COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE - A simple and paperless environment for Customs and Trade

CONTENT

Background

Introduction

1. Putting in context

2. The challenges

2.1. What does business expect from customs?

2.2. What does society expect from customs?

2.3. Conclusion

3. The objectives

3.1. Radically simplify and modernise legislation and procedures

3.2. Ensure interoperability through a convergent IT framework

4. How to achieve the objectives? - Actions to be taken

4.1. Simplify customs legislation, integrating security aspects

4.1.1. Setting the rules: electronic declaration and electronic exchange of data

4.1.2. Reduce significantly the number of existing customs treatments

4.1.3. A single guarantee

4.1.4. Single European Authorisation

4.1.5. Review of the customs debt provisions and the roles of frontier and inland customs offices

4.1.6. Redefinition of the roles of traders and freight forwarders

4.1.7. Providing a legal basis for new tools and working methods

4.1.8. Electronic signature, electronic documents, electronic archiving

4.1.9. Standardise and harmonise data requirements

4.2. Rationalise business processes through the use of modern technology

4.2.1. Ensure customs/customs and customs/trade interfaces

4.2.2. Ensure secure internet payment systems

4.2.3. Single automated access point to the EU for trade

4.2.4. Transparency

Conclusion

Annex 1:Action plan

Annex 2:Main costs and benefits for traders and administrations

BACKGROUND

This Communication follows on from the Council Resolution on the simplification of customs procedures [1], as well as the earlier Commission Communication on a strategy for the Customs union [2] and the related Council Resolution [3]. It responds to the Council's request to draw up an action plan for the simplification and rationalisation of customs regulations and procedures and the use of efficient working methods such as information technology, risk analysis and advanced auditing systems. It aims also at implementing in the customs area the objectives of the e-Europe [4] and the better regulation [5] initiatives. Finally, it takes account of the changing roles of border and inland customs offices after the forthcoming enlargement. Alongside, a Commission Communication on the role of customs with regard to the security at the external border [6] is submitted.

[1] OJ C 332 1996, p. 1.

[2] COM(2001)51 final, 08.02.2001

[3] OJ C 171 2001, p.1.

[4] COM(2002) 263.

[5] COM(2001)726 final (Communication from the Commission on simplifying and improving the regulatory environment, Brussels 05.12.2001)

[6] COM(2003) 452 final, 24.07.2003.

Introduction

Globalisation and liberalisation of trade, the increased volume of trade and just-in-time delivery, the sophisticated nature of products and transport services, as well as the growth of electronic commerce have continuously thrown down new challenges to Customs administrations. [7]

[7] See Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee concerning a strategy for a Customs Union, COM(2001) 51 final, 08.02.2001.

Moreover, the need of our society to be protected against dangerous or harmful products and the necessity after the events of September 11th, 2001, to better integrate security aspects into customs procedures demonstrate the urgency to find solutions that can marry security concerns and trade facilitation. Although these seem to be two contradictory goals, the use of information technology (IT) tools combined with modern risk-management techniques is the adequate response to such developments. However, to be efficient, these techniques require the availability of certain import/export data at an early moment (wherever possible before the arrival of the goods at the border) and their transmission or availability to customs and other agencies responsible at the border through electronic means using a single channel of communication.

In addition, the level of customs intervention must be equivalent throughout the European customs union, and risk analysis and risk assessment must, therefore, be organised in a way that takes into account the dimension of the Internal Market. This aspect is of particular importance in the light of the forthcoming enlargement with a displacement of a major part of the land border of the European Union. Creating a paperless environment for the movement of goods, supplemented by limiting border controls mainly to security aspects and shifting other controls to the customs authorities responsible for the trader's premises, thus minimising the risk of fraud and non-compliance will constitute a first part of an answer to that challenge.

In the broad European context, e-Europe [8] has now become a political priority and governments have agreed to go on-line by the year 2005, in order to better serve citizens and ensure better governance.

[8] COM (2002) 263 final, p.10.

It is only logical and in the spirit of the customs union, that customs seizes this opportunity to ensure a simplified and paperless environment for trade and thus give an example of e-government at the level of the customs union.

Sharing the same legitimate concerns, Member States have developed their own individual strategies for creating an electronic environment for customs, taking into account national practices and requirements. However, by definition this has resulted in different IT solutions and perhaps different approaches to the implementation of customs rules and procedures, while maintaining old barriers and potentially introducing new ones (e.g. digital barriers) to the Single Market and undermining an equal treatment of economic operators.

Traders operating in more than one Member State have to comply with different conditions for electronic access to customs, generating unnecessary costs and jeopardising the functioning of the Internal Market. Even traders established in only one Member State but importing or exporting goods through the territory of another Member State face difficulties because of the lack of common data requirements and common interfaces. Electronic communication between customs administrations is equally hampered by the lack of common standards (apart from the new computerised transit system - NCTS). The forthcoming enlargement will further accentuate this situation and create additional burdens.

In addition, current customs procedures have become old fashioned, as they are too complicated and based on the use of paper documents. It is not cost effective to maintain the many variants of customs procedures reflecting a paper-based environment and relatively high duty rates and to develop IT solutions for procedures that can no longer be economically justified. Furthermore, movements of goods across several Member States cannot be effectively monitored by customs without common interfaces and data elements.

As Member States alone cannot create the necessary legal and IT environment, they need the Commission to act as a "catalyst" to ensure that the legal and operational framework is appropriate to the creation of a simplified and paperless environment for customs and traders and that interoperability between existing IT systems is achieved. Compliant traders should be able to operate in a "business friendly " environment in which controls ensuring the protection of citizens and businesses are performed in the most effective and least burdensome manner.

The European Commission invites the Council and the European Parliament to endorse the following strategic goals:

* Customs procedures are fully revised and radically simplified, integrating modern techniques, including the extensive use of IT [9] and of risk analysis;

[9] This corresponds to a request made by the Council already in 1996 (OJ 1996 n° C 332, p. 1), and which, so far, has been partially implemented with the reform of the customs procedures with economic impact.

