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[EU Clearance and Tariff System and Etc.]
To the trade area, EU is differentiated from the trade system of other countries for this union is the single economic region of various nations. Therefore, hereafter described is mainly upon the characteristics and clearance procedures of EU.
(Characteristics of EU to the trading / EU Import clearance / EU Export clearance / Transit (Clearance, transshipment) procedure / EU Product classification system / EU Tariff, internal tax and others to import and/or export / Taxation standard and tariff assessment)
Ⅰ. Characteristics of EU to the trading
The characteristics and principles of EU that are applied to the trading area are the followings:
☉ Single market
Goods are free to be transported within the EU territory is secured and, according to this principle, the border regulations, tariffs and all the trade obstacles are abolished. Unrestrained transportations of goods within the EU territory is realized through the harmonisation of regulations, principle of indiscrimination and the principle of mutual recognition.
☉ Harmonisation of Regulations
The Community Customs Code(CCC) is commonly applied to the 28 EU member states. The Community Customs Code(CCC) regulates and unifies factors such as the regulation on the place of origin, customs clearance, bonded area, tariff mortgage and collection. However, the investigation, punishment and others for any violation of this code is under the jurisdiction of each competent member state and, thereby, such is regulated by the domestic laws of each member state.
ㅇ The Community Customs Code(CCC) of EU
ㅇ The Customs Code’s Implementing Provisions(CCIP) of EU
※ Links upon the EU customs codes
☉ Principle of Indiscrimination
It is the principle that no member state handle any legally imported goods differently from similar domestic products. However, some allowed exemptions exist.
☉ Principle of Mutual Recognition
It is the principle that every product that is legally produced and/or sold under the legislations of a member state is allowed to be imported into other member state markets.
☉ Presence of Harmonized authority
EU is aimed to harmonize the trade related system and implementation by establishing the Directorate-General for Trade and the Directorate-General for Taxation and Customs Union that are in charge of managing general trade affairs and situated under the European Commission, which is set as the prime authority.
☉ Use of Single Documentation
EU member states are required to use Single Administrative Document(SAD) that is proposed by EU, to the areas of exportation, importation, transportation and etc.
However, if any document such as TIR carnet (International road duty-free pass certificate), ATA carnet (Temporary import clearance certificate) and 136F declaration(Diplomatic immunity), single administrative document is exceptionally not used.
☉ External and/or Internal Goods
Various procedures and regulations are depend on whether articles are the community goods(EU goods and/or offshore goods) under the EU trade system, therefore, such classification is mandatory.
The internal goods are the followings and the rest is external goods:
ㅇ Goods completely acquired and/or produced within the EU territory
ㅇ Goods imported in the EU territory and then passed the customs clearance to be freely distributed
ㅇ Goods obtained and/or produced within the EU territory due to the goods written above
※ The concept of external or internal goods is required to be known as another concept rather than that of the place of origin. For example, if any EU member state freely distributed goods made in the USA within the EU territory, such goods become the internal goods, but they are still made in the USA.
The EU criteria of determining the place of origin is regulated under the article 22 ~ 27 in the EU Community Customs Code(CCC), which is based on the standards of complete production and substantial transformation.
☉ Free Movements within the EU Territory
The transportations of goods between the EU member states, or goods finished the customs clearance within a specific EU member state to be imported from the foreign nations are no required of specific documentations to any EU member state and are guaranteed for the free movements with no restriction. However, additional procedures must be followed for some articles such as the products that were levied the excise duties, firearms and cultural properties.
Ⅱ. EU Customs Clearance Procedures
Every offshore goods imported in the EU customs areas must take one of the following procedures and then declare:
1. Import clearance for consumption
2. Clearance(Transshipment, transit)
3. Temporary importation
4. Bonded warehousing
5. Re-export process
6. Customs control process
Various taxes such as tariff are postponed for the rest procedures except the one for consumption.
Import clearance (for consumption) means the procedure that the competent customs authority that is given an import declaration must confirm it and then give an authorization once the import requirements are fulfilled, to convert the foreign articles into the EU commodities.
Hereafter described is mainly upon the import clearance procedures that are most frequently occurred.
