[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 30.11.2005

COM(2005) 608 final

2005/0246 (COD)

Implementing the Community Lisbon programmeProposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

laying down the Community Customs Code

(Modernized Customs Code)

(presented by the Commission) {SEC(2005)1543}

EXPLANATORY MEMORANDUM

CONTEXT OF THE PROPOSAL |

110 | Grounds for and objectives of the proposal The present Community Customs Code, Council Regulation (EEC) No. 2913/92, is out of date. It has not kept pace with either the radical changes to the environment in which international trade is conducted, particularly the rapid and irreversible growth of the use of information technology and the exchange of electronic data, or with the changing focus of customs work. This compromises efficient customs clearance and risk-based controls within the internal market. One should also take into consideration the Community's trade facilitation agenda in the context of the Doha Development Agenda, as well as the requirements stemming from the need to address emerging security and safety threats by strengthening controls at the external border of the Community. The modernizing of the Customs Code, streamlining of customs procedures and processes and the adaptation of the rules towards common standards for IT systems will implement the e-Government initiative in the area of customs; fulfil the commitment to the 'better regulation' initiative in this area, by providing less complex and better structured rules and regrouping several Regulations; enhance the competitiveness of companies doing business in and with the Community, thus creating economic growth; increase security and safety at the external border, once common standards (including those for risk-analysis) are introduced and managed via a common IT framework; reduce the risk of fraud; contribute to better coherence with other Community policies, such as indirect taxation, agricultural, commercial, environmental, health and consumer protection policy; and ensure an effective decision-making process for the adoption of implementing provisions, guidelines and explanatory notes and provide for the Commission to request a national administration to withdraw a decision. Such extensive changes cannot be achieved by continued amendment of the present Customs Code, but only by a complete overhaul, i.e. its replacement by a modernized Community Customs Code. |

120 | General context The present proposal must be seen in the context of the renewed Lisbon Strategy, whose objectives are to make Europe a more attractive place to invest and work, where growth is led by knowledge and innovation and where policies allow businesses in the EU to create more and better jobs. The present proposal was also developed to fulfil the objectives of the e-Government initiative, by allowing business, through electronic Customs, to benefit fully from modern technology and the resulting facilitation of trade. The Commission proposals to create a simple and paperless environment for customs and trade were welcomed and supported in the Council Resolution of December 2003, which endorsed the Commission proposals for the modernization of customs rules and procedures and to establish a regulatory framework in support of reformed customs procedures in a computerised context. No general revision has been made of the present Code since it was adopted in 1992, only limited changes addressing specific problems. It still bases procedures upon paper transactions and, although the use of electronic customs clearance through national computerized systems is now the rule rather than the exception, there is still no obligation under Community law to use such systems. Community-wide IT applications for customs clearance do not generally exist, yet the new computerized transit system, NCTS, has successfully demonstrated the feasibility of such systems and opens new opportunities for similar applications in other customs regimes. Furthermore, the role of customs is shifting away from the collection of customs duties, which have declined dramatically over the past 20 years, towards the application of non-tariff measures, including, in particular, those related to security and safety, to the fight against counterfeit goods, money laundering and drugs, and the application of sanitary, health, environmental and consumer protection measures, as well as the collection of VAT and excise duties on importation or the exemption from such taxes on exportation. The Customs Code has to be adapted to fit, but also to govern, the electronic environment for customs and trade. Moreover, economic operators and administrations have all favoured taking this opportunity to carry out a major overhaul of the customs rules in order to make them simpler and better structured. Not least, radical changes in the Code are needed, in an enlarged Community and an electronic trading environment, to provide for the collection of taxes at the most appropriate place, which is at the place where the trader is established (centralized clearance). At the same time, it is essential to safeguard common standards, including those for risk-analysis and customs penalties. The latter can only be achieved through a common Community framework, for which the Commission will table a proposal soon. It is also necessary to improve coherence with other Community policies, such as those related to indirect taxation, agricultural, commercial, environmental, health and consumer protection policy. This requires a revised division of tasks between border and inland customs offices. Failure to make these changes to the Code will prevent companies doing business in Europe from taking full advantage of more modern conditions for performing their international trade duties, which will affect their performance in an increasingly competitive environment. Outdated procedures, processes and other customs rules that were developed for a paper-based environment will also increase the risk of fraud, compromise safety and security at the external border and weaken the role of customs as the principal agency for border protection and supervision in respect of the international movement of goods. |

130 | Existing provisions in the area of the proposal Council Regulation (EEC) No 2913/92 of 12 October 1993, establishing the Community Customs Code, and Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code. The proposal and its implementing provisions will replace these Regulations, together with the following Regulations and their implementing provisions, which are incorporated in the new Code: Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duties, Council Regulation (EEC) No 3925/91 of 19 December 1991 concerning the elimination of controls and formalities applicable to the cabin and hold baggage of persons taking an intra-Community flight and the baggage of persons making an intra-Community sea crossing, Council Regulation (EC) No 82/2001 of 5 December 2000 concerning the definition of the concept of "originating products" and methods of administrative co-operation in trade between the customs territory of the Community and Ceuta and Melilla, Council Regulation (EC) No 1207/2001 of 11 June 2001 on procedures to facilitate the issue of movement certificates EUR.1, the making-out of invoice declarations and forms EUR.2 and the issue of certain approved exporter authorizations under the provisions governing preferential trade between the European Community and certain countries. |

140 | Consistency with the other policies and objectives of the Union Consistent with the renewed Lisbon strategy and the e-Government initiative. |

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT |

Consultation of interested parties |

211 | Consultation methods, main sectors targeted and general profile of respondents Progressive versions of the draft modernized Customs Code have been discussed with Member States' customs administrations, in the Customs Code Committee, and with European trade federations, in Trade Contact Group meetings, since May 2004. An open consultation was carried out on the Internet during the summer of 2004. The numerous comments received from various economic operators, Member States, and third countries were then taken into account in the drafting of a revised version, which was presented to these stakeholders at a major seminar in Budapest in April 2005. Furthermore, a questionnaire was sent to European trade federations and customs administrations in order to provide feedback on the probable costs and benefits of implementation of the modernized Customs Code. |

212 | Summary of responses and how they have been taken into account The reactions to the Commission proposal received from these consultations and at the Budapest conference were largely favourable; however, some specific comments have been taken into account in the final drafting of the proposal. Responses were received to the impact questionnaire and the results have been collated in an impact assessment accompanying this draft proposal. |

213 | An open consultation was conducted over the internet from 01/07/2004 to 15/09/2004. The Commission received 56 responses. The results, including the Commission's responses as to how the comments have been taken into account, are available on http://europa.eu.int/comm/taxation_customs/resources/documents/CustomsCodes_tables.pdf |

Collection and use of expertise |

229 | There was no need for external expertise. |

230 | Impact assessment No further legal changes: Under this option, the current Customs Code, as recently amended, but which was conceived in the eighties and entered into force in the nineties, would continue to apply. Paper based transactions will continue to be defined as the standard procedure. Customs procedures and processes will continue to be unnecessarily complex and the rules will not reflect the economic reality, making it increasingly difficult for both customs administrations and traders to apply these outdated rules in a modern environment. The recently published security amendment to the Customs Code could lead to an increase in compliance costs of approximately 1,200 million €, which may be reduced in part by some national IT initiatives, plus an increase in investment of 50 to 60 million €/year for the Commission and the Member States for the implementation of the necessary IT infrastructure. Member States could still commit themselves, without re-engineering of the customs business, to computerizing customs rules and procedures within the existing legal framework and create inter-operable customs systems, both within the same Member State and with regard to other Member States. This would, however, not allow for a change over to a fully electronic environment, as traders would keep the option of submitting paper based instead of electronic customs declarations. Inter-operability is also likely to be limited to customs administrations, as there would be no legal obligation in the Customs Code for the implementation of a 'single window'. Accessibility for traders would be limited to the present situation where only national, non-harmonized interfaces for traders exist. Service providers and administrations could be encouraged to create single access points, whereby traders could submit declarations to the competent customs authorities via their existing interface, thus avoiding multiplication of costly investments, but there would be no legal obligation for Member States to invest in such systems. This would restrict the opportunity for traders to be able to benefit from simplifications such as centralized clearance and 'single window' and from Community wide decisions. Only by further harmonization of the rules and procedures at EC level will we be able to reap full benefits from the new electronic customs regime in the context of new business and commercial realities. Without that harmonization, the development of pan-European strategies and processes, including common software packages would also be hampered. Multi-national companies would often have to continue using the services of national agents or establish branches in all Member States where they are operating, even if they are able to use electronic customs procedures. This could decrease the above mentioned security related compliance costs by about 15%, but additional costs of around 40 to 50 million €/year are likely to be incurred. Modernization of the Customs Code: Under this option, an appropriate legal framework is put in place and the work of achieving electronic customs will be dramatically simplified. Electronic customs under this option is mainly 'efficient customs', with an in-depth re-engineering of the customs business into a coherent business package. This is a low risk strategy from an IT perspective, since the initiation of any significant action and investment, either at Community or at national level, is based on solid legal foundations. This option would allow for reduced legislative complexity, a level playing field for economic operators, the withdrawal of restrictions for customs agents and the development of a customs information portal, inter-operable and accessible automated customs systems, single access points, a 'single window' and a 'one stop shop' for control of goods by all authorities involved in the movement of goods across Community borders. This option would not only significantly reduce the risk of fraud, but also facilitate trade. The full objectives in terms of modernization, streamlining and a fully electronic environment for customs and trade can be attained. Companies would be able to benefit from a much improved authorization programme, leading both to better facilitation and greater simplification. They will be able to use, under certain conditions, centralized clearance, which provides them with the benefit of dealing with a single customs office in the EU. Information would be more easily accessible, via common customs information portals, and all interactions with different competent administrations could be channelled through a Single Window. The costs for such an 'efficient customs' solution would obviously be higher than the previous option, a likely additional investment of 40 to 50 million € per year, until 2013, for the Commission and the Member States together. Benefits, however, could be as high as 2,500 million € per year when the system is fully operational, which, at the earliest, would be in 2009. The break even point of this option will be reached in 2010. |

