Special report No 2/2008 concerning Binding Tariff Information (BTI) together with the Commission's replies
Date: 2008-03-06
Institutions: European Court of Auditors
Subjects: customs regulations, exchange of information, report, tariff nomenclature, tariff policy

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IV

(Notices)

NOTICES FROM EUROPEAN UNION INSTITUTIONS AND BODIES

COURT OF AUDITORS

SPECIAL REPORT No 2/2008

concerning Binding Tariff Information (BTI) together with the
Commission’s replies

(pursuant to Article 248(4), second subparagraph, EC)

(2008/C 103/01)

CONTENTS

Paragraph

Page

LIST OF ACRONYMS AND ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Organisation and description of the BTI system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AUDIT SCOPE AND APPROACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of the BTI system at the Community level

. . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of BTI classification by the Customs Code Committee . . . . . . . . . . . . . .

The financial responsibility of a Member State which has issued an incorrect BTI

Use of the EBTI-3 database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adequacy of the legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of BTI in the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issue of BTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annulment or invalidation of BTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reconciling BTI with the import declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I-IV

1-7

1-3

4-6

7

8-12

13-38

15-27

17-19

20-21

22-25

26-27

28-38

31-33

34-37

38

39-48

39-42

3

4

5

5

5

5

5

7

7

7

8

8

8

8

9

9

9

9

9

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Paragraph

Page

Specific conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment of BTI classification in the Customs Code Committee . . . . . . . . . . . . . . .

Financial responsibility of a Member State which has issued an incorrect BTI . . . . .

Use of the EBTI-3 database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adequacy of legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementation of the BTI system by the Member States . . . . . . . . . . . . . . . . . . . . .

43-48

43-44

45

46

47

48

Annex I — BTI issued per Member State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex II — Overview of observations for the Commission and the six Member States visited . . . . . . . . . . . .

The Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

10

10

10

10

11

12

13

14

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BTI

CCC

CCCIP

LIST OF ACRONYMS AND ABBREVIATIONS

Binding Tariff Information

Community Customs Code: Council Regulation (EEC) No 2913/92

Community Customs Code Implementing Provisions: Commission Regulation (EEC)
No 2454/93

DG BUDG

Directorate-General for the Budget (Commission)

DG TAXUD

Directorate-General for Taxation and Customs Union (Commission)

EBTI-3 database European Binding Tariff Information database

EU

European Union

GATT

General Agreement on Tariffs and Trade

IT

OJ

Information Technology

Official Journal

OLAF

European Anti-Fraud Office

WTO

World Trade Organization

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SUMMARY

I.
Binding Tariff Information (BTI) is a tariff classification decision given in writing by the customs authori-
ties of a Member State at the request of economic operators. It is legally binding on all customs authorities
within the European Union vis-à-vis the holder for up to six years from the date of issue.

II.
BTI promotes the uniform application of customs policy, which is a requirement of both the Customs
Union and the World Trade Organization (WTO), and also helps ensure that the correct duty is levied. It does
this by attributing an EU-wide classification to a given good. The economic operators and customs offices thus
have certainty about the tariff classification of such goods which the former intend to import (or export).

The Court reviewed the Commission’s management role and examined the implementation of BTI in
III.
six Member States. Overall, the BTI system was found to be well-designed. In general, the Commission’s man-
agement was adequate and the six Member States audited have largely applied the legal provisions on BTI. Nev-
ertheless the main findings set out below demonstrate that improvements are needed in order to enhance the
overall functioning of the system:

(a) where two or more Member States have issued different BTI for the same goods (commonly referred to as
divergent BTI), the cases are brought to the Customs Code Committee to be resolved, unless the Member
States concerned are able to find an agreement on classification. The Court’s audit found situations which
may affect the prompt resolution of classification issues. Thus an inconsistent tariff classification may per-
sist for a period of time. This could affect the collection of the correct amount of traditional own resources;