■ EORI Number Issuance
ㅇ Economic Operator Registration and Identification(EORI) is the system implemented since July 2009, which is mandatory numbers for every person and entrepreneur to import in and/or from the EU territory with the member states.
ㅇ EORI Numbers are the serial numbers that are issued to an applicant by a EU member state and, once the numbers are given by the member state, it is commonly used within the entire EU member states with no additional issuance.
■ Entry Summary Declaration(ENS)
Import cargo carriers (normally, shipping lines) must submit an Entry Summary Declaration(Shipping invoice or manifest) to the competent customs office of the first port prior to the cargo arrival. In principle, the carrier is responsible for the filing of the ENS, however, the importer and/or consignee may declare in lieu of.
This system is similar to the 24-hour rule of the USA, and it is implemented for the purpose of selecting criminal cargos via the manifest preliminary inspection and fortifying the security measures and, if no submission, levies relevant penalties.
The content of an ENS covers the personal information such as the cargo(name, HS Code, container number and etc), carrier, consignor and etc., the Authorized Economic Operator(AEO) information and other sailing information.
The submission period of the ENS is may differ as the followings:
ㅇ Container of sea cargos(excluding short sea shipping) : 24 hours before the commencement of loading at the port of departure
ㅇ Bulk cargos(excluding short sea shipping) : 4 hours prior to the arrival at the first port within the EU territory
ㅇ Short-range sea cargos : 2 hours prior to the arrival at the first port within the EU territory
ㅇ Short-haul flights (within 4 hours) : Until the actual takeoff time
ㅇ Long-haul flights (over 4 hours) : 4 hours prior to the arrival at the first airport within the EU territory
ㅇ Railroads and canals : 2 hours prior to the arrival at the competent customs office within the EU territory
ㅇ Lands : 1 hour prior to the arrival at the competent customs office within the EU territory
■ Entry of Goods
Once goods are arrived at the port of entry, the following procedures shall be taken:
☉ Unloading and Examination of Goods
The unloading and/or transshipment of imported goods is principally required to take the approval from the customs office where can require the inspection, sample collection, packing release and others of the imported goods with its authority.
☉ Entry of Goods into The Customs Territory
When imported goods are arrived at a specific port within a EU member state, the member state should take the customs clearance at the port, or the goods can take the bonded transportations to the specific customs office within any other preferable member state for the clearance.
In either case, the imported goods must carried into the customs territory whereby the customs office principally designated and/or approved for the temporary storage. This storage period is for 45 days after the submission date of the ENS for sea cargos, and 20 days for the other cargos and, if the period is passed with no clearance, the importer must take the bonded transportation of the cargos to carry these into a private bonded warehouse, or take the procedures of return, destruction and others on the cargos.
If any need of carrying out, inspection, sample collection and others for the goods prior to the clearance within the customs territory, the special approval must be given by the competent customs office.
☉ Presentation of Goods to Customs
A carrier or agent, clearance agent, customs territory operator and others of imported goods must draw up an arrival declaration form on the entry of the goods within the customs territory and then submit it to the customs office.
However, goods such as mail, traveller's belonging and others with commercially less values may be omitted to the submission of the form.
■ Customs Declaration of Goods
ㅇ Targets are every non-community goods imported in the EU member states, and EU community goods are not required to declare in accordance with the principle of free movements.
ㅇ To an importer who belongs to the country A, an EU member state, to take the clearance procedures in the country B, also an EU member state, the clearance must be progressed via the VAT numbers that is belonged to the importer and/or the special VAT number that is belonged to the clearance agency. In addition, additional statements signed by the importer are required at this moment.
These statements must cover the contents, referring to: ① No branch nor subsidiary of the importer that has VAT numbers present in the country B; ② Acknowledged of the duty to report on VAT under the regulations of the country B; ③ CMR Note must be delivered to the distribution company or the clearance agency.
ㅇ Import declaration obligator means a carrier or agent (normally, a qualified clearance agent), and the means of declaration can be chosen either the online method via the customs clearance system or submission in writing.
The single administrative document(SAD) form is used for the import declaration at any customs office within the EU territory.
ㅇ Documents required for the import declaration have no difference from any other country, and the followings should be prepared:
Import declaration, declaration of value(only if a product value is over 10,000 EUR), B/L or AWB, commercial invoice, packing list, certification of origin if any preferential tariff and other various proof of documentations required for other imported goods.