231 | The Commission carried out an impact assessment listed in the Work Programme, whose report is accessible on: http://europa.eu.int/comm/taxation_customs/common/consultations/customs/index_en.htm. |

LEGAL ELEMENTS OF THE PROPOSAL |

305 | Summary of the proposed action To replace the existing Community Customs Code, and the related Regulations listed under point 1, with a modernized Customs Code that streamlines customs procedures and lays the foundations for accessible, inter-operable customs clearance systems at EU level. |

310 | Legal basis Articles 26, 95, 133 and 135 of the EC Treaty |

329 | Subsidiarity principle The proposal falls under the exclusive competence of the Community. The subsidiarity principle therefore does not apply. |

Proportionality principle The proposal complies with the proportionality principle for the following reasons. |

331 | The modernized Customs Code contained in the proposal has been made as simple as possible, with the aim of ensuring, in conjunction with implementing provisions, guidelines and explanatory notes, its uniform application throughout the Community. A directive could not achieve this objective. |

332 | The simplification of procedures is crucial to the successful passage to the electronic customs environment. It will also reduce the burden on customs administrations and economic operators who, as a consequence of recent amendments to the present Code, already need to invest in electronic systems, for security purposes. |

Choice of instruments |

341 | Proposed instruments: Regulation. |

342 | Other means would not be adequate for the following reason(s). As there is exclusive Community competence with regard to external trade, only a Regulation can ensure uniform application of customs legislation. |

BUDGETARY IMPLICATION |

401 | Member States and traders will have to invest in accessible, inter-operable customs clearance systems. The financial implications for the Commission are set out in a financial statement attached to the proposal. |

ADDITIONAL INFORMATION |

510 | Simplification |

511 | The proposal provides for simplification of legislation, simplification of administrative procedures for public authorities (EU or national) and simplification of administrative procedures for private parties. |

512 | In addition to a simpler structure and more coherent terminology, with fewer Articles and simpler rules, the new Code takes a client-oriented approach, using commonly understood definitions of activities such as import, export, movement, storage, processing or use of goods. It also adopts a process-oriented approach, grouping together similar procedures under common rules with fewer exceptions; some procedures are to be abolished and others merged or aligned, reducing the existing thirteen different customs approved treatments or uses to just three basic procedures, import, export and special procedures, all with consistent rules, notably for authorizations, guarantees and customs debt. As a result, more than two thirds of the 258 Articles in the present Code have been amended, integrated or transferred to the implementing provisions. This modernized Code, which will be followed by consolidated and simpler implementing provisions, as well as explanatory notes and guidelines, will further ensure consistent interpretation and application of the customs rules by Member States, which will be of great benefit to economic operators. |

513 | The merger or alignment of related procedures means that fewer specialists will be needed to manage them, which will allow for the re-allocation of human resources to risk areas, thus increasing security and reducing the risk of irregularity. Administrations who are in the process of reducing their staff or have done this already will benefit from such an approach. |

514 | A simpler structure and a maximum of common elements across different arrangements will mean easier access to the rules and less programming efforts for compliance with the customs rules. |

517 | The proposal is included in the Commission's Work and Legislative Programme under the reference 2004/TAXUD-015. |

520 | Repeal of existing legislation The adoption of the proposal will lead to the repeal of existing legislation. |

