EUROPEAN COMMISSION Brussels, 28.10.2020 SWD(2020) 238 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT REPORT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council establishing the European Union Single Window Environment for Customs and amending Regulation (EU) No 952/2013 {COM(2020) 673 final} - {SEC(2020) 360 final} - {SWD(2020) 237 final} - {SWD(2020) 239 final}



Table of content 1. Introduction: Political, legal context and Vision statement 2. Problem definition 2.1 What are the problems? 2.2 What causes the problem? 2.2.1 Overall context 2.2.2 Problem drivers 2.3 What are the consequences and size of the problem? 2.3.1 Delays and inefficient use of financial and human resources 2.3.2 Ineffective application of rules in the EU single market and beyond 2.4 Affected stakeholders 2.5 How will the problem evolve? 3. Why should the EU act? 3.1 Legal basis 3.2 Subsidiarity: Necessity and added value of EU action 4. Objectives: what is to be achieved? 4.1 General objectives 4.2 Specific objectives 5. What are the available policy options?

5.1 What is the baseline from which options are assessed? 5.2 Ongoing impacts without any further EU policy action 5.3 Description of the policy options 5.3.1 Group I: Government-to-government (G2G) 5.3.2 Group II: Business to government (B2G) 5.3.3 Group III: Cross-cutting options for registration and identification of economic operators 5.4 Options discarded at an early stage 6. What are the impacts of the policy options? 6.1 Approach to the analysis of the options 6.2 Analysis of the impacts of the policy options 7. How do the options compare? 8. Preferred option 9. How will actual impacts be monitored and evaluated? Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Who is affected and how? Annex 4: Analytical methods Annex 5: Acronyms Annex 6: Glossary Annex 7: Overall volumes of EU supporting documents

Annex 8: Categorisation of regulatory formalities Annex 9: Single window initiatives at national level Annex 10: Single Window initiatives At international level Annex 11: Number of declarations covered by options 1, 2 and 6 Annex 12: Analysis of the discarded policy options Annex 13: Comparison of economic impacts for all option packages Annex 14: Evaluation of the EU CSW-CVED pilot and EU CSW-CERTEX project Annex 15: Assessment of impacts related to information and communication technologies and systems Annex 16: Country Case Study reports Annex 17: Overview of policy options



1.Introduction: Political, legal context and Vision statement The EU Customs Union is a fundamental aspect of the European Union and the management of external borders is of crucial importance in ensuring the health and prosperity of EU citizens and businesses. The Covid-19 pandemic has made it more important than ever to establish a stronger framework for the Customs Union and to ensure more effective controls while facilitating trade especially in times of emergency. This involves not only customs formalities, but also multiple non-customs regulatory requirements that certain goods are also subject to at the border in policy domains such as health and safety, the environment, agriculture, etc. The customs administrations and competent authorities in charge of enforcing non-customs regulatory formalities (hereafter ‘partner competent authorities’) have worked mostly in silos. Most e-government initiatives have preserved the silos inherited from manual processes, leading to the development of many electronic systems of varying interoperability. In the customs domain, the Customs Union has undergone a number of modernisation steps since its creation. The design and deployment of the 17 Union Customs Code (UCC) systems aim to consolidate the digitalised EU Customs Union, enabling the electronic processing of more than 99% of all customs declarations. President von der Leyen recently proposed equipping the Customs Union with a stronger framework to better protect EU citizens and the single market and using an integrated European approach to reinforce customs risk management and support effective controls by the Member States. In response, the EU Commission (hereafter ‘the Commission) is preparing an Action Plan that includes the implementation of an EU Single Window Environment for customs over the next decade. Figure 1: Path to the Customs Union digital modernisation This digitalisation process is ongoing at a varying pace in the different policy areas interacting with customs at the border and requires breaking existing silos to facilitate trade and enhance controls. In recent years, single window initiatives have gained momentum as a way of doing this within and across EU. The vision of the EU Single Window environment for customs is designed to coordinate customs and partner competent authorities at the border to eliminate these silos. There is a short window of opportunity to advance this initiative before Member States establish distinctly different and non-harmonised single windows, increasing the risk of an uneven playing field for economic operators and citizens across the EU. The establishment of the EU Single Window environment for customs is envisaged as an ‘evolution, not a revolution’ approach. The strategy will build on existing solutions to develop a framework for digital cooperation with partner competent authorities that would encompass their regulatory formalities over time once the respective sectorial legislation and operational Information and Communication Technology (ICT) aspects are in place. The objective of this initiative is not to revise the sectorial legislation, which falls under different areas of Union competence. Instead, it sets the appropriate conditions for digital collaboration between customs and partner competent authorities. The Commission and EU Member States have made a number of commitments to develop harmonised single window services at EU level. The 2008 e-Customs Decision on a paperless environment for customs and trade called on the Member States and Commission to “endeavour to establish and make operational a framework of single window services”. However, the evaluation of the e-Customs Decision in 2014 found these provisions insufficiently concrete and recommended the adoption of a new legal instrument for the single window. The 2014 Venice Declaration proposed a progressive action plan to implement an EU Single Window environment for customs and to develop its legal framework. In addition, in 2016 the Communication from the European Commission on “Developing the EU Customs Union and its Governance” announced the Commission’s plans to explore a workable solution for the development and creation of an EU Single Window environment for customs. This position was supported by the ECOFIN Council Conclusions of March 2017 which requires the signatory parties to “make their best efforts to establish single windows”. This is also in line with the 2017 Trade Facilitation Agreement of the World Trade Organization (WTO), which requires the signatory parties such as the EU to “make their best efforts to establish single windows”. Some of EU’s main trading partners have embarked on ambitious single window initiatives, while other countries are building the foundation for future implementation.

