Table of contents 1.Introduction Purpose, scope and methodology of the evaluation 2.What was the expected outcome of the intervention? 2.1Description of the intervention and its objectives 2.2 Points of comparison 3.How has the situation evolved over the evaluation period? 3.1.Current state of play 3.2.State of implementation of the UCC package (legal and IT aspects) 4.Evaluation findings (analytical part) 4.1.Preliminary remarks 4.2.To what extent was the intervention successful and why? [Related criteria to assess: effectiveness, efficiency, coherence] 4.2.1 Effectiveness and Efficiency 4.2.2 Coherence 4.3.How did the EU intervention make a difference? [Related criterion to assess: EU added value] 4.4.Is the UCC still relevant? 5.What are the conclusions?

Annex I: Procedural Information Annex II. Methodology and Analytical models used Annex III. Evaluation matrix and, where relevant, Details on answers to the evaluation questions (by criterion) Annex IV. Overview of benefits and costs [and, where relevant, Table on simplification and burden reduction] Annex V. Stakeholders consultation - Synopsis report Annex VI. The Union Customs Code Legal acts, IT Systems and planning and Intervention Logic Annex VII. UCC State of Implementation



Glossary Term or acronym Meaning or definition AEO Authorised Economic Operator AEO-C Authorised Economic Operator (Customs simplifications) AEO-F Authorised Economic Operator (Full authorisation) AEO-S Authorised Economic Operator (Security and safety) AES Automated Export System BOI Binding Origin Information BTI Binding Tariff Information CBA Cost-benefit analysis CCC Community Customs Code CCI Centralised Clearance for Import (electronic system) CCIP Community Customs Code Implementing Provisions CCT Common Customs Tariff CD Customs Declaration CDMS Customs Decisions Management System CDS Customs Decisions System CEA Cost-effectiveness analysis CEG Customs Expert Group CEG GEN Customs Expert Group General Customs Legislation Section CUP Customs Union Performance DG AGRI Directorate-General for Agriculture and Rural Development DG GROW Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs DG TAXUD Directorate-General for Taxation and Customs Union DG TRADE Directorate-General for Trade DSB Dispute Settlement Body EBTI European Binding Tariff Information EC European Commission ECA European Court of Auditors EIDR Entry in the Declarant’s Records ENS Entry Summary Declaration EO Economic operator EORI Economic Operators Registration and Identification EP European Parliament EQ Evaluation question EU European Union EUROSTAT European Statistical Office F4F Fit for Future Platform FTE Full-time equivalent GATT The General Agreement on Tariffs and Trade GSP Generalised Scheme of Preferences GUM Guarantee Management (electronic system) HDR Harmonised data requirements IA Impact Assessment ICS Import Control System INF Standardised Exchange of Information for Special Procedures IT Information technology MASP-C Multi-Annual Strategic Plan for Electronic Customs MCC Modernised Customs Code MS Member State MSME Micro-, small- and medium-sized enterprises NA Notification of Arrival NCTS New Computerised Transit System NIS National Import Systems OLAF European Anti-Fraud Office PN Presentation Notification PoUS Proof of Union Status REX Registered Exporter System SASP Single Authorisation for Simplified Procedures SCM Standard Cost Model SP Special Procedures SURV3 Surveillance 3 TARIC Integrated Tariff of the European Union database TCG Trade Contact Group TFEU Treaty on the Functioning of the European Union TS Temporary Storage TSD Temporary Storage Declaration UCC Union Customs Code UCC-DA Union Customs Code Delegated Act UCC-IA Union Customs Code Implementing Act UCC-TDA Union Customs Code Transitional Delegated Act UK United Kingdom UUM&DS Uniform User Management and Digital Signature VAT Value-added tax WCO World Customs Organization WTO World Trade Organization 1.Introduction Purpose, scope and methodology of the evaluation The purpose of this evaluation is to provide an interim assessment of the implementation of the Union Customs Code (UCC) at both EU and Member States’ levels. Since its entry into force in 2016, the UCC is the main legal and IT framework for customs processes in the EU customs territory. The UCC aims: -to protect the financial interests of the Union and the Member States -to protect the safety and security of EU citizens and -to maintain a proper balance between customs controls and facilitation of legitimate trade. To accomplish these goals, the UCC aims, in particular, to achieve more simplicity and uniformity in the application of customs rules in order to enhance the competitiveness of European businesses and to provide a fully electronic environment for the completion of customs formalities by customs authorities and economic operators, via the deployment of 17 electronic systems (see Annex VI). The Commission carried out this evaluation following a request of the European Parliament to take stock of the state of play of the implementation of the customs legislation and the delivery of electronic systems set out in the UCC and to ensure that the customs regulatory framework formed by the UCC is effective, proportionate and fit for purpose both for Member States and for trade operators. In an initial report published on 22 January 2018 , the Commission found that the UCC had not encountered any major legislative problems during its first eighteen months of implementation, despite the major changes introduced. However, the Commission also acknowledged that the impact of the UCC would have to be assessed in a more comprehensive way. The UCC package is composed of the basic Regulation (the UCC) and several delegated and implementing acts (see Annex VI). In line with the request from the European Parliament, the evaluation focuses on the implementation of the UCC package, i.e. the different activities and mechanisms progressing from its existence as a legal text to its correct interpretation, implementation, application and enforcement by the Commission and the Member States. More details about this approach are provided in section 2.1 and in the intervention logic in Annex VI.

The evaluation period goes from 1 May 2016 (the date from which the UCC’s substantial provisions started being applied) to end of December 2020 (original date by which all the UCC IT systems should have been deployed). The geographical scope of the evaluation includes all Member States. While the United Kingdom was a Member State in the period considered, it is not included in the analysis due to the impossibility of collecting relevant data from its customs authority. From a methodological point of view, the main input for the evaluation comes from an external study carried out by Economisti Associati from August 2020 to November 2021 In addition, ad-hoc consultations were also carried out at meetings of the Trade Contact Group (TCG) and internally among Commission services. Finally, the opinion of the Fit for Future Platform (F4F) has also been taken into account in the analysis. It includes suggestions on simplifying and reducing potential unnecessary costs in the Code. The methodology used in the supporting study was composed of two phases: ·A detailed overview of the UCC’s practical implementation in terms of its rules, procedures and IT systems, mainly based on desk research and on the replies to a targeted questionnaires by the 27 customs authorities and by 21 economic operators representing EU level business associations and companies in the field of logistics, sea, air and rail transport, express operators, postal operators, shipping, airports and seaports operators between November 2020 and February 2021. ·Given the impossibility of analysing every change introduced by the UCC and considering that not all changes were impactful, a sample of the most significant UCC provisions and changes (eight “key issues”) was used for an in-depth analysis in the evaluation phase through the prism of the Better Regulation criteria (effectiveness, efficiency, relevance, coherence and EU added value). The choice of the eight topics was based on the outcome of the implementation review phase described above and an analysis by the Commission of the most impactful topics arising. The sample does not cover the standard rules on the main customs processes (import, export, transit) because the UCC’s predecessor, the Community Customs Code, already codified those core rules. As the UCC digitalised these procedures and the related formalities, the issues selected for the evaluation were intended to cover the areas in which the UCC introduced substantial changes, such as rules on customs decisions, authorised economic operator, temporary storage, guarantees, simplifications to the customs formalities and clearance processes and harmonised data requirements. In addition, the sample also includes the IT systems that were already deployed by 2020 (central IT systems) and an area in which the European Court of Auditors had identified problems (risk management). Each of the eight topics was carefully selected and considered as representative of a broader group of related aspects rather than a single legal provision or IT system. More details are in section 4 and annex II. Data and evidence for this second phase of the study include: i) the above mentioned implementation questionnaires; ii) 112 interviews with Commission officials (13), customs officials (61) and national economic operators (38 among federations and individual companies) in a sample of 10 Member States; iii) a public consultation with 126 respondents, mainly economic operators (112), nearly half of which were large companies (250 or more employees); iv) and an IT costs assessment for five UCC systems. Given the practical difficulty with covering all Member States for the broad scope of the evaluation, the sample of Member States (Germany, Netherlands, France, Italy, Poland, Ireland, Sweden, Romania, Estonia, Luxembourg) aimed at ensuring a proper balance in terms of geographical location, population size, share of EU GDP; trade volumes and specific interest for customs purposes (i.e. exposure to e-commerce flows, external borders, level of IT development). In the public consultation, wherever possible, findings were cross-checked, either using input from different stakeholders or data collection methods, or