570 | Detailed explanation of the proposal TITLE I: GENERAL PROVISIONS The new text includes a mission statement describing the role and objectives of the customs administrations and specifies that customs legislation includes the Customs Tariff, an omission from the previous Code that needed rectifying. The principle of electronic declarations and electronic data exchange between customs administrations is introduced, in full respect of the provisions on protection of data, together with a legal basis for the voluntary exchange of additional information between economic operators and customs authorities. The rules on representatives have been changed, with former restrictions being withdrawn as they are neither compatible with an electronic environment nor with the principles of the Single Market. This revision is also in line with a general approach under which all empowerments for special national provisions have been removed from the Code, except where they apply to the organization of customs controls. The framework for the Authorized Economic Operator programme introduced into the Code by Council Regulation (EEC) No 648/2005 is expanded. The provisions of the Code are in conformity with the Charter of Fundamental Rights, which requires that every person has a right to be heard before any decision is taken which would adversely affect him, including decisions on post-clearance recovery and rejections of repayment or remission claims. It has been clarified that several persons may request and be covered by a decision and that decisions are valid throughout the Community, unless otherwise specified, and that the rules on decisions also apply where an appeal is dealt with by the customs authorities. The proposal foresees that Member State shall provide for effective, proportionate and dissuasive customs penalties. In order to reinforce consistency throughout the Internal Market, a common framework for penalties in respect of infringements of the Community customs rules will be proposed to the Council and the European Parliament at a later stage. The inclusion of exceptions to controls or formalities in this Chapter allows the repeal of Council Regulation (EEC) No 3925/91 of 19 December 1991. All situations where customs administrations may recover costs or charge fees are brought together under one Article, instead of several. Fees for the granting of deferred payment have been abolished The provisions for currency conversion have been consolidated and aligned with Regulation (EEC, Euratom) No 1182/71; the detailed rules are now to be laid down in the Customs Code Implementing Provisions (CCIP). TITLE II: FACTORS ON THE BASIS OF WHICH IMPORT OR EXPORT DUTIES AND OTHER MEASURES PRESCRIBED IN RESPECT OF TRADE IN GOODS ARE APPLIED The new provisions are aligned with Article 3 of the 1994 Marrakesh Agreement on Rules of Origin. This will allow, once international harmonization work is completed, the incorporation of the new rules of origin into the CCIP. In addition, it is made clear that non-preferential rules of origin are also relevant to the application of Community measures not related to tariff or trade. All autonomous origin rules applicable in preferential regimes, including Ceuta and Melilla, but apart from those applicable to the overseas countries and territories listed in Annex II of the EC Treaty, are also to be adopted under the committee procedure. Articles with general coverage of valuation issues are grouped together to provide a general legal basis for the adoption of implementing rules, notably when the EU accepts commitments and obligations in relation to the application of the WTO Agreement on Customs Valuation, including Decisions of the WTO Customs Valuation Committee. TITLE III: CUSTOMS DEBT AND GUARANTEES The modernization and simplification of the rules on the customs debt require major changes, as whether or not a customs debt is incurred should depend on objective circumstances and not on the degree of negligence on the part of the person concerned. This is in line with the Kyoto Convention stipulating that duties shall be repaid where it is established that they have been overcharged as a result of an error in their assessment (General Annex, Chapter 4, Standard 18). Administrative penalties are a more appropriate response to infringements of the customs rules in cases where the customs authorities are in a position to establish that a customs procedure has ended or been discharged in accordance with the customs rules. In the context of the proposed new division of responsibilities between border and inland customs offices, it is proposed that a customs debt is normally incurred at the place where the holder of a procedure or an authorization is established, except where the holder is not established in the Community customs territory or in the case of infringements, in which case the residual rules shall apply as at present. Chapter 4 of the General Annex of the Kyoto Convention leaves the determination of the factors, the conditions and the point in time for the determination of duties and taxes to national or Community legislation, so there is no requirement to maintain the present complicated rules for the determination of a customs debt in the context of suspensive procedures, free zones and free warehouses. The provisions of Title III relating to “customs debt and guarantees” establish a balanced approach between the interests of the trade, notably the general possibility to reduce the amount of the guarantee in case of potential debts and the extension of the cases in which the customs debt may be extinguished, and the protection of the financial interests of the Community and of the Member States, improved by the extension of the coverage of the guarantee provided to secure the amount of the customs debt. The functioning of the Internal Market will be improved through the harmonization of measures such as time limits for notification of the amount of the customs debt where the acts which led to the incurrence of the debt are liable to give rise to criminal court proceedings, and the rules on the collection of interest on arrears. TITLE IV: ARRIVAL OF GOODS IN THE CUSTOMS TERRITORY OF THE COMMUNITY This Title incorporates the security-related changes to the Customs Code introduced by Regulation (EC) No 648/2005 and further integrates and consolidate these changes, taking into account the general introduction of electronic declarations, electronic exchange of data between customs authorities, notably the Import Control System (ICS), and the creation of common portals and a Single Window. The exemption of free zones from customs supervision, a security loophole, has been withdrawn; free zones become a customs procedure and are subjected to customs controls at entry and with regard to records. The rules on the presentation of goods have been re-drafted in order to clarify the obligations and the person(s) responsible for notifying customs of the arrival of the goods and making them available for controls. The deadlines for assigning the goods to a customs procedure are removed as temporary storage will itself be a special procedure. TITLE V: GENERAL RULES ON CUSTOMS STATUS AND CUSTOMS PROCEDURE The major changes concern the electronic declaration being the normal form of a customs declaration, and the alignment of the former variants of simplified declaration procedures, including local clearance. The basic principles for the presumption, and loss, of the status of Community goods have been transferred to the Code from the CCIP. The detailed rules will continue to be laid down in the CCIP. With certain exceptions, e.g. Carnets TIR or ATA, where a customs declaration is required, electronic declarations shall become the rule. Whereas it has been clarified that free zones will, in future, become a customs procedure, the existing waiver of the obligation to make a customs declaration is to be maintained. Where authorized, access to the declarant’s electronic system may replace the transmission of the electronic declaration. Supporting documents may also be lodged in electronic form; documents need not ‘accompany’ the declaration, provided they are ‘available to the customs authorities’. In line with the principles of the Kyoto Convention, the new Code provides for the lodging, registering and checking of the goods declaration prior to the arrival of the goods and for the dissociation of the place where the declaration is submitted from the place where the goods are physically located. There is also provision for release of goods at a place other than that where the customs declaration has been accepted, which together with the merger of the former simplified declaration and local clearance procedure provides for the implementation of ‘centralized clearance’. Under this system, an authorized economic operator can lodge his summary and/or customs declaration in electronic form from his premises, irrespective of the Member State in which the goods are entering into or leaving the Community, so allowing companies to conduct all of their EU business with one customs office. TITLE VI: RELEASE FOR FREE CIRCULATION AND RELIEF FROM IMPORT DUTIES As release for free circulation is one of the most important customs procedures it is considered appropriate to devote a separate Chapter to this procedure, despite its brevity. This Title also deals with goods released for free circulation under special circumstances, except for goods placed under the end-use provisions covered by Title VII (Special procedures) and includes the legal basis for provisions of former Council Regulation (EEC) No 918/83, setting up a Community system of reliefs from customs duty, to be laid down in the CCIP. This is a more transparent approach than laying down some provisions in a separate Council/Parliament Regulation. TITLE VII: SPECIAL PROCEDURES The former suspensive procedures have been grouped together and aligned with other similar customs approved treatments and uses within four special procedures: transit (external transit, internal transit); storage (temporary storage, customs warehousing, free zones); specific use (temporary admission, end-use); and processing (inward and outward processing). This alignment has made it possible to merge the inward processing suspension system with processing under customs control and to abandon the inward processing drawback system, given that the intention of re-exportation is no longer necessary. Common rules will govern all special procedures, such as those applicable to guarantee, application and authorization, and use of equivalent goods, with special rules for an individual procedure maintained only where there are duly justified economic reasons. Clarifications have been inserted in respect of the suspension of VAT at importation and excise duty, as provided for under Articles 7 (3) and 10 (3) of the 6th VAT Directive and Article 5 (2) of Directive 92/12/EEC. Special rules for agricultural products are laid down in agricultural legislation, not the CCIP, and a reference to these special rules is no longer necessary because they are directly applicable. TITLE VIII: DEPARTURE OF GOODS FROM THE CUSTOMS TERRITORY OF THE COMMUNITY Further amendment is made to the requirements for pre-departure declarations introduced under Regulation No 648/2005, taking into account the general introduction of electronic declarations, electronic exchange of data between customs authorities, notably the Export Control System (ECS), and the future creation of common portals/single windows. Specific provision is made for re-export of non-Community goods destined to leave the Community although these will be subject to the same rules as for the export Community goods, apart from the fact that a re-export notification will be required instead of a customs declaration. Summary declarations will be required only when neither a customs declaration nor a re-export notification are required, e.g. for transhipments and re-exports from free zones and from temporary storage at ports/airports etc. This Title also includes the provisions for exportation and relief from export duty on account of special circumstances, which, as with import duties should be determined in accordance with the committee procedure, rather than by an autonomous Regulation. The provisions relating to outward processing are now covered by Title VII. A new Article covers certain cases of temporary export (notably under the ATA carnet system) which are dealt with in the CCIP but without a formal basis in the present Code TITLE IX: CUSTOMS CODE COMMITTEE AND FINAL PROVISIONS The committee procedure (consultative committee) is extended to the adoption of explanatory notes and guidelines, which will make national instructions interpreting the Community customs rules unnecessary. In order to optimise the efficiency of the Customs Code Committee in cases where implementing provisions are to be voted on before they are adopted by the Commission, this regulatory committee is transformed into a management committee and the period necessary for Council adoption of the CCIP is reduced from three months to one month. The above mentioned repealed Regulations are incorporated in the Customs Code. The date of applicability of the new Community Customs Code must take into account the need of amending the existing CCIP. This will require a period of approximately one year from the time that the date of the final version of the new Customs Code can be safely predicted. Only at this time can the date of applicability be laid down definitively. |

1. TABLE OF CONTENTS

RECITALS

TITLE I:GENERAL PROVISIONS 11

Chapter 1 : SCOPE OF CUSTOMS LEGISLATION, MISSION OF CUSTOMS AND DEFINITIONS 12

Chapter 2: RIGHTS AND OBLIGATIONS OF PERSONS WITH REGARD TO CUSTOMS LEGISLATION 17

Section 1: Provision of information 17

Section 2: Customs representation 20

Section 3: Authorized Economic Operator 21

Section 4: Decisions relating to the application of customs legislation 23

Section 5: Customs penalties 26

Section 6: Appeals 27

Section 7: Control of goods 28

Section 8: Keeping of documents and other information; fees and costs 30

Chapter 3: CURRENCY CONVERSION, TIME LIMITS AND SIMPLIFICATION 31

TITLE II:FACTORS ON THE BASIS OF WHICH IMPORT OR EXPORT DUTIES AND OTHER MEASURES IN RESPECT OF TRADE IN GOODS ARE APPLIED 33

Chapter 1 : COMMON CUSTOMS TARIFF AND TARIFF CLASSIFICATION OF GOODS 33

Chapter 2 :ORIGIN OF GOODS 34

Section 1: Non-preferential origin 34

Section 2: Preferential origin 36

Chapter 3: VALUE OF GOODS FOR CUSTOMS PURPOSES 36

TITLE III: CUSTOMS DEBT AND GUARANTEES 40

Chapter 1: INCURRENCE OF A CUSTOMS DEBT 40

Section 1:General provisions 40

Section 2:Customs debt on importation 40

Section 3:Customs debt on exportation 43

Section 4:Provisions common to customs debts incurred on importation and exportation 44

Chapter 2: GUARANTEE FOR A POTENTIAL OR EXISTING CUSTOMS DEBT 47

Chapter 3 : RECOVERY AND PAYMENT OF DUTY AND REPAYMENT AND REMISSION OF DUTY 51

Section 1:Determination, notification to the debtor and entry in the accounts of the amount of duty 51

Section 2:Time limit and procedures for payment of duty 54

Section 3:Repayment and remission of duty 58

Chapter 4 EXTINCTION OF CUSTOMS DEBT 62

TITLE IV:ARRIVAL OF GOODS IN THE CUSTOMS TERRITORY OF THE COMMUNITY 64

Chapter 1: GOODS BROUGHT INTO THE CUSTOMS TERRITORY 64

Chapter 2: ARRIVAL OF GOODS 66

Section 1:Entry of goods into the customs territory of the Community 66

Section 2:Presentation, unloading and examination of goods 68

Section 3:Formalities after presentation 69

Section 4:Goods which have moved under a transit procedure 70

TITLE V:GENERAL RULES ON CUSTOMS STATUS AND CUSTOMS PROCEDURE 71

Chapter 1: STATUS OF GOODS 71

Chapter 2: CUSTOMS DECLARATION 72

Section 1:General provisions 72

Section 2:Standard declarations 73

Section 3:Verification 75

Section 4:Release 77

Chapter 3: SIMPLIFICATIONS RELATING TO CUSTOMS DECLARATIONS 78

Section 1:Simplified declarations 78

Section 2:Other simplifications 80

Chapter 4: DISPOSAL OF GOODS 80

TITLE VI: RELEASE FOR FREE CIRCULATION AND RELIEF FROM IMPORT DUTIES 82

Chapter 1: RELEASE FOR FREE CIRCULATION 82

Chapter 2: RELIEF FROM IMPORT DUTIES 82

Section 1:Returned goods 82

Section 2:Sea-fishing and products taken from the sea 84

Section 3:Special circumstances 84

TITLE VII:PECIAL PROCEDURES 85

Chapter 1: GENERAL PROVISIONS 85

Chapter 2: TRANSIT 89

Section 1:External and Internal transit 89

Section 2:Community transit 91

Chapter 3: STORAGE 92

Section 1:Common provisions 93

Section 2:Temporary storage 94

Section 3:Customs warehousing 95

Section 4:Free zones 95

Chapter 4: SPECIFIC USE 98

Section 1:Temporary admission 98

Section 2:End-use 100

Chapter 5: PROCESSING 101

Section 1: General provisions 101

Section 2:Inward processing 101

Section 3:Outward processing 103

TITLE VIII: DEPARTURE OF GOODS FROM THE CUSTOMS TERRITORY OF THE COMMUNITY 106

Chapter 1: GOODS LEAVING THE CUSTOMS TERRITORY 107

Chapter 2: EXPORT 108

Chapter 3: RELIEF FROM DUTIES 110

TITLE IX:CUSTOMS CODE COMMITTEE AND FINAL PROVISIONS 111

Chapter 1: CUSTOMS CODE COMMITTEE 111

Chapter 2: FINAL PROVISIONS 112

ANNEX : 114

Correlation Table 1: New Regulation < Regulation (EEC) 2913/92 114

Correlation Table 2: Former Regulation (EEC) 2913/92< New Regulations 117

Correlation Table 3: Repealed Regulation < New Regulation 120

2005/0246 (COD)