* Customs work is organised in such a way that traders can benefit from the dimension of the Internal Market, i.e. irrespective of the place where a customs procedure begins and where it ends.

* Customs intervention must ensure that the Internal Market functions properly and that no barriers, including those of a digital nature, are introduced or maintained.

* Customs controls are of equivalent intensity and reliability at the EU's external borders, especially where the protection of our society and its security is at stake; such controls are normally based on pre-arrival and pre-departure information; other controls are normally performed on the basis of periodic declarations and audits at the trader's premises. This requires common risk management.

* Customs IT systems operated by Member States offer everywhere the same facilities to traders and are fully inter-operational, taking into account the role of the European customs union as being at the heart of the Internal Market. [10]

[10] This corresponds to a request made by the Council in the Resolution on a strategy for the Customs Union (OJ C 171 2001, p. 1).

This communication aims at seeking the political backing from both the Council and the European Parliament to implement these objectives; at the same time it explains the framework and the milestones for common action between the Commission, Member States (current and future), and traders in order to achieve the new simplified paperless environment for customs and traders.

1. Putting in context

Both at European level, as well as at international and national level, efforts are being made and initiatives taken to facilitate legitimate trade by using IT and by improving and simplifying legislation.

The Sevilla summit in June 2002 has endorsed two important political initiatives: "e-Europe" and "better regulation".

The e-Europe 2005 initiative [11] aims at providing a favourable environment to boost productivity, modernise public services, create jobs, in order to make Europe the most competitive and dynamic knowledge based economy. Some of the key targets of this initiative are:

[11] COM(2002) 263 final, 28.5.2002

* interactive public services (e-government), accessible for all and offered on multiple platforms. This requires an agreed interoperability framework to support the delivery of pan-European e-government services to citizens and enterprises;

* a review of legislation affecting e-business.

The "better regulation" initiative, which is one of the commitments of the White Paper on European Governance, [12] aims at simplifying European legislation in order to reduce the cost of doing business in Europe and increase legal certainty for citizens.

[12] COM (2001) 428 final, 25.7.2001

Customs is a key area in this context: privileging electronic transmission of harmonised data through common interfaces will allow traders to avoid numerous declarations to different agencies at the borders with often similar or even the same data. At the same time, all requirements in relation to importation and/or exportation (e.g. phyto-sanitary, health, environment etc.) could be channelled through one single entry point/gateway.

At international level, trade facilitation and the use of IT for customs procedures are part of the political agenda, both in the WTO and in the WCO, as well as in the context of bilateral agreements the Community has concluded or is currently negotiating.

Following the WTO Doha Ministerial Declaration, trade facilitation is an integral part of the current WTO work programme. Simplification of customs rules, use of modern technology, and transparency are main components of trade facilitation. If the Community wants to remain a key player in pushing for trade facilitation worldwide, it must itself be at the forefront of state of the art customs handling.

In addition, the WCO Customs Data Model provides a common understanding on customs information requirements. In line with the revised Kyoto Convention, [13] a global standard exists for the implementation of customs provisions dealing with initial reduced electronic data requirements and subsequent submission of periodic declarations and supporting documents.

[13] OJ L86, 2.4.2003, p. 3.

It is therefore essential that any initiative at Community level aiming at simplifying and harmonising customs procedures and thus facilitating trade takes full account of developments at international level.

The current context, both at European and international level, provides a unique opportunity for simplification and automation in the customs field. It is therefore important to seize this opportunity to set the objectives and to identify the means to achieve a simpler and paperless environment for customs in which economic operators do not have to suffer from the fact that currently 15 and soon 25 different national administrations implement Community legislation.

2. The challenges

Customs administrations nowadays have to face additional challenges in carrying out their tasks, due to apparently conflicting new requirements by traders and society. They have to effectively manage a greater volume of goods crossing borders, at a faster rate, and with increasing pressure to reduce costs and delays. All this whilst dealing with an ever larger number of serious controls issues, involving environmental, health protection and security issues, etc. [14]

[14] Commission Communication "towards an integrated management of the external borders of the member states of the European union",COM(2003) 233 final, 7.5.02,and Commission Communication concerning the security of the external frontiers, COM(2003) 452 final, 24.07.2003.

Traditionally, the most important role of customs has been collecting customs and agricultural duties and thus contributing to the Community budget; its involvement in the collection of value added tax and excise duties for Member States' budgets still remains a major task. Today customs is also a central part of the globalisation process and a catalyst to the competitiveness of countries and companies, as it plays a key role in the monitoring and management of international trade.

Customs services are the first line of defence for screening of both passengers and freight of third country origin, as well as for the detection of illegal importations of animals and animal products and infringements of the veterinary rules.

An equally important role of customs is enforcement. They are the gatekeepers tasked with the responsibility of guarding against any dangerous or even illegal activity that might damage the well being of our society, and that of our trading partners. The enforcement actions of customs services goes well beyond the border inspection posts and cover the whole territory of the Community.

Both business and society have important expectations with regard to customs administrations.

2.1. What does society expect from customs?

Notwithstanding their traditional revenue role, customs administrations play a major role in protecting the society.

Customs fosters the EU economy where it needs protection, for example, against dumped, subsidised or counterfeit goods.

Customs services are acting not only for the protection of the public health from substances dangerous to health (e.g. dioxin, drugs, hormones) but also to ensure the protection of the environment (radioactivity, waste) and of endangered species (CITES Convention).

Moreover, customs acts against criminal activities, such as child pornography, illegal trade in arms or dual-use items, money laundering and the circumvention of international sanctions (embargoes).

Customs is also protecting society's economic interests by fighting fraud (in the field of own resources, VAT and excise duties) and by ensuring the correct application of agricultural or commercial policy instruments (export refunds, antidumping duties, export and import licences). The customs declaration is the key element for statistics which allow traders to elaborate their market strategy and Member States and the Commission to prepare negotiations with their trading partners.