In line with these priorities, the Commission launched a pilot project (“EU Customs Single Window-Common Veterinary Entry Document” ‘EU SW-CVED’)in 2015 to provide an interface between national customs systems and a certification system at EU level through the central information technology (IT) solution of the Directorate-General for Taxation and Customs Union (DG TAXUD). This project enabled the automated verification of three health certificates by five Member States’ customs administrations, participating on a voluntary basis. The “EU Customs Single Window-Certificates Exchange project” (hereafter ‘EU CSW-CERTEX’), launched in 2017, expanded the pilot and enhanced its functionality. By the end of 2018, new certificates were introduced, and the number of participating Member States increased from five to nine. EU SW-CVED and EU CSW-CERTEX can be considered as a blueprint for this initiative. An evaluation of EU SW-CVED and EU CSW-CERTEX carried out by DG TAXUD (hereafter ‘the evaluation’) is included in Annex 14. The scope of the EU Single Window environment for customs extends beyond the field of customs. Its establishment builds upon the UCC’s digital transformation approach to take the Customs Union to the next level of modernisation by digitally connecting customs and non-customs domains. The ongoing Covid-19 crisis has created challenges for government authorities and trade to realise full digitalisation of the entire supply chain. Establishing an EU Single Window environment for customs will provide a solution for digital collaboration between customs and partner competent authorities in response to part of the challenges raised by such crises. This collaboration will enhance trade facilitation, while ensuring the safety and security of European citizens in the single market. 2.Problem definition 1.1 2.1 What are the problems? In 2018, the EU was the second largest exporter and importer of goods in the world, with extra-EU trade accounting for 16% of export and 15% of import globally. In handling the high volume of imported and exported goods, the role of customs serves two main purposes: it implements customs and trade-related legislation in line with the provisions of the UCC, and it enforces many non-customs regulatory requirements for specific goods at the external borders. The laws governing non-customs regulatory requirements are the result of specific policies established in different domains of EU competence under the Treaties, such as health and safety, environment protection, fisheries, agriculture, market surveillance, etc. They impose different obligations for the import, export or transit of specific goods and create specific administrative procedures. These have been designed independently and are mostly run in a non-coordinated manner, overlapping to a certain extent. This generates complex and burdensome reporting obligations for traders and poses a significant barrier to the effective enforcement of the regulatory formalities at stake. This impact assessment defines as the main problems (as established by the external study to support the impact assessment): (1) fragmented interoperability between customs and partner competent authorities responsible for regulatory formalities required for the international trade in goods, and (2) duplication of information and procedural redundancies in the fulfilment of these formalities. The fragmented interoperability between regulatory authorities involved in the clearance of goods is a major obstacle to progress on the digital single market and to achieving an integrated, coordinated border management. Interoperability is defined by the European Interoperability Framework as “the ability of organisations to interact towards mutually beneficial and agreed common goals, involving the sharing of information and knowledge between these organisations, through the business processes they support, by means of the exchange of data between their ICT systems.” The use of IT systems is a prerequisite for such interoperability. The increased digitisation of customs and partner competent authorities creates opportunities to promote the digital exchange of data between each other for a fully coordinated and efficient goods clearance process. However, there is no domain-specific interoperability framework to support interaction between customs and partner competent authority systems. This means that, while electronic systems are in place for some policy areas, customs authorities still rely on manual documentary controls to verify certain non-customs formalities. These manual checks take time and resources and, compared to automated checks, are more prone to error and fraud (see section 2.3.1). In addition, the lack of interoperability prevents the possibility of streamlining and integrating customs and non-customs procedures. To give an indication of the scale of the problem, non-customs reporting formalities associated with the import and export of various goods apply to a sizeable portion of imports and exports at EU level: this applies to up to 39.7 million customs declarations annually. In part for this reason, 93% of economic operators participating in the public consultation carried out for this impact assessment considered that the “promotion of electronic means to exchange information” should be one of the most important priorities for potential EU action. This shows the significance of this problem for economic operators dealing with the cross-border movement of goods. Fragmented interoperability also poses a significant barrier to the enforcement of certain regulatory formalities. In particular, this is because partner competent authorities lack systematic and automated feedback on the use of the supporting documents they issue. Fragmented interoperability (CVED-A, CVED-P and CED certificates) For those Member States that have put in place a solution for the automated verification of Common Veterinary Entry Documents for Animals (CVED-A), for products of animal Origin (CVED-P), and of Common Entry Documents for Feed and Food of non-Animal Origin (CED), the existing arrangements have improved clearance procedures. However, interoperability between customs and non-customs authority systems is limited. This hinders the effective monitoring on the use of these certificates and increases the risk of fraud (see section 2.3). Lack of interoperability (export and import of hazardous chemicals) Customs is responsible for enforcing the obligations specified in Regulation 649/2012 for the export of hazardous chemicals. Some of these chemicals are subject to an export notification and Prior Informed Consent (PIC) from the importing country outside the EU. These procedures are managed by the European Chemicals Agency (ECHA) through the PIC IT system (ePIC). Customs must check the inclusion and validity of the Reference Identification Number (RIN) of the export notification, referenced as a supporting document to the customs declaration. Although this is available electronically, ePIC and customs systems are not interoperable, meaning that customs authorities need to check the ePIC system manually. A recent study on the enforcement of Regulation 649/2012 revealed that this had not been done in 44% of the cases. Automatic checks would ensure that necessary checks are carried out in addition to increasing efficiency. Duplication of information and procedural redundancies is another dimension of the problem. The different regulatory frameworks introduce data requirements and business processes, which are not harmonised with the customs ones. Differences in data sets inhibit exchange across competent authorities and at EU / Member State level, making operators submit the same information several times. On the other hand, lacking data harmonisation serves as a barrier to the re-use of data. This is a significant drag on the supply chain, diverting resources that could have been deployed elsewhere. Indeed, 81% of the economic operators responding to the public consultation cited “submission of the same information to more authorities” as negatively impacting the movement of goods. One representative from a trade association participating in the EU Customs Single Window project group stated that “duplication and inefficiencies caused by the absence of harmonised procedures and systems amongst Member States are an economic drag on the whole supply chain”. A customs policy adviser working for a Dutch company interviewed for the external study provided the example of aluminium. When importing aluminium from certain third countries, economic operators must apply for a paper document to facilitate the Commission’s monitoring of this type of product. Nearly all of the information is also provided in the customs declaration. The Spanish customs authority confirmed that the overlap of information is 92%. The Spanish customs authority further confirmed that about 30% of the customs declarations affected by non-customs regulatory formalities require more than one supporting document from partner competent authorities, creating high potential for duplication of information across these different requirements. For example, the import and export of shark fins could be subject to four different certificates to comply with the EU tariff and trade legislation measures for this commodity. In addition to the identified problems, the problem tree in the figure below depicts an overview of the underlying drivers (i.e. root causes) and consequences for stakeholders, as well as key contextual factors. Each of these other aspects is described in detail over the next pages.

Figure 2: Problem tree Source: DG TAXUD 2.2What causes the problem? 1.1.1 2.2.1Overall context This initiative focuses on the customs clearance process of goods subject to non-customs regulatory formalities. The key underlying drivers linked to the identified problems are: (1) complex and fragmented goods clearance, and (2) insufficient cooperation and coordination between the regulatory authorities involved in goods clearance. To better understand these drivers, it is important to consider the fundamental contextual factors surrounding the clearance of these specific goods, including the existing complexity of the regulatory and political frameworks along with the uneven state of digitalisation of the different regulatory authorities. The interaction between these factors provides the overall context for identifying the problem drivers. The regulatory complexity stems from a large number of regulatory formalities required for international trade. National customs authorities and partner competent authorities enforce over 60 EU acts at the EU’s external borders . In addition, Member States introduce national requirements in accordance with Article 36 of the Treaty on the Functioning of the European Union (TFEU). To meet these regulatory formalities, economic operators must often provide supporting documents to the customs declaration as evidence of compliance. These supporting documents can be grouped into several categories (see Annex 8), depending on whether they relate to EU or national legislation, and whether the documents or the data are available at the national or EU level. EU regulatory requirements and associated mandatory supporting documents vary significantly by Member State, in line with their different trading profiles, both in terms of type and volumes of goods traded. Based on estimates by partner Directorates-General (DGs), the overall volumes of data available for supporting documents in the past few years indicate that these are required in large numbers, particularly in some countries (see Annex 7). The political complexity results from the diverse implementation schemes within the regulatory framework governing goods clearance. Most notably, this is linked to the internal organisation of the Member States, meaning that the division of competences between the multiple partner competent authorities involved in the management of non-customs regulatory formalities varies significantly across Member States according to national specificities. Adding to this complexity are the differing priorities and resources for customs and partner competent authorities. Customs authorities are unique for their comprehensive insight on regulatory requirements for international trade and the concerns economic operators face. In contrast, partner competent authorities lack a clear picture on the broader set of administrative burdens related to goods clearance due to the specialist nature of their policies. In addition, the different comparative advantages and trading profiles among Member States lead to differing objectives in terms of balancing trade facilitation with customs controls. The uneven state of digitalisation of partner competent authorities involved in the clearance of goods adds to the regulatory and political complexity surrounding goods clearance and would need to be considered as part of any future attempt to improve digital collaboration between customs and partner competent authorities. This will be pursued by building on existing systems and providing a framework that would progressively encompass sectorial regulatory requirements as they become digitalised. 2.2.2Problem drivers Problem driver 1: Complex and fragmented goods clearance The fact that customs and sectorial legislation have developed independently has led to isolated administrative procedures which are run sequentially and overlap to a certain extent. This fragmented model of regulatory compliance creates a complex and challenging path for economic operators to import or export certain goods. They must communicate separately with both customs and non-customs authorities to place the goods under a specific customs procedure and wait for validated supporting documents from the relevant partner competent authority before starting the customs declaration process where they have to submit those at the request of the customs authority. This is a major obstacle to streamline the import or export of affected goods (see box 5). The progressive digitalisation of the authorities concerned and the possibility of electronic information sharing between them has opened up new opportunities to improve this situation as depicted in the figure below. Figure 3: Complex and fragmented goods clearance Source: DG TAXUD Problem driver 2: Insufficient cooperation and coordination between regulatory authorities involved Another underlying driver is the insufficient cooperation and coordination between the different authorities responsible for goods clearance that typically operate in institutional silos. Interviews in eight Member States with relevant authorities suggested that close cooperation was not the norm and required commitment and resources from both sides to develop integration.