Implementing the Community Lisbon programmeProposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

laying down the Community Customs Code

(Modernized Customs Code)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 26, 95, 133 and 135 thereof,

Having regard to Protocol 2 to the Act of Accession of Spain and Portugal, concerning the Canary Islands and Ceuta and Melilla, and in particular Article 9 (1) thereof,

Having regard to the proposal from the Commission[1],

Having regard to the opinion of the European Economic and Social Committee[2],

Acting in accordance with the procedure laid down in Article 251 of the Treaty[3],

Whereas:

(1) The Community is based upon a customs union. It is advisable, in the interests both of economic operators and the customs authorities in the Community, to assemble current customs legislation in a Community Customs Code (hereinafter called ‘the Code’). Based on the concept of an internal market, the Code should contain the general rules and procedures which ensure the implementation of the tariff and other common policy measures introduced at Community level in connection with trade in goods between the Community and countries or territories outside the customs territory of the Community, taking into account the requirements of those common policies. This should be without prejudice to specific provisions laid down in other fields as may exist or be introduced in the context , inter alia , of legislation relating to agriculture, the environment, the common commercial policy, statistics or own resources. Customs legislation should be better aligned on the provisions relating to the collection, suspension or reimbursement of Value Added Tax (VAT) and excise duties, without change to the scope of the tax provisions in force.

(2) In accordance with the Communication from the Commission concerning the protection of the Community’s financial interests and the Action Plan for 2004-2005[4], it is appropriate to adapt the legal framework for the protection of the financial interests of the Community.

(3) Council Regulation (EEC) No 2913/92 of 12 October 1992, establishing the Community Customs Code[5], was based upon integration of the customs procedures applied separately in the Member States during the 1980s. That Regulation has been repeatedly and substantially amended since its introduction, in order to address specific problems such as the protection of good faith or the taking into account of security requirements. Further amendments to the Code are necessary as a consequence of the important legal changes which have occurred in recent years, both at Community and international level, such as the expiry of the Treaty establishing the European Coal and Steel Community and the entry into force of the Act of Accession on 1 May 2004, as well as the Amendment to the International Convention on the simplification and harmonization of customs procedures (hereinafter referred to as the 'Kyoto Convention'), the Accession of the Community to which was approved by Council Decision 2003/231/EC[6]. The time has now come to streamline customs procedures and to take into account the fact that electronic declarations and processing are the rule and paper-based declarations and processing the exception. For all of these reasons, further amendment of the present Code is not sufficient; a complete overhaul is necessary.

(4) The facilitation of legitimate trade and the fight against fraud require simple, rapid and standard customs procedures and processes. It is therefore appropriate, in line with the Communication from the Commission on a simple and paperless environment for customs and trade[7], to simplify customs legislation, so as to allow the use of modern tools and technology and to promote further the uniform application of customs legislation, thus contributing to ensuring the basis for efficient and simple clearance procedures. Customs procedures should be merged or aligned and the number of procedures reduced to those that are economically justified, with a view to increasing the competitiveness of business.

(5) The completion of the internal market, the reduction of barriers to international trade and investment and the reinforced need to ensure security and safety at the external borders of the Community have transformed the role of customs, making them a central part of the globalization process and, in the monitoring and management of international trade, a catalyst to the competitiveness of countries and companies. Customs legislation should therefore reflect the new economic reality and the new role and mission of customs.

(6) The use of Information and Communication Technology (hereinafter referred to as 'IT') is a key element in ensuring trade facilitation and, at the same time, the effectiveness of customs controls, thus reducing costs for business and risk for society. It is therefore necessary to establish the legal principle that all customs and trade transactions are to be handled electronically and that IT systems for customs operations offer, in each Member State, the same facilities to economic operators.

(7) In the interests of facilitating business, while at the same time providing for the proper levels of control of goods brought into or out of the customs territory of the Community, it is appropriate that the information provided by economic operators is shared, taking account of the relevant data protection provisions, between customs authorities and with other agencies involved in that control, such as police, border guards, veterinary and environmental authorities, so that the economic operator need give the information only once ('single window') and that the goods are controlled by those authorities at the same time and at the same place ('one stop shop').

(8) In the interests of facilitating business, economic operators should have the right to appoint a representative in their dealings with the customs authorities.

(9) Compliant and trustworthy economic operators should, as 'Authorized Economic Operators', be able to take maximum advantage of widespread use of simplification and, taking account of security and safety aspects, benefit from reduced levels of customs control.

(10) All decisions, that is official acts by the customs authorities pertaining to customs legislation and having legal effect on one or more persons, including binding information issued by those authorities, should be covered by the same rules. Any such decisions should be valid throughout the Community and be able to be annulled, amended except where stipulated, or revoked where they do not conform to the customs legislation or its interpretation.

(11) In accordance with the Charter of Fundamental Rights, it is necessary, in addition to the right of appeal against any decision taken by the customs authorities, to provide for the right of every person to be heard before any decision is taken which would adversely affect him. Such a provision within the Code should also apply to cases of post-clearance recovery and to decisions on repayment or remission claims.

(12) The streamlining of customs procedures within an electronic environment requires the sharing of responsibilities between the customs authorities of different Member States. It is necessary to ensure an appropriate level of effective, dissuasive and proportionate sanctions throughout the Internal Market in order to discourage any serious infringements of the customs rules and thus reduce the risk of fraud, of threats to safety and security, and to protect the financial interests of the Community. This can only be achieved through a common Community framework, which allocates jurisdiction for the imposition of penalties and delimits those penalties, in full respect of the Charter of Fundamental Rights.

(13) In order to secure a balance between, on the one hand, the need for customs authorities to ensure the correct application of customs legislation and, on the other, the right of economic operators to be treated fairly, the customs authorities should be granted extensive powers of control and economic operators a right of appeal.

(14) In order to minimize the occurrence of risk to the Community, its citizens and its trading partners, the harmonized application of customs controls by the Member States should be based upon a common risk management framework and an electronic system for its implementation. The establishment of a risk management framework common to all Member States should not prevent them from controlling goods by random checks.

(15) It is necessary to establish the factors on the basis of which import or export duties and other measures in respect of trade in goods are applied. It is also appropriate to lay down clear provisions for issuing proofs of origin in the Community, where the exigencies of trade so require.

(16) As regards the rules on preferential origin, it is appropriate, in order to expedite the decision-making process within the Community, to confer on the Commission powers for the adoption of these rules in the case of goods benefiting from preferential measures applicable to trade between the customs territory of the Community and Ceuta and Melilla.

(17) It is desirable to group together all cases of incurrence of a customs debt on importation, other than following the submission of a customs declaration for release for free circulation or temporary admission with partial relief, in order to avoid difficulties in determining the legal basis on which the customs debt was incurred. The same should apply in case of incurrence of a customs debt on exportation.

(18) Since the new role of customs authorities implies the sharing of responsibilities and co-operation between inland and border customs offices, the customs debt should, in most cases, be incurred at the place where the debtor is established, as the customs office competent for this place can best supervise the activities of the person concerned.

(19) Furthermore, in line with the Kyoto Convention, it is appropriate to provide for a reduced number of cases where administrative co-operation between Member States is required in order to establish the place where the customs debt was incurred and to recover the duties.

(20) The rules for special procedures should allow for the use of a single guarantee for all categories of special procedures and for that guarantee to be comprehensive, covering a number of transactions.

(21) In order to ensure better protection of the financial interests of the Community and of the Member States, a guarantee should cover non-declared or incorrectly declared goods included in a consignment or a declaration for which it is provided. For the same reason, the undertaking of the guarantor should also cover amounts of duties which fall to be paid following post-release controls.

(22) In order to safeguard the financial interests of the Community and of the Member States and to curb fraudulent practices, arrangements involving graduated measures for the application of a comprehensive guarantee are advisable. Where there is an increased risk of fraud it should be possible to prohibit temporarily the application of the comprehensive guarantee, taking account of the particular situation of the economic operators.

(23) It is appropriate to take account of the good faith of the person concerned in cases where a customs debt is incurred through non-compliance with customs legislation and to minimize the impact of negligence on the part of the debtor.