secondary sources. The assessment provided in this evaluation is intended to be as comprehensive as possible but is limited by certain specific factors, for which mitigation actions have been taken, as follows: ·The very large scope of the UCC package in terms of rules and processes covered, and for that reason the choice to focus on eight key issues; ·Lack of systematic quantitative data for the cost-benefit analysis (CBA) and subsequently the focus on qualitative assessment based on information provided in the questionnaires and in the interviews with customs officials and economic operators at EU and national level. Nevertheless, a quantitative analysis was performed in the assessment of efficiency and some quantified figures serve to illustrate the scale of benefits and costs in specific cases. The reasons for this limitation mainly relates to: -difficulties for the stakeholders consulted with distinguishing the costs of adaptation to the new UCC rules from the costs of running the usual customs operations, as the need to adapt to new rules and IT systems has become a constant element in the customs environment; -the conceptual challenge of quantifying in monetary terms the benefits that the new rules and IT system are progressively bringing, namely certain types of benefits such as increased clarity of rules; -the difficulties for the national administrations in accessing and providing detailed data on costs, for confidentiality reasons, capacity constraints or internal practices. -The lack of mandatory monitoring arrangements in the UCC for its implementation, except the reporting obligation on the progress made by Member States on the development of IT systems; -The delays in the IT implementation (notably in the upgrade of the National Imports and the deployment of the national component of the Automated Exports systems by the Member States)) are not a main cause but limit the possibilities for providing quantitative data as such (e.g. the system Surveillance3 cannot work without data provided by the national systems). ·Reliance on stakeholder feedback: given the relative scarcity of relevant secondary data and the importance of stakeholder experiences for the implementation of the UCC, direct input from the widest possible spectrum of stakeholders was the main evidence source for the external study that provided the main input for this evaluation, via the consultation activities explained above. It is crucial to note that judgment criteria and indicators used in the evaluation include not only opinions of the stakeholders but also take into account the fact that those stakeholders are in possession of the data necessary for the analysis of the UCC implementation (especially customs authorities, who are the ones responsible for the implementation on the ground). Feedback expressed in the questionnaires, interviews and in the public consultation were cross-checked, wherever possible, either using input from different stakeholders or data collection methods, or secondary sources, including from the Customs Union Performance tool. Overall, this should ensure sufficient confidence in the findings of the evaluation, although these are not based on statistically representative samples or objectively ‘hard’ data. ·Partial implementation of the UCC package, as the legal deadlines for the completion of certain IT projects will expire after the temporal scope of the evaluation. Instead, the evaluation covers five IT systems that were deployed by the end of 2020, in line with the temporal scope of the evaluation itself. ·New challenges: Some of the findings of this evaluation refer to the absence in the UCC package of adequate solutions to the issues encountered by customs authorities when faced with matters such as e-commerce. The external study addressed this problem in the form of topical case-studies, offering a horizontal analysis of inter-related elements which emerged during the “main” line of research (see Annex 4 of the study). 2.What was the expected outcome of the intervention? 2.1 Description of the intervention and its objectives

The UCC entered into force on 30 October 2013 although most of its substantive provisions took effect from 1 May 2016. The UCC provides for a comprehensive legal and IT framework governing nearly all aspects of how EU customs operate, and covering all customs domains, procedures, declarations, decisions, systems, etc. The UCC is the main legal and IT framework for customs processes in the EU Customs Union. The EU Customs Union is more than 50 years old. The Customs Union means that EU Member States apply a common system of customs duties to imports of goods from outside the EU customs territory. There are no customs duties and no customs controls at the borders between the EU Member States. Member States’ customs authorities supervise all goods entering or leaving the EU customs territory, regardless of their mode of entry or exit. The UCC repealed the 1992 Community Customs Code (“CCC”) . The CCC for the first time consolidated the EU’s main customs regulations in one single text and converted the customs union from a space in which the same tariffs applied into an area of full regulatory integration. The CCC already regulated in detail the main customs procedures (release for free circulation, transit, customs warehousing, processing, temporary admission and exportation), the factors used to calculate customs duties (origin and value of the goods) and the customs debt. Although a major achievement and a facilitation for businesses at that time, the procedures and practices under the CCC relied on the use of paper documentation. This was not suited to a modern, electronic business environment and to the increasing responsibilities of customs authorities at the border of the Union, in matters going beyond the traditional collection of duties (such as addressing security and safety challenges, illegal cash movements and counterfeit goods). A first attempt to modernise customs took place through the adoption of a Decision on electronic customs in late 2008. A second attempt was the adoption of the Modernised Customs Code (“MCC”) . Due to the new rules and procedures introduced by the Lisbon Treaty the Commission was obliged to recast the MCC before its planned application date, which led to the adoption of the UCC and its accompanying acts. The UCC effectively applies from May 2016. The UCC codifies for the first time in the history of the Customs Union the mission of the customs authorities, thereby setting the general objectives of the Customs Union as such, namely: (1) to protect the financial interests of the Union and the Member States; (2) to protect the safety and security of EU citizens and (3) to maintain a proper balance between customs controls and facilitation of legitimate trade. As the CCC already codified the main customs procedures, the UCC was never meant to introduce major substantial changes in those procedures but rather to consolidate them and adapt them to new realities, notably the use of electronic means. Accordingly, the specific objectives of the UCC are (1) to streamline and simplify the existing customs rules, procedures and processes; (2) full automation of all customs procedures and processes; and (3) to strengthen legal certainty, uniformity and predictability of customs rules. The intervention logic of the UCC implementation is represented in annex VI. The main innovations of the modern approach adopted in the UCC package included: 1.Principle that all customs and trade transactions are to be handled electronically; 2.No limitations on the right of customs representatives to provide services in a Member State other than his place of establishment, to ensure a level playing field; 3.Harmonised and standardised application of customs controls by the Member States, to ensure an equivalent level of customs control throughout the Union; 4.Harmonised and predictable common rules on customs decisions issued by the Member States, including on the issuing of customs authorisations and on binding customs decisions on tariffs and on origin; 5.Stronger rules and criteria for granting the status of Authorised Economic Operator (AEO) to compliant and trustworthy economic operators who can enjoy the possibility of using customs simplifications, benefit from facilitations relating to security and safety and more favourable treatment in respect of customs controls; 6.Compulsory guarantees for all customs procedures, so as to safeguard the EU’s own resources and financial interests, coupled with the availability of reductions and waivers for AEOs; 7.New simplifications of customs clearance processes for operators fulfilling some or all of the criteria required for obtaining the Authorised Economic Operator status, such as the authorisations (see section 4.1.2). Key to achieving the objectives of the UCC is the progression of customs to a paperless, integrated and fully electronic environment. To this end, the UCC established common rules and data requirements for customs pre-arrival and pre-departure declarations, notifications, applications and decisions, which are to be processed through the upgrade or development of seventeen electronic systems detailed in Annex VI. The UCC initially provided for a transitional period ending on 31 December 2020 during which pre-existing electronic systems such as national import systems, and paper-based systems were accepted, while allowing sufficient time to develop or upgrade all the electronic systems that under the UCC should be used for the management of customs formalities. However, several factors led to delays in the IT implementation beyond the original deadline: 1.The end date of 2020 was chosen for financial reasons, as this was also the end date of the Multi-annual Financial Framework 2014-2020, although it was a very ambitious deadline from the outset. 2.The scale and complexity of the work to complete by 2020 was underestimated in terms of financial and human resources, including insufficient allocation of staff. 3.The late adoption at the end of 2015, as a result of the complexity of the provisions involved and the ensuing discussions with Member States and businesses, of the necessary delegated and implementing rules, including the common data requirements, resulted in the Commission and the Member States not being able to comply with the original planning for the IT developments.