Where formal cooperation has been developed, it is typically limited to certain competent authorities. For instance, agreements are in place in Romania between customs and the Ministry of Health to allow for a coordinated control for goods requiring CVEDs. Likewise, Irish Customs is collaborating with the Department for Agriculture, Fisheries and the Marine for coordination of goods requiring CVEDs. Member States implementing national single window initiatives (France, Spain, and Italy) have managed to put in place more agreements for digital cooperation, but these are exceptions. Feedback from stakeholders suggests that, in general this problem driver is very difficult to overcome. When asked about factors which act as barriers to developing a single window environment, nearly half of responding customs authorities cited the reluctance among competent authorities to give up traditional areas of responsibility or coordinate with other authorities. Likewise, a respondent to the public consultation specified that improving coordination between authorities should be the priority, considering that customs authorities, as the "final" authority for the release of goods, should play a leading role in the organisational structure. 2.3 What are the consequences and size of the problem? Two types of consequences have been identified: (1) delays and inefficient use of financial and human resources, and (2) an ineffective application of rules in the EU single market and beyond, leading to negative impacts on the safety and security of EU citizens. 2.3.1Delays and inefficient use of financial and human resources Fragmented interoperability and duplication of information contributes to an inefficient use of financial and human resources. This implies that processes at the border are unnecessarily long, while compliance costs are higher, leading to negative impacts on the competitiveness of EU businesses involved in the international trade of affected goods (see box below). The final report on data and information collection for EU dual-use export control policy review indicates that in the space industry six companies out of nine experienced delays at customs when seeking to export dual-use items. This was also true of the machinery sector, where companies reported export delays even after licences were issued. In the chemical sector, dual-use controls were seen to delay export procedures because of misaligned export requirements and customs requirements for the same goods. The report found that export controls are a key element for international competitiveness. Several associations representing the space industry indicated that the current dual-use export controls affect competition, giving rise to significant distortions between companies located in different EU Member States and between EU companies and third country competitors, such as the USA and India. Delays: Longer clearance times Main affected stakeholders: economic operators At import, the general ratio of customs declarations subject to clearance documentary controls is around 5% and for physical controls around 3.2% (2.1% and 1.2%, respectively, at export). Compared to that, the ratios of documentary or physical customs controls for specific goods subject to non-customs regulatory formalities are very high, reaching in some cases 100%. This is due to the sensitivity of the goods and the enforcement role assigned to the customs authorities in the respective regulatory frameworks. In the absence of electronic information exchanges between authorities, documentary checks must be carried out manually. This requires the assignment of customs officials to gather and review the supporting documents issued by the partner competent authorities from the economic operator and to verify their content with the customs declaration data. The release of the goods subject to manual checks can take days, for example, where a declaration is lodged outside of working hours. However, manual intervention by customs authorities have significantly decreased in those Members States that have electronically interconnected the customs systems with those of partner competent authorities, enabling the automated verification of supporting documents. Indeed, more than 80% of respondents to the public consultation indicated that the length of clearance time was the most prominent problem for respondents. In Spain and France, the introduction of a single window environment has resulted in automated data crosschecks with significant time and human resource savings. In Spain, the system analyses data from the different competent authorities' systems and provides results within one minute compared to the manual process that can take up to two days. A similar situation was found in France where the single window environment has led to fewer interventions on the part of customs officers, freeing up their time for other activities. Specifically, prior to the automated exchange of supporting documents, 85% of these documents required manual checks, whereas now this has been reduced to 15% for supporting documents included in the single window environment. This means intervention is much less likely and resources can be deployed elsewhere. Inefficient use of financial and human resources: Direct costs (particularly for compliance) and enforcement costs Main affected stakeholders: customs authorities, economic operators and citizens These costs relate to the financial and human resources needed to deal with customs and other regulatory requirements, which could otherwise be deployed elsewhere. The need for these resources is linked to the complexity of goods clearance processes: as regulatory requirements increase, the clearance time increases, and so do the resources needed to deal with them. The stakeholders affected by this problem are primarily customs officers who must spend resources processing declarations, and economic operators who must navigate complex systems and liaise with different authorities. Partner competent authorities are impacted but to a lesser extent, since they are typically involved earlier. Citizens are impacted to a certain extent, as costs are pushed onto them in the form of higher prices. Evidence from several sources shows that related costs are too high for the main stakeholders. For example, in Ireland, customs officials estimated that the enforcement costs for dealing with non-customs formalities accounted for two thirds of their work. Some customs officials were dedicated to dealing specifically with implementing or verifying non-customs formalities (in this case often the license for import of agricultural goods). This represents a diversion of resources from other tasks, which could potentially have higher added value as well as better enforcing compliance. For economic operators, compliance costs are also considered a significant problem, especially for smaller organisations with fewer resources. Evidently the costs are higher in sectors where border formalities are more complex (e.g. for food, animals and animal products), and for those economic operators trading in countries with outdated or lacking electronic systems.

The extent of human resources needed to deal with regulatory formalities is shown by the responses to the public consultation: most economic operators, and in particular micro, small and medium-sized enterprises (MSMEs), reported that they devote between one and four full time equivalents (FTEs) to formalities related to movement of goods across borders. Unsurprisingly, large businesses tend to have more staff dedicated to customs operations and related regulatory requirements. Consultation with representatives of trade association members confirmed the significance of costs associated with hiring customs experts to deal with the specificities of the different national systems, and again highlighted that the burden falls harder on MSMEs. 2.3.2Ineffective application of rules in the EU single market and beyond The main consequences are heightened risk of fraud, distorted competition in the single market and unintentional non-compliance. The problems of fragmented interoperability and the complex clearance process also create knock-on effects for the achievement of EU public policy objectives, such as security and safety of citizens, animals and the environment, as it makes it more difficult to ensure the effective application of rules in the EU single market. In addition, some of the non-customs formalities at stake stem from international agreements (e.g. Convention on International Trade in Endangered Species of Wild Fauna and Flora licences (CITES), Waste Shipment Regulation, Prior Informed Consent Regulation on international trade in hazardous chemicals, etc.) or aim to protect third countries cultural heritage (e.g. import of cultural goods licences). Any loophole in the enforcement of these policies affects the proper fulfilment of international commitments and the level of protection of EU partners in these agreements and third countries in general. Risk of fraud Main affected stakeholders: partner competent authorities, EU citizens The risk of fraud and corruption relates to deliberate deception to secure unfair or unlawful gain. This risk is higher when the systems for enforcement of regulatory requirements between and within Member States cannot talk to each other. The most tangibly affected stakeholders in this case are partner competent authorities who are unable to effectively apply rules and regulations in their remit, as well as EU citizens who may suffer the consequences. Fraudulent reuse of supporting documents and abuse of quotas Some supporting documents can be used to import or export defined quantities of goods which can be split across different consignments (meaning there is not a one-to-one relationship between supporting documents and customs declarations). Typically, such documents are valid EU-wide and relevant consignments may be cleared in different Member States. To verify the validity of such documents, authorities need to know that the remaining quantity has not already been used in the clearance of other consignments. Automated quantity management requires data to be shared in real time. Similar principles apply to goods subject to quotas, meaning further imports or exports are prohibited after a certain threshold is reached. The current processes involving manual checks are not only time-consuming but also subject to error and fraud, making it difficult to prevent the fraudulent use and re-use of quotas (especially when supporting documents are supplied in paper form). However, EU-level quantity management is currently not possible in real time and extremely challenging to conduct retrospectively given patchy and inconsistent monitoring and reporting requirements. Evidence from several sources shows there is an unaddressed demand for the capability to undertake EU-level quantity management in order to apply EU rules in the single market. For example, the desire to have quantity management capabilities is high on Member States’ agendas, as shown in several case study reports and the feedback received in relation to the EU CSW-CVED and EU CSW-CERTEX (see Annex 14). Interviews with Commission officials also highlighted the prominence of this need for EU-level quantity management. This issue was said to contribute to the inconsistent enforcement of EU legislation in some domains, such as those relating to environmental protection (see further information in the boxes below). Controls for the import and export of Ozone Depleting Substances licences (ODS) are managed centrally by the Directorate-General for Climate Action (DG CLIMA) but implemented at the border. While DG CLIMA oversees issuing quotas, licences and authorisation for economic operators importing goods, customs offices must conduct the actual controls. This includes verifying quantities and checking the validity of licences. However, only about 15% of customs offices (i.e. about 400 out of 2 600 customs offices in the EU), are registered in to verify the authenticity and validity of the documents. In the case of ODS licenses, only 70% of the licenses are currently verified; the remaining 30% are not checked. Box 7: Abuse of quotas: Illegal trade of hydrofluorocarbons (HFCs) Quotas related to the phasing down of HFCs in line with the 2016 Kigali Amendment to the Montreal Protocol have increased significantly prices of HFCs. While encouraging innovation, this price increase has also raised the risk of illegal trade, which could potentially undermine environmental benefits and lead to unfair competition. In 2018, the Commission received allegations of widespread illegal trade in HFCs, from industry sources and a report published by the Environment Investigation Agency (EIA). The report noted in particular that the current HFC reporting system does not allow customs authorities to fully verify compliance with quotas for HFC shipments. The fact that these shipments may be imported without quota emerges as an “open smuggling” phenomenon that could undermine the enforcement of the F-GAS Regulation. A study performed in 2019 by the Commission to assess the magnitude of illegal trade partly refuted the conclusions of the EIA as regards “open smuggling”, but acknowledged the presence of illegal activities and the need to improve the enforcement of the quota system. Quantity management at EU level of any restricted goods would require a centralised system to consistently monitor imported and exported quantities in one or more Member States and to determine remaining unused quantity(s) for a supporting document (or quota). This can only function correctly and be effective if all Member States participate within a single IT platform and use it in a consistent way, or if all Member States have IT systems which are interoperable in real time. Forgery of supporting documents Evidence from several sources shows that there is currently an unacceptable risk of documentary forgery, although it is not possible to fully estimate its scale.