(24) It is necessary to lay down the principle of how to determine the status of Community goods, the circumstances pertaining to the loss of such status, and to provide a basis for determining when this status remains unaltered in cases where goods temporarily leave the customs territory of the Community.

(25) It is appropriate, where an economic operator has provided, in advance, the information necessary for risk-based controls on the admissibility of the goods, to ensure that quick release of goods is then the rule. Fiscal and trade policy controls should primarily be performed by the customs office responsible for the premises of the economic operator.

(26) The rules for customs declarations should be modernized and streamlined, in particular requiring that customs declarations are, as a rule, made electronically and providing for only one type of simplified declaration.

(27) Since the Kyoto Convention favours the lodging, registering and checking of the customs declaration prior to the arrival of the goods and, furthermore, the dissociation of the place where the declaration is lodged from the place where the goods are physically located, it is appropriate to provide for centralized clearance at the place where the economic operator is established. Centralized clearance should include the facility for the use of simplified declarations, deferment of the date of the submission of a complete declaration and required documents, periodic declaration and deferred payment.

(28) In order to contribute to ensuring neutral conditions for competition throughout the Community it is appropriate to lay down at Community level the rules governing the destruction or disposal otherwise of goods by the customs authorities, which have previously required national legislation.

(29) It is appropriate to provide common and simple rules for the special procedures (transit, storage, specific use and processing), supplemented by a small set of rules for each category of special procedure, in order to make the choice for the operator of the right procedure simple, to avoid errors and to reduce the number of post-release recoveries and repayments.

(30) The granting of authorizations for several special procedures with a single guarantee and a single supervising customs office should be facilitated and there should be simple rules on the incurrence of a customs debt in these cases. The basic principle should be that goods placed under a special procedure, or the products made from them, are assessed at the time the customs debt is incurred. However, it should also be possible, where economically justified, to assess the goods at the time they were placed under a special procedure. The same principles should apply to usual forms of handling.

(31) In view of the increased security-related measures introduced into the Code under Regulation (EC) No 648/2005, the placing of goods into free zones should become a customs procedure and the goods should be subject to customs controls at entry and with regard to records.

(32) For goods placed under a specific use, a basic legal framework should be established relating to the suspension of excise duty, provided for under Council Directive 92/12/EEC of 25t February 1992, on the General Arrangements for products subject to excise duty and on the holding, movement and monitoring of such products[8], VAT at importation provided for under Articles 7(3) and 10(3) of Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax; uniform basis of assessment[9], and commercial policy measures.

(33) Given that the intention of re-exportation is no longer necessary, the inward processing suspension procedure should be merged with processing under customs control and the inward processing drawback procedure abandoned. This one inward processing procedure should also cover destruction, except where destruction is carried out by, or under the supervision of, customs.

(34) Security-related measures relating to Community goods brought out of the customs territory of the Community should apply equally to the re-export of non-Community goods. The same basic rules should apply to all types of goods, with the possibility of exceptions where necessary, such as for goods only transiting through the customs territory of the Community.

(35) It is appropriate, in order to ensure an effective decision-making process and uniformity, to streamline mechanisms for the adoption of implementing measures, explanatory notes, guidelines and decisions of the Commission requesting the withdrawal of a decision taken by the customs authorities, as well as for the preparation of a common position in committees, working groups and panels introduced by or under international agreements dealing with customs legislation. The management procedure is most appropriate for the adoption of implementing provisions, and the consultative procedure most appropriate for the adoption of guidelines and explanatory notes.

(36) The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 January 1999 laying down the procedure for the exercise of implementing powers conferred on the Commission[10].

(37) It is appropriate to provide empowerment for the adoption of implementing provisions, notably where the Community accepts commitments and obligations in relation to international agreements which require the adaptation of provisions of the Code.

(38) In order to simplify and rationalize customs legislation, a number of provisions presently contained in autonomous Community acts have, for the sake of transparency been incorporated into the Code.

The following Regulations, together with Regulation (EEC) No 2913/92, should therefore be repealed:

- Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duties[11],

- Council Regulation (EEC) No 3925/91 of 19 December 1991 concerning the elimination of controls and formalities applicable to the cabin and hold baggage of persons taking an intra-Community flight and the baggage of persons making an intra-Community sea crossing[12],

- Council Regulation (EC) No 82/2001 of 5 December 2000 concerning the definition of the concept of "originating products" and methods of administrative co-operation in trade between the customs territory of the Community and Ceuta and Melilla[13],

- Council Regulation (EC) No 1207/2001 of 11 June 2001 on procedures to facilitate the issue of movement certificates EUR.1, the making-out of invoice declarations and forms EUR.2 and the issue of certain approved exporter authorizations under the provisions governing preferential trade between the European Community and certain countries[14].

(39) In accordance with the principle of proportionality, it is necessary, and appropriate for the effective functioning of the Customs Union as a central pillar of the internal market, to lay down rules and procedures applicable to goods brought into or out of the customs territory of the Community. This Regulation does not go beyond what is necessary in order to achieve the objectives pursued, in accordance with the third paragraph of Article 5 of the Treaty,

HAVE ADOPTED THIS REGULATION:

TITLE I

GENERAL PROVISIONS

CHAPTER 1

SCOPE OF CUSTOMS LEGISLATION, MISSION OF CUSTOMS AND DEFINITIONS

Article 1

Subject matter and scope

This regulation establishes the Community Customs Code, hereinafter 'the Code', laying down the general rules and procedures applicable to goods brought into or out of the customs territory of the Community.

The Code shall apply uniformly throughout the customs territory of the Community without prejudice to legislation in other fields pertaining to such trade.

Article 2

Mission of customs authorities

Customs authorities shall be responsible for administering international trade at the Community's external borders, thereby contributing to open trade, to the implementation of the external aspects of the internal market and of common Community policies with a bearing on trade, as well as to overall supply chain security. These tasks shall include the following:

(a) protecting the financial interests of the Community and its Member States;

(b) protecting the Community from unfair and illegal trade while supporting legitimate business activity;

(c) ensuring the security and safety of citizens, and the environment, where appropriate in close co-operation with other authorities;

(d) facilitating international trade.

Article 3

Customs territory

1. The customs territory of the Community shall comprise the following territories, including their territorial waters, internal waters and airspace:

- the territory of the Kingdom of Belgium;

- the territory of the Czech Republic;

- the territory of the Kingdom of Denmark, except the Faeroe Islands and Greenland;

- the territory of the Federal Republic of Germany, except the Island of Heligoland and the territory of Buesingen (Treaty of 23 November 1964 between the Federal Republic of Germany and the Swiss Confederation);

- the territory of the Republic of Estonia;

- the territory of the Hellenic Republic;

- the territory of the Kingdom of Spain, except Ceuta and Melilla;

- the territory of the French Republic, except New Caledonia, Mayotte, Saint-Pierre and Miquelon, Wallis and Futuna Islands and French Polynesia;

- the territory of Ireland;

- the territory of the Italian Republic, except the municipalities of Livigno and Campione d'Italia and the national waters of Lake Lugano which are between the bank and the political frontier of the area between Ponte Tresa and Porto Ceresio;

- the territory of the Republic of Cyprus, in accordance with the provisions of the Act of Accession;

- the territory of the Republic of Latvia;

- the territory of the Republic of Lithuania;

- the territory of the Grand Duchy of Luxembourg;

- the territory of the Republic of Hungary;

- the territory of the Republic of Malta;

- the territory of the Kingdom of the Netherlands in Europe;

- the territory of the Republic of Austria;

- the territory of the Republic of Poland;

- the territory of the Portuguese Republic;

- the territory of the Republic of Slovenia;

- the territory of the Slovak Republic;

- the territory of the Republic of Finland;

- the territory of the Kingdom of Sweden;

- the territory of the United Kingdom of Great Britain and Northern Ireland and of the Channel Islands and the Isle of Man.

2. The following territories, including their territorial waters, internal waters and airspace, situated outside the territory of the Member States shall, taking the conventions and treaties applicable to them into account, be considered to be part of the customs territory of the Community:

(a) FRANCE

The territory of Monaco as defined in the Customs Convention signed in Paris on 18 May 1963 (Official Journal of the French Republic of 27 September 1963, p. 8679);

(b) CYPRUS

The territory of the United Kingdom Sovereign Base Areas of Akrotiri and Dhekelia as defined in the Treaty concerning the Establishment of the Republic of Cyprus, signed in Nicosia on 16 August 1960 (United Kingdom Treaty Series No 4 (1961) Cmnd. 1252).

3. Certain provisions of the customs legislation may apply outside the customs territory of the Community within the framework of legislation governing specific fields or of international conventions.

Article 4

Definitions

For the purposes of the Code, the following definitions shall apply:

(1) 'Customs authorities' means the customs administrations of the Member States responsible for applying the customs legislation and any other authorities empowered under national law to apply certain customs legislation.

(2) 'Customs legislation' means the body of legislation made up of the following:

(a) the Code and the provisions adopted at Community level and, where appropriate, at national level, to implement it;

(b) the Common Customs Tariff;

(c) international agreements containing customs provisions, in so far as they are applicable in the Community.