Finally, customs contributes to regional integration through the promotion of preferential trade links between countries and regions, thus enhancing their prosperity.

2.2. What does business expect from customs?

Supply chain management and collaboration has reduced delivery times enormously with the support of IT applications linking all actors involved. If the customs process stays out of this circuit, it is a stumbling block to just-in-time delivery.

Against this new frame of reference, it is natural for the business sector to also expect benefits, including better efficiency, better services and higher productivity from customs.

Transport costs, the regulatory environment, easy access to information, the predictability of the total transaction, including border controls involving different agencies, all play their part in creating a competitive advantage and new opportunities for business.

Strategic partnership

Customs administrations, being a critical link (or obstacle) in the supply chain, are expected to facilitate trade transactions. The business sector has a vital interest in forming a strategic partnership with customs.

Short and predictable release times

The demand for, and ability to supply, rapid deliveries has been greatly increased by multimodal transport and electronic commerce, and is reflected in globally integrated just-in-time supply production and distribution systems. Under these circumstances simple, predictable and uniform customs controls and procedures involving different agencies are an imperative.

EU wide level playing field

Traders need a predictable and transparent regulatory and operational framework in which the law is interpreted in a uniform way throughout the Community and customs practices are similar, thus putting the economic operators on an equal footing.

Moreover, business wants to avoid unexpected loss of time when launching its products on the Single Market. A single entry point for customs declarations and other formalities (instead of multiple communication channels to different authorities/agencies) for all requirements related to import/export would help to achieve this objective.

Reduction of bureaucracy; further simplification for compliant traders

The business community expects that necessary controls (legitimate and well-founded) do not result in cumbersome and complicated procedures, thus increasing costs. Compliance should be accompanied by further simplification. The use of risk analysis techniques, applied in the same manner throughout the Community, reduces the burden of controls.

Coherent legislation

Importers and exporters do not only have to comply with customs legislation but also with tax, agricultural, commercial policy, environmental and health requirements. The application of such requirements needs to be made more coherent, in order to facilitate trade, reduce errors, and increase compliance.

2.3. Conclusion

Customs authorities are more than ever facing the potentially contradictory role of ensuring facilitation and enforcement. In addition, they need to adjust to new patterns of trade and technology.

3. The objectives

The only response on how to deal with the divergent expectations and of applying a growing number of controls to protect the Community's financial, social, security and business interests whilst at the same time facilitating legitimate is twofold:

3.1. Radically simplify and modernise legislation and procedures

A re-engineering of procedures allows the use of modern tools and technology which will promote a uniform application of the law, thus reducing costs for business and the risk of error.

Therefore a framework needs to be created in which:

* the large variety of the current customs regimes and special rules is reduced to some basic procedures, such as importation, exportation and suspensive arrangements, with a maximum of common rules and data requirements, and special rules only for cases where a strong economic justification for an exception from the general rules exists;

* a quick release of goods is the rule where a trader has provided before the arrival or the departure of the goods the information necessary for risk-based controls on the admissibility of the goods; fiscal and trade policy controls being primarily performed by the customs office responsible for the traders premises, where the customs and fiscal debt is normally incurred;

* all transactions between the trader and the administration can and are normally handled electronically;

* Community customs administrations act as if they were a single administration; this involves the possibility of exchanging information between traders and customs authorities in any Member State in the same way, as well as between these authorities, the granting of authorisations valid throughout the Community within strict deadlines, and the use of common procedural rules, interfaces, data requirements and risk criteria;

* customs administrations are able to share data electronically with other public authorities for the correct application of fiscal, agricultural, commercial, health, phyto sanitary and other measures applied at importation or exportation, so that eventually a single window solution can be achieved.

Current customs rules, formalities and systems do not yet take full account of these requirements. Under the new rules, and in respect of the principles of a customs union, it should not make a difference whether a customs transaction affects only the territory of one Member State or that of several Member States. After enlargement most imports and exports may fall under the latter category anyway.

3.2. Ensure interoperability through a convergent IT framework

Information and documentation are key elements in the control of international cross-border trade. In an interconnected electronic environment these controls will normally include trader-to-customs information exchange prior to the arrival or departure of the goods in order to provide the necessary data for security checks as well as acceptable release times.

Member States have already invested significantly in the development of IT systems. However, because of the different existing systems (comparable to the situation before harmonisation the national customs legislation) the different sets of rules and data offset the advantages of the harmonisation achieved so far, notably because of a lack of interoperability.

It is therefore essential to introduce interfaces between existing and planned national systems and to create a common and single interface towards trade. This implies the introduction of a convergence framework and common standards and, where appropriate, common structures.

4. How to achieve the objectives ? - actions to be taken

This section sets out the major steps of an action plan taking into account that both a coherent and appropriate legislative as well as an operational framework is essential to achieve a simple and paperless environment for customs and trade. Provision must be made for the transitional period in which electronic and paper-based procedures exist alongside each other.

4.1. Simplify customs legislation, integrating security aspects

The bulk of the Community Customs Code and its implementing provisions were conceived in the 80s and adopted in 1992 and 1993 respectively, with the exception of the rules on transit and the customs procedures with economic impact. Consequently, these provisions do not reflect today's trends and the realities of the international supply chain, nor the reduction of duty rates.

Moreover, the recently increased focus on security aspects in the movement of goods requires that risk-related data [15] are shared in real time between customs administrations of Member States on the one hand and customs administrations and other agencies (e. g. police, veterinary authority) on the other hand. This will enable customs authorities to decide on which consignments they will carry out thorough physical checks at the border. This can mainly be done through the use of IT and the adoption of the relevant legislation at Community level, which will stipulate the use of IT and will overcome difficulties linked to divergent national legislation (e.g. on data protection).

[15] Including sensitive goods (e.g. dangerous chemicals) or high risk goods (e.g. goods subject to high duties or taxes).

It will be easier to streamline customs treatments, veterinary and other procedures if common procedural rules and interfaces are created.