(b)

the Commission has not systematically addressed the issue of a Member State’s financial responsibility
when the latter has issued an incorrect BTI which leads to losses of traditional own resources. No reliable
estimate of the amount of traditional own resources lost due to such incorrect classifications is available;

(c)

the Commission has not systematically monitored whether Member States respect Community legislation
on BTI;

(d) various shortcomings were noted in Member States, including examples of failure to verify whether other
BTI applications or divergent BTI existed for the same goods, the slow issuance of BTI and delays in updat-
ing the EBTI-3 database;

(e) when declaring his goods an economic operator has no obligation to present his BTI, and the audit con-
firmed that BTI are seldom presented. An import declaration can only be easily cross-checked with the
relevant BTI when the latter is actually referred to at import. When its existence is not declared, customs
officers have difficulty verifying whether the declarant has a BTI for the goods and if the customs classi-
fication is correct. The Commission currently has no reliable estimate of the value or volume of imports
covered by a BTI;

(f) when a ‘period of grace’ is granted to an economic operator, the goods benefiting from it can be imported
in any Member State. However, under the current system, it is difficult for national customs to ensure that
only the quantities of goods that were the basis for the period of grace are imported using the BTI.

IV.

The main recommendations arising from the Court’s audit are:

(a)

the Commission should take measures to shorten the time needed to resolve BTI classification issues;

(b)

the Commission should be active in the supervisory process. It should analyse the data in the EBTI-3 data-
base in order to identify risky patterns;

(c) BTI should be obligatorily mentioned in economic operators’ customs declarations, as this would facili-

tate the customs authorities’ checks.

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INTRODUCTION

Background

1.
Upon import or export of a good, an economic opera-
tor (1) must fill in a declaration for the customs authorities. This
declaration should include a tariff code which classifies the good
according to its precise nature. The actual code used (2) corre-
sponds to a rate of import duties (or export refunds) payable and
to the requirements and restrictions (3) for importing (or export-
ing) this good. The economic operator is legally responsible for
the correct determination of the code entered in the declaration.

2.
This determination of the correct tariff code can present
difficulties, for example in respect of innovative products with
new technology or products made up of many elements. In order
to obtain legal certainty before importing (or exporting) a good,
the economic operator may apply for an official classification
from the customs authorities. This classification is known as
Binding Tariff Information (BTI), which is a written decision sent
to the economic operator.

In 1993 the BTI procedure became a Community-wide
3.
system which provides economic operators with tariff classifica-
tion decisions which are legally binding for up to six years on the
customs authorities throughout the EU vis-à-vis the holder of the
BTI. This helps resolve the problem of potential differing classifi-
cations for the same good and, at the same time, contributes to a
harmonised functioning of the customs union.

Legal framework

4.
The specific provisions for BTI are set out in Article 12 of
the Community Customs Code (CCC) (4), together with Articles 5
to 14 of the Implementing Provisions of the Community Cus-
toms Code (CCCIP) (5). General provisions concerning BTI deci-
sions and information are also set out in Articles 6 to 11 of the
CCC. In 2004, the Commission provided administrative guide-
lines on the European Binding Tariff Information system and its
operation (6).

(1) Community customs legislation uses the term ‘economic operator’

which is synonymous with the term ‘trader’.

(2) See website:

http://ec.europa.eu/taxation_customs/dds/cgi-bin/

tarchap?Lang=EN.

(3) Whether an import (or export) licence is required, if preferential tar-
iffs or quotas or any other quantitative restrictions apply and how the
goods are to be treated for statistical purposes.

(4) Council Regulation (EEC) No 2913/92 of 12 October 1992 estab-
lishing the Community Customs Code (OJ L 302, 19.10.1992, p. 1).
(5) 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 (OJ L 253,
11.10.1993, p. 1).

(6) Doc. TAXUD/907/2004-rev.2. The administrative guidelines were
presented and accepted on 10 October 2004 in the 353rd meeting
of the Customs Code Committee — Tariff and Statistical Nomencla-
ture Section — (BTI sector).