(3) 'Person' means natural persons, legal persons, and any association of persons which is not a legal person but which is recognized under Community or national law as having the capacity to perform legal acts.

(4) 'Economic operator' means a person who is professionally involved in the import or export of goods to or from the customs territory of the Community.

(5) 'Risk' means the likelihood of an event that may occur, with regard to the entry, exit, transit, transfer or end-use of goods moved between the customs territory of the Community and countries or territories outside that territory and to the presence of goods which do not have Community status, which would have any of the following results:

(a) it would prevent the correct application of Community or national measures;

(b) it would compromise the financial interests of the Community and its Member States;

(c) it would pose a threat to the security and safety of the Community and its citizens, to human, animal or plant health, to the environment or to consumers.

(6) 'Customs controls' means specific acts performed by the customs authorities pursuant to Articles 27 to 30.

(7) 'Summary declaration' means a declaration to be made before goods are brought into or out of the customs territory of the Community.

(8) 'Customs declaration' means the act whereby a person indicates in the prescribed form and manner a wish to place goods under a given customs procedure, with an indication, where appropriate, of the specific arrangement to be applied.

(9) 'Customs procedure' means any of the following procedures under which goods may be placed in accordance with this Code:

(a) release for free circulation;

(b) special procedures;

(c) export.

(10) 'Import duties' means customs duties as laid down in the Common Customs Tariff, payable on the importation of goods.

(11) 'Export duties' means customs duties as laid down in the Common Customs Tariff, payable on the exportation of goods.

(12) 'Non-Community goods' means goods other than those referred to in point (20) or which have lost their status as Community goods.

(13) 'Risk management' means the systematic identification of risk and the implementation of all measures necessary for limiting exposure to risk.

(14) 'Release of goods' means the act whereby the customs authorities make goods available for the purposes specified for the customs procedure under which they are placed.

(15) 'Customs supervision' means action taken in general by the customs authorities with a view to ensuring that customs legislation and, where appropriate, other provisions applicable to goods subject to such action are observed.

(16) 'Drawback' means the repayment or remission of import duties on goods released for free circulation if such goods are exported from the customs territory of the Community in an unaltered state or in the form of processed products.

(17) 'Processed products' means goods placed under a processing procedure which have undergone processing operations.

(18) 'Person established in the customs territory of the Community' means:

(a) in the case of a natural person, any person who has his habitual residence in the customs territory of the Community;

(b) in the case of a legal person or an association of persons, any person who has his registered office, central headquarters or a permanent business establishment in the customs territory of the Community.

(19) 'Customs status' means the status of goods as Community or non-Community goods.

(20) 'Community goods' means goods which fall into any of the following categories:

(a) goods wholly obtained in the customs territory of the Community and not incorporating goods imported from countries or territories outside of the customs territory of the Community;

(b) goods imported from countries or territories outside of the customs territory of the Community and released for free circulation;

(c) goods obtained or produced in the customs territory of the Community, either solely from goods referred to in point (b) or from goods referred to in points (a) and (b).

(21) 'Presentation of goods to customs' means the notification to the customs authorities of the arrival of goods at the customs office or at any other place designated or approved by the customs authorities and the availability of those goods for customs controls.

(22) 'Holder of the goods' means the person who is the owner of the goods or who has a similar right of disposal over them or who has physical control of them.

(23) 'Holder of the procedure' means the person who makes the declaration, or on whose behalf the customs declaration is made, or the person to whom the rights and obligations of that person in respect of a customs procedure have been transferred.

(24) 'Commercial policy measures' means non-tariff measures established, as part of the common commercial policy, in the form of Community provisions governing the import and export of goods.

(25) 'Processing operations' means any of the following:

(a) the working of goods, including erecting or assembling them or fitting them to other goods;

(b) the processing of goods;

(c ) the destruction of goods;

(d) the repair of goods, including restoring them and putting them in order;

(e) the use of goods which are not to be found in the processed products, but which allow or facilitate the production of those products, even if they are entirely or partially used up in the process (production accessories).

(26) 'Rate of yield' means the quantity or percentage of processed products obtained from the processing of a given quantity of goods placed under a processing procedure.

CHAPTER 2

RIGHTS AND OBLIGATIONS OF PERSONS WITH REGARD TO CUSTOMS LEGISLATION

Section 1

Provision of information

Article 5

Exchange of data

1. All required exchanges of data, accompanying documents, decisions and notifications between customs authorities and between economic operators and customs authorities shall be made using electronic data processing techniques.

The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures laying down exceptions to the first subparagraph of this paragraph.

2. Save where otherwise specifically provided, the Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the following:

(a) the rules defining and governing the messages to be exchanged between customs offices, as required for the application of the customs legislation;

(b) a common data set and format of the data messages to be exchanged under the customs legislation.

The data referred to in point (b) of the first subparagraph shall contain the particulars necessary for risk analysis and the proper application of customs controls, using, where appropriate, international standards and commercial practices.

The systems necessary for the electronic exchange of data between customs offices in accordance with paragraph 1 shall be in place by 30 June 2009, at the latest.

Article 6

Data protection

1. All information acquired by the customs authorities in the course of performing their duties which is by its nature confidential or which is provided on a confidential basis shall be covered by the obligation of professional secrecy. Except for the purposes of customs controls as provided for under Article 28(2), such information shall not be disclosed by the competent authorities without the express permission of the person or authority who provided it.

Such information may, however, be disclosed without permission where the competent authorities are obliged or authorized to do so pursuant to the provisions in force, particularly in respect of data protection, or in connection with legal proceedings.

2. Communication of confidential data to the customs administrations and other bodies of countries or territories outside the customs territory of the Community shall be permitted only in the framework of an international agreement, ensuring an equivalent level of data protection.

The disclosure or communication of information shall take place in full compliance with data protection provisions in force.

Article 7

Exchange of additional information between customs authorities and economic operators

1. Customs authorities and economic operators may exchange any information not specifically required under the customs legislation, for the purpose of mutual co-operation in the identification and counteraction of risk. That exchange may take place under a written agreement and may include access to the computer systems of economic operators by the customs authorities.

2. Any information provided by one party to the other in the course of the co-operation referred to in paragraph 1 shall be confidential unless both parties agree otherwise.

Article 8

Provision of information by the customs authorities

1. Any person may request information concerning the application of customs legislation from the customs authorities. Such a request may be refused where it does not relate to an import or export operation actually envisaged.

2. Customs administrations shall maintain a regular dialogue with economic operators and other authorities involved in international trade in goods. They shall promote transparency by making the legislation, administrative rulings and application forms pertaining to international trade in goods available to economic operators free of charge and, wherever practical, through the Internet.

Article 9

Provision of information to the customs authorities

1. Any person directly or indirectly involved in the accomplishment of customs formalities shall provide the customs authorities with all the requisite documents and information, irrespective of the medium used, and all the requisite assistance, at the request of the customs authorities and within any time limit specified.

2. Without prejudice to the possible application of administrative or criminal penalties, the lodging of a summary declaration or customs declaration, including a simplified declaration, or notification, or the submission of an application for an authorization or any other decision, shall render the person concerned responsible for the following:

(a) the accuracy of the information given in the declaration, notification or application, or in any other relevant form;

(b) the authenticity of any documents lodged or made available;

(c) where applicable, compliance with all of the obligations relating to the placing of the goods in question under the procedure concerned, or to the conduct of the authorized operations.

The first subparagraph shall apply also to the provision of any information required by the customs authorities.

Where the declaration or notification is lodged, the application is submitted or requested information is provided by a representative of the person concerned, the representative shall also be bound by the obligations set out in first subparagraph.

Article 10

Common data system

Member States shall co-operate with the Commission with a view to developing, maintaining and employing an electronic system for the common registration and maintenance of records of the following:

(a) all persons directly or indirectly involved in the accomplishment of customs formalities;

(b) any authorization concerning a customs procedure or the status of Authorized Economic Operator.

The data shall be accessible to the customs administrations of the Member States in the course of their duties and, in accordance with the rules referred to in the third paragraph, to economic operators.

The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the standard form and content of the data to be registered and the rules for access to that data.

Section 2

Customs representation

Article 11

Customs representative

1. Any person may appoint a representative in his dealings with the customs authorities to perform the acts and formalities laid down in the customs legislation, hereinafter a 'customs representative'.

Such customs representation may be either direct, in which case the customs representative shall act in the name of and on behalf of another person, or indirect, in which case the customs representative shall act in his own name but on behalf of another person.

2. A customs representative must be established within the customs territory of the Community.

The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the conditions under which the requirement referred to in the first subparagraph of this paragraph may be waived.

Article 12

Empowerment

1. When dealing with the customs authorities, a customs representative shall state that he is acting on behalf of the person represented and specify whether the customs representation is direct or indirect.

A person who fails to state that he is acting in the name of or on behalf of another person or who states that he is acting in the name of or on behalf of another person without being empowered to do so shall be deemed to be acting in his own name and on his own behalf.

2. The customs authorities may require any person stating that he is acting in the name of or on behalf of another person to produce evidence of his powers to act as a customs representative, except where a person belongs to a category of persons entitled to act on behalf of another person.