Box 8: Risk of forged supporting documents (Firearm exports and Certificate of Inspection (COI)) According to Regulation 258/2012 on firearms exports, each Member State is free to decide on the electronic system for the application and licensing process of export licenses in line with national practices. The channels used for the fulfilment of regulatory requirements thus vary significantly, while, the absence of electronic systems to manage the authorisation process systematically creates high risks of fraud. The rapidly increasing demand for organic products has led to multiple types of fraud, including documentary forgery, driven by large price differences between organic and conventionally produced goods. The Commission has already put measures in place to face this problem, for instance by developing the electronic Certificate of Inspection (COI), which had substantially improved the traceability of the organic products imported from non-EU countries. However, even if the regulatory authorisation systems become fully digital, an electronic connection with customs systems is necessary to tackle the existing heightened risk of fraud in full and to guarantee the complete traceability of organic products. While these issues are widespread, evidence suggests that national single window initiatives have to some extent contributed to reducing the risk of fraud and corruption through more joined-up information sharing. For instance, when an electronic solution was introduced at national level in France it showed that 5% of CVEDs were illegally reused. Although no hard data on the impact of these was available, the authorities believe this to have reduced the risk of fraud. In other Member States, the reduction of fraud was expected to occur through the introduction of electronic solutions, particularly where these were developed at EU level or made interoperable between Member States. The European Parliament report on the shadow economy and the EIA report on illegal HFC trade refer to the importance of electronic systems and information sharing as a means to combat fraud. Distortion of competition Main affected stakeholders: Economic operators The ineffective application of rules in the EU single market creates a distortion of competition, contributing to an uneven playing field for economic operators. A special report published by the European Court of Auditors in 2017 on EU customs controls reiterated serious weaknesses and concluded the illicit traders exploited differences and weaker links. The report found evidence of uneven application of customs controls. It also found different approaches to imposing customs penalties. The report highlights that burdensome customs controls can have an impact on the traders’ choice of customs office of importation and that (air)ports with fewer customs controls may attract more traffic. These shortcomings clearly have important implications, creating perverse incentives and customs duty evasion, as well as disadvantaging legitimate traders. While it has not been possible to provide concrete estimates, the evidence was cited as cause for significant concern. A 2018 report from the European Parliament took this further to indicate that the current imbalance in the performance of customs control by Member States creates a “diversion of the flows of goods towards the weakest points” – “port-shopping” by custom fraudsters. This was mentioned during the interviews with members of trade associations, who highlighted a risk of incoherence for the EU if there are persistent differences in the application of community law by different Member States. Linked to this is the potential for some Member States or economic operators to exploit such differences for commercial gain. Unintentional non-compliance related to lack of regulatory knowledge or comprehension Main affected stakeholder: Economic operators (particularly small businesses) Evidence from field visits and consultations within the Commission suggested that, in some cases, the complexity of border management processes led to poor awareness of requirements and unintentional non-compliance by economic operators. This was suggested in interviews with authorities dealing with the export of waste, and the import of ozone depleting substances, among others. A total of 84% of economic operators responding to the public consultation cited “insufficient support from authorities” as negatively impacting the movement of goods. This suggests difficulties navigating the complex legal and technical requirements for movement of goods which may in turn hamper compliance. For example, a customs specialist working for a fruit importer in Ireland explained that the position had been created because the organisation was previously making too many errors and this was simply due to difficultly dealing with the complex requirements, liaising with different authorities and so on. 2 2.3 2.4Affected stakeholders There are four key groups likely to be affected by the problem: national customs authorities, other national authorities, economic operators, and citizens. Directly affected stakeholders Indirectly affected stakeholders Economic operators National customs authorities Partner competent authorities Citizens -Economic operators involved in international trade: oManufacturers, retailers and wholesalers active in the business of purchasing and/or selling goods; oShipping and transport companies dealing with the physical movement of goods or commercial transportation (freight forwarders and logistics companies); oOther transport intermediaries such as port and airport authorities, terminal handlers, stevedores and warehouse operators, involved in the physical movement of goods; oOther intermediaries involved in fulfilment of procedures, including customs brokers and businesses providing a service to one or several parties in the supply chain (in form of data processing and information exchange. -EU businesses compliant with EU regulatory requirements that are affected by distortion of competition due to the uneven enforcement of these EU requirements. -Customs authorities of the 27 Member States -Commission DGs -National/local ministries and agencies relying on customs to control and implement their policies at the border. -Citizens in general affected by the security of the market. -Third countries, in particular partner countries bound by EU international commitments. Source: DG TAXUD 2.5How will the problem evolve? In the absence of new action, there is no evidence to suggest that the identified problems and their consequences would substantially improve. As such, the baseline scenario would not introduce any drastic changes or improvements in the following areas:

·Clearance times and efficient use of human and financial resources needed to meet the requirements for border formalities: the customs clearance of goods affected by certain non-customs formalities would be simplified and lead to time and resource savings in those Member States involved in single window initiatives for those particular formalities under their scope. However, no drastic changes in clearance times would be possible in most Member States. Likewise, this means the human and financial resources needed to meet the requirements for border formalities, would continue to be used at the expense of more efficient technical solutions. Without concerted action at EU level, this would deepen the differences between trade facilitation measures available to the economic operators in the Member States, affecting especially small businesses with fewer resources to move their import or export (international trade) operations to other Member States. ·Better application of rules in the EU single market, including: oRisk of fraud resulting from lack of real time EU-level quantity management. The risk of fraud derived from the fraudulent reuse of supporting documents and abuse of quotas will not improve unless the 27 Member States customs systems are interoperable to the electronic systems managing non-customs regulatory requirements and the necessary exchanges of information between customs and partner competent authorities that would enable EU-wide quantity management are uniformly defined. oDistortion of competition, as economic operators or Member States would continue to exploit differences in the application of legislation for commercial gain. Differences in the enforcement of non-customs legislation, which may cause diversion of the flows of goods towards the weakest points and raise disadvantages for EU businesses compliant with internal market rules will not be reduced. Rather, these would increase if the digital cooperation between customs and partner competent authorities and its positive contribution in terms of automated controls and improved risk management were only applicable in some Member States (those involved in single window initiatives). oNon-compliance due to lack of regulatory knowledge or comprehension would also continue to be a risk, particularly when combined with multiple and non-aligned national single window solutions. This would be problematic if individual Member States develop divergent solutions to simplify reporting formalities for economic operators (B2G solutions). 3.Why should the EU act? 3.1 Legal basis The legal basis for the EU to act is provided by Articles 33, 114 and 207 of the TFEU. Articles 33 and 114 give the European Parliament and the Council the right to take measures to strengthen customs cooperation between Member States and between the latter and the Commission to ensure the proper functioning of the internal market. In addition, the choice of Article 207 as a legal basis relies on the premise that the scope of the initiative extends beyond cooperation between customs authorities to include trade facilitation as an important aspect of trade policy. 3.2 Subsidiarity: Necessity and added value of EU action The identified problems are inherently transnational, involving the movement of goods across borders and EU-wide effects of any error and fraud taking place in individual Member States. The EU, given its responsibility for the Customs Union and for the non-customs regulatory requirements in question, is well placed to address the problems by coordinating action, tackling fragmentation and generating economies of scale. Moreover, existing and expected action at different levels has been shown to be inadequate on its own. The following points explain this for each of the three types of existing and expected action, namely the gradual digitalisation and modernisation of processes related to the clearance of certain goods; the development of customs single windows at national level; and continued operation of the EU CSW-CERTEX project. Gradual digitalisation and modernisation of the processes for certain goods: over time, as relevant EU non-customs legislation is reviewed and modernised, paper documents are likely to be replaced by electronic versions. This is likely to generate some positive effects, both in terms of efficiency and correct application of EU rules. However, due to fragmented interoperability and diverse business processes, this would not make it easier for economic operators, partner competent authorities and customs authorities to share information. The problem could even get worse, or force actors to resort to the exchange of paper documents, if the systems and processes are changed in divergent ways, since customs authorities could not be expected to develop links with all of them. Without a coordinated approach, it is also likely that developments would proceed at an uneven pace, with the current paper-based processes remaining in use for some regulatory requirements. Finally, any such issues would be exacerbated for the substantial proportion of goods movements involving more than one Member State (e.g. goods requiring supporting documents issued in one Member State, but cleared in another), since customs authorities could not be expected to make the investments needed to align with the different partner competent authorities in other countries. Development of national customs single windows: several Member States, such as France, Italy and Spain, have made significant progress in implementing national customs single windows. However, these initiatives face several challenges, which suggest that the benefits would be limited. First, according to feedback from project group members, the necessary resources are unavailable in most Member States. Second, a major shortcoming of the current patchwork arrangements is the lack of EU-wide quantity management. This would be unachievable under national customs single windows, even if they became widespread. Third, the scope of national customs single windows varies and usually only includes a few non-customs regulatory requirements, leaving the majority of problems unaddressed. Fourth, the development of national customs single windows would bind individual Member States to their chosen solutions, making any later decision to improve coordination and interoperability more difficult to realise. Evidently, the absence of harmonised measures to develop national single-entry points would lead to a complex situation for economic operators due to significant variations in regulatory reporting arrangements in different Member States. Continued operation of the EU CSW-CERTEX project: in the absence of a new initiative, some Member States would continue to participate in EU CSW-CERTEX on a voluntary basis. For the countries concerned, this would allow some of the identified problems to be addressed to a certain extent, especially as procedural redundancies (e.g. the continued need for paper documents to accompany electronic versions) are reduced. However, the project’s desired benefits in terms of efficiency gains, enforcement and reduction of fraud and errors cannot be realised without EU-wide quantity management, which is only possible if all Member States participate. The current levels of participation have been achieved in anticipation of the imminent introduction of an obligatory version. Without this prospect, participation would stagnate or decline. This would also make it difficult to justify the investment needed at EU level to further expand the scope of the initiative to cover more regulatory requirements. Given its role in modernising the Customs Union and better enforcing customs and non-customs regulatory requirements at the border, the EU has a unique advantage to reassess the fundamental practices and procedures of the current fragmented model of regulatory compliance. EU action in this area will improve compliance of regulatory requirements with EU legislation and further facilitate the cross-border movement of goods. This, in turn, would bring a clear added-value to the interaction between customs and partner competent authorities and the day-to-day activities of economic operators. Ultimately, EU intervention will generate significant social and environmental impacts and substantial economic benefits for society as a whole. In accordance with Article 5(4) of the Treaty on the European Union, the content and form of Union action must not go beyond what is necessary to meet the objectives of the Treaties. Respect for the principle of proportionality will be provided by ensuring that the policy approach and its outreach match the identified problem/objective. For this purpose proportionality is a key criterion considered in the comparison of the policy options. 4.Objectives: what is to be achieved? 1. 4.1 General objectives The general objective of this initiative is twofold: (1) to improve the enforcement of non-customs regulatory requirements that must be applied to goods at EU borders, thereby enhancing the protection of the Union; and (2) to facilitate international trade. 4 4.2 Specific objectives