A review of customs legislation must therefore aim at achieving the following objectives:

* electronic declarations (including accompanying documents), and electronic exchange of data become the rule;

* the existing customs procedures and other regimes are simplified and reduced;

* simplified procedures are aligned, adjusted to the needs of electronic treatment, and their scope and use is extended;

* the roles of inland and frontier customs offices are redefined;

* the rights and responsibilities of traders and freight forwarders are redefined;

* new tools and methods are introduced in the customs legislation.

Such modernisation and simplification of customs legislation would reduce the cost for business, increase legal certainty for citizens (better regulation), and allow businesses and citizens to fully benefit from the possibilities offered by IT procedures and the Single Market.

4.1.1. Setting the rules: electronic declaration and electronic exchange of data [16]

[16] This action is a necessary condition for the creation of a paperless environment for customs.

Both the Community Customs Code and its implementing provisions treat the electronic declaration and electronic exchange of data as the exception and paper-based declarations and the submission of paper documents as the rule. Customs legislation should be adapted to make electronic communication the basis of importation and exportation transactions, both between traders and customs and between customs administrations. This should produce an environment where both trade and customs operate a seamless flow of information comprising common data requirements and common interfaces. Paper declarations may be used under specific conditions only. Simplifications, such as oral declarations for travellers, will of course remain.

Accompanying documents (invoice, certificate of origin) should, wherever possible, be provided in electronic form, through the single window approach or to be held in a database accessible to customs (e.g. import authorisations). Where this is not feasible, specific conditions will have to be defined to ensure authenticity.

4.1.2. Reduce significantly the number of existing customs treatments [17]

[17] This action, although not a necessary condition for the creation of a paperless environment for customs, would facilitate electronic treatment of customs transactions.

In order to achieve a simpler and more coherent legislation and therefore establish a common core of data whilst reducing compliance costs, it is suggested to merge the thirteen existing customs treatments [18] and other special regimes (such as temporary storage, returned goods and products of sea-fishing). Less variations mean also less procedural differences between Member States.

[18] Art. 4 n° 15,16 CC.

The current provisions scattered over the Community Customs Code could be grouped under the following three types of customs procedures, with different variations where necessary and sufficiently justified:

* importation (covering current presentation of goods to customs, summary declaration, temporary storage, release for free circulation including end-use, inward processing [drawback system], internal transit [entry of goods], returned goods, products of sea-fishing, destruction, abandonment),

* exportation (covering current exportation, re-exportation, outward processing, internal transit [exit of goods]),

* suspensive arrangements (covering current external transit, customs warehousing, inward processing [suspension system], processing under customs control, temporary importation, free zones, free warehouses).

VAT and excise duties could be suspended under suspensive customs arrangements in order to facilitate the application of the destination principle (i.e. the tax is paid in the Member State where the importer or consumer is established).

4.1.3. A single guarantee [19]

[19] This action is not a necessary condition for the creation of a paperless environment for customs. However, a common guarantee for all customs regimes will be easier to handle electronically.

The merger of all suspensive arrangements will allow the use of a single guarantee for all - currently separated - procedures, provided the use of the different variants has been authorised. This guarantee would, as currently in the case of transit, also cover VAT and excise duties, and could be managed electronically.

4.1.4. Single European Authorisations [20]

[20] This action is not a necessary condition for the creation of a paperless environment for customs but aims at simplifying the customs environment.

Under the current customs legislation simplified procedures, the end-use arrangements and customs procedures with economic impact are de facto restricted to the territory of the authorising Member State. Though Single European Authorisations (SEA) valid in several Member States are legally possible, they are hardly used in practice, because each Member State has a veto right for transactions on its territory. As long as this veto right exists, a widespread use of SEA will not be possible. In this context it should be noted that binding tariff and origin information issued in one Member State is already today valid in all the others.

Community wide decisions should be favoured by Community legislation. Consequently, the authorisation for central, simplified clearance should be granted by the customs office responsible for the place where the trader is established, holds his main accounts or performs his main economic activities (the exact criteria for determining the responsible authorities in cases where these conditions may be met in more than one Member State are to be determined). This ensures efficient controls and the granting of authorisations within reasonable deadlines.

Such an authorisation would be valid throughout the Community and the lead customs administration is obliged to consult the partner administrations in order to ensure the feasibility and effectiveness of the envisaged control mechanisms. Joint audit teams would carry out an audit so that the appropriate control mechanisms can be established. Model authorisations would simplify this task and contribute to overcoming linguistic problems.

The principle that a decision can cover cases where a company established in one Member State has legally independent subsidiaries in other Member States could be extended to other areas, such as binding tariff and origin information.

4.1.5. Review of the customs debt provisions and the roles of frontier and inland customs offices [21]

[21] This action is not a necessary condition for the creation of a paperless environment for customs, but aims at improving security and creating a more predictable environment for traders.It is a prerequisite for centralised customs clearance.

The implementation of the Single Market on 1st of January 1993 saw a significant increase in the volumes of consignments requiring a declaration at the external frontier as well as an increased need of communication between border and inland customs offices.

The increased volume of trade, the speed required for the release of goods, as well as the fact that commercial import and export data are normally available in electronic form before the actual customs transaction make it necessary to review the roles of the frontier and the inland customs offices.

* Though complete customs clearance will still be possible at the entry point, most traders may prefer not to use it, given the advantages linked to centralised, global clearance at the place where the trader is established (deferment of the date of the submission of a complete declaration with the required documents, periodic declaration, deferred payment). On exportation, clearance at the place where the trader is established is already a reality.

* The promotion of the centralised clearance concept frees frontier customs offices to focus on admissibility and security checks. Inland customs offices carry out all other controls (and notably customs duty, fiscal and commercial policy controls, except where a control at the border is required) at the trader's premises through audits and on spot checks based on commonly developed and applied risk criteria.

* Under this system, the customs (and related fiscal) debt is normally incurred at the place where the trader is established.