4.There were technical reasons such as the harmonisation with the international data models and the need to ensure the necessary sequential development of the systems for their correct interoperability. The UCC was amended in 2019to postpone the end of the transitional period from 2020 to 2022 for three national systems and to 2025 for six (trans-European) systems. The UCC electronic systems are being deployed by 2025 as planned (see IT planning in Annex VI). In addition, to better monitor the process, the UCC now clearly requires Member States to provide the Commission with information regarding their progress on completing the IT work and, based on that, the Commission must produce annual progress reports. 2.2 Points of comparison In the absence of an impact assessment of the UCC, the baseline scenario below is partially “reconstructed” based on the impact assessment on the proposal for the UCC’s predecessor, the Modernised Customs Code (MCC), which dates back to 2003-2005, and on a WTO dispute between the US and the EU on customs matters. Both revealed a series of problems (mainly the need to shift to an electronic customs environment and to ensure a uniform application of customs legislation across the EU) for which Union action was needed, the UCC being the response to those needs. The impact assessment on the proposal for an EU Modernised Customs Code provides some indication of what the situation, in terms of the functioning of the Customs Union, was like before the UCC and what changes were needed to adapt the customs legislation to the reality of an electronic customs environment and to simplify and restructure the rules contained therein. However, since the policy, trade and technological context had shifted in the intervening period, the original impact assessment can only serve as an indicative but not firmly established baseline for the UCC. Moreover, the MCC impact assessment did not quantify the scenarios and problems assessed therein, therefore it is not possible to report quantitative evidence from that analysis. Overall, the problems identified during preparatory works for the MCC oscillated around: a)Paper-based processes and non-interoperable systems: customs procedures and processes were, in the mid-2000s, mostly based on paper declarations. Although all Member States offered and economic operators used electronic customs clearance, electronic declarations and the electronic submission of supporting documentation were considered to be exceptions and required the approval of customs authorities. In addition, where electronic processes did exist, the different IT systems in the Member State could not communicate between them, due to the lack of common rules for electronic clearance (apart from the new computerised transit system – NCTS), and of common standards for the use of IT in the customs area. b)Insufficient trade facilitation and the need for efficient, predictable and cost-effective customs formalities, such as effective simplifications. c)Scope for greater uniformity in implementation of rules and decisions: in the Community Customs Code, certain operational and implementation issues were left to Member States’ decisions, leading to divergent practices and additional burdens for economic operators. Further uniformity in the implementation of customs legislation, simplified and streamlined rules and more efficient procedures for adopting implementing provisions and guidelines were needed. d)Legislation not in line with the new role of customs: the Community Customs Code mainly dealt with procedures aimed at ensuring that customs duties were collected and provided for procedures allowing a suspension of duty liability. It did not reflect the shift of customs work to new tasks such as: ·enforcing prohibitions and restrictions imposed in order to ensure the non-proliferation of weapons of mass destruction, arms, dual-use items, the protection of cultural heritage, of industrial or commercial property, of the environment, including endangered species; ·ensuring that VAT and excise duties are paid at import and certifying exit for VAT and excise duty exemption; ·ensuring that the formalities for goods benefiting from export refunds are fulfilled. The customs legislation in the pre-UCC era was scrutinised in the case “EC selected customs matters” taken by the United States against the European Communities before the WTO Dispute Settlement Body (DSB) in 2004-2006. The subject of the case was, amongst others, the alleged lack of uniformity in the application of the customs law adopted by the European Communities (now Union) and implemented by the Member States, as required by Article X:3(a) GATT. Throughout the dispute, it was argued that different interpretations of EU customs legislation were identified in the areas of classification of goods (e.g. conflicting Binding Tariff Information (BTI) decisions on the same class of goods), valuation (e.g. lack of EU tools for ensuring uniform application of the rules, such as a binding IT system and limited ability of the Commission to impose uniformity or to reconcile different interpretations), and customs procedures (e.g. different approaches taken by Member States in carrying out audits after the release of the goods, varied assessments of the economic conditions necessary for granting the authorisation for the procedure "processing under customs control” (now inward processing), non-uniform requirements in the Member States for the application of the “local clearance” procedures). While the WTO appellate body found that it was “unable to complete the analysis with respect to the United States’ claim that the European Communities’ system of customs administration as a whole or overall is not administered in a uniform manner”, it nevertheless recommended that the European Communities take some action. The MCC (and therefore the UCC as its recast) was part of the Union response to that request. In particular, the creation under the UCC of an IT system, Binding Tariff Information (eBTI), to record the decisions on tariff classification adopted by the Member States addresses the problem of a disparities among Member States on tariff classification. Similarly, the simplification and redefinition of the special customs procedures and the streamlining of the rules for issuing customs decisions are intended to address the criticism towards the lack of uniform application of the customs rules in these areas. 3.How has the situation evolved over the evaluation period? 3.1.Current state of play The European Union is one of the largest trading blocs in the world, alongside the United States and China, accounting for around 14% of global trade, equivalent to a value of EUR 3.6 trillion in 2020.

Looking at the trend over time, as of 2012 the EU trade balance recorded a continuous surplus that peaked at EUR 264 billion in 2016. The EU surplus decreased in 2017 and 2018 and started to increase again in 2019 and 2020. The increase in trade increases the need for efficient customs procedures. Looking more closely, half of EU external trade was primarily with four main partners in 2020: China, the United States, the United Kingdom and Switzerland. These were the same as in 2016, with the difference that while the UK was a Member State, Russia was in the top 4 trade partners. Since the UCC entered into force in 2016, a general increase can be observed for imports and exports of the EU, which is reflected in increasing volumes of transactions handled and a generally positive if irregular trend concerning the collection of customs duties. Source: DG TAXUD data (for 2020, data are for EU27) The evolution in the collection of customs duties shows a peak in 2019 and significant decrease in 2020, compared with the value of imports in the 2020 COVID-affected year. This can be explained by the fact that the average value of imported item decreased from EUR4 443 in 2019 to EUR2 581 in 2020. Most of those items were protective equipment against COVID-19 (see below), which was, in certain circumstances, exempt from duties. New developments in the period covered by the evaluation Three developments arose during the evaluation period, all having a significant impact on how the situation(s) that the UCC was meant to regulate evolved during that time, namely: the COVID-19 pandemic, the increase of e-commerce and Brexit. In 2020, EU trade was hit hard by the COVID-19 pandemic, as shown below. . In March 2020 several Member States asked for a flexible application of the UCC customs provisions relating to the customs decision-making process, duty collection, customs procedures and customs formalities so as to address problems deriving from the disruption of trade flows, delays, restrictive measures for the movement of persons taken by the Member States and the related unavailability of staff. The Commission provided customs guidance in the form of guidelines and other explanatory documents to illustrate the solutions offered by the Code to address the exceptional circumstances at play, in the absence of clear exceptions based on force majeure allowing for deviations from the regular application of UCC requirements.. As regards e-commerce, the UCC was conceived for a business model mainly based on traditional trade, done by cargo vessels sailing the seas to move large quantities of similar goods into and outside the EU customs territory. While this model still largely exists today, the dramatic increase in e-commerce transactions, in which low value consignments are individually shipped from third countries to the final consumers in the Union, is today one of the main challenges faced by customs authorities and by the customs legislation they are called to apply. In order to solve urgent problems which had emerged in this area regarding the collection of VAT, new VAT e-commerce rules were adopted in 2017, introducing a new set of fiscal requirements aimed at regulating the flows of low value consignments, which are those with a value below EUR150. Customs provisions had to be adapted to support the enforcement of the VAT rules and requirements for e-commerce movements. The new rules apply from July 2021 and are therefore outside the evaluation period. However, preliminary analysis of the implementation for the new rules shows a massive increase in volume of import traffic with approximately 660 million import declarations lodged for low value consignments only in the period July-December 2021 (for comparison, the total number of imported items was around 690 million in the full year 2020). E-commerce transactions are also problematic as regards compliance with prohibitions and restrictions applied in the EU linked to non-financial risks. A third event, unforeseen at the time of the UCC’s drafting, which has had an impact on the implementation of the UCC, is the UK’s withdrawal from the European Union. Member States’ customs authorities were obliged to devote resources to preparing for the impact of their trade with the UK shifting from intra-Union trade, for which no customs formalities are required, to third-country trade for which full import and export formalities are required. Some Member States doubled the number of customs declarations that their systems had to process. The difficulties in dealing with customs formalities partly explain why in the first four months of 2021, export value to the UK (€89,6 billion) decreased by 1% and import value from the UK (€33 billion) decreased by 43% in relation to the same interval in 2020 (€90,1 billion and €57,4 billion, respectively). 3.2. State of implementation of the UCC package (legal and IT aspects) This section includes an overview of the state of the implementation of the UCC legal provisions and IT systems in the period 2016-2020.