The BTI system for tariff classification facilitates trade and
5.
customs clearance. It assists the European Union to fulfil its obli-
gations in accordance with Article X of the GATT Agreement by
helping to ensure a uniform treatment for the same good in all
Member States.

6.
More than 46 000 BTI were issued in 2006 and over
167 000 BTI were still valid as at mid-July 2007 (the situation by
Member State is given in Annex I).

Organisation and description of the BTI system

7.
Figure 1 presents the BTI system as a flowchart. When an
economic operator makes a BTI application, national customs
authorities should ensure that the conditions for granting the BTI
are met and if so, issue it. They must also enter both the BTI appli-
cation and the issued BTI into the EBTI-3 database (7) managed by
the Commission, which is the key element of the system. Appli-
cations are accessible in this database to national customs authori-
ties and the Commission only, whereas BTI issued are accessible
via internet to the public (8). If a BTI ceases to be valid and is thus
invalidated, under certain circumstances the economic operator
may apply for a ‘period of grace’ (9) of up to a further 6 months
during which he can still use the BTI for imports (and exports).
However, in order to be granted a ‘period of grace’, the economic
operator must have concluded binding contracts for the purchase
or sale of the goods in question, on the basis of his BTI, before the
adoption of the measure (10) making the BTI invalid.

AUDIT SCOPE AND APPROACH

The BTI system is intended to help ensure uniform appli-
8.
cation of customs policy, which is a requirement of the customs
union, and consequently also help ensure that the correct duty is
levied (11).

9.

The audit objectives were:

(a)

to assess whether the Commission adequately manages the
BTI system, and whether its procedures and mechanisms
ensure that this system is working as intended; and

(b)

to evaluate whether the Member States apply the BTI system
in accordance with the legal provisions.

(7) The EBTI-3 database contains the decisions and photographs of the
product sent by the Member States to the Commission. The present
computerised system was deployed in the Member States at the end
of 1999. Some Member States audited (Germany, Hungary and the
United Kingdom) use an interface between their national BTI data-
base and the EBTI-3 database.

(8) http://ec.europa.eu/taxation_customs/dds/cgi-bin/ebtiquer?Lang=EN
(9) Article 12(6) of Regulation (EEC) No 2913/92.
(10) For example, where a new regulation is adopted which renders the
classification in the BTI obsolete (see Article 12(5)(a) of Regulation
(EEC) No 2913/92 for the other cases).

(11) The audit concentrated on imports.

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Figure 1

BTI system

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The audit included an analysis and assessment of the
10.
supervisory and control measures carried out by the Commission
and Member States and combined a review of the BTI system with
the testing of 185 import operations supported by BTI in order
to verify whether the rules in force were being applied.

satisfactory. The training given by the Commission provides the
key elements of the system, which can then be passed on to the
end users. However, the Commission’s monitoring should be
improved (paragraphs 20 to 25). The legislation, complemented
by the administrative guidelines of the Commission, is adequate
but should be strengthened in two areas (paragraphs 26 and 27).

The Court carried out its audit in the following Commis-

11.
sion services: DG TAXUD, DG BUDG and OLAF.

12.
The audit in the Member States covered the procedures
for issuing and managing BTI in Denmark, Germany, Greece,
Hungary, Slovenia and the United Kingdom which represented
63,8 % of the BTI issued in the EU in 2005 (1). It also included an
analysis of the controls carried out by customs at import and the
use of BTI by economic operators. BTI files and import declara-
tions supported by BTI were audited. A total of 340 files were
examined during the audit (2).

OBSERVATIONS

13.
In general, the BTI system was found to be well-designed
with the legal provisions largely applied by the Member States
visited.