The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures identifying the categories of persons referred to in the first subparagraph of this paragraph.

Article 13

Representation in special cases

1. Where a person acts as a customs representative on a regular and commercial basis, he may be granted the status of 'authorized economic operator' in accordance with Article 14.

2. A customs representative may act as a fiscal representative, as provided for under value added tax, hereinafter 'VAT', and excise provisions in force.

Section 3

Authorized Economic Operator

Article 14

Application and authorization

1. A person who is established in the customs territory of the Community and who meets the conditions set out in Articles 15 and 16 may request the status of authorized economic operator.

The customs authorities shall, if necessary following consultation with other competent authorities, grant that status, which shall be subject to periodic review.

2. An authorized economic operator may benefit from facilitations with regard to customs controls relating to security and safety or from simplifications provided for in accordance with this Code or its implementing provisions.

3. The status of authorized economic operator shall, subject to Articles 15 and 16, be recognized by the customs authorities in all Member States, without prejudice to customs controls. However, subject to the conditions laid down pursuant to point (g) of Article 16, the applicant may request that the status referred to in paragraph 1 of this Article may be limited to one or more specified Member States.

4. Customs authorities shall, on the basis of the recognition of the status of authorized economic operator and provided that the requirements related to a specific type of simplification provided for in Community customs legislation are fulfilled, authorize the operator to benefit from that simplification.

5. The status of authorized economic operator may be suspended or withdrawn in accordance with the conditions laid down pursuant to point (h) of Article 16.

6. The authorized economic operator shall notify the customs authorities of all factors arising after that status was granted which may influence its continuation or content.

Article 15

Granting of status

The criteria for the granting of the status of authorized economic operator shall be at least the following:

2. an appropriate record of compliance with customs requirements;

3. a satisfactory system of managing commercial and, where appropriate, transport records, which allows appropriate customs controls;

4. where appropriate, proven financial solvency;

5. where appropriate, practical standards of competence or professional qualifications directly related to the activity carried out;

6. where applicable, appropriate security and safety standards.

Article 16

Implementing measures

The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures governing the following matters:

(a) the granting of the status of authorized economic operator;

(b) the frequency of review of the status of authorized economic operator;

(c) the granting of authorizations for the use of simplifications;

(d) identification of the customs authority competent for the granting of such status and authorizations;

(e) the type and extent of facilitations that may be granted in respect of customs controls relating to security and safety, taking into account the rules adopted pursuant to Article 27(3);

(f) consultation with and provision of information to other customs authorities;

(g) the conditions under which a request made by the applicant for an authorization may be limited to one or more Member States;

(h) the conditions under which the status of authorized economic operator may be suspended or revoked;

(i) the conditions under which the requirement of being established in the Community may be waived for specific categories of authorized economic operators, taking into account, in particular, international agreements.

Section 4

Decisions relating to the application of customs legislation

Article 17

General provisions

1. Where a person requests that the customs authorities take a decision, that person shall supply all the information required by those authorities in order for them to be able to take that decision.

A decision may also be requested by, and taken with regard to, several persons.

2. A decision as referred to in paragraph 1 shall be taken, and the applicant notified, at the latest within two months of the date on which the request is received by the customs authorities, except where otherwise provided for in the customs legislation.

However, where the customs authorities are unable to comply with those time limits, they shall inform the applicant of that fact before the expiry of those time limits, stating the reasons and indicating the further period of time which they consider necessary in order to give a decision on the request.

3. Unless otherwise specified in the decision or in the customs legislation, the decision shall take effect from the date on which the applicant receives the decision, or is deemed to have received it. Except in the cases provided for in Article 25(2), decisions adopted shall be enforceable by the customs authorities from that date.

4. Before taking a decision which would adversely affect the person or persons to whom it is addressed, the customs authorities shall communicate their objections to the latter, stating the grounds on which they base those objections. The person concerned shall be given the opportunity to express his point of view, within a period from the date on which the objections were sent.

The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the period referred to in the first subparagraph of this paragraph .

Upon expiry of this period, the person concerned shall be notified, in the appropriate form, of the decision, which shall set out the grounds on which it is based.

The requirement to communicate objections before a decision is taken which would adversely affect the person to whom it is addressed, shall also apply to decisions taken by the customs authorities without prior request from the person concerned and in particular to the notification of a customs debt as set out in Article 72(3).

The decision shall refer to the right of appeal provided for in Article 24.

5. Without prejudice to provisions laid down in other fields which specify the cases in which, and the conditions under which, decisions are invalid or become null and void, the customs authorities who issued a decision may annul, amend or revoke it where it does not conform with the customs legislation or with guidelines or explanatory notes for its interpretation.

Article 18

Community-wide validity of decisions

Unless otherwise requested or specified, decisions taken by the customs authorities shall be valid throughout the customs territory of the Community.

Article 19

Annulment of favourable decisions

1. The customs authorities shall annul a decision favourable to the person to whom it is addressed if all the following conditions are satisfied:

(a) the decision was issued on the basis of incorrect or incomplete information;

(b) the applicant knew or ought reasonably to have known that the information was incorrect or incomplete;

(c) if the information had been correct and complete, the decision would have been different.

2. The person to whom the decision was addressed shall be notified of its annulment.

3. Annulment shall take effect from the date on which the initial decision took effect, unless otherwise specified.

4. The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures for the implementation of paragraphs 1, 2 and 3 of this Article, in particular in respect of decisions addressed to several persons.

Article 20

Revocation and amendment of favourable decisions

1. A favourable decision shall be revoked or amended where, in cases other than those referred to in Article 19, one or more of the conditions laid down for its issue were not or are no longer fulfilled.

2. Unless otherwise specified in the customs legislation, a favourable decision addressed to several persons may be revoked only in respect of a person who fails to fulfil an obligation imposed under that decision.

3. The person to whom the decision was addressed shall be notified of its revocation or amendment.

4. The revocation or amendment of the decision shall take effect from the date on which the notification of the revocation or amendment is received, or is deemed to have been received, by the person to whom it was addressed.

However, in exceptional cases where the legitimate interests of the person to whom the decision was addressed so require, the customs authorities may defer the date on which revocation or amendment takes effect.

5. The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures for the implementation of paragraphs 1 to 4 of this Article, in particular in respect of decisions addressed to several persons.

Article 21

Special decisions

1. The customs authorities shall, on request, issue decisions specifying binding tariff information, hereinafter 'BTI decisions', or decisions specifying binding origin information, hereinafter 'BOI decisions'.

Such a request may be refused where it does not relate to any customs procedure actually envisaged.

2. BTI or BOI decisions shall be binding only in respect of the tariff classification or determination of the origin of goods.

They shall be binding on the customs authorities, as against the person to whom the decision was addressed, only in respect of goods for which customs formalities are completed after the date of the decision.

They shall be binding on the person addressed, as against the customs authorities, only with effect from the date on which he receives, or is deemed to have received, notification of the decision.

3. BTI or BOI decisions shall be valid for a period of three years from the date specified in the decision.

4. For the application of a BTI or BOI decision in the context of a particular customs procedure, the person to whom that decision is addressed must be able to prove that:

(a) in the case of a BTI decision, the goods declared correspond in every respect to those described in the decision;

(b) in the case of a BOI decision, the goods in question and the circumstances determining the acquisition of origin correspond in every respect to the goods and the circumstances described in the decision.

5. By way of derogation from Article 17(5) and Article 19, BTI or BOI decisions shall be annulled where they are based on inaccurate or incomplete information from the applicants.

6. BTI or BOI decisions shall be revoked in accordance with Article 17(5) and Article 20.

They may not be amended.

7. Notwithstanding Article 20, the Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the following:

(a) the conditions under which, and the moment when, the BTI or BOI decision ceases to be valid;

(b) the conditions under which, and the period of time for which, a decision as referred to in point (a) may still be used in respect of binding contracts based upon the decision and concluded before the expiry of its validity.

8. The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the conditions under which other special decisions are to be issued.

Section 5

Customs penalties

Article 22

Customs penalties

1. Each Member State shall provide for administrative and criminal penalties for failure to comply with Community customs legislation. Such penalties shall be effective, proportionate and dissuasive.

2. Administrative penalties shall take one of the following forms, or both:

(a) a pecuniary charge by the customs authorities, including a settlement applied in place of and in lieu of a criminal penalty;

(b) the withdrawal, suspension or amendment of any authorization held by the person concerned.

Where administrative penalties are combined with criminal penalties, on the basis of the same facts, aggregation of such penalties shall be proportionate.

Section 6

Appeals

Article 23

Decisions taken by a judicial authority

Articles 24, 25 and 26 shall not apply to appeals lodged with a view to the annulment, revocation or amendment of a decision taken by a judicial authority.

Article 24

Right of appeal

1. Any person shall have the right to appeal against any decision taken by the customs authorities which concerns him directly and individually.

Any person who has applied to the customs authorities for a decision and has not obtained a decision on that request within the time limits referred to in Article 17(2) shall also be entitled to exercise the right of appeal.