Given the lack of sufficiently accurate, up to date and comparable data, input for the implementation review was comprised mainly of (i) desk research and (ii) responses to questionnaires that all Member State customs authorities and a sample of EU level business organisations and individual economic operators answered, as explained in Section 1. The written consultation sought opinions on the six main areas that the UCC had modified (namely, customs procedures and declarations; customs decisions and AEO authorisations; centralised systems related to the rules on tariff, origin, valuation; customs debt and guarantees; formalities for the entry of goods and temporary storage; special procedures) and covered in total 24 sets of legal provisions. Implementation of the UCC legal provisions Given the many and diverse provisions under review, it is difficult to draw simple, general conclusions about the state of implementation. However, national customs authorities indicate that progress with implementation of the legal provisions is largely on track within the frame of deadlines as currently defined, while keeping in mind that the timeframe for certain provisions has been extended in line with the delays to related IT projects. Economic operators showed more concern about the progress made, but this likely relates to communication issues, which prevent them from being fully aware of the periodic amendments that have been made to the UCC provisions. Table 1: How would you rate the overall state of implementation of the UCC in your country with regard to the deadlines as they are defined at the time of writing? Application of the legal provisions Ahead of schedule On track Somewhat behind schedule Facing significant delays Don’t know No response National customs authorities - 20 (74%) 4 (15%) - - 3 (11%) Economic operators - 6 (29%) 5 (24%) 2 (10%) 2 (10%) 6 (29%) Source: Economisti Associati (2021); Base: 27 Member States, 21 economic operators (TCG members). Concerning the difficulties in implementing the above mentioned 24 sets of legal provisions, customs authorities and economic operators indicated that no sets of legal provisions are – on average – generating ‘major’ difficulties and challenges. They found on average ‘minor’ challenges in implementing all sets of provisions. Authorities and economic operators also expressed broadly similar views, with exceptions mostly reflecting their differing roles in the customs ecosystem. For example, the reduction in the types of customs warehouses created more difficulties for economic operators that needed to adjust their business processes (see Annex VII). Based on desk research, questionnaires and interviews with customs authorities and traders in the selected ten Member States, the 24 sets of UCC legal provisions can be categorised into four groups, according to the difficulties in implementing the provisions and to the uniformity of how they have been/are implemented by the Member States. Table 2: Difficulties with implementation by category of provisions None to minor implementation difficulties Moderate to major implementation challenges Relatively uniform understanding / application Group 1 ·Increased scope of compulsory guarantees ·Guarantees that are valid in more than one Member State ·Assessment of a customs debt / establishing reference amount ·Time limits for customs decisions ·Binding nature of BTI and BOI decisions ·Possibility to lodge BTI / BOI applications for any customs procedure ·Deletion of the concept and list of sensitive goods Group 3 ·Harmonised data requirements ·Changes for low-value consignments ·Review of pre-existing authorisations ·Lodgement and treatment of ENS and other ‘Pentalogy’ steps ·Comprehensive guarantees ·Reduction in the types of customs warehouses Relatively large discrepancies between Member States Group 2 ·Rules for temporary storage ·New AEO criterion ·Decisions on extinguishment of a customs debt ·Right to be heard ·Simplification of the rules on free zones Group 4 ·Simplifications (i.e. EIDR, self-assessment and SASP) ·Reduced / waived guarantees ·Electronic declarations ·Use of electronic transport docs as transit declarations ·Common provisions for special procedures ·Rules for customs valuation Source: Economisti Associati (2021) The first group is comprised of seven sets of provisions relating mostly to legislative changes that are independent of IT developments and that have been implemented largely to plan, in a relatively uniform way across Member States. For example, in the case of the increased scope of compulsory guarantees, the introduction of guarantees that are valid in more than one Member State and the imposition of time limits for customs decisions, the targeted consultation customs officials confirmed that these crucial provisions are being applied in a uniform way, while no major problem arose in terms of implementation. The second group includes provisions where the Member States have adopted different approaches but where implementation has nonetheless posed few or only minor challenges so far. For example, during the interviews several Member States complained about the lack of clarity and guidance for applying the new ground for the extinguishment of a customs debt, but none to date had experienced a situation where this new ground would actually need to be applied. Different approaches based on more uniform rules without significant problems also relate to temporary storage and to the new AEO criterion on practical standards of competence or professional qualifications. Group 3 contains provisions that have been problematic despite largely harmonised rules, because they entail more complex, interrelated changes, and/or rules concerning delays to IT developments. In case of the harmonised data requirements, given the varied starting points of each Member State and the frequent changes for adapting the IT systems, hardly any Member States have been able to apply the common requirements introduced by the UCC. This problem has been solved with the new Annexes B that was published in March 2021. Other sets of provisions in this group are based on similar dynamic. For example, several Member States pointed to difficulties in applying comprehensive guarantees, in part because the IT developments are still ongoing. With regard to the lodgement and treatment of ENS, customs administrations are facing disruption both due to the fluctuating IT specifications, and reliance on the on-going ICS2 IT project. Overall, the difficulties in implementing these sets of provisions highlight the difficulty of applying harmonising rules and practices in areas where Member States previously had more discretion, which has led to some friction. The last group consists of provisions where a lack of clarity and/or divergent interpretations of the rules have already caused significant problems. These were especially acute (particularly for economic operators) with regard to several simplifications, namely the possibility to lodge customs declarations via an entry in the declarant’s records (EIDR), the self-assessment authorisation and the Single Authorisation for Simplified Procedures (SASP, the predecessor of the centralised clearance). Economic operators considered the simplifications unattractive, partly because of the non-harmonised approaches being taken across Member States. For example, since EIDR corresponds closely to simplifications already available at national level before the UCC, those Member States that already had processes in place could implement the new rule seamlessly, but for those who had not, the alignment was more challenging and the risk of divergent practices augmented. In case of self-assessment, this has not been applied in any Member States, which seems at least partly because national customs authorities are not sure how it should be implemented. For reduced and waived guarantees, some customs authorities reported a lack of clarity in how to apply this possibility for AEOs in practice, which lead inevitably to discrepancies across Member States. Economic operators cited difficulties in the area of electronic customs declarations, because these continue to depend on IT systems and requirements that vary by country. Despite the efforts to improve legal clarity for some of these sets of provisions, e.g. for the interpretation of rules on customs valuation, for other areas proper guidance and clarity is still lacking. One of the most significant UCC simplifications, centralised clearance, is evidently awaited by stakeholders as a major benefit, but is dependent on the completion of the IT project Centralised Clearance at Import (CCI). Infringements Compliance by Member States with the provisions of the UCC has been mostly commendable. In the years 2016 – 2020, 156 complaints were registered in CHAP, 13 EU Pilots were launched leading to 5 infringement or potential infringement procedures. Of these 5, 3 were resolved and closed before reaching the stage of issuance of a letter of formal notice, and 2 are yet to be launched. The categories of provisions that were most frequently the subject of proceedings concerned the value of goods for customs purposes (Article 69 UCC, four proceedings), followed by the limitation of the customs debt (Article 103 UCC, three proceedings). Implementation of the UCC IT systems At the end of 2020, the Commission can report the successful completion of eight systems out of seventeen. The remaining nine IT systems will be deployed progressively until 2025. A detailed list and planning of the systems is included in Annex VI.

Around half of the consulted Member States reported that the overall state of implementation of the UCC IT systems was on track, while less than a third acknowledged it was somewhat behind schedule. However, the latter finding likely refers to work on the systems that were delayed legally, whose scheduled dates for completion are in 2022 and 2025. Economic operators were less optimistic, with three quarters of respondents to the questionnaires reporting some or even significant delays. However, their opinion could relate to economic operators’ reduced awareness of the details of the IT projects and continued focus on the original deadlines. Table 3: How would you rate the overall state of implementation of the UCC [with regard to the development and deployment of the IT systems] in your country with regard to the deadlines as they are defined at the time of writing? Development and deployment of the IT systems Ahead of schedule On track Somewhat behind schedule Facing significant delays Don’t know No response National customs authorities - 13 (48%) 10 (37%) - - 4 (15%) Economic operators - 3 (14%) 7 (33%) 2 (10%) 3 (14%) 6 (29%) Source: Economisti Associati (2021) Stakeholders were also consulted on specific difficulties with the implementation of the main IT changes introduced by the UCC. The group of systems that was deemed to have given rise to the most significant implementation problems by both Member States and economic operators include the National Import Systems (due at the end of 2022), Automated Export System (AES, due in 2023), Centralised Clearance at Import (CCI, phase 1 in 2023, phase 2 in 2025) and Proof of Union Status (PoUS, due in 2024/25). This was followed by a group of systems that have already been deployed: Customs Decisions System (CDS), Trader Portal, and the Economic Operator System/Authorised Economic Operator database (EOS/AEO). The third group of systems that, according to respondents from both groups, has caused “moderate” difficulties on average is the Import Control System 2 (ICS2, for which, after the questionnaire was completed, the first release was deployed on 15 March 2021, final release in 2024). Overall, difficulties encountered by Member States and economic operators were fairly consistent, the main difference being that customs authorities perceived the implementation of the IT systems for notification of arrival, presentation notification and temporary storage (NA, PN and TS) to be far more problematic than economic operators (presumably because the latter are largely unaffected by them, for the time being at least). Regarding the eight IT systems that have already been deployed in the period 2016-2020, customs authorities encountered only minor challenges and are very satisfied with EORI, the EOs/AEO system, REX, and UUM&DS. Figure 3: Are the following new/upgraded IT systems functioning satisfactorily? Source: Economisti Associati (2021) 4.Evaluation findings (analytical part) 4.1.Preliminary remarks The findings below are based on the specific findings for the eight topics selected for in-depth analysis. These topics are meant to be a balanced choice reflecting i) the UCC changes that stakeholders perceive as most important, ii) changes that produced real benefits or posed significant challenges and iii) changes that are already implemented and from which data and evidence can be collected. The sample is therefore considered as indicative of the overall performance of the UCC to date, in spite of the limited quantitative data. Table 4: List and description of the eight key issues covered by the evaluation Key issue/change Brief description Harmonised data requirements The UCC has harmonised the information that is required in the different customs declarations and decisions (data requirements) throughout the EU. They are defined in great detail in the UCC delegated and implementing regulations (Annexes A and B). This is to facilitate the interoperability of the IT systems, the harmonised application of the rules, and alignment with international customs data models. However, due to frequent changes to the Annexes, and significant delays with the development of some crucial IT systems, the harmonised data requirements are not yet fully applied by the Member States. The requirements were revamped and stabilised in 2021. Before the UCC, electronic declarations and in particular the electronic submission of supporting documentation were considered to be exceptions. Moreover, where electronic processes did exist, the different IT systems in the Member States could not communicate between them, due to the lack of harmonisation of the data elements and