Treatment of BTI classification by the Customs Code
Committee

Where divergent BTI are issued by different Member
17.
States (3) an attempt is first made to resolve the issue bilaterally.
If this fails, the Commission must, on its own initiative or at the
request of a Member State, place the item on the agenda of the
next Customs Code Committee meeting (4). In accordance with
the Committee procedure, the Commission has to adopt a mea-
sure to ensure the uniform application of nomenclature as soon
as possible and within six months following the meeting. It is
important for divergent BTI to be resolved as quickly as possible
so that the correct tariff classification is attributed to the good in
question and to reduce the corresponding risk to the collection of
the correct customs duties.

14.
Weaknesses were however found during the Court’s
audit (see Annex II) which, while not fundamental to the opera-
tion of the scheme, should be addressed. They are presented in
accordance with the two main areas of the BTI system:

18.
Between 2004 and 2006, 156 cases concerning classifi-
cation in BTI were brought before the Customs Code Committee.
While the uniform application of the nomenclature is the key
impetus for the Customs Code Committee in resolving classifica-
tion issues, the following situations were identified:

(a)

its management at the Community level;

(b)

its management in the Member States, together with the use
of BTI by the economic operators.

Management of the BTI system at the Community level

15.
The Commission Unit in DG TAXUD which is respon-
sible for tariff classification, administers BTI at Community level.
It drafts the legislation, chairs the ‘Tariff and Statistical Nomen-
clature Section’ of the Customs Code Committee, manages the
EBTI-3 database and organises the appropriate training for train-
ers in the Member States.

16.
Globally the Court’s audit found that the Customs Code
Committee allows inconsistent tariff classifications to be resolved,
although delays were identified (paragraphs 17 to 19). The EBTI-3
database contains the information on BTI and its availability is

(1) For the selection, the Member States were classified according to their
length of time in the European Union and the number of BTI they
have issued. A risk analysis was then performed in order to select six
representative Member States. During the preparation of the audit,
Portugal was also visited.

(2) 155 BTI files plus 185 import declarations. The amount of customs
duties at stake cannot be determined because holders of BTI can
import goods EU-wide without having to declare that they have a BTI
for these goods.

(a) when the first discussion takes place at the Committee meet-
ing, it is frequently decided that more information is needed
in order to decide on the appropriate classification, which
means that the case is postponed to a future meeting;

(b) after the necessary information has been obtained and a pro-
posal for resolving the dispute is brought to the meeting,
there is often continuing disagreement between Member
States’ representatives on the classification to be given, and
consequently more than one meeting may be required before
an agreement can be reached;

(c)

even when an agreement can be reached relatively quickly,
the six-month time limit was found to be difficult to meet
due to the time needed for drafting, translating and publish-
ing a legal measure. The Commission also pointed out that it
is difficult to complete all the cases within the set time limit
because of a lack of human resources.

(3) The creation of a centralised EU-wide body to issue all BTI was men-
tioned in a Member State audited. A thorough evaluation of the asso-
ciated costs and benefits (financial and non-financial) would however
need to be carried out.

(4) In accordance with Article 9 of Regulation (EEC) No 2454/93.

Between 2004 and 2006 34 such meetings were held.

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The Commission considers that the present six-month
19.
time limit is not realistic and has proposed to amend Article 9
CCCIP so that the time limit for implementing a measure would
be counted from the meeting where a measure was approved.
However, this could extend the period of time during which dif-
fering interpretations on tariff classification for imported or
exported goods in different Member States might exist.

The financial responsibility of a Member State which has
issued an incorrect BTI

Member States are financially responsible for the losses
20.
of traditional own resources caused by their administrative errors,
regardless of the degree of negligence (1). However, the Commis-
sion has not systematically addressed the question of the possible
financial responsibility of a Member State after issuing an incor-
rect tariff classification in a BTI.

According to the EBTI-3 database there were 1 080 cases
21.
of BTI that were invalidated by the Member States due to an
incorrect tariff classification in 2005 and 1 134 in 2006. How-
ever not all invalidated BTI necessarily have a financial conse-
quence. There is no reliable estimate of either the number of
customs declarations or the amount of import duties affected by
invalidated BTI. This is due to the fact that economic operators in
possession of a BTI are not obliged to declare this when they
import goods (see paragraph 26).