The initiative will contribute to the general objective by pursuing the following three specific objectives in line with the identified problems: 1.Define a governance framework for the EU Single Window environment for customs to enhance cooperation and ensure interoperability of national and EU Single Window solutions where beneficial and appropriate. This objective addresses the problem of fragmented interoperability in the management of goods clearance processes. 2.Improve working practices between customs and partner competent authorities involved in international trade to automate to the extent possible customs controls of non-customs regulatory formalities, and to promote electronic feedback of the customs clearance as well as a better integration of the applicable procedures. This objective addresses the problems of fragmented interoperability in the management of goods clearance processes and duplication of information and procedural redundancies. 3.Determine a framework for data harmonisation and enable the re-use of data provided by economic operators when fulfilling the different formalities required by customs and non-customs authorities for international trade. This objective addresses the problem of duplication of information and procedural redundancies. Taken together, the general and specific objectives would achieve the overall objective of a streamlined EU regulatory environment for international trade that delivers long-term benefits to the Union and its citizens across policy domains. Importantly, any technical solutions capable of addressing the objectives would take considerable time to develop and be deployed progressively, with various elements becoming operational at different times. For this reason, it is envisaged that the objectives would be achieved gradually over the course of the next decade. Source: DG TAXUD 5.What are the available policy options? 5.1 What is the baseline from which options are assessed? The baseline scenario serves as the benchmark against which the different options are assessed. Its analysis requires an examination of EU CSW-CERTEX and the existing national single window solutions. To facilitate this analysis, two different variables are taken into account to present the scope of single window initiatives to date at EU and national levels: Categories of single window services provided: these services are divided in a government-to-government (G2G) and a business-to-government (B2G) dimension; Type and volume of non-customs regulatory requirements covered: regulatory requirements 1) imposed and regulated at EU level, 2) introduced nationally in accordance with Article 36 of the TFEU, or 3) certified by third countries in the context of international agreements or EU legislation. The increased digitalisation of customs and regulatory procedures has opened up new opportunities to improve the interoperability and cooperation between customs and partner competent authorities. Both the Commission and some Member States have started to develop and put in place G2G single window services to interconnect national customs systems with those of partner competent authorities where the supporting documents data is stored. In principle, G2G single window services may be described as digital exchanges of information between customs and partner competent authorities’ systems that: ·Allow customs authorities to automatically receive and verify the relevant electronic supporting documents issued by partner competent authorities; and ·Enable partner competent authorities to monitor and manage the authorised quantity of goods based on the release of goods by customs (quantity management).

The presence of G2G single window renders the customs clearance process more efficient, thanks to the automation of documentary controls and enables customs authorities to better enforce the regulatory policies of partner competent authorities, thanks to the ability to automatically monitor the consumption or use of supporting documents. However, these services do not resolve the issue of economic operators having to communicate separately with both customs and the relevant partner competent authorities to place the goods under a specific customs procedure. B2G single window services aim at streamlining reporting formalities imposed on trade for the import, export and transit of specific goods subject to non-customs regulatory formalities. They avoid reporting and procedural redundancies and enable the realisation of the internationally recognised single window concept by providing economic operators with a single-entry point to fulfil all import, export and transit-related regulatory requirements. B2G single window services aim to significantly improve the customs clearance process, by allowing economic operators to lodge all the necessary data required by customs and non-customs legislation at a single-entry point and receive any related information from concerned authorities directly from this point. The relevant non-customs regulatory formalities can be categorised in four groups as shown in the table below (a detailed list of the regulatory requirements under each category is provided in Annex 8). Category 1 Category 2 Category 3 Category 4 EU regulatory requirements with data available for all Member States at EU level. EU regulatory requirements with data available in a national or EU voluntary system. National regulatory formalities introduced by national legislation in accordance with Article 36 of the TFEU. EU regulatory formalities certified by a third-country authority and submitted to EU customs authorities. Source: DG TAXUD In light of the above variables, the relevant existing EU and national initiatives consist of the G2G solution provided by EU CSW-CERTEX and the national single window initiatives being developed in several Member States. EU CSW-CERTEX is focused on establishing a connection between the national customs systems of the participating Member States and a number of EU databases covering certain non-customs regulatory requirements. In practical terms, supporting document data is passed through to the customs systems of the participating Member States in a way that it can be automatically verified against the customs declaration data. This platform also provides a quantity management functionality for reserving the declared quantities of authorised goods in the source database. EU CSW CERTEX covers only a subset of Category 1, namely Union regulatory formalities, whose information is available for all Member States at EU level. In addition to the voluntary participation of several Member States in EU CSW-CERTEX, a number of single window national initiatives are ongoing in countries such as Austria, Czechia, France, Italy, Latvia, Lithuania, Portugal, Spain and the Netherlands. The majority of these are focused on G2G services while some Member States, such as Spain, Italy, and the Netherlands have started taking steps to develop B2G services. Some Member States are also using their national initiatives to integrate processes across various authorities for the coordination of respective controls providing a one-stop shop solution. The regulatory formalities within the scope of each national initiative can be summarised as follows: ·Czechia, Latvia and Portugal, participating in the EU CSW-CERTEX have developed interconnections with some national systems hosting EU regulatory requirements (e.g. AGRIM/AGREX for Czechia, Latvia and Portugal and CITES licences for Czechia). This allows the automated verification of 85-90% of the volume of these supporting documents, as long as they are issued within the same Member State. In 10-15% of the cases, the supporting document presented to customs for import or export has been issued in another Member State and therefore cannot be automatically validated through the established national connections. In these cases, a paper version of the supporting document has to be verified manually. ·Austria, Spain, France, Italy, Lithuania and Sweden have connected their customs systems to national systems hosting either EU regulatory requirements, such as AGRIM, AGREX, CITES, dual use goods licences, surveillance documents and export authorisation of firearms, or national ones. Similarly to the above, this enables the automated verification of the respective supporting documents in around 85-90% of the cases and manual verification for the other 10-15%. ·Spain and Italy have also developed a connection to automatically verify EU regulatory requirements available in EU systems (e.g. CHED-A, CHED-P, CHED-D) outside the EU CSW-CERTEX solution. Authorities in the EU also deal with supporting documents issued by third countries. Connections between customs and third countries licensing or certification systems have not been established at either EU or national level. This means that any EU regulatory formalities certified by a third-country authority and presented to EU customs as a supporting document to the customs declaration has to be verified manually as is currently the case for the VI-1 document for wine imports, the Kimberley Process Certification Scheme (KPCS) for diamond imports, or Certificates of Origin. 5.2Ongoing impacts without any further EU policy action The evolution of the current situation without additional EU intervention would affect in several ways the actors involved in the international trade. The scope of EU CSW-CERTEX project would remain limited to G2G services focused on the verification of regulatory requirements for a relatively small number of non-customs formalities. Member States would continue to participate in this project on a voluntary basis. While both the Commission and Member States would incur considerable costs to maintain the system and connections to it, the limited participation would make it impossible to implement crucial features such as reliable EU-wide quantity management. The Member States that are not participating in this project would continue to follow national practices leading to difficulties in verifying volumes consumed in these Member States for EU CSW-CERTEX members. As reported universally by Member States, this would discourage additional Member States from joining the project. With fewer Member States likely to participate and an uncertain future, it would be difficult to justify the investment necessary to integrate further regulatory requirements. It can thus be assumed that coverage would remain limited to those where agreements between DG TAXUD and other DGs have already been made. Based on the experiences to date and information regarding expected developments, national Single Window initiatives in a growing but limited number of Member States would be likely to continue in parallel with EU CSW-CERTEX. They would evolve in different directions and modalities based on the varying levels of digitalisation of government services, political priorities, existing IT architecture and cost structures. These initiatives would also entail significant costs, partly due to the need for each Member State pursuing a national Single Window to develop separate IT solutions. In some cases, national customs and partner competent authorities would even need to replicate EU-level databases such as TRACES in order to cover certain regulatory requirements. EU CSW-CERTEX and advanced national single window initiatives pursued by a few Member States will continue to provide certain benefits in the participating Member States. These mainly include time savings through reductions in the time and effort needed for various stakeholders to deal with the goods clearance processes, improved cooperation between customs and non-customs authorities and better enforcement of non-customs formalities. These limited benefits would only partially achieve the objectives of this proposal. In the absence of new EU action the following impacts could be expected: ·Customs authorities in non-participating countries without national single window initiatives would continue to rely heavily on manual checks for the verification of non-customs regulatory formalities. Reliance on manual procedures implies more complex and uncoordinated goods clearance processes for both regulatory authorities and economic operators at EU and national level. Moreover, their continued use would cause delays in the clearance process and may generate administrative errors. ·The lack of EU-wide automated quantity management would lead to persistent risks of fraud and gaps in the enforcement of concerned regulatory requirements by customs, even in Member States participating in the pilot or with single window initiatives at national level. The potential for the fraudulent reuse of documents is high due to the absence of a strict one-to-one relationship between a supporting document and a customs declaration. For example, EU level quantity management is also necessary for the effective enforcement of quotas (see box 7 in section 2.3.2.), but this functionality is not possible unless all Member States are involved, and the technology supports real-time information sharing. ·Finally, the current situation in the EU related to regulatory formalities required for the international trade in goods is still far from meeting the needs of traders for efficient goods clearance. Differences in data sets and processes across regulatory formalities inhibit harmonised exchange between customs and partner competent authorities, resulting in the submission of the same information multiple times. In the absence of EU action, only non-harmonised B2G single window services would be available in the (few) Member States that decide to develop them nationally, leading to an uneven playing field in terms of trade facilitation.