ㅇ In case that the submitted import declaration fulfilled the relevant requirements, the customs office shall receive it with no delay. However, the inspection of imported goods and additional documents can be required if any insufficient fulfillment and/or any other necessary supervision.
■ Tax payment such as Tariff and Carrying Out of Goods
Tax obligors(shippers) must make the complete payment of taxes such as tariff, value added tax(VAT) and excise duty before the articles are released out of the relevant bonded areas, or provide the corresponding securities.
In case that importers transport articles into their homelands after finished the import clearance in other countries, relevant tariffs must be paid instantly in the country whereby the import clearance is made, and VAT shall be suspended until it is declared in their homelands.
The articles can be released with no delay once this procedure is completed.
■ Free movements
Goods completed the import clearance shall have the free movement within the EU member states with no restriction.
Ⅲ. EU Export Clearance
Export procedures mean to export the goods of a member state from the EU customs territory to foreign nations. The internal goods become the offshore goods after these procedures, and evry offshore goods must take the export clearance to be carried out from the EU customs territory.
ㅇ Export declarations must be submitted to the competent customs office that supervises the place where the commencement of loading for the packing and export shipping of goods shall be implemented by the shipper or clearance agent.
ㅇ Export declarations are applied to any EU member state as the same SAD form, and the goods in need of export requirements must prepare every relevant document.
ㅇ Export declaration must be preliminarily implemented prior to the departure of the EU customs territory and, if any departure from the customs territory with no export declaration, the retroactive reporting may be tolerated, but the relevant penalties would be followed.
ㅇ If goods completed the export clearance after the export declaration cannot leave the community customs territory, the exporter must notify the competent customs office of such.
Ⅳ. Transit (Clearance, Transshipment) Procedures
Transportations to the EU member states and EFTA member states(Iceland, Norway, Lichtenstein and Switzerland) can be implemented while every relevant tax is suspended to export and/or import, in the EU Clearance system, which is called as the transit.
ㅇ External transit means that external goods are transported from an EU member state to the member state of destination. In addition, that passing the external boundaries to be exported to foreign nations is also included. (T1 Transit procedures)
On the other hand, the term, internal transit, means that internal goods are transported into an EU member state again, via foreign nations. (T2 Transit procedures)
Thereby, in case of external goods transported between foreign nations and/or internal goods transported between EU member states, neither of them is included in the external or internal transit.
ㅇ External and/or internal transit does not mean the completely free movements, but is recognized as the legal transit once conformed with the following procedures and requirements:
- In case that external or internal transit procedures are implemented
- By the TIR carnet on the overland transportation convention
- By the ATA carnet on the convention on temporary importation
- By the article 9 in the convention on the navigation of the Rhein by the Rhine declaration
- By the form no.302 between the NATO member states
- By mails, including packages
ㅇ The procedures for external and/or internal transit is began once the declarant submit the transit declaration to the competent customs office at the place of departure, and the corresponding security of considerable amount must be provided to the said customs office. The said security would be canceled and the transit procedures shall be completed once the transit documents are submitted to the customs office at the place of destination.
ㅇ The valid period of the said transit documents is generally for 7 days, and the cargos must be arrived at the country of destination within the valid period so that to substitute the transit documents with the import clearance documents.
ㅇ However, the exception for not requiring of import clearance within this valid period is the case of bonded warehousing from one to another. At this point, the importer must be given the documents for bonded warehousing(IMAJ or In Bond Document), and the valid period is for a year from the date of issuance, but can be extended after the expiration date, considering it as infinite.
While the bonded warehousing, Any tax obligation such as tariff and VAT is suspended until the actual transit.
Ⅴ. EU Product Classification System
EU also uses, as same as the other nations, the HS(Harmonized System) code system regulated by the World Customs Organization(WCO), to the international trade areas.
■ Basics (1~6 digit code)
HS code of 1~6 digit code and product classification system is the same as the WCO and other countries. - In fact, it is used globally as common.
■ CN(Combined Nomenclature) Code
CN Code is made of 6 digit basic code with an additional 7~8 digit code(8 digit code in total). CN Code is the EU special product classification system that regulates the basic community tariff rate, and is also used for the purpose of trade statistics.
