchandise and to sell it progressively. There is a suspension of customs duties and VAT until it leaves the warehouse.

• Storage before exporting. This plan allows to stock, under customs control, the merchandises meant to be exported. The storage takes place in the national territory. Exempt from VAT. Maximum length of storage time is 2 years.

• Temporary economic plan:

- The returned-goods system. This plan allows to re-import the merchandises previously exported, which need to be returned due to an unforeseen incident (defective material), or a cancellation of a contract. In this case a partial or total suspension of customs duties and VAT can be applied. The calculation of customs duties is based on Prorata Temporis (based on the amount of months used).

- The commercial samples system. This is the plan that facilitates the temporary import and export of merchandises meant to be utilized in the state (ex: international fairs).
This temporary admission needs an ATA carnet (Customs document used for temporary admission and transit of goods).
The ATA convention regroups about a hundred member countries. The length of time is limited to 3 years. Exempt from customs duties.

• The customs system plan for the transformation of merchandises:

- The inward processing system in suspension. This plan consists of importing raw materials from a third country, to be transformed. On this plan, the goods or finished products are to be re-exported outside the community. They are exempt from customs duties and VAT.

- The inward processing draw-back system. In this plan, the detached items which form part of the whole composition of a product are imported from a third country and they are assembled together in one of the community countries. The manufactured products are sold within the community territory and outside the EEC. This plan implies free movement and consumption, simultaneously, of the merchandise that remains in the community. The final products that remain in the community will not be exempt from customs duties nor VAT. However, the products that are exported outside the community, will receive an accorded reimbursement of customs duties for the detached items previously imported.

- Outward processing. This plan allows manufacturing outside the community the transformation or the repair of the temporary exported goods but with the purpose of being re-imported into the community. This plan benefits a differential tax system which consists of a reduction in customs duties for the finished products and the amount of customs duties on raw materials. The import of these products is exempt from partial or total custom duties (the principle of the differential tax).

- The standard trade plan. This plan is used in the case of repairs or a standard exchange of defective merchandise. Exempt from partial or total customs duties and VAT. The replacing merchandise benefits of a differential tax regime.

• The transit system:

- National transit. This plan consists of importing goods from a third country. These goods circulate in transit within the territory until they reach the company of their final destination. Suspension of customs duties and VAT for the merchandises while circulating through the national territory. This plan is suitable for all means of transport.

- Community transit. The purpose of this plan is to regulate the operations in the hub of the community. The community transit allows importing merchandises form a third country and these can circulate in transit within the community.
Suspension of customs duties and VAT. This plan is suitable for all means of transport.

- Common transport. It has the same principle as the Community transit but it involves all the member countries of European Union and the countries of the EFTA (European Free Trade Association).

- International transit. This plan concerns all the operations that take place between at least two countries. The international transit began with the rail transport, then the air transport and finally the road transport. For the road transport, the international convention requires the use of a single document to accompany the merchandise: the TIR carnet (International Road Transport -Transport International Routier). The truck must carry a TIR plate. Suspension of customs duties and VAT.

- Rhine waterways. The plan of the Rhine waterways transit concerns the transport through the Rhine River. A document called "Rhine Manifest" must be used. Suspension of customs duties and VAT.

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The RBC Global Connect team offers a free guide to find the customs nomenclature code for any given product.

Find the customs duties and local taxes that apply to your product in our service Customs duties and local taxes.

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