* The customs environment could be made more predictable for the trader if non fraudulent lack of compliance with a customs rule does not lead to a customs debt where it is established that the failure had no significant effect on correct operation of the procedure. [22] For such cases administrative sanctions based on a schedule established at Community level could ensure better compliance for the future. Such a solution would seek to maintain a level playing field for traders throughout the Community, without compromising its financial interests.

[22] Such a rule is already stipulated in Art. 204 of the Community Customs Code and Art. 859 of its implementing provisions and could be extended to other cases.

4.1.6. Redefinition of the roles of trades and freight forwarders [23] .

[23] Although this issue is not directly linked to e-customs, the use of IT will allow to better target the profile of the authorised trader.

According to the current principles of the Community Customs Code the role of the importer and exporter is to provide the necessary information to customs at the time the goods are physically presented to the customs authorities in order to allow these authorities a selection of certain goods for further examination. The large increase in volumes of trade and the need to speed up the clearance process have rendered this approach impossible in practice, so that simplified procedures (such as local clearance) are largely used in order to reduce burdens both on traders and administrations. However, according to the Community Customs Code, such procedures are defined as an "exception" to the normal rule. The time has now come to take account of recent developments and to introduce the general concepts of an "authorised trader" and an "authorised freight forwarder"

The authorised trader:

* can declare electronically goods for import into the Community, wherever possible before their arrival, with a set of core data (one element being whether the goods are entered for import or for a suspensive arrangement); such goods may be destined for different Member States;

* can declare electronically goods for export, normally before their departure, with a set of core data; such goods may exit the Community from another Member State from that where he is established;

* is, in principle, subject to border controls only for antismuggling and security controls;

* makes complete electronic declarations, assesses duties within regular periods, ensures that quantitative limits are respected, and is regularly audited by customs. Certain simplifications (e.g. waiver of notification requirements) can be granted where customs has access to the relevant data where this has been agreed between the operator and customs, taking into account the need of data security;

* is granted different levels of simplification according to the types of goods traded, the volume of trade, the reliability and transparency of his accounting system and his compliance; the criteria for granting different levels of simplified treatment are the same throughout the Community.

The authorised freight forwarder or transporter can:

* take over some of the obligations which would normally be those of an authorised trader (e.g. he could lodge a customs declaration or notification for him);

* produce certain evidence (e.g. on the arrival of the goods or on the exit of the goods from the Community), and

* handle consolidated consignments that are destined to a multitude of importing or exporting companies (possibly in different Member States) as holder of a suspensive arrangement on entry into the Community and by providing the necessary data at exit.

Importers and exporters who do not wish to use the authorised trader/freight forwarder, transporter concept or do not fulfil the conditions, will not be entitled to use simplified procedures and would have to choose, following a pre-arrival declaration, at importation between release for:

* free circulation, or

* a suspensive arrangement (requiring a guarantee).

At exportation, the required data would have to be provided before the goods are loaded, in order to allow security checks.

In either case, traders could also use a customs agent (who may be an authorised freight forwarder, transporter, so that the above-mentioned concept would be more attractive).

4.1.7. Providing a legal basis for new tools and working methods [24]

[24] This action is directly linked to the creation of a paperless environment for customs.

The re-engineering of rules and processes should be accompanied by the introduction of modern, efficient tools and methods in the Community customs law, in order to ensure efficiency and a similar level of control at all customs points. This includes :

* self-assessment and subsequent audits as the normal form of customs declaration for authorised traders;

* a common methodology and common criteria for risk management;

* common audit and pre-audit [25] standards;

[25] Pre-audits are performed, where necessary, before an authorisation is granted.

* common accreditation standards for the granting of facilitations, based on volumes of trade, types of procedures, risk parameters, compliance, and the results of a pre-audit (in line with the Stairway concept);

* Memoranda of Understanding (MOUs) [26] allowing a certain flexibility in the relationship between customs and the economic operator with regard to facilitations and control arrangements; model MOU's could be developed;

[26] Used mainly in the context of SEA and simplified procedures.

* the "single window" approach for co-operation between customs authorities and other departments or agencies on the one hand and traders on the other;

* the use of guidelines and explanatory notes wherever no legal provisions are required but a harmonisation of practices is necessary, in order to guarantee transparency and an equal treatment of economic operators.

4.1.8. Electronic signature, electronic documents, electronic archiving [27]

[27] This action is a necessary condition for the creation of a paperless environment for customs.

The use of information technology poses the crucial problem of the authenticity and soundness of the data exchanged or electronically stored, such as invoices [28], bills of lading, certificates of origin or authenticity, and licences.

[28] See Directive 2001/115/EC with regard to VAT.

By using electronic signatures it is possible to authenticate the person signing an electronic document. Community legislation is already in place to guarantee the legal recognition of electronic signatures.

The electronic signature Directive has been implemented in almost all Member States. Consequently electronic signatures are ensured legal effectiveness and admissibility as evidence for legal proceedings to the same extent as hand-written signatures in the Member States.

Consequently:

i) Member States who have not yet implemented Directive 1999/93/EC on electronic signature should proceed with the implementation;

ii) there should be a specific provision in the Community Customs Code explicitly recognising the legal value of an electronic signature and document for customs purposes, independently from the state of implementation in the different Member States;

iii) Member States should ensure interoperability where a trader uses an electronic signature recognised under the rules of the Member State where he is established.

4.1.9. Standardise and harmonise information requirements [29]

[29] This action is a necessary condition for the creation of a paperless environment for customs.

Standardised and harmonised information requirements and procedures are essential to establish the common understanding which allows for an effective and efficient exchange of information between all parties involved in the international cross-border movement of goods.

Standardisation and harmonisation of information requirements should be consistent with the work undertaken by the G7. Initiatives to harmonise the SAD [30] and the SAM [31] with regard to the optional boxes should lead to operational results.Data to be transmitted to another Member State must necessarily be the same throughout the Community.

[30] Single Administrative Document.

[31] Single Administrative Message.

It is important to ensure a seamless flow of information: traders should provide data only once (or twice where the system of an initial incomplete and a supplementary declaration is used), one Member State's data become another Member State's data where necessary.