their structure, and of common standards for the use of IT in the customs area. There were more data elements optional for different Member States. Harmonised rules and procedures for customs decisions The UCC comprehensively recast and streamlined the rules and procedures regarding the various types of customs decisions (UCC Art. 22-37). This includes new time limits for decisions upon application. A new, trans-European IT system (CDS) to harmonise the processes for application and management of customs decisions, in particular authorisations, was deployed in 2017 and upgraded in 2020. Before the UCC, each type of customs decision and authorisation was regulated by separate rules, which sometimes were repetitive and most of the procedural rules were dependent on the national law. There was not a dedicated IT system at EU level for submitting and processing the applications for decisions and for some of the decisions no specific deadlines for customs authorities to issue decisions, generating divergent practices across the Union. Obtaining and monitoring Authorised Economic Operator (AEO) status Authorised Economic Operators are operators being recognised a high level of trustworthiness for customs purposes. The UCC introduced a new criterion to become AEO related to possessing proven practical standards of competence or professional qualifications was introduced (UCC Art. 39(d)). Other AEO criteria were strengthened by adding additional conditions (UCC Art. 39(a), (b), (c) and (e)). The AEO IT system was upgraded to align the business processes related to AEO applications, authorisations and their management with the UCC changes. The AEO concept is based on standards introduced by the World Customs Organisation (WCO) and was introduced in EU law in 2008 through the 'security amendments' to the Community Customs Code. Traders who voluntarily meet specific conditions work in close cooperation with customs authorities to assure the common objective of supply chain security and are entitled to enjoy benefits throughout the EU. The experience gained during the implementation of the AEO programme indicated a need to strengthen some of the AEO requirements. At the end of 2020, there were 14,868 operators authorised as AEO, which were involved in 74,3% of the total Union imports and 83% of the total Union exports. AEO are therefore relevant to a very significant part of Union trade. Risk management and controls Risk management is the whole of the activities that seek to ensure that customs controls are based on electronic risk analysis with the purpose of identifying and evaluating the risks, and developing the necessary counter-measures, based on criteria developed at national or Union level. The UCC provides the legal base package to establish an EU Common Risk Management Framework and common action in this area (UCC Art. 46-50s). However, the UCC also provides significant room for Member State discretion. The focus of the evaluation was on whether the UCC provides an adequate framework for achieving a uniform level of controls that ensures the safety and security of the EU and its residents. Certain core common provisions on risk management and controls existed even before the UCC, however the majority of the operational rules were left to the discretion of national implementation. There were very limited provisions allowing for the exchange of information between Members States and with the Commission, including for areas like security and safety. Centralised IT systems for the implementation of rules on customs tariff, origin and valuation The UCC Work Programme foresees three IT centralised systems to support the implementation of UCC rules on customs tariff, origin and valuation, namely EBTI, REX and SURV3. These three IT systems did not exist before the UCC. Guarantees and guarantee management The UCC requires mandatory guarantees in more situations, as well as more situations where the guarantee must also cover import VAT and excise duty. Before the UCC, there were more cases where Member States could decide at national level whether to require a guarantee or not. This resulted on one hand, in different treatment of economic operators and on the other hand, in problems for collecting the customs debt when incurred. Changes to temporary storage requirements The UCC introduced new rules for temporary storage (which is the situation in which goods are before they are declared for any other procedure), including the need for an authorisation to run temporary storage locations, the maximum duration of that situation, allowing movements between temporary storage facilitates and ability to make declarations in advance. Before the UCC, most of the rules governing temporary storage were national. The period for which goods could stay in temporary storage was also much shorter, which was considered problematic for certain business models as well as for customs authorities. It was also not possible to move goods between different temporary storage facilities without placing the goods under transit. Customs Simplifications The UCC introduced several new simplifications to the customs clearance process: a) entry in the declarant's records (EIDR) authorises the holder to lodge a customs declaration in the form of an entry into the declarant’s own records, provided that the particulars of that declaration are at the disposal of the customs authorities in the declarant's system when the declaration is lodged; (b) centralised clearance authorises a holder to lodge, or make available, at the customs office where he is established, a customs declaration for goods, which are presented to customs at another customs office within the customs territory of the Union; (c) self-assessment authorises an AEO to carry out certain customs formalities that are to be carried out by the customs authorities, to determine the amount of import duty payable, and to perform certain controls under customs supervision. Other customs simplifications are the reduction or waiver of comprehensive guarantees and the permission to move goods to another Member State while they are still under temporary storage without using transit. There were a number of customs simplifications even before the UCC (e.g. local clearance procedure and simplified declarations). However, their use was not harmonised across the Member States, which resulted on the one hand in different treatment of economic operators and on the other hand in weaknesses in the level of controls. 4.2.To what extent was the intervention successful and why? [Related criteria to assess: effectiveness, efficiency, coherence] The implementation of the UCC legal and IT framework in the first five years after its entry into force is only partially successful. The UCC provided some tangible progress in improving the customs environment. However, such achievements are not evenly distributed across all the topics analysed in the evaluation and were realised at significant costs, in the expectation of future benefits that have not fully materialised in the period covered by this evaluation, for different reasons that will be examined in this chapter. This concerns in particular the provisions which rely on the deployment of IT systems that were delayed. In addition, the UCC implementation did not fully tap into the potential synergies with related policies and proper coordination between customs authorities and other relevant national administrations in charge of applying EU policies at the border. To analyse whether the UCC has been successful a comparison is made between its achievements in the period under consideration and the expectations of the legislator when the intervention was adopted, which are reflected in the objectives of the UCC. Such comparison also takes into consideration the benefits brought by the UCC against a description of the costs implicit in the implementation of the intervention. 4.2.1 Effectiveness and Efficiency

The UCC was expected: (a) to streamline and simplify customs rules and processes, (b) to provide legal certainty and predictability and (c) to create a paperless customs environment. The evaluation demonstrates that the UCC was in part successful in contributing to the achievement of these specific objectives, which translated into some tangible, direct benefits for the stakeholders involved in customs activities, in terms of simplification of customs clearance. However, the overall success is limited by structural, sometimes inevitable factors (e.g. Covid-19 pandemic, Brexit) that required shifts in implementation planning, relatively high initial costs and by transitional challenges that are expected to be solved over time. Brexit, in particular, necessitated significant advance preparatory work, commencing in 2017, to ensure customs operators and authorities would remain fully operational after the consequences of the UK’s withdrawal from the European Union took effect. The technical nature and interdependencies between various customs processes and rules makes it difficult to assess whether the problem is at Union level or at the Member States level. Unclear and/or complex legal provisions are to be associated with the Union level. However, the review shows that Member States and economic operators also found moderate to major difficulties in the implementation of rules of relatively uniform understanding (e.g. harmonised data requirements). The examination of the individual topics or groups of provisions covered by the evaluation provides a detailed insight into the general findings under the criteria of effectiveness and efficiency (see also Annex II). As regards the latter, it must be noted that in addition to limited availability of quantitative data, another factor that complicated the assessment is that at the current point in time significant transition and adaptation costs have already been incurred, but the gradual deployment of the IT systems (and hence the full implementation of many rules and requirements) is still in progress, meaning the most significant expected benefits will materialise once those systems are operational. Objective to streamline and simplify customs rules and processes The extensive consultation activities showed the UCC succeeded in streamlining customs rules in certain areas, insofar as it has rationalised, structured and framed the provisions better than under the Community Customs Code, and eliminated some redundant or unnecessary provisions. Referring to streamlining, three quarters of Member States reported some progress against this objective, with 24% of them saying that progress was significant (Figure 4). For around half of the respondents to the public consultation (65, mainly economic operators), the UCC contributed to the rationalisation of customs legislation in some or in a significant way (Figure 5). Figure 4: How much progress do you think has been made towards the specific objectives of the UCC since its substantive provisions entered into force on 1 May 2016? Source: Implementation questionnaire, Economisti Associati (2021) (2021) ; Base: 25 national customs authorities. Figure 5: To what extent did the UCC and its implementation to date contribute to progress towards these objectives? Source: Public consultation – UCC Interim evaluation (2021). There are several examples of the progress made by the UCC towards streamlining customs rules: -Customs decisions: the UCC has replaced, with a set of common rules located among the general provisions, rules that previously differed depending on the type of decision and were included in the different parts of the old Community Customs Code. Rules are now implemented through a new, trans-European IT system - the Customs Decision System (see infra, page 36), which harmonises the processes for application and management of customs decisions, in particular authorisations. -Temporary storage: the introduction of the 90-day maximum duration and the possibility to authorise a movement of goods from one temporary storage facility to another without a transit procedure, was assessed positively. -The harmonised framework for guarantees increased uniformity in the approaches of customs administrations to implementation. -The harmonised data requirements are seen by stakeholders as broadly fit for purpose, comprehensive, logically structured, and reasonably clear, although their frequent changes affected the legal certainty on the common data requirements (see infra). However, the success is less evident regarding the simplification objective. According to interviews with customs officials, a few specific areas were seen as simplified, while other elements have become more complex, which can be attributed to the fact that complex situations require more detailed rules. The reasons for this are both general (the need to deal with an increasingly complex global trade context), and structural, as the legal package is a vast, highly technical framework of rules that maintains a certain level of complexity, as too did its predecessor. The amount of practical simplification of the customs clearance processes achieved by the UCC legal framework and its implementation to date has fallen well short of the expectations of economic operators, which was confirmed by many of the interviewed customs authorities. In particular, -Customs decisions: the common requirements simplified the process both across different types of applications, but also across Member States, contributing to the reduction in differences in the requirements and processes. -Centralised IT systems supporting the implementation of UCC rules on customs tariff, origin and valuation: customs authorities and economic operators agree that they have successfully streamlined and simplified the related rules. -The harmonised data requirements has led to certain elements being defined in more detail and broken down in a more granular way, which has increased their overall complexity. If for some customs administrations this was seen as inevitable and ultimately beneficial, economic operators perceive it as an increasing burden mainly related to the need to update their systems and to the fact that national customs authorities may require certain additional data elements.