Use of the EBTI-3 database

22.
The EBTI-3 database makes it possible for the Commis-
sion to query whether the BTI applications, BTI decisions and
annulled (2) or invalidated BTI are promptly entered in the data-
base. However the Commission has not fully exploited the pos-
sibilities offered by the EBTI-3 database to monitor the input of
data by the Member States (for example, it is possible to make
queries to check the time between the start date of validity of BTI
and when it was entered in the database) (3). If more systematic
use of the database had been made, some of the delays noted —
particularly the slow updating of the database by Member States
— would have been detected and remedied earlier.

23.
Accurate input in the EBTI-3 database by Member States
and improved use of its possibilities would enable both them and
the Commission to better monitor BTI applications and BTI deci-
sions in other Member States. The Commission has organised
training based on the principle that the Commission trains the
trainers who then train users in their Member States. However,
this knowledge has not spread to the operating level in the Mem-
ber States in all cases.

(1) In accordance with Judgement C-392/02 of the European Court of

Justice (OJ C 330, 24.12.2005, p. 1).
(2) Article 8 of Regulation (EEC) No 2913/92.
(3) DG TAXUD, which is responsible for the database, only allocates 1,5

The thesaurus which contains the terms used in the
24.
EBTI-3 database has not been updated. This reduces the useful-
ness of the EBTI-3 database as some relevant keywords are not
included.

25.
The user interface of the public EBTI database was not
entirely translated into the languages of the Member States which
acceded since 2004. This limits its use in those countries.

Adequacy of the legislation

26.
As the holder of a BTI has no legal obligation to present
his BTI when declaring the goods at import (or export), these are
seldom presented. In practice, if no BTI is declared it is difficult
for customs to ascertain whether the declarant does indeed hold
a BTI for the goods. Therefore the Commission currently has no
reliable estimate of the value or volume of imports covered by
a BTI.

BTI holders rarely request ‘periods of grace’ (4). However,
27.
when a period of grace is granted, customs authorities have dif-
ficulties to monitor that the maximum quantities of the goods
allowed in the binding contracts and subject to the period of
grace are not exceeded. This is because such goods can continue
to be imported in any Member State without an obligation to
declare the existence of the ‘period of grace’.

Management of BTI in the Member States

28.
The six Member States audited have each created a spe-
cific unit dealing with BTI. The instructions they use or give to the
economic operators were found to be in conformity with the rel-
evant regulations and the administrative guidelines.

29.
Based on the 155 BTI files checked, the Court’s auditors
conclude that the processing of the economic operators’ applica-
tions and the issuance of the BTI are satisfactory. However some
customs checks were not recorded (paragraph 31) and action was
not always timely or appropriate (paragraphs 32 to 37). BTI is
barely taken into consideration by some Member States in their
checks (paragraph 38).

30.
185 import declarations were selected by the Court in
order to check whether economic operators correctly use their
BTI or if they try to classify goods for which they have a BTI
under other tariff codes. No evidence of such errors was detected.

persons to this task.

(4) See paragraph 7.

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Issue of BTI

The Commission’s guidelines require customs to check
31.
whether the applicant has submitted other BTI applications for
the same goods in other Member States and if there are divergent
BTI. In three Member States audited the checks were either not
done in most cases (1) or they were not at all documented (2).
These checks are essential for preventing BTI ‘shopping’, whereby
an economic operator applies in different Member States for BTI
for the same good in order to use the BTI with the most favour-
able tariff classification throughout the EU.

32.
The customs authorities of the Member States have to
enter, without delay, BTI applications and issued BTI into the
EBTI-3 database (3). In three Member States visited (4) there were
systematic delays when entering BTI applications and issued BTI
in the EBTI-3 database. In one Member State (5) refused BTI appli-
cations were not entered in the database even though the reason
for refusal was BTI ‘shopping’. When BTI applications and issued
BTI are not entered in the database, there are no practical means
to prevent the issuance of divergent BTI by other Member States
for similar goods.