5.3Description of the policy options Eight policy options have been identified to address the problems discussed above and to achieve the set objectives. They are based on the evaluation of EU SW-CVED carried out by DG TAXUD and the experience derived from its evolution into EU CSW-CERTEX as well as discussions and deliverables of the project group. They were further analysed and assessed by the senior management of Member States customs administrations and trade representatives at the High-Level Seminar that took place in Bucharest on 15-16 May 2019. The options cover a range of potential actions to develop an EU Single Window environment for customs and can be structured in three different groups depending on the type of services offered: ·Group I (options 1-4): options for government-to-government (G2G) back-end cooperation that would focus primarily on facilitating information sharing between customs and partner competent authorities. ·Group II (options 5-7): options for business-to-government (B2G), front-end cooperation aimed at improving economic operators’ interactions with customs and partner competent authorities. ·Group III (option 8): cross-cutting option aimed at streamlining the way customs and partner competent authorities identify and store information on economic operators. 2 3 3 4 5 5.2 5.3 5.3.1Group I: Government-to-government (G2G) Options 1-4 address how customs and partner competent authorities can automatically and effectively exchange, cross-reference and verify information for the customs clearance process when an economic operator submits a customs declaration requiring the compliance of non-customs regulatory formalities. Each option covers a different category of non-customs regulatory requirements (see Annex 8). Since different categories of regulatory requirements have different systems and arrangements for receiving, processing and storing information, the solutions needed to include any of them in a future policy choice would also differ. Even within options, multiple implementation choices could be envisaged. Options 1-4 are not mutually exclusive, but rather are cumulative, meaning that a combination of them could form part of a future policy choice. Given that option 1 builds on the existing EU CSW-CERTEX project by expanding it to all Member States and covers regulatory formalities that (due to their management using existing EU electronic systems) are easier to interconnect, it would not make any logical sense to put in place options 2, 3 or 4 (which cover different categories of formalities) without firstly implementing option 1. For this reason, option 1 is viewed as a prerequisite to any future policy choice apart from continuing with the baseline scenario. Option 1 – Interconnecting national customs systems to EU non-customs regulatory formalities digitally available at EU level This option would cover EU regulatory requirements managed through EU electronic systems or through a combination of EU and national systems, but where the relevant information required by customs for clearance, for all Member States, is available at central level (e.g. CHED-A, CHED-P, CHED-D, CHED-PP, COI, FLEGT, ODS, FGAS). Source: DG TAXUD

It would put in place a legal framework for uniform and obligatory use of the existing EU CSW-CERTEX system to exchange information between the national customs systems and the existing and future EU electronic systems managing EU regulatory requirements. This means that the scope of the option has a dynamic feature and additional EU regulatory formalities will be added as they become available at EU central level. Where applicable, this option would allow quantity management by customs of supporting documents at EU level. Option 2 – Interconnecting national customs systems to EU non-customs regulatory formalities digitally available at Member State level Option 2 would cover EU regulatory requirements managed through national electronic systems, or a combination of national and voluntary EU systems, which make only the customs-relevant information from participating Member States centrally available (e.g. agricultural import and export licenses and dual use goods licences). The scope of this option has a dynamic element intrinsically linked to the scope of option 1. Formalities currently under the scope of option 2 will be integrated into option 1 progressively as EU regulatory formalities become digitally available for all Member States at EU level. The possibility to centralise national non-customs systems must be assessed on a case by case basis against each regulatory formality under the scope of option 2. This assessment should be based on the specific framework of each sectorial legislation and conducted through the engagement of all relevant stakeholders. This explains why the centralisation of existing national non-customs systems falls outside the scope of this impact assessment and it is subject to further analysis in the respective areas of competence. For the purpose of this initiative, this option would put in place a legal framework for making existing national systems and future voluntary EU electronic systems interoperable through EU CSW-CERTEX. This would grant national customs systems access to relevant information stored both in their own and other Member States’ certification or licensing systems. Customs authorities of a given Member State would be able to automatically verify supporting documents issued in another Member State and provide feedback of goods clearance for quantity management purposes. Technical solutions for connecting EU CSW-CERTEX to national certification or licencing systems could either be direct – option 2 (i), or indirect – option 2 (ii). Option 2 (i) – Direct connection Figure 6: Option 2(i) – EU regulatory requirements managed through national systems, connecting EU CSW-CERTEX directly Source: DG TAXUD EU CSW-CERTEX would establish a direct connection between national customs systems and existing national partner competent authorities’ systems and/or future voluntary EU systems. Option 2(ii) – Indirect connection EU CSW-CERTEX would enable national customs systems to access relevant information stored in the national partner competent authorities’ systems of other Member States through their national customs system. Thus, each national customs authority will be responsible for collecting the relevant information on non-customs regulatory requirements from their own national competent authority. Source: DG TAXUD Option 3 – Interconnecting national customs systems to national non-customs regulatory requirements in another Member State This option would cover a wide spectrum of national non-customs regulatory requirements managed through national systems, resulting in highly diverse examples (see Annex 8). Option 3 would put in place a legal framework for national customs administrations to access information from the national certification/licensing systems of other Member States. The need to access information on a national regulatory formality of another Member State would only arise in the context of centralised clearance whereby the economic operator can lodge a customs declaration at the customs office where his activity is established for goods, which are presented at another customs office in the EU. Similar to option 2, technical solutions for connecting EU CSW-CERTEX to national systems could be either direct or indirect. Option 4 – Interconnecting national customs systems to EU non-customs regulatory formalities digitally available in third countries Option 4 would put in place a legal framework that would allow customs authorities to electronically access information and verify compliance with EU regulatory formalities requiring third country supporting documents. Its scope covers EU regulatory requirements for which there is no EU or national system, such as the Certificate of Origin, VI 1 document for wine imports and the Kimberley Process Certification for diamond imports. 5.3.2Group II: Business to government (B2G)