Solutions must also be found with regard to differences caused by national legal requirements, such as fiscal regimes (e.g. reduced VAT rates, excise duties). Whilst the Community Customs Code cannot resolve such divergences, the SAD and the SAM provide for a framework under which a standardisation is possible.

4.2. Rationalise business processes through the use of modern technology [32]

[32] This action is directly linked to the creation of a paperless environment for customs.

Once the information requirements have been harmonised or standardised, the customs interface should be presented to the trader in each Member State in the same form. This is not only a symbol for the Community but helps also to overcome linguistic problems.

4.2.1. Ensure customs/customs and trader/customs interfaces

In order to be able to act as if they were a single customs authority, customs offices all over the EU territory should be inter-linked. Therefore it is necessary to ensure the appropriate interfaces between divergent electronic customs systems.

Traders should be able to lodge their declaration or notification directly from their own IT system (if they wish via a clearing house or customs agent) and give all necessary data electronically to customs according to a standard interface. Certain notification requirements could be waived where customs administrations are granted, on a voluntary basis, electronic access to the relevant trader's records. Also for such cases, appropriate common interfaces should be developed. A customs internet declaration/notification should be available for small and medium sized traders.

4.2.2. Ensure secure internet payment systems

On technical security, the Commission's e-Europe initiative [33] promotes several solutions, including a smart card action plan and plans further work on identification and authentication techniques.

[33] COM(2002) 263 final, 28.5.2002

These developments have to be closely followed and appropriate solutions should be sought.

4.2.3. Single automated access point for trade

It is important for traders to have a single automated access point to the Community. This means that from this entry point they can access the relevant customs clearance and information systems. They will have to provide data only once, independently from the number of destination countries.

4.2.4. Transparency

Information on customs procedures, simplifications, accreditation criteria, guidelines, etc. should be available on the internet in a language widely understood in international trade.

CONCLUSION

The Communication from the Commission concerning a strategy for the Customs Union [34] has highlighted the need to simplify and rationalise customs legislation to take into account changes in business trends and to tackle fraud. Emphasis is given in particular to promoting modern techniques and a greater spread of information to help customs and economic operators apply the legislation in a consistent manner.

[34] COM(2001)51 final, 8.2.2001

The Council, in its Resolution of 30 May 2001 on a strategy for the Customs Union [35] has invited the Commission "to develop a broad-based programme for computerisation of customs procedures and exchange of customs information, as well as a credible strategy for the development and use of information networks in customs activities".

[35] OJ C 171,p. 1

The objective of a simplified and paperless environment for customs and traders, in which legitimate trade can operate the seamless movement of goods with minimum interference by customs, has been established and endorsed by the business community in the Forum on electronic customs (Toledo, May 2002).

This is the only way to avoid further diversion from the internal market and an increase of bilateral arrangements (as it happens with SEA). Only standardisation and simplification of customs procedures will prevent business from authorisation "shopping", resulting in substantial economic consequences for certain Member States, leading ultimately to distortion of competition. Only uniform integrated customs processes can avoid high administrative costs and a serious competitive disadvantages for European companies.

Moreover, the proposed approach ensures that security, public health and environmental protection will not be compromised. This way less "secure" entry points and territories within the European Union and the abandonment of certain regions and ports can be avoided.

There is no other alternative than ensuring optimal conditions for the tasks that have to be carried out by customs authorities and traders.

Existing legislation, systems and processes will have to be reviewed and simplified and a paperless environment be created. Where technical and legal gaps exist, they will have to be filled in order to obtain an integrated legal and technical framework. Improvements will ensure that Community's regulatory infrastructure keeps pace with the latest developments in commercial logistic practices, the reduction of customs duties and the forthcoming enlargement.

Customs controls will lose their cumbersome nature for trade and will become a part of the trade transaction, with optimised efficiency.

Key players and their respective roles have been identified. An action plan has been proposed. Public authorities (Commission and customs and other administrations) and the private sector (traders) will have to discuss and this action plan and carry out their specific tasks in partnership and continuous transparency and consultation.

The success of the strategy for a simplified and paperless environment for customs and trade will highly depend on key players' commitment to its implementation.

Annex 1 sets out a first action plan and Annex 2 gives an overview of costs and benefits for traders and administrations.

ANNEX 1

Proposal for actions under E-Customs

1

1. What type of action is proposed?

Legal

Propose amendment of the Community Customs Code (modification of Council Regulation N° 2913/92)

2. Subject/Content (main issues:)

Adjust the Customs Code to the principle that electronic declarations and messages are the rule and paper-based declarations the exception.

Define the conditions of a digital environment for customs

Rationalise customs (normal and simplified) procedures and treatments (from 13 to 3) reducing divergences to a minimum and defining a common core of data

Redefine the roles and responsibilities of inland and border customs offices

Use of a single guarantee for all customs treatments

Favour extensive use of central clearance

Provide legal basis for new tools and methods (e.g. risk analysis model and data base)

3. Importance of the action: High

4. Expected results of the proposed action:

Proposal of new Council and Parliament regulation amending the CC

5. Measurement of the results achieved:

Adoption of the proposal

Implementation by Member States

6. Cost and benefits [36] for the main stakeholders:

[36] A preliminary feasibility study is currently under preparation including the cost/benefit analysis. Until the final results of the study only assumptions on the basis of contacts with MS and traders can be made.

6.1. Commission

Costs: A slight increase of the budget for missions (analysing the situation in MS for the feasibility study) and meetings. Temporary need of at least two A officials (one is currently working on the file) and 1 man/year technical consultants.

Benefits: Simpler legislation, easier implementation by MS and improved enforcement of customs law via significant improvements in detection of fraud. Improved collection of revenues (own resources) as direct result of the preceding (fraud detection) as well as via likely improved compliance rates in declarations

6.2. Member States (MS)

Costs: Preparatory legal work should not involve extra costs (apart from participation in some additional meetings and seminars) at least for current MS because it is part of anticipating change and progress. Concerning new MS, these costs are already planned and budgeted for the implementation of the "acquis".