※ CN Code Guideline Web-Site
■ TARIC Code (Tariff Integrated Community) - EU Integrated Tariff Schedule
TARIC Code is made of CN code of 8 digit code with an additional 2 digit code(10 digit code in total, and an additional 4 digit code can be added to this again).
TARIC Code is the most detailed, and the EU special prouct classification table, which includes the classifications on every trade policy and tariff procedure(temporary tariff suspension, anti-dumping tariff and etc.) that apply to EU.
※ Code references
ㅇ 3501 : Casein, caseinates and other casein derivatives; casein glues
ㅇ 3501.10 : Casein (WCO Provision code - universally common)
ㅇ 3501.10.50 : For industrial uses....(EU - CN Code)
ㅇ 3501.10.50.10 : With a water content of...(EU - Taric Code)
※ TARIC Code Guideline Web-Site
■ Importance of HS Code and Product Classification and Etc.
ㅇ While exporting and/or importing in the EU territory, like the other countries, All the tariff rates, internal tax rates, various regulations, requirements and others may differ by categories in which the products are sorted. Thereby, the HS code classification to the international trades is the most important.
ㅇ EU implements the product classification called CN(Combined Nomenclature) and TARIC Codes, but such codes also exist within the framework of the HS code provided by the WCO. Therefore, The CN and TARIC codes may be called as the EU HS code as long as there is no additional notification.
ㅇ This system provided by IT-SilkRoad uses the TARIC code of 10 digit code to ensure the utilization on trade businesses.
■ Preliminary evaluation System for Product Classification
ㅇ Product classification may affect various aspects to the trade areas, thereby, the European Commission has the preliminary evaluation system for HS code that is commonly operated by the EU member states. (BTI : Binding Tariff Information)
ㅇ Qualifications for the product classification via BTI can be applied only by enterprises established within the EU member states. Enterprises situated within non-member states cannot apply on their own unless they are given the assistance by the ones within the member states. The language for filing of an application can be the language of each member state, and the evaluation period may differ by each case. (The period approximately takes about 1~3 months)
ㅇ The product classification determination of BTI is commonly applied to all the competent customs authorities of EU member states, and it is valid for 6 years from the date of determination.
※ Web-Sites for searching BTI Classification Cases
※ BTI Application and Other Guidelines Web-Site Links
Ⅵ. EU Tariff, Internal Tax and Others for Exporting and/or Importing
■ Export and Tariff (In case of exports from EU member states to foreign nations)
ㅇ Tariffs are not levied onto goods exported to foreign nations from EU member states.
ㅇ VAT also not levied, and the VAT shall be refunded when export to foreign nations.
ㅇ Other internal taxes such as excise duty also shall not be levied.
■ Import and Tariff (In case of imports from foreign nations to EU member states)
To the goods imported in EU member states from the third countries, relevant taxes shall be occurred from the three following areas:
ㅇ Fixed tariffs for each product shall be levied to the goods imported in EU member states. Every goods imported from foreign nations is applied the same tariff rate by every EU member state.
ㅇ Tariff rates are varied, referring to: Basic tax rate, conventional tariff, FTA tax rate, GSP tax rate, countervailing duty, retaliatory tariff, anti-dumping tariff, seasonal duty and etc.. In case that the possibility that various tax rates would be applied to specific goods imported from a specific country is low, the said various rates cannot be applied at once, but only one rate.
That determines a tariff rate of them is depend on the preparations of requirements such as exporting country, type of tariff rate and certification of origin. In general, the most advantageous tariff rate if there are various tariff rates to specific goods imported from a specific country.
2) Value Added Tax(VAT)
ㅇ VAT is may differ by each EU member state and, in fact, every VAT is different.(About 15%~25%)
ㅇ VAT applied within the EU member states is applied to the alienation of properties, provision of services, acquisition within the EU territory, imported goods and others. In case of imported goods, the tax rate at the country of destination is applied. For example, if any EU member state move the goods imported at a specific port within the state to another member state(country of destination) by using the bonded transportations, in principle, the tax rate of the country of destination whereby the bonded procedures terminated shall be applied.