-The 90-day maximum duration for temporary storage, while reportedly making the monitoring simpler for some customs authorities (due to having only one maximum duration), has made the situation more complex for most economic operators consulted by imposing requirements for a guarantee, the need to obtain an authorisation and to designate a specified location for temporary storage. -For example, for some customs authorities and economic operators the new, more detailed criteria and conditions introduced by the UCC to obtain the AEO status have added complexity without giving operators access to significant additional simplifications. -Similarly, provisions on guarantees were clarified and streamlined to a certain extent but for stakeholders the new rules did not become simpler than under the previous code. The additional cases where the provision of a guarantee is mandatory, as well as where the guarantee must cover import VAT and excise duty made it simpler for economic operators operating in several markets, but increased perceptions of complexity among those active in a single or small number of Member States. -Customs simplifications: economic operators and customs authorities overwhelmingly agreed that the UCC had not brought any significant new or enhanced simplifications for traders. Of the two which were deemed to have the highest potential to generate significant benefits, self-assessment has turned out to be impossible to implement, and EU-level centralised clearance for import will only be deployed in 2023. Such difficulties are due to failures of implementation at both a UCC and national level. On the one hand, due to parallel developments in other policy areas and their crossover with customs, e.g. various prohibitions and restrictions, the actual scope of customs simplifications had to be narrow, thus making them less attractive for both national authorities and economic operators. On the other hand, in the area of customs simplifications, the UCC contains a lot of ‘may’ provisions so that the actual implementation is to a large extent dependent on the discretion of Member States. The targeted consultation of customs authorities confirmed that further clarity and guidance for such “optional” provisions are needed if they are to be fully implemented and their potential to be fully realised. -Other aspects: economic operators pointed that the increase in the number of authorisations required as a result of the UCC and other aspects have become more burdensome under the UCC. As for the costs, in addition to the inevitable one-off costs regarding familiarisation and training on certain new rules and requirements necessary to bring a large number of staff up to date, the recurring administrative, compliance and enforcement costs of customs procedures and processes have not increased or decreased significantly. Anecdotal evidence from the questionnaires and interviews include the experience of two customs authorities, one spending EUR14 per hour for 100 hours of workshops for informing and training economic operators about the new customs decision rules and the CDS, and another one mentioning a total of 50 hours for training on customs decisions at EUR13 per hour. One economic operator reported an expenditure of EUR8.000 for training its staff on the AEO requirements as restructured by the UCC. Member States incurred costs related to the adaptation to the new rules, in particular the mandatory re-assessment of authorisations issued before the UCC, with one Member State reporting around 1,000 full audits to re-assess all AEO authorisations issued before 2016), and in some cases for training of customs officials. It can be assumed that a large number of customs administrations and economic operators incurred similar costs, although other customs authorities did not share precise and comparable data. Regarding guarantees, customs authorities and economic operators faced relatively minor one-off costs to implement and apply the new rules. However, the increased scope of compulsory guarantees requiring reference amounts to be calculated and monitored, has led to increased recurring administrative as well as compliance costs for economic operators, with most interviewees describing the former as more significant than the latter, since the reference amounts need to be monitored even if the guarantee is waived (which was the case for many interviewees). The majority of economic operators who provided information on the guarantee regime reported an increase in administrative burdens due to having to spend more time on determining and monitoring the reference amount, with one estimating they now need an additional 0.25 full-time equivalents (FTEs) to comply with the changed rules. On the other hand, the compliance costs (in terms of the capital outlay) were described as minimal or non-existent by most interviewees, since their total stock of guarantees increased only marginally or not at all under the UCC. Compliance costs would presumably be more significant for non-AEOs, who typically cannot have guarantees waived but who formed a relatively small share of our sample. There are also enforcement costs for national customs authorities (some, but not all, interviewed customs administrations reported increased recurring costs for processing guarantees, due to an increase in the number of authorisations and/or the average time spent per guarantee in determining and monitoring the reference amount), but these have been at least partly outweighed by the benefits, which included harmonisation of the rules across the EU, which saves time for customs officials. The increased scope of compulsory guarantees also contributes to securing the collection of customs duties, and hence to protecting the financial interests of the EU and its Member States, although there was some disagreement among interviewees about the extent of this, with some arguing that guarantees were already compulsory for higher-risk procedures pre-UCC, and their extension to more (less risky) procedures offers only minor benefits in this respect. There is a shared general expectation among stakeholders that, once all IT systems are fully operational, and all relevant UCC processes fully digitalised and harmonised, this will lead to substantial cost savings for both economic operators and customs. In terms of benefits, in the areas where the rules have become more rational and well-structured, they are easier to comprehend and apply, with time savings associated to the use of the Customs Decision System, e.g. processing times and the tracking of time limits prescribed by the UCC rules for both customs officials and traders having to enforce or comply with said rules. According to them, this applies to customs decisions, rules on classification and valuation handled by central IT systems, guarantees management and special procedures. However, in the bigger picture, such savings are minor, whereas potentially more significant savings from substantially simpler rules have not materialised. Further details are provided in the section on the detailed findings on the UCC selected key issues in section 4.2. Objective to provide legal certainty and predictability The UCC has marginally contributed to strengthening the legal certainty and predictability of customs rules, procedures and processes. The interviews to the national customs authorities reveal that this is the specific objective in respect of which the least significant progress has been made. Three quarters of national customs authorities reported that ‘some’ progress had been made, but only three saw ‘significant’ progress, and the same number saw very little or even no progress (Figure 4 above). Similarly, almost half of the respondents to the public consultation (mainly businesses) indicated that customs in the UCC had made ‘significant’ or ‘some’ progress towards strengthened legal certainty and predictability, while over a third saw very little or no progress, and only a small or no UCC contribution (Figure 5 above). Nearly all customs officials interviewed agreed that, to a greater or lesser extent, the UCC legal framework has contributed to enhanced certainty and predictability via three main mechanisms: 1)by defining certain aspects more clearly and precisely in the legal text. As an example, the new AEO legislation is considerably more detailed and comprehensive in relation to the conditions to be fulfilled to obtain the AEO status and this provides legal certainty. Certainty also came from non-legal texts: while the provisions regarding compliance with taxation rules had initially raised some interpretation issues that culminated in a case before the European Court of Justice , the AEO guidelines clarified the issue and thus strengthened the clarity of the provisions. 2)by harmonising rules and elements that had previously been left to the discretion of Member States. For example, the binding time limits for taking customs decisions imposed by the UCC were seen by many stakeholders as a significant improvement, eliminating the possibility of applicants having to wait an unknown and potentially indefinite period of time for customs to process their applications (which reportedly was not a frequent occurrence before the UCC, but the uncertainty around the time frames was sometimes a burden on traders).With the harmonised new rules on guarantees, there is less room for interpretation and possible divergences, fewer exceptions, and more uniformity across Member States. Through the introduction of more detailed and specific rules on temporary storage, the UCC has increased legal certainty and predictability for economic operators, who can now expect the same treatment regardless of the Member State in which they operate. Regarding customs simplifications, the UCC has clarified the application of certain simplifications, such as the use of simplified declarations and EIDR, reducing divergence between Member States to a certain extent. The amended rules on EIDR increased harmonisation, providing an advantage to businesses operating in multiple Member States. 3)indirectly, via the process of the intense deliberations and discussions about the UCC involving the Commission and Member States in various fora, during which many uncertainties were addressed and resolved. Two factors explain why the UCC has not increased the legal certainty in other areas. Firstly, some rules or elements were unclear. Several economic operators reported a lack of clarity, ambiguity and/or discrepancies in the way the criteria for reductions and waivers of guarantees are assessed, reference amounts monitored, and release of guarantees handled, which could have serious financial implications for traders, in particular for warehouse or temporary storage facility operators. Moreover, several Member States and some economic operators underlined that, despite the UCC’s harmonisation efforts, different approaches remained in the EU in relation to monitoring and audits for AEOs. Such divergences were also identified by the ECA in its recent reports on import procedures and e-commerce, which found that the AEO monitoring practices in some Member States may imperil the protection of the EU’s financial interests. This problem was also highlighted in the F4F opinion. In the field of customs simplifications, the lack of clarity regarding self-assessment and the uncertainty around its application in practice has meant that this simplification has not been used in a single Member State to date, creating confusion and perplexity. Reportedly, while the UCC defined self-assessment quite flexibly, allowing operators to perform controls, the sectoral legislation would need to provide a legal basis for traders to perform such controls under customs supervision. This concern was also highlighted in the F4F Platform opinion, which advised the development of a comprehensive concept of self-assessment as a simplification with clear and visible advantages for operators. A different consideration applies in the area of customs risk management: the related strategy, action plan and other common actions taken in the years 2016-2020, such as new common risk criteria being introduced in several fields or the possibility to define priority control areas and the sharing of risk information through risk information forms (RIFs), increased legal certainty to a certain extent. Nevertheless, as the UCC continues to afford the Member States considerable discretion in how they apply the provisions on risk management and controls, the evaluation found that there is no uniform application. Secondly, the gradual deployment process for some IT systems and the delays with the full implementation of the harmonised data requirements led to an element of non-uniformity and lack of clarity across the Member States. Even if the harmonised data requirements and the new structure of the Annexes B leave very little room for legal uncertainty, the main factor that affected legal certainty according to customs officials and operators consulted are the frequent changes to Annexes B, due to the need to align the common data requirements to the progressive deployment of the UCC IT systems, while solving other technical problems. This led to a lack of uniformity and predictability in the short term but problems were solved with the revamped Annexes B published in March 2021. The constant addition of new requirements in the rolling-out of IT systems has been pointed out in the F4F Platform opinion as a source of additional burden in terms of financial and human resources, disrupting the implementation as planned. In addition, to solve problems which emerged after the entry into force and to deal with new initiatives, eight amendments to the delegated and implementing acts, and changes to the timetable for the deployment of the IT systems were necessary between 2014 and 2020 (see Annex VI for more details about the content of the above-mentioned amendments). These changes had a negative impact on legal certainty during the transition period.