2. The right of appeal may be exercised in at least two steps:

(a) initially, before the customs authorities or another body which may be a judicial authority or an equivalent specialized body designated for that purpose by the Member States;

(b) subsequently, before a higher independent body, which may be a judicial authority or an equivalent specialized body, according to the provisions in force in the Member States.

3. The appeal must be lodged in electronic or written form in the Member State where the decision has been taken or applied for.

Article 25

Suspension of implementation

1. The submission of an appeal shall not cause implementation of the disputed decision to be suspended.

2. By way of derogation from paragraph 1, where irreparable damage may be caused to the person who lodged the appeal, the customs authorities shall suspend implementation of the disputed decision, in whole or in part.

The customs authorities may suspend implementation of the disputed decision, in whole or in part, where they have good reason to suspect that it is inconsistent with the customs legislation.

3. Where the disputed decision has the effect of causing import duties or export duties to be payable, suspension of that decision shall be conditional upon the provision of a guarantee, unless such a guarantee would be likely to cause the debtor serious economic or social difficulties.

The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures for the implementation of the first subparagraph of this paragraph.

Article 26

Decision on the appeal

Article 17 shall apply with regard to decisions by the customs authorities on appeals.

Member States shall ensure that the appeals procedure enables the prompt correction of decisions taken by the customs authorities.

Section 7

Control of goods

Article 27

Customs controls

1. The customs authorities may carry out all of the controls they deem necessary to ensure the correct application of customs legislation and other legislation governing the entry, exit, transit, transfer and end-use of goods moved between the customs territory of the Community and other territories, and the presence of non-Community goods.

Those controls, hereinafter 'customs controls', may consist in examining goods, verifying declaration data and the existence and authenticity of electronic or written documents, examining the accounts of undertakings and other records, inspecting means of transport, inspecting luggage and other goods carried by or on persons.

Customs controls may be carried out outside the customs territory of the Community where an international agreement provides for this.

2. Customs controls, other than random checks, shall be based on risk analysis using electronic data processing techniques, with the purpose of identifying and evaluating the risks and developing the necessary measures to counter the risks, on the basis of criteria developed at national, Community and, where available, international level.

Member States, in co-operation with the Commission, shall develop, maintain and employ an electronic system for the implementation of risk management, by 30 June 2009 at the latest.

3. The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures laying down the following:

(a) rules for a common risk management framework;

(b) rules for establishing common criteria and priority control areas;

(c) rules governing the exchange of risk information and analysis between customs administrations.

Article 28

Co-operation between authorities

1. Where, in respect of the same goods, controls other than customs controls are performed by competent authorities other than the customs authorities, such controls shall be performed in close co-operation with the customs authorities, wherever possible at the same time and place (one-stop-shop).

2. In the framework of the controls referred to in this Section, customs and other competent authorities may, where necessary for the purposes of minimising risk, exchange data received, in the context of the entry, exit, transit, transfer and end-use of goods moved between the customs territory of the Community and other territories, and the presence of non-Community goods, with each other, with the customs authorities of other Member States and with the Commission.

Article 29

Post-release verification

The customs authorities may, after releasing the goods and in order to satisfy themselves as to the accuracy of the particulars contained in the summary or customs declaration, inspect the commercial documents and data relating to the operations in respect of the goods in question or to subsequent commercial operations involving those goods.

Such inspections may be carried out at the premises of the declarant or his representative, of any other person directly or indirectly involved in those operations in a business capacity or of any other person in possession of that document and data for business purposes. Those authorities may also examine the goods where it is still possible for them to be presented.

Article 30

Exceptions

1. No customs controls or formalities shall be carried out in respect of either of the following:

(a) the cabin and hold baggage of persons taking an intra-Community flight;

(b) the baggage of persons making an intra-Community sea crossing.

2. Paragraph 1 shall apply without prejudice to either of the following:

(a) the security and safety checks carried out on baggage by the authorities of the Member States, port or airport authorities or carriers;

(b) checks linked to prohibitions or restrictions laid down by the Member States, provided that such prohibitions or restrictions are compatible with the Treaty.

Section 8

Keeping of documents and other information; fees and costs

Article 31

Keeping of documents and other information

1. The person concerned shall keep the documents and information referred to in Article 9(1) for the purposes of customs controls, for the period laid down in the provisions in force and for at least three calendar years, irrespective of the medium used.

In the case of goods released for free circulation in circumstances other than those referred to in the third subparagraph, or goods declared for export, that period shall run from the end of the year in which the declarations for release for free circulation or export are accepted.

In the case of goods released for free circulation duty-free or at a reduced rate of import duty on account of their end-use, that period shall run from the end of the year in which they cease to be subject to customs supervision.

In the case of goods placed under another customs procedure, that period shall run from the end of the year in which the customs procedure concerned has ended.

2. Without prejudice to Article 73(4), where a customs control carried out by the customs authorities in respect of a customs debt shows that the relevant entry in the accounts has to be corrected and the person concerned has been notified of this, the documents shall be kept for three years beyond the time limit provided for in paragraph 1 of this Article.

Where an appeal has been lodged, the documents must be kept until the procedure is terminated.

Article 32

Fees and costs

1. No fees shall be charged by customs authorities for the performance of customs controls or any other application of the customs legislation during the normal opening hours of their competent customs offices.

However, the customs authorities may charge fees or recover costs where specific services are rendered.

2. The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures for the implementation of the second subparagraph of paragraph 1 and, in particular, the following:

(a) attendance, where requested, by customs staff outside normal office hours or at premises other than customs premises;

(b) analyses or expert reports on goods and postal fees for the return of goods to an applicant, particularly in respect of decisions taken pursuant to Article 21 or the provision of information in accordance with Article 8(1);

(c) the examination or sampling of goods for verification purposes, or the destruction of goods, where costs other than that of using customs staff are involved;

(d) exceptional control measures, where these are necessary due to the nature of the goods or to potential risk.

CHAPTER 3

CURRENCY CONVERSION, TIME LIMITS AND SIMPLIFICATION

Article 33

Currency conversion

1. Where the conversion of currency is necessary for one of the following reasons, the rate of exchange applicable shall be that published, or made available on the Internet, by the competent authorities:

(a) because factors used to determine the customs value of goods are expressed in a currency other than that of the Member State where the customs value is determined;

(b) because the value of the euro is required in national currencies for the purposes of determining the tariff classification of goods, value thresholds and the amount of import or export duties.

The rate of exchange shall reflect, as effectively as possible, the current value of the converted currency in terms of the currency of the Member State.

2. Where the conversion of currency is necessary for reasons other than those referred to in paragraph 1, the value of the euro in national currencies to be applied within the framework of the customs legislation shall be fixed once a year.

3. The Commission shall, in accordance with the procedure referred to in Article 196(2), adopt measures for the implementation of paragraphs 1 and 2 of this Article.

Article 34

Time limits

1. Where a period, date or time limit is laid down in the customs legislation, such period shall not be extended and such date or time limit shall not be deferred unless specific provision is made in the provisions concerned.

2. The rules applicable to periods, dates and time limits set out in Council Regulation (EEC, Euratom) No1182/71[15] shall apply to time limits set within the customs legislation, except where other specific provisions apply.

Article 35

Simplification

The Commission may, in accordance with the procedure referred to in Article 196(2), adopt measures laying down in which cases, and under which conditions, the application of this Code may be simplified.

TITLE II

FACTORS ON THE BASIS OF WHICH IMPORT OR EXPORT DUTIES AND OTHER MEASURES IN RESPECT OF TRADE IN GOODS ARE APPLIED

CHAPTER 1

COMMON CUSTOMS TARIFF AND TARIFF CLASSIFICATION OF GOODS

Article 36

Common Customs Tariff

1. Import and export duties shall be based on the Common Customs Tariff.

Other measures prescribed by Community provisions governing specific fields relating to trade in goods shall, where appropriate, be applied according to the tariff classification of those goods.

2. The Common Customs Tariff shall comprise the following:

(a) the Combined Nomenclature of goods as laid down in Council Regulation (EEC) No 2658/87[16];

(b) any other nomenclature which is wholly or partly based on the Combined Nomenclature or which provides for further subdivisions to it, and which is established by Community provisions governing specific fields with a view to the application of tariff measures relating to trade in goods;

(c) the conventional or normal autonomous import duties applicable to goods covered by the Combined Nomenclature;

(d) the preferential tariff measures contained in agreements which the Community has concluded with certain countries or territories outside the customs territory of the Community or groups of such countries or territories;

(e) preferential tariff measures adopted unilaterally by the Community in respect of certain countries or territories outside the customs territory of the Community or groups of such countries or territories;

(f) autonomous measures providing for a reduction in or exemption from import duties on certain goods;

(g) favourable tariff treatment specified for certain goods, by reason of their nature or end-use, in the framework of measures referred to under points (c) to (f) or (h);

(h) other tariff measures provided for by agricultural, or commercial, or other Community legislation.

3. Where the goods concerned fulfil the conditions laid down in points (d) to (g) of paragraph 2, the measures referred to in those provisions shall apply, at the request of the declarant, instead of those provided for in point (c) of that paragraph. Such application may be made retrospectively, provided that the time limits and conditions laid down in the relevant measure or in the Code are complied with.

4. Where application of the measures referred to in poin