ㅇ Any transaction on the provision of products and/or services by an entrepreneur who does not have a business place within an EU member state where is the place of taxation is applied the reverse charge system. Originally, it is the principle that VAT is paid, by a supplier of products and/or service, to the competent tax office of each member state with the VAT collected from the opposite party. However, this reverse charge system is the one that transfers the tax obligations from the supplier to the opposite party.
3) 소비세(EXCISE DUTY)
ㅇ EU generally levies excise duties to articles such as tobacco, alcohol-containing material and energy materials(oil, gas, electricity and etc.).
ㅇ The European Commission only regulates the minimum tax rate to the excise duties, and this may varied by each member state. Each paid tax is individually belong to the member state that levied.
■ Transactions between Member States(Territory)
ㅇ The transactions between the EU member states are not considered as importations, thereby, no tariff is levied to every articles.
ㅇ The transactions between the territories of EU member states also have the VAT at each transaction stage.
ㅇ The transactions between the territories of EU member states must pay the excise taxes if the articles subject to the excise duty rule are sold.
Ⅶ. Tax Assessment Standard and Customs valuation
■ Tax Assessment Standard
Tax assessment standard means the price and/or amount that becomes the foundation of calculating tax amounts. In principle, the cargo price or amount at the tax return becomes the tax assessment standard.
Ad valorem duty is the price as the tax assessment standard, specific duty for the amount as the tax assessment standard and ad valorem and specific duty(compound duty) for the both of price and amount as the tax assessment standard.
(Most of tariffs are ad valorem duties on the EU system, and the specific and/or compound duties are applied to products of small numbers such as coal, part of agricultural products, food product and movie film.)
Tariff amount = Tax assessment standard × Tariff rate
Tariff rate is mostly and separately proposed by product, and is depend on the country where the products are imported from.
■ Customs value - CIF value
To the ad valorem duty, the price as the tax as the tax assessment standard is the customs value, and the CIF value that includes international freights and cargo insurance premiums is proposed as the customs value.
■ Customs valuation
Customs valuation is the price of imported goods as the tax assessment standard, which means the procedures and methods to determine the customs value.(It especially becomes a problem to the ad valorem duty)
In case the customs valuation is different between member states, it is hard to seek for the harmonisation of international trade, therefore, the convention on new assessment is completely included under the WTO system and those who are not registered in this convention cannot join the member of the WTO. Thereby, the customs valuation system is internationally harmonized to every member state of the WTO.
(However, the determination on including the international freight and insurance premium is depend on the judgement of each member state. For the USA, upon the customs value for importing, it uses the FOB value that does not include these, and most of countries such as Japan, Korea, Taiwan, EU and others use the CIF value that includes freights and insurance premiums as their standard.)
The convention on WTO customs valuation regulates the six ways of customs valuation from the method 1 to 6, and these methods use the sequential application way, for example, the method 2 if the method 1 is not available, and the method 3 if the method 2 goes for the same reason, and so on.
ㅇ Method 1 : Customs value based on the market price of the goods in the year
ㅇ Method 2 : Customs price based on the market price of the goods of same model and type
ㅇ Method 3 : Customs price based on the market price of the similar goods
ㅇ Method 4 : Customs price based on the domestic sale price
ㅇ Method 5 : Customs price based on the estimated value of production cost and others in the year
ㅇ Method 6 : Customs price made by reasonable standards
Most of tariffs are of ad valorem duties and, among them, that determines the customs value is the method 1 with the dominant majority. On the other hand, since the method 1 is based on the market price of the invoice declared by an import declarant, there are much misunderstanding that trade parties might think they could adjust the tariff amount.
However, the method 1 must be the price whose actual market price is not affected by any special condition and/or relationship, and be the additional amounts that is added the additional factors and, if the application requirements of the method 1 are not insufficient, the method 2 or others should be taken in lieu of. For such various preconditions are hidden, it is not recommended to take this method with no preparations.
With the characteristics of trade that have continuous and repetitive tendencies, there are risks of spending a considerable amount of surcharge if any problem highly concerned in the customs valuation and, of course, any corresponding criminal punishment could be followed, thereby, the trade parties are highly recommended to take extra cautions to the customs valuation areas.