The Commission also issued guidance documents to clarify most of the controversial issues and to ensure more harmonised practices in the Member States. Those actions were carried out within the framework of the customs expert group and Customs 2020 joint actions. Such guidance is considered by both Member States and trade representatives as very helpful in enhancing uniformity and legal certainty, despite their non-binding nature. |However, in a few specific areas, the interpretation and application of the UCC provisions has not yet entirely stabilised and further guidance might be needed. Overall, the evaluation found that, insofar as important sets of rules such as those on risk management, prohibitions and restrictions and – to a certain extent – the harmonised data requirements are not applied uniformly, there appears to be a problem of legal certainty that could not be rectified exclusively by the e.g. increased clarity/certainty of the customs decisions rules, where the most progress has been achieved. The non-uniform application in certain areas, on the other hand, is as a result of unclear rules and the resulting level of discretion left to Member States in their implementation. There might have been costs related to repetition of processes that were not completed correctly due to a lack of clarity (additional investment of time to seek to clarify questions or reconcile apparently contradictory information, or invest financial and human resources in court cases to have differences of interpretation adjudicated) but these are difficult to quantify. The clarified AEO criteria and conditions were not associated with any tangible benefits for stakeholders. Instead, customs authorities and economic operators were confronted with non-negligible one-off costs during the implementation phase mainly for the reassessment of AEO authorisations, training and adaptation of internal processes. Example of costs range from EUR 8,000 reported by one economic operator for training staff on the AEO requirements to EUR100,000 reported by another for upgrading the system used for self-monitoring its AEO status. When it came to clarifying rules and criteria, the UCC facilitated a more consistent and harmonised interpretation and application across the EU with tangible benefits for stakeholders: customs officials that were consulted stated that they need to invest less time in figuring out how to apply certain rules, are subject to a reduced risk of legal challenge and litigation, and find it easier to exchange information with or deal with applications from other Member States. Economic operators (especially those that are active in several Member States) also confirmed that they achieved savings from the increased use of standardised processes and data, and can make better informed decisions, because there are fewer divergent practices in different Member States to get their heads round potentially helping organise their dealings with customs more efficiently. At the same time, the transition from the CCC to the UCC legal and IT framework has reportedly generated (and to some extent still generates) uncertainties and a non-uniform application of the new rules and requirements, which has had the exact opposite effect on stakeholders consulted in this evaluation. Objective to create a paperless customs environment By requiring that “all exchanges of information […] shall be made using electronic data-processing techniques” (Article 6(1) UCC), the UCC prioritises the digitalisation of customs processes based on interoperable systems for the actors involved as the main tool to achieve its objectives. The shift to paperless customs was for Member States the most important feature of the UCC (Figure 4) and the biggest challenge in its implementation, because of the complexity of the activities involved: developing harmonised data requirements that could serve as a ‘common language’ for interoperable systems and data sharing, making the IT changes needed to implement those requirements and ensure interoperability via major upgrades to existing systems and the development and implementation of new IT systems to digitalise processes that were previously paper-based or analogue. As previously mentioned, for customs authorities and economic operators the effort needed to implement the harmonised data requirements, especially by making them mandatory also for national import systems, that were previously under the control of national authorities, and compliant with the UCC requirements, coupled with delays to the deployment of many trans-European IT systems meant that they have only been implemented to a very limited extent. Stakeholders agreed that the requirements will eventually make an important contribution to the objective of the paperless environment, but that this will come later in the implementation process. The timeframe for realising the necessary IT developments was always ambitious and proved impossible to achieve, as described in section 2.1. Eight systems were completed by 2020, with those that have not yet been deployed including those which are expected to make the biggest difference to the digitalisation of customs, such as UCC-compliant upgrades to national import and export systems, ICS2 and UCC CCI. Against this backdrop, stakeholders were well aware of the original ambition and considered that the UCC has nevertheless facilitated progress towards the envisaged paperless customs environment, although such process is not complete. The large majority of Member States (72%) feel that ‘some’ progress had been achieved, while for 24% of Member States the progress was ‘significant’ (Figure 4). There are however nuances. For half of the national customs officials consulted, satisfactory progress was made despite the immensely challenging nature of the tasks faced, but the other half of customs authorities raised important concerns related to uncertainty about the future as well as criticism of the decisions taken. Criticism referred to practical problems experienced, such as IT projects that had not proceeded according to original schedules and first releases of certain IT systems (e.g. CDS) that were not able to execute the expected business processes, but also to the frustration stemming from the frequent amendments and changes to technical specifications of several IT projects. A factor of concern for some Member States is the uncertainty regarding whether all Member States would enact the changes necessary to make the paperless and interoperable customs environment a reality, since some tend to prioritise national projects, at the potential detriment of uniformity in the level of controls. An important finding is that in the Member States where the IT infrastructure was previously less advanced, the UCC has prompted significant progress on all fronts, thanks to the digitalisation and resulting factual and procedural improvements. In evaluating the trans-European central systems delivered to date by the Commission (including REX, CDS and EBTI), the external study concluded that they have generated tangible benefits, making clear that where developments can be centralised, there is significant added value in these as described in section 4.3. Some progress towards paperless customs was achieved also in the area of simplifications, insofar as it encouraged some Member States to implement the UCC principle of electronic customs declarations, including when linked with a simplification, although these were already used in other Member States. In the Member States where a similar measure was not already in place, the simplification of EIDR also increased digitalisation, although it is not widely implemented in all Member States. The Customs Decision System (CDS) did not exist before the UCC and for the first time allows economic operators to process 22 types of customs decisions allowing automatic data validation. It is widely recognised as a step-change compared to the old Community Customs Code, even if some Member States allow the continued existence of both a central EU system and national systems, which means that economic operators working in multiple Member States still need to deal with different national portals. However, the automatic validation of authorisations from CDS into the national clearance systems is a totally new and important feature for the functioning of national import systems, because authorisations are now valid across the EU. According to the study, greater impacts could be achieved if the scope of CDS were to be increased beyond the current 22 types of authorisations, which is possible in principle. However, the graph below illustrates the cumulative number of applications submitted and decisions taken on a monthly basis from October 2017, the date of commencement of this IT system, to December 2020, showing that the system is increasingly being used. The more than 20,000 decisions taken have a Union-wide validity and therefore contribute to a consistent and predictable application of Union law. The EOS/AEO system digitalised and streamlined the process for dealing with AEO applications, even if there are some national differences depending on whether individual Member States provide access to the system via the EU Trader Portal or national portals. It is also important to point out that the process is not entirely digital, as paper documents and correspondence were also required for some aspects of the application process in some Member States. The Registered Exporter system (REX) provides a Union-valid database of exporters in third countries (beneficiary countries of the GSP, Overseas Countries and Territories, partner countries in some preferential agreements) that are entitled to declare the origin of the goods they produce or trade. Importers, freight-forwarders, customs brokers or any other operator in the Union can therefore check therein that their foreign counterpart is effectively entitled to declare the origin of its goods. This assurance significantly reduces the risk for the Union operator importing the goods, as the origin of the goods is one of the factors used to calculate the duties and assess non-financial risks inherent in some products. REX therefore provides legal certainty to the economic operators. The REX system also provides a database of registered exporters established in the Union, who are entitled to declare the origin of the goods exported to partner countries of some preferential agreements, with the benefit of having a centralized database of registered exporters and a common registration procedure in the Union that did not exist before. The graph below shows the registrations over time from 2017 to 2020 both for the Union and for third countries and therefore the growing success of the system. In total, at the end of 2020 more than 100,000 operators have registered to provide valid proofs of origin. This system facilitates the procedure for certification of origin because the registration procedure is much simpler and faster (few days instead of several months) than it was for obtaining the status of approved exporter, the predecessor of REX. To certify the origin of goods, there is no intervention needed by the competent authorities, as exporters themselves declare the origin, free of any charges. In some beneficiary countries, such as the third countries benefitting from the Generalised System of Preferences, this is a significant simplification, as it can save time and costs (in certain countries, exporters are charged to obtain a certificate of origin). The REX system facilitates business operations also because the status of the exporter (validity of its registration) is visible for the importer using the proof of origin. This is thanks to the central database of registered exporters, used by the importers, but also by the competent authorities to perform appropriate controls. Figure 7: Evolution of registrations in the REX system EBTI provides a central database for BTI applications, effectively digitalising the process in a harmonised way and allowing customs authorities to verify the decisions on