Benefits: Same as for Commission. More efficient allocation of human and other resources deriving from the re-engineering of customs processes and procedures and removal of activities and controls duplicated between MS.More efficient use of NCTS investment/infrastructure, even though external borders have moved and there are less transit movements. Maintain customs offices in the current MS with no external border. Improved security and compliance.

6.3. Traders

Costs: Investments necessary to access the services (including client software and training, network/telecommunications costs and possible security measures. Costs of providing and maintaining common interface to customs (only one for all MS).

Benefits: Numerous and recurring. Improvement in customs clearance and release time. Simplification and streamlining of compliance obligations and procedures (e.g. SEA, single guarantee for all customs treatments). Increased transparency, co-operation and uniformity in interactions with customs. Reduction of costs via the automation of customs procedures. Availability of a single automated entry point to the EU. Increased flexibility in co-operation structure with customs administrations.

7. When is the action planned to take place?

After preparatory technical discussions within the Customs Code Committee (started in 2002, until end 2003) the formal proposal is expected to be transmitted to the Council and the E.P in 2004 (provided resources are available).

8. Duration of action:

+/-1,5 year until submission of a proposal (depending on resources).

9. Resource implications (for Commission)

At least 2 A officials (full time) and 1 external consultants 1 year.

Proposal for actions under E-Customs

2

1. What type of action is proposed?

Legal

Propose amendment of the Community Customs Code implementing provisions (Commission regulation)

2. Subject/Content (main issues:)

The same as for table 1, but at more "technical" level (= a guide to the application of the CC)

Adjust the provisions to the principle that electronic declarations and messages are the rule and paper-based declarations the exception.

Define the conditions of a digital environment for customs

Rationalise customs (normal and simplified ) procedures and treatments (from 13 to 3) reducing divergences to a minimum and defining a common core of data

Redefine the roles and responsibilities of inland and border customs offices

Use of a single guarantee for all customs treatments

Favour extensive use of central clearance

Provide legal basis for new tools and methods (e.g. risk analysis model and data base)

3. Importance of the action: High

4. Expected results of the proposed action:

Proposal of new Commission regulation amending the CCIP

5. Measurement of the results achieved:

Adoption of the proposal

Implementation by MS

6. Cost and benefits [37] for the main stakeholders: (same as for fiche 1 namely)

[37] A preliminary feasibility study is currently under preparation, including the cost/benefit analysis. Until the final results of the study only assumptions on the basis of contacts with MS and traders can be made.

6.1. Commission

Costs: A slight increase of the budget for missions (analysing the situation in MS for the feasibility study) and meetings. Temporary need of at least two A officials (one is currently working on the file) and a 1 man/year technical consultants.

Benefits: Simpler legislation, easier implementation by MS and improved enforcement of customs law via significant improvements in detection of fraud. Improved collection of revenues (own resources) as direct result of the preceding (fraud detection) as well as via likely improved compliance rates in declarations

6.2. Member States (MS)

Costs: Preparatory legal work should not involve extra costs (apart from participation in some additional meetings and seminars) at least for current MS because it is part of anticipating change and progress. Concerning new MS, these costs are already planned and budgeted for the implementation of the "acquis".

Benefits: Same as for Commission. More efficient allocation of human and other resources deriving from the re-engineering of customs processes and procedures and removal of activities and controls duplicated between MS.More efficient use of NCTS investment/infrastructure, even though external borders have moved and there are less transit movements. Maintain customs offices in the current MS with no external border. Improved security and compliance.

6.3. Traders

Costs: Investments necessary to access the services (including client software and training, network/telecommunications costs and possible security measures. Costs of providing and maintaining common interface to customs (only one for all MS).

Benefits: Numerous and recurring. Improvement in customs and release clearance time. Simplification and streamlining of compliance obligations and procedures (e.g. SEA, single guarantee for all customs treatments). Increased transparency, co-operation and uniformity in interactions with Customs. Reduction of costs via the automation of customs procedures. Availability of a single automated entry point to the EU. Increased flexibility in co-operation structure with customs administrations.

7. When is the action planned to take place?

Prior to and following adoption of the new Council and E.P Regulation modifying the Customs Code, preparatory technical discussions within the Customs Code Committee are expected to start once the proposal for the amendment in the Customs Code has been submitted and to end one year after its adoption.

8. Duration of action:

1-2 years (depending on resources and progress in the Council and the Parliament).

9. Resource implications (for Commission)

same as for table 1.

Proposal for actions under E-Customs

3

1. What type of action is proposed?

Operational (co-operation between some MS)

Pilot project on automated exportation

2. Subject/Content (main issues:)

The pilot project would cover indirect exportation towards a third country involving at least 2 MS (in the first is situated the office of exportation and in the second the office of exit).

During the Finland seminar in December 2002, three MS volunteered to participate to the pilot project (PP), namely DE, IT and BE. Traders expressed interest to participate through selected companies.

3. Importance of the action: High

4. Expected results of the proposed action:

Ensure (in a computerised customs environment) that goods declared for export, outward processing or re-exportation have left the customs territory towards a third country, after a control of the admissibility of the export has taken place.

Integrate third countries data requirements relating to security aspects (and define common data elements required for exportation to third countries) in the flow of data between the customs office of departure and the customs office of exit.

Ensure optimal co-operation between customs offices of the MS involved

Identify bottlenecks and problems to solve

Share the experience and results with other current and future MS and traders, and serve as a model for the automated export procedure to be applied throughout the Community, and as a first tangible result of the electronic customs initiative after the implementation of the new computerised transit system (NCTS). Organisation of a seminar with all interested parties.

5. Measurement of the results achieved:

Evaluation of the results by MS and Commission (report), implementation by the Member States concerned.

6. Cost and benefits for the main stakeholders:

6.1. Commission

Costs: Costs will be covered by Customs 2007 under "electronic customs" and by the Internal Market budget (seminar).