Options 5-7 focus on different ways of streamlining reporting processes for the economic operators to customs and partner competent authorities when dealing with regulatory requirements mentioned above. These options are mutually exclusive, meaning only one of them could form part of a future policy choice. A continuation of the baseline scenario would mean no EU action at the front end, though individual Member States may pursue related initiatives at national level. Option 5 – Harmonised portal for economic operators to fulfil EU non-customs regulatory requirements This option would put in place a legal framework to give economic operators a harmonised portal for interacting with the various electronic systems used to deal with EU regulatory requirements of partner competent authorities. This would give economic operators a common portal for lodging various types of information regardless of the Member State(s) and/or the partner competent authority involved. However, customs declarations would still need to be lodged separately through the customs systems of individual Member States, meaning economic operators would fulfil regulatory formalities through both customs and non-customs channels instead of through a single-entry point. This option could either cover only regulatory requirements of partner competent authorities for which relevant information is stored in EU systems, or a combination of EU and national systems. Individual Member States could also facilitate access between the portal and national systems managing national regulatory requirements in order to expand its scope. Technical solutions for implementing this option would be based on the provisions of the Regulation on electronic identification and trust services for electronic transactions in the internal market (eIDAS Regulation), which facilitates the use of national electronic identification systems across borders, as well the Commission’s Uniform User Management and Digital Signatures (UUM&DS) authentication system. Option 6 – Harmonised national single-entry points for economic operators to fulfil customs and non-customs regulatory requirements Option 6 would put in place harmonised measures for the Member States to set up customs single windows at national level, providing economic operators with harmonised single-entry points to fulfil all customs and non-customs regulatory requirements. National customs authorities would act as a hub for receiving relevant information from economic operators on behalf of partner competent authorities, as part of the customs declaration process. This solution would enable economic operators to submit information related to non-customs regulatory requirements in addition to customs data at the time of lodging the customs declaration. This information will then be distributed to partner competent authorities’ systems via the EU CSW-CERTEX. Depending on which of options 1-4 this option is combined with, the result would allow for a degree of interoperability and process integration between Member States. Option 7 – EU single-entry point for economic operators to fulfil customs and non-customs formalities This option calls for the development of a centralised EU electronic system that would provide (1) a common interface for economic operators to submit both customs declarations and all other data needed to fulfil non-customs regulatory requirements and (2) a common repository that would replace existing national systems for import, export and transit. In other words, this option would introduce a single-entry point at EU level for all border formalities required for the clearance of goods. This information will then be distributed to partner competent authorities’ systems via the EU CSW-CERTEX as needed to verify compliance. Due to the specific features of this option, the way it could be combined with options 1-4 differs from option 6 in terms of interoperability and system integration. Given that its implementation would replace existing national customs systems with a single centralised system, this option could only be combined with a simplified version of option 1 that entails a single connection to EU CSW-CERTEX. For the same reason, it would be impossible to implement option 7 alongside the indirect connection versions of options 2 and 3. 5.3.3Group III: Cross-cutting options for registration and identification of economic operators Option 8 – Extend the use of the Economic Operator Registration and Identification System (EORI) to partner competent authorities This is a cross-cutting option that aims to extend the use of the Economic Operator Registration and Identification system (EORI) to partner competent authorities. While this is not a standalone option, it would serve as a facilitation tool to implement G2G and B2G options. This would allow customs and partner competent authorities to exchange, collect and receive information about economic operators more easily, with the purpose of reducing the administrative burden on economic operators and facilitating the implementation of any of the other policy options chosen. Two alternatives can be considered under this option: a)Option 8(i) would extend EORI to partner competent authorities for registration, identification and validation purposes. This sub-option would imply the registration of additional businesses who are not registered with the customs authorities, as EORI would become a common registration and identification number for customs and partner competent authorities involved in international trade. b)Option 8 (ii) would grant access to EORI system to partner competent authorities for validation purposes. This would mean they can request the EORI number from economic operators in the context of their formalities and validate it against the EORI systems, but not register on the basis of this initiative additional businesses which are not covered under the UCC. As a reference point for the foregoing problem analysis and proposed options, a summary of the intervention logic of the initiative is presented in the figure below. It provides a visual representation of the links between the identified problems, their drivers, the specific objectives for further intervention and the options that are likely to achieve these objectives. Although the impacts of each proposed option category would likely influence all three objectives to a limited extent, the arrows connecting the specific objectives to the policy options represent the most relevant links. Figure 8: Intervention logic Source: DG TAXUD 5.4Options discarded at an early stage The options have been screened to focus the analysis on the most viable ones. The screening exercise was carried out based on evidence collected from stakeholders in the project group and Commission services, using criteria for technical feasibility, effectiveness and proportionality. The results are presented in the table below, with a preliminary judgement and explanation provided for each option and criterion. The last column states whether an in-depth analysis or a limited analysis would be appropriate for each option.

