Symposium on Trade Facilitation WTO Symposium on Trade Facilitation Practical Experience of Implementing Trade Facilitation Reforms (8-9 November 2011) Michael Lux, Head of Customs Procedures Unit TAXUD/A3 European Commission

BEST PRACTICES IN THE EU Based on The Convention on a Common Transit Procedure

Approx. 12+ million movements per year* Some data Geographical scope: - 30 countries (EU 27) Volume: Approx. 12+ million movements per year* Approx. 33+ thousand of movements in NCTS per business day* * Community transit + common transit

Crossing borders in transit- Best Practices

A main characteristic of the common transit procedure One single procedure from start to finish End Compare to the TIR Convention based on a series of standardized national transit procedures Start End

How does the procedure operate ? Let us take a closer look at: New Computerised Transit Procedure (NCTS) Guarantees Enquiry procedure and recovery Simplifications

MS 1 MS 2 MS 3 MS 4 MS 5 MS 6 MS 7 MS 8 MS 9 MS 10 MS 11 MS 12 A single Customs Union but national fiscal territories required internal facilitation : Community transit procedure MS 1 MS 2 MS 3 MS 4 MS 5 MS 6 MS 7 MS 8 MS 9 MS 10 MS 11 MS 12 Trade facilitation was therefore urgently needed and in 1969 the Community transit procedure was created to facilitate the movement of goods and customs formalities between and within its Member States and of course to allow for the movement of goods from third countries (called non-Community goods) from the Member State of entry to the Member State of destination. Where transit is normally regarded as a procedure to pass through a territory the Community transit procedure extended to movement within a territory. EU goods (free circulation) : Non-EU goods:

IS MS 1 MS 2 MS 3 Third country NO MS 5 CH (+ LI) MS 6 MS 7 MS 8 Extension of Community transit to neighbouring countries: common transit procedure (starting 1972) IS MS 1 MS 2 MS 3 Third country NO MS 5 CH (+ LI) MS 6 MS 7 MS 8 The extension of the Community transit procedure to non-EU countries started in 1972 with Switzerland and Austria (the latter now an EU-Member State). The bilateral transit agreements were replaced by the Convention on a common transit procedure in 1987. The Convention has a model function for other countries in the region who may in the future become Contracting Parties. EU goods (free circulation) : Non-EU goods:

IS MS 1 MS 2 MS 3 Third country NO MS 5 CH (+ LI) MS 6 MS 7 MS 8 EU Internal Market (1993) IS MS 1 MS 2 MS 3 Third country NO MS 5 CH (+ LI) MS 6 MS 7 MS 8 The completion of the EU internal market in 1993 was a very important step and one that eliminated the need to use the Community transit procedure for the movement of Community goods between EU Member States. These goods can now freely circulate within the EU and this because of the harmonisation of rules at EU level (while separate control systems were created for fiscal control). Non-Community goods remain of course subject to customs control and their movement within the EU can take place under the transit procedure, in particular when the MS of entry is not the place of destination in the EU. Transit allows then to pay both import duties and national taxes at the same time and in the same location. EU goods (free circulation) : Non-EU goods:

Geographical scope today Convention on a common transit procedure / SAD Convention applies between the EU, Iceland, Norway, Switzerland, Liechtenstein Community transit applies in the customs territory of the EU (27 MS) + Andorra & San Marino (Customs Unions) Note: in the territory of the EU the common transit convention follows the rules of Community transit Community and common transit are the most used.

Goals Facilitation of border crossing Trade facilitation Cost saving Efficient controls Balance between the economic interest of operators and the interest of customs (simplified procedures, modulation of guarantee, authorised consignor/consignee, etc.) Alignment of legislation, formalities and procedures Safety/Security declaration can be combined with transit

Accession to the Conventions A country must be invited by the EC/EFTA Joint Committee Formal accession procedure is described in Articles 15.5 and 15a of the Common Transit Convention (Articles 11.5 and 11a of the SAD Convention) Communication (COM(2001)289 of 31.5.2001) sets out the general conditions that must be met by the EU pre-accession countries Communication (COM(2010)668 of 18.11.2010) sets out a strategy to prepare certain neighbouring countries for accession to the Conventions and re-confirms the conditions for accession - Council support received (28.03.2011, 6800/2/11) - conclusions on a strategy to prepare certain neighbouring countries for accession

General conditions for accession Ability to implement the whole acquis: - adopt the legal provisions; - have the operational administrative structure in place; - a computerised transit system (NCTS); - connection to the CCN/CSI network linking all Contracting Parties (separate Convention), alternative ways of connection are under consideration (SPEED2)