Benefits: Identify problems (legal and technical), including security aspects before changing the legislation (as exportation is already a two step procedure no major changes to the Customs Code are needed, but mainly to the implementing provisions) and before defining interfaces.

Having a concrete view on other countries requirements (such as CSI [38]), serve as a model for export automation in MS.

[38] CSI: Container Security Initiative.

6.2. Member States

Costs: Some technical adaptation of NCTS infrastructure may be needed.

Benefits: Same as for Commission.

Use of NCTS investment/infrastructure, even though external borders have moved and transit movements have been reduced. Maintain customs offices in the old MS with no external border. Improved security and compliance.

6.3. Traders

Costs: Possible technical adaptations to electronic interface with customs

Benefits: Improvement in customs clearance and release time.Better proof of export for tax purposes. Simplification and streamlining of compliance obligations (including foreign countries requirements in the CSI context) and procedures

7. When is the action planned to take place?

During 2003 and throughout 2004. Preparatory meetings have already taken place.

8. Duration of action:

+/-1 to 2 years (depending on resources).

9. Resource implications (for Commission)

same as for table 1.

Proposal for actions under E-Customs

4

1. What type of action is proposed?

Technical

Evaluate current IT environment for the creation of a convergence framework between MS

2. Subject/Content (main issues:)

Achieve a convergence framework among MS (who currently run different electronic systems for customs and related purposes) in view of ensuring interoperability, a technical evaluation is needed.

3. Importance of the action: High

4. Expected results of the proposed action:

Identify problems and propose solutions in order to ensure interoperability between the MS IT systems

Define technical specifications for convergence

Produce and publish a report based on the information given by MS

5. Measurement of the results achieved:

Evaluation of the results by MS and Commission, endorsement of a convergence roadmap.

6. Cost and benefits for the main stakeholders:

6.1. Commission

Costs: The work will be carried out by MS (with the assistance of the Commission) in the Customs 2007 framework. Costs for meetings will be covered by C2007 under "electronic customs".

Benefits: If a convergence framework between different systems allows interoperability, the financial and human resources required for a centrally run Commission system can be avoided.

6.2. Member States

Costs: Travel costs will be covered by C 2007.Human resources : 1 per MS

Benefits: Member States invested already significant money and resources in their IT systems. Making use of them (instead of introducing a new system) through technical adaptations, will allow them to save public money and human resources (no new training needed)

6.3. Traders

Costs: Some technical adaptations, insofar as current interfaces change.

Benefits: Traders who already do customs transactions electronically, are accustomed to the IT system of the MS in which they are established. No further training and technical investment is needed, if MS system can be maintained.

7. When is the action planned to take place?

Throughout 2003 and 2004.

8. Duration of action:

+/- 2 years

9. Resource implications (for Comission)

same as for table 1 +1 informatics specialist

Proposal for actions under E-Customs

5

1. What type of action is proposed?

Technical

Define appropriate interfaces in order to ensure interoperability

2. Subject/Content (main issues:)

In order to ensure interoperability among MS (who currently run different electronic systems for customs purposes) it is important to define appropriate technical interfaces:

Customs to Customs

Customs to other administrations (one stop shop)

Customs to traders/traders to customs

3. Importance of the action: High

4. Expected results of the proposed action:

Identify problems and solutions in order to ensure interoperability between the MS systems

Define technical specifications for convergence

Produce and publish a report based on the information given by MS

5. Measurement of the results achieved:

Evaluation of the results by MS and Commission.Produce and endorse interface specifications.

6. Cost and benefits for the main stakeholders:

6.1. Commission

Costs: The work will be carried out by MS (with the assistance of the Commission) in the Customs 2007 framework. Costs for meetings will be covered by C2007 under "electronic customs"

Benefits: If a convergence framework between different systems allows interoperability, financial and human resources required for a centrally run Commission system can be avoided.

6.2. Member States

Costs: Additional software updating costs, but these costs are similar to those that would normally be incurred during the maintenance and evolution cycle of their software.

Benefits: MS invested already a lot of money and resources in their IT system. Making use of them (instead of using a new system) through appropriate interfaces, will allow them to save public money.

6.3. Traders

Costs: Investment necessary to access the services, including client software and training.

Benefits: General reduction in the costs of doing business in the EU by having one single interface to all EU customs administrations (currently 15 and soon 25 different interfaces).

7. When is the action planned to take place?

Throughout 2004 and 2005.

8. Duration of action:

+/- 2 years

9. Resource implications (for Commission)

same as for table1 + 1 informatics specialist

Proposal for actions under E-Customs

6

1. What type of action is proposed?

Technical

Define common standards for common data requirements

2. Subject/Content (main issues:)

In order to ensure interoperability among MS (who currently run different electronic systems for customs purposes) it is important to define common standards for the exchange of data from:

Customs to customs

Customs to other administrations (one stop shop)

Customs to traders/traders to customs

Moreover, it is important to agree on a minimum common core of data (as under NCTS) which will be exchanged between them and will allow electronic handling of the goods flow.

3. Importance of the action: High

4. Expected results of the proposed action:

Identify a common core set of data and standards

5. Measurement of the results achieved:

Produce and endorse list of core data and standards.

6. Cost and benefits for the main stakeholders:

6.1. Commission

Costs: The work will be carried out by MS (and the Commission) in the Customs Code Committee and in the Customs 2007 framework. Costs for meetings will, in the second case, be covered by C2007 under "electronic customs".

Benefits: A common standardised set of data will facilitate exchange of information between stakeholders.

6.2. Member States

Costs: Travel costs + 1 person per MS.

Benefits: Same as for Commission.

6.3. Traders

Costs: Cost of adaptation of existing data structure and codes.

Benefits: General reduction in the costs of doing business in the EU by having standardised and common data at Community level.

7. When is the action planned to take place?

Throughout 2003 and 2004.

8. Duration of action:

+/-2 years.

9. Resource implications (for Commission)

same as for table 1 + 1 Informatics specialist.

ANNEX 2

Main costs and benefits for traders and administrations

>TABLE POSITION>