There are no specific legislative time limits for issuing
33.
BTI. The Commission’s administrative guidelines recommend that
BTI be issued within 3-4 weeks of application. Four of the Mem-
ber States audited (6) did not achieve this recommendation. Three
Member States (7) did not notify applicants when they had
received all the information needed to reach a decision (8).

The customs authority which issued the BTI is required
35.
to notify the Commission of its annulment or invalidation as
soon as possible (11). In two of the Member States (12) audited
delays were found in entering these annulments or invalidations
in the EBTI-3 database. In another Member State (13) around
3 000 invalidated or annulled BTI were still recorded as valid in
the EBTI-3 database due to interface problems between the
national IT system and the EBTI-3 database. If invalidated or
annulled BTI are not transmitted to the EBTI-3 database promptly,
customs authorities and economic operators may understand that
those BTI are still valid and can be used by their holders.

In two cases of divergent BTI identified by a Member
36.
State (5), consultation with the two other Member States con-
cerned (14) started in June 2005 and lasted until the end of
May 2006 with one of them (15). Neither the legislation nor the
Commission’s Guidelines establish a deadline for Member States
to reply in such cases.

37.
In one Member State (13) a BTI was revoked instead of
being annulled. The same Member State had granted 13 periods
of grace in 2006. None of these was reported to the EBTI-3
database.

Reconciling BTI with the import declaration

38.
When an importer declares a BTI in his import declara-
tion, the latter can be cross-checked to the BTI as part of the cus-
toms authorities’ checks on tariff classification. This is a further
benefit of the BTI system and enhances the controls in Member
States. In two Member States visited (16) there was no evidence
that BTI were being checked in this way.

Annulment or invalidation of BTI

CONCLUSIONS AND RECOMMENDATIONS

34.
A BTI should be annulled if it is subsequently found that
it has been issued based on incorrect or incomplete information
provided by the applicant (9). A BTI should be invalidated if a new
legal measure which is inconsistent with the BTI is adopted by the
European Union, if the BTI is no longer compatible with the inter-
pretation of the customs nomenclatures, or if the BTI is revoked
or amended (10).

In accordance with Article 8(1) of Regulation (EEC) No 2454/93.

(1) Denmark.
(2) Germany and Greece.
(3)
(4) Germany, Hungary and Slovenia.
(5) Hungary.
(6) Denmark, Germany, Greece, Slovenia.
(7) Denmark, Greece, Slovenia.
(8)
(9) Article 8 of Regulation (EEC) No 2913/92.
(10) Articles 9 and 12(5) of Regulation (EEC) No 2913/92.

In accordance with Article 6(4) of Regulation (EEC) No 2454/93.

General conclusions

39.
The Court’s audit has confirmed that the Binding Tariff
Information system has, in general, been well-designed. BTI is a
useful means whereby economic operators can obtain certainty of
tariff classification of goods before decisions on imports (or
exports) are taken. It promotes uniform tariff classification within
the EU which is a WTO requirement and an essential part of the
European Community’s Customs Union.

(11) Article 13 of Regulation (EEC) No 2454/93.
(12) Germany and Hungary.
(13) United Kingdom.
(14) Belgium and the Netherlands.
(15) Belgium.
(16) Denmark and Greece.

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When BTI is issued in conformity with the Common
40.
Customs Tariff and is correctly and effectively applied, it does
help ensure that the appropriate traditional own resources are
established in respect of those goods subject to BTI.

The Commission should evaluate the full financial impact of
the issuance of incorrect BTI and make Member States finan-
cially responsible for any resulting losses to traditional own
resources.

41.
Although in general the Commission has adequately
managed the system, weaknesses were found, notably in the area
of supervision. Specific improvements are required to enhance
the overall functioning of the system and to ensure that it works
fully as intended. The legislative provisions would be strength-
ened if economic operators were obliged to indicate their BTI in
the import declarations.