binding tariff information made by the Member States. It reduces the time for issuing decisions and avoids duplications or errors. EBTI ensures the Union-wide validity of the BTIs as well as their binding character, for 3 years throughout the EU, regardless of where they are issued. They are binding on all EU customs administrations and the BTI holder. It replaced a paper-based process. According to stakeholders, the system is helpful in guaranteeing full compliance with relevant UCC provisions and ensuring a harmonised approach. EBTI provides economic operators with legal certainty when calculating the price of import or export transactions and secures a uniform application of the Common Customs Tariff, in line with the objectives of the UCC to achieve more simplicity and uniformity in the application of customs rules. SURV3 allows the Commission to collect data from the electronic declarations lodged in the Member States. SURV3 exploits the digitalisation in order to improve the Commission’s surveillance capacity by providing relevant information on import/export flows. SURV3 is very valuable for the Commission because it provides essential data for monitoring the functioning of the customs union. Among the one-off costs incurred by stakeholders to implement the UCC rules the IT development costs are the most significant. These include the definition of the IT specifications by the Commission and the Member States, the development (often in collaboration with external contractors), testing and deployment of the various UCC systems. Many economic operators have their own IT infrastructure and interfaces for customs, and so also incur IT development costs as they adapt their own systems to be interoperable with the new / updated EU and national systems and data requirements. At EU level, according to the final evaluation of Customs 2020, IT costs account for a significant share of the programme budget: the cost for the development (not including operation) of IT systems that are included in the UCC Work Programme amounted to a little over EUR 50 million over the seven-year period covered by the programme. In particular, the one-off development costs went from EUR 2.6 million for REX to EUR 14.1 million for CDS, as detailed below. At national level, costs reportedly vary significantly from system to system, and from country to country, but frequently amount to several million euros per Member State for the most significant systems (such as the updated national import systems, which are not covered by this evaluation). In anecdotal evidence regarding the CDS, one Member State reported costs in ensuring compatibility of CDS with the national IT decisions system amounting to nearly EUR 350, 000 and over 11,000 hours of work. Economic operators reported the transition to EBTI had minor cost implications for them. Table 5 indicates the costs for the development of the systems by the Commission. Table 5: Member States costs for the development of CDS, EBTI, SURV3 and REX System 2014 2015 2016 2017 2018 2019 Total CDS €17 313 €158 152 €569 631 €1 281 853 €2 191 375 €691 885 €4 910 209 eBTI €7 449 €44 759 €39 476 €50 942 €60 726 €102 225 €305 577 SURV €194 €24 €70 448 €39 310 €1 738 €4 349 €116 063 REX in mill. € 0.705 €1.915 €2.110 € 0.657 € 0.327 € 0.088 Source: Commission e-customs progress reports (N=between 24 and 28 Member States)

IT System Costs in millions of Euros One-off Development Costs Annual Maintenance Costs (Estimate) REX € 2.60 € 0.52 EBTI € 3.35 € 0.67 SURV3 € 6.99 € 1.40 Beyond the development costs, the cost of training and awareness raising for customs officials and/or traders on the new systems was described as negligible by all but one of the customs administrations that provided information (the latter indicated a cost of EUR 1400 just for workshops for informing traders on the new CDS) . In a similar vein, some economic operators reported that the process of applying for decisions has become significantly faster as a result of the new rules and the CDS, but also that they had incurred one-off costs related to having to upgrade internal IT systems. In spite of the structured change management mechanism that was put in place by the Commission in order to cope with the UCC’s complex multi-dimensional IT implementation, national customs administrations still described the process as very challenging. The work on IT implementation frequently stretched both their financial and their human resources to the limit, especially where there were changes to the technical specifications and/or data requirements that required adaptations at the national level, frequently at rather short notice, sometimes forcing developers to revisit work that had already been done and start again (with obvious cost implications). As for the benefits of an electronic customs environment, these are evident for the stakeholders consulted: the electronic exchange and storage of customs information reduces the need for economic operators to provide same data several times and improves risk analysis, which allows for better-targeted controls and speedier treatment for legitimate compliant traders. The progress accomplished to date already has tangible benefits for these stakeholders. The digitalisation and harmonisation of processes via centralised or interoperable national systems can lead to time savings for the customs officials interviewed, since access to and exchange of relevant data is facilitated, and economic operators consulted, in so far as access to only one central, rather than several national systems is required, can increase certainty and predictability (since more information is accessible online), and ultimately result in faster customs processes. As for specific benefits resulting from the digitalisation of the customs processes: -For CDS, three customs administrations reported savings in relation to processing times and the tracking of time limits (one interviewee described the savings resulting from the introduction of streamlined procedures as “huge”), and two Member States indicated reductions in the time taken to consult other Member States in case of multi-country decisions (which frees up resources for other activities). -The EOs/AEO system has proved to be very beneficial for customs authorities, who frequently need to process and check the status of operators, while it is more of a minor benefit for businesses, for whom making an AEO application is not a regular action. -For REX and EBTI, the savings are very difficult to quantify, as they relate mainly to the fact that most Member States no longer need to develop and maintain their own national systems but can instead directly access the centralised EU databases. This brings reduced time for verification and ensures increased harmonisation and certainty for economic operators. Additionally, some savings result from the transition from a paper-based to an electronic system, although this also reduces the ability to correct errors without restarting the application process. As the harmonised data requirements are an enabler of digitalisation and interoperability as opposed to a legal provision or an IT application as such, it is not possible to quantify their benefits or costs per se. The main costs are related to the development of the IT systems, where the frequent changes to Annexes B appear to have increased the costs for some stakeholders at least. The benefits will only materialise to a significant extent once Annex B is applied fully and consistently across the EU. In general, the benefits and costs of the harmonised data requirements as such cannot be separated from those related to the IT systems. Overall, while very substantial transition costs have already been and are still being incurred, many of the most significant expected benefits (e.g. better risk management thanks to ICS2, or reduced burdens for traders thanks to Centralised Clearance at Import) have yet to materialise. Therefore, it is impossible to conclude on the UCC’s benefit-cost ratio since it depends primarily on the course of action in the coming years. According to the information collected and the stakeholders, opinions and the study findings, the expectation is that the benefits will ultimately justify the costs. Contribution to the general mission of customs Through its specific objectives described above, the UCC was expected to contribute to the general mission of customs (protect the financial interests of the Union and its Member States, protect the Union from unfair and illegal trade, ensuring the safety and security of the EU residents, and the protection of the environment, in close coordination with other authorities), while maintaining a proper balance between customs controls and facilitation of legitimate trade. A large majority of Member States (around 90%) considered in the questionnaires that the UCC did not bring significant progress in how well equipped the EU and Member States are for achieving the mission of customs. Only three Member States felt that they and the EU were ‘much better equipped’ to achieve their mission. However, this is attributed by customs authorities to the fact that the most important changes depended on IT systems that are not yet operational while being absolutely necessary for dealing, for example, with the challenges of e-commerce, which has become an urgent issue. As a result, only incremental benefits could have been expected at this stage of implementation. Relatedly, few respondents in the public consultation identified significant progress in achieving the general objectives (around 10%), while the majority noted some or ‘very little progress (57% to 60%). A significant number of respondents (15% to 25%) did not know, showing perhaps the difficulty for individual businesses of making judgements about the high-level achievements of the Customs Union. As to what extent the UCC implementation to date contributed to the achievement of the mission of customs, the following can be said based on the findings of this evaluation on the UCC implementation: -As regards the protection of EU financial interests. In terms of the initiatives pursued, the changes to the rules on guarantees and the establishment and application of financial risk criteria (FRC) appear to have had an immediate, direct impact on efforts towards the proper collection of customs duties and the detection of customs fraud, with the EU able to hold Member States liable for identified lost revenue. In the case of e-commerce, where substantial new requirements were introduced, namely the need to submit customs declarations for goods worth not more than EUR 150, the goal is tackling under-valuation and VAT fraud, and to level the playing field for EU traders. Despite this, in terms of actual results of controls activities, Commission experience and findings from a 2021 European Court of Auditors report on customs controls highlighted that a sufficient level of harmonised controls has not yet been attained and Member States act in different ways, in particular in implementing the new customs financial risk framework, whose provisions are not sufficiently detailed to ensure uniformity. In addition, data on amounts of unpaid duties (see section 3), on illegal goods seized, and amounts of undetected customs duties have been roughly stable since 2016, implying that the levels of control have not changed much. -As regards the protection of the safety and security of the citizens, the deployment of the system ICS2 and the adoption of the new risk management framework are expected to contribute to the objectives of protecting financial interests and ensuring safety and security. However, the UCC in general does not include specific treatment of goods subject to prohibitions and restrictions. To achieve further simplification, extensive coordination with other competent authorities would be necessary in this respect, which was lacking during the UCC negotiations. Both customs authorities and economic operators demanded flexibility at the beginning of the COVID-19 pandemic, such as a temporary reduction in controls or waiving of cer