Future accessions Croatia and Turkey are first in line to accede to the Conventions Formal process may start after positive evaluation missions and presentation of missions reports (November-December 2011) Council Decisions on the EU position concerning an invitation to Croatia and Turkey to accede to the conventions required (already prepared, to be discussed after the evaluation missions) Decision of the EC-EFTA Joint Committee (February 2012) Deposit of the accession instruments (April 2012) Extension of the Conventions (July 2012)

NCTS Principles and Benefits For Customs: ‘Real time’ exchange of information (declaration, advance arrival information, guarantee check, etc.) Customs authorities are linked electronically More effective customs control (risk analysis, guarantee, discharge) Statistics Safety/security data combined with transit Since 1 January 2009 this computerised system is also used for TIR movements in the customs territory of the Community. 15 15

NCTS Principles and Benefits -2 For business: Fast administrative process Faster release of guarantee More information available (e.g. movement status info) Faster discharge (less open movements and enquiries) Safety/security data combined with transit

NCTS System Architecture International domain 27 EU Member States NO IS CH & LI TAXUD Common Communications Network and Interface (CCN/CSI) AND SM We distinguish three so-called domains in NCTS in function of the parties involved. CCN/CSI exchanges on average 630 million messages per year (it is used for number of customs applications: quotas, tariff information, etc). National domain Customs offices External domain Traders

Guarantee Individual guarantee: Covers a single operation By cash deposit, by guarantor or by voucher (€ 7000) Covers the full amount of potential customs debt Comprehensive guarantee (simplification): Covers several operations Calculated as the potential debt of one week’s operations (reference amount) Guarantee level 100% of potential debt or reduced to 50% or 30% or guarantee waiver (depending on meeting specific criteria) Guarantee furnished by guarantor (third party established in a Contracting Party) Comprehensive guarantee covers a number of transit operations (reference amount covers the operations of at least one week). Reductions on the basis of criteria (to 50% sound finances, sufficient experience, to 30% sound finances, sufficient experience, close co-operation, waiver if also in command of transport operations).

Fast electronic procedure based on exchange of messages via NCTS Enquiry procedure Objective is to determine how the debt incurred, identify the debtor(s) and determine the authorities for recovering the debt Fast electronic procedure based on exchange of messages via NCTS Starts at the latest one week after the goods should have been presented at the office of destination Recovery of customs debt starts seven months from the date the goods should have been presented at destination (shorter period in case the operator provides no or insufficient information) In around 1,5-2% of operations the enquiry procedure will be started but the percentage of cases where duties and taxes have to be collected is lower than that.

Recovery procedure Customs debt covers import and export duties and other charges There can be more than one debtor (joint and several liability) If there is a guarantor he is liable for the debt incurred by the principal (holder of the procedure) Customs debt must be notified to guarantor within specific time-limits in order to maintain his liability Recovery is carried out in accordance with the country’s own regulations

Customs may authorise simplifications to operators meeting general and specific conditions - Use of comprehensive guarantee/waiver - Status of authorised consignor/consignee - Use of seals of a special model Exemption of prescribed itinerary - Simplified transit procedures (rail, air, sea, pipeline) - National/bilateral/multilateral simplifications

Example: Authorised consignor/consignee Authorisation stipulates how and when to inform customs / measures of identification / categories of goods Authorised consignor: Places goods under transit from authorised premises without presentation to customs Must hold a comprehensive guarantee / guarantee waiver Electronic communication with supervising customs office Authorised consignee: Receives goods placed under transit at authorised premises without presentation to customs

TIR Convention Objectives: allow the movement of goods between and through different customs territories (68 Contracting Parties) under customs seals under relief from import duties and taxes and without application of economic commercial policy measures Provide an international system replacing national procedures (including documentations, guarantee) but providing the same guarantees for the national revenue

Weakness of the current paper TIR system Paper format Formalities for holders at every border crossing No risk management prior to physical presentation of goods Movements in the EU monitored on the basis of information exchange on paper Prolonged time limits for enquiry Fraud fighting mainly at national level No automatic guarantee checks Statistics collected and available only from Contracting Parties

Computerization of the TIR procedure The eTIR project Discussed since 1997 by the Contracting Parties to the TIR Convention Aims to progressively computerise the TIR procedure between all Contracting Parties NCTS/TIR Computerization of the TIR procedure within the European Union- as of 1st January 2009

What we want to avoid

Transit should be trouble free IDEAL SITUATION

Follow EU transit operations on line Transit map http://ec.europa.eu/taxation_customs/dds2/tra/transit_emap.jsp?Lang=en

Thank you Website: http://ec.europa.eu/taxation_customs/customs/procedural_aspects/transit/common_community/index_en.htm - Legislation - Transit Manual - Brochure Name: Michael LUX Telephone: +32-2-29 54 257 E-mail: Michael.Lux@ec.europa.eu