Table 3: Screening of the policy options Technically feasible Likely to be effective Proportionate Level of analysis Option 1 Yes; the viability has been tested through the EU SW-CVED pilot and EU CSW-CERTEX project. Yes; results of the EU SW-CVED pilot and initiatives similar to this option at national level indicate that significant benefits could be expected in terms of all the policy objectives as defined. Yes; while substantial benefits would be expected, this option uses fairly low-cost DG TAXUD middleware in order to link existing/planned EU electronic systems. Evidence from the EU SW-CVED pilot also shows just limited costs for the Member States, while economic operators would incur hardly any costs. In depth analysis; this option is highly feasible and likely to be effective and proportionate. Option 2 Yes; technical feasibility has been investigated through the project group, showing that the DG TAXUD middleware could be used to link national systems and / or any relevant EU systems. Unclear without further investigation; benefits from key functions (e.g. quantity management) would depend on the full participation of Member States. Unclear without further investigation; the costs to the Member States could be substantial and would need to be compared to the likely benefits. In depth analysis; while this option is feasible and potentially effective, key aspects concerning the viability of this option remain unclear and are subject to further investigation. Option 3 No; linking the systems for the wide spectrum of national regulatory requirements concerned (see Annex 8) is unlikely to be possible using the EU CSW-CERTEX system. No; information on national regulatory formalities of another Member State would only be required in the context of centralised clearance for which alternative solutions are being explored . No; the major investments needed at national level and EU level to link each of the many relevant electronic systems to EU CSW-CERTEX would outweigh the benefits that would be realised. Limited; given that this option is neither feasible nor likely to be effective or proportionate. Option 4 Implementing this option would require changes to third-country systems that would depend on bilateral or multilateral agreements on a case-by-case and country-by-country basis. No; preliminary stakeholder feedback suggests that the goods movements involved are not a major cause of the identified problems (see section 5.1). No; despite the limited benefits, the costs to link EU, Member States and third country systems are likely to be substantial. Limited given that this option is not yet technically feasible or effective in addressing the identified problems. Option 5 Yes; preliminary research carried out for the policy options document shows that the technical developments for this option would be straightforward. No; while this option would put in a place a common portal for economic operators to deal with key supporting documents, they would still have to deal with customs authorities separately, strongly limiting the gains for trade facilitation. No; the costs to DG TAXUD to develop the portal and for partner competent authorities and economic operators would be substantial and out of proportion to the limited potential benefits. Limited; the likely ineffectiveness of this option to achieve the objectives means it does not make sense to investigate it in depth. Option 6 Yes; this option leaves key aspects to be defined according to national prerogatives, increasing its feasibility. The B2G use cases on a selection of regulatory requirements also show that the necessary changes to the systems and trader interfaces can be developed. Yes; the B2G use cases on a selection of regulatory requirements show that this option is likely to generate substantial benefits for traders. Unclear without further investigation; this option would entail considerable development and implementation costs for the Commission and Member States authorities. Further data is needed to estimate these and compare them with the likely benefits. In-depth; preliminary evidence shows that this option is feasible and likely to be effective, showing its viability and meriting in-depth investigation. Option 7 Yes; although it would require wholesale changes to the approach for implementing the provisions of the UCC. Yes; the experience of the US shows that this option could have major benefits in terms of increased efficiency of goods clearance and improved compliance / reduced fraud and errors. The implementation of this option would radically change the regulatory and operational practices of the Customs Union, allowing economic operators to access a single EU portal for international trade formalities. The costs to the Commission, Member States and economic operators would be substantial and difficult to ascertain without in-depth analysis. In-depth; while this option is technically feasible and potentially effective, key aspects concerning the viability and proportionality of this option remain unclear, subject to further investigation. Option 8(i) No; it would require major changes to the current framework. The cases where existing registration systems should be replaced by EORI are diverse and involve multiple authorities. Thus, they would need to be addressed individually. Yes; this option would particularly benefit economic operators by providing a single registration mechanism for customs and non-customs formalities. No; it would require many additional and diverse businesses (including those based in third countries or involved in intra- community trade) to register in EORI. This would be highly complex and costly and would not prevent some businesses having to register for other purposes such as VAT. Limited; preliminary evidence shows that this option is not viable. Option 8(ii) Yes; the technical implementation of this option is straightforward. Yes; preliminary evidence based on a pilot in one country and stakeholder feedback indicates this option would make it much easier to collect and share information on economic operators, since existing systems for managing economic operators are disparate and not interoperable. Yes; preliminary evidence indicates that the likely costs would be low compared to the benefits. In-depth analysis; preliminary evidence indicates that this option provides a feasible and practical way to facilitate the implementation of the other policy options. The screening of the policy options determined that three options and one sub-option were unviable due to a lack of feasibility, likely effectiveness and / or proportionality. These options are thus not analysed in depth. However, a brief overview of the economic, social and environmental impacts that could be expected if these obstacles were to be overcome is provided in Annex 12. 6.What are the impacts of the policy options? This section describes the approach to the analysis of the options, in terms of the sources of evidence and methods for estimating the impacts and applies this framework to assess options 1, 2, 6, 7 and 8(ii), in terms of stakeholder views, direct economic impacts, social and environmental impacts and potential risks. 6.1 Approach to the analysis of the options The main criteria to assess the policy options are closely linked to the general and specific objectives of the initiative and can be grouped into direct economic impacts and social and environment impacts. The direct economic impacts are comprised of one-off implementation and recurrent costs, as well as savings from reduced amounts of labour and out-of-pocket expenses (e.g. for delays, intermediaries, storage facilities etc.) needed for customs authorities, partner competent authorities and economic operators to enforce EU legislation and deal with goods clearance. These savings would relate to achievements in terms of the first and second specific objective of enhanced cooperation and improved working practices between customs and partner competent authorities, and to the third specific objective of data harmonisation and re-use of data provided by economic operators when fulfilling the customs and non-customs formalities required for international trade, as they will all contribute to simplify the clearance processes for economic operators. To the extent possible, the analysis seeks to quantify and monetise these impacts to determine their net costs or benefits over time. The objectives are not referenced repeatedly in the analysis to enhance readability. The approach has been developed with a view to the complex regulatory framework and diverse operations and processes at stake. In particular, it is noted that the timing for submission of documents and extensiveness of checks vary by type of good and regulatory requirement, meaning that experiences for both authorities and economic operators may differ depending on factors such as the Member State and nature of the goods in question. In addition, the cost for the Member States to implement new IT infrastructure differs substantially depending on the maturity of their existing IT architecture, arrangements with service providers, and varying capacity requirements, which are based on trading volumes and profiles. Due to these issues, it is very difficult to extrapolate individual examples from a limited number of Member States to the whole EU. Moreover, in many cases, national administrations were reluctant to provide detailed information on the costs of IT projects and process changes and time spent by officials to perform controls due to its political sensitivity. To obtain quantitative estimates despite these challenges, the analysis of direct impacts relies on plausible assumptions based on the available data and stakeholder feedback. For example, some participants in the project group, representing highly diverse Member States, provided insight into their IT infrastructures and the extent of likely changes needed to implement the different policy options, including on costs. While this input cannot be cited directly due to confidentiality concerns, it allows to develop plausible estimates for a range of scenarios. Similarly, qualitative data about business processes and experiences with the clearance of certain goods is used to come up with estimates concerning time savings that could be expected from the introduction of a certain process improvement. In all cases, the high degree of diversity among Member States and regulatory requirements in question, as well uncertainty regarding future changes, makes it impossible to define simple figures that could be applied to the whole EU. At the same time, the data, which is sensitive and not comprehensive, do not allow for detailed breakdowns by Member State. For this reason, EU-wide figures are used, based on plausible ranges with regard to the costs and potential changes that could be expected. Finally, to ensure the reliability of the ranges, these were validated in consultation with project group participants representing the Member States and trade associations. One-off implementation and recurrent costs would be borne by the EU Commission, national customs authorities, partner competent authorities and economic operators. Implementation costs include spending on IT hardware and software, process change management, training and support, and are expected to be phased over an implementation period. The timing for these implementation periods has been developed in consultation with IT units at DG TAXUD and varies depending on the option. For most options (1, 2, and 6), this implementation period would be seven years. This timeframe is consistent with experiences of other customs IT projects of similar size and scope (including the well-developed pilot solution EU CSW-CERTEX, which forms the basis for option 1). The time needed for development and implementation is much longer for option 7 due to its larger scale and complexity, while option 8(ii) would be operationalised much more quickly. Afterwards, implementation costs will be replaced by recurrent costs, comprised of maintenance, periodic updates, continued support and day-to-day operations. The table below lists the sources used to estimate the costs for different actors, while full explanations are provided in the sections on the impacts of each policy option. Actor Sources for cost estimates EU Commission Based on data provided by DG TAXUD. National customs authorities and partner competent authorities Based on some documentary sources (e.g. technical specifications) and interviews with experts and stakeholders. Despite the level of progress with national initiatives, very few Member States were able to provide hard data on IT and business costs . The credibility of these figures was verified with the national customs administrations participating in the project group. In terms of variation, larger Member States would typically incur larger costs while smaller Member Stats incur lower costs. However, the prevalence of fixed costs means that smaller Member States would likely face costs that are relatively higher compared to their proportion of international trade. At the same time, for all options these costs are much lower than would be incurred if individual Member States had to develop all elements individually. Economic operators The G2G options (i.e. options 1 and 2(i) and 2(ii)) and cross-cutting option 8 do not entail any front-end changes that would generate costs for economic operators. Option 6, in creating a single-entry point for interactions with customs and non-customs authorities, would require very slight adjustments related to the introduction of a few new data elements. However, these are deemed negligible both due to their small scale and the fact that implementation would be phased over several years. Option 7, by requiring economic operators to adjust to a new system for customs clearance, would involve some IT and training costs. Source: DG TAXUD The direct economic benefits would relate to reduced administrative burdens and are estimated based on a variant of the standard cost model . The model works by multiplying the number of information obligations with the cost for different stakeholders. Due to the unavailability of sufficient data on the baseline costs, the research has allowed for estimates regarding the amount of time saved per information obligation under the different policy options. For each option, the model is then applied by multiplying the number of obligations (expressed in terms of the number of customs declarations for which supporting documents to comply with certain non-customs regulatory requirements are required) with the amount of time saved. The latter is monetised using standard hourly labour costs. Each of these aspects is described in more detail below. a)Number of affected customs declarations: estimates are derived based on extrapolations from extensive real data from the Member States. More specifically, 15 Member States participating in the project group provided data on the numbers of customs declarations subject to certain regulatory requirements during the years 2015-2017. By assuming that the numbers of relevant declarations varied roughly in proportion to international trade volumes, it was possible to extrapolate these figures to the whole EU using Eurostat trade statistics. Since the envisaged social and environmental impacts also depend to a great extent on which customs declarations are affected, these are also informed by these estimates. Since any of the policy options that is implemented would become operational gradually, the analysis assumes that implementation would be spread over a time period that is described in the analysis of each option. b)Time saved for each operation (in minutes): estimates are made based on feedback from national officials and economic operators about how (1) clearance processes changed after the implementation of EU CSW-CVED and relevant national single window initiatives, and (2) the specific policy options would be likely to affect existing practices. While the time savings would be distributed across the Member States in line with their trading volumes, the estimates also need to take into account the different starting points across Member States. For example, relatively lower savings would be expected for the customs declarations that are already dealt with using the single window initiatives that are in place in a small number of Member States. Higher savings would be expected where less progress has been achieved at national level, such as the Member States that have not participated in EU CSW-CERTEX or developed a similar national solution so far. Taking these aspects into account as well as the inherent degree of uncertainty (see discussion below), estimates are presented in terms of a range of values for the plausible time savings. It is also noted that the delays and process redundancies that characterise the present situation (see section 2.3.1) have been found to affect SMEs disproportionately. This is due to SMEs’ limited ability to make investments that would allow them to handle administrative burdens more efficiently and unfamiliarity with complex processes. For example, the supporting study for this Impact Assessment identified examples where senior staff of SMEs needed to physically transport documents between competent authorities and customs offices to deal with a single declaration. Larger companies typically deal with higher volumes of declarations, providing the economies of scale that allow them to put in place more efficient processes or to outsource customs operations. Since all of the options seek to reduce burdens of this kind, SMEs would experience comparatively large benefits compared to other economic operators, regardless of the policy option. The reductions in administrative burdens could also be expected to increase the number of SMEs participating in international trade . c)Labour costs (in EUR): the time saved for different actors can be monetised by applying a standard labour cost for staff of national authorities and economic operators. To derive this cost, Eurostat data on average salaries in EU public administration (adjusted to take account of overheads, social security contributions, etc.) was divided by OECD data on average hours worked per year in the EU Member States to arrive at an average hourly cost. This figure was then weighted based on