42.
The BTI legal provisions are largely applied in the audited
Member States, although the audit did identify various shortcom-
ings which could have an effect on traditional own resources.

Specific conclusions and recommendations

Treatment of BTI classification in the Customs Code
Committee

43.
The Customs Code Committee has to resolve BTI classi-
fications issues when the Member States cannot reach an agree-
ment after bilateral discussions. The present Committee
procedure can lead to the overrun of the time limit set in Article 9
of CCCIP thus extending the period of time during which incon-
sistent tariff classification might exist (see paragraphs 17 to 19).

Use of the EBTI-3 database

46.
The centralised EBTI-3 database managed by the Com-
mission should be up-to-date and contain all BTI applications and
BTI decisions in order to render the BTI system effective EU-wide.
It is thus the key tool of the system, but some of its potential ben-
efits are lost (see paragraphs 22 to 25).

The Commission should:

(a) use more actively the possibilities offered by the EBTI-3
database to identify where Member States are not man-
aging BTI in accordance with the legal provisions;

(b) better target the training it organises on the EBTI-3 data-

base to the operating level in the Member States;

(c) update the thesaurus, in order to maximise the usefulness

of the EBTI-3 database;

(d)

translate the user interface of the public EBTI database
into all languages of those Member States which have
acceded since 2004.

The Commission

44.
improvements:

should make

the

following

Adequacy of legislation

(a)

the working procedures of the Customs Code Commit-
tee should be streamlined and factors which can lead to
delays eliminated;

Several weaknesses in the legislation were identified in

47.
the course of the audit (see paragraphs 26, 27 and 36):

(b)

the maximum time for resolving BTI classification issues
should be reassessed;

(c)

the number of staff dealing with BTI in the Commission
should be reassessed in relation to the time limits for
resolving classification issues.

Financial responsibility of a Member State which has issued
an incorrect BTI

45.
Member States are not systematically held accountable
for losses resulting from the issue of incorrect BTI. This question
needs to be addressed (see paragraphs 20 to 21).

(a)

(b)

(c)

in order to facilitate customs checks it is important that
BTI are declared when importing the goods, and there-
fore a holder of a BTI should be obliged to declare his
BTI. This could also allow the value and volume of
imports covered by BTI to be determined;

the Commission should examine ways to remedy the
control deficiency regarding the period of grace system.
For example, the IT system created for managing quotas
could be extended to BTI periods of grace;

the Commission should establish reasonable deadlines
for consultation between Member States in order to
resolve BTI classification issues. If no agreement can be
found within the deadline, the case should be forwarded
to the Commission.

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Implementation of the BTI system by the Member States

(b)

to update the EBTI-3 database promptly;

48.
Whereas the Member States audited have in general cor-
rectly applied the legal provisions, some weaknesses in their
implementation were noted (see paragraphs 31 to 38).

(c)

to check, before granting a BTI, if the applicant has sub-
mitted BTI applications for the same goods in other
Member States and whether divergent BTI exist;

The Commission should encourage Member States:

(a)

to remedy promptly any systematic problems found
regarding their procedures and IT tools;

(e)

to instruct their customs authorities, to include cross-
checks of import declarations against BTIs when per-
forming customs controls.

(d)

to issue BTI as soon as possible in accordance with
Article 7(1) of Regulation (EEC) No 2454/93;

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 6 March 2008.

For the Court of Auditors
Vítor Manuel DA SILVA CALDEIRA
President

C 103/12

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ANNEX I

BTI ISSUED PER MEMBER STATE

Member States

in 2005

in 2006

415

483

not in the EU

not in the EU

622

170

17 509

12

1 240

3

461

6 188

130

4

258

204

0

185

11

2 780

750

141

19 891

9

1 626

6

513

5 762

236

9

92

32

9

137

1

4 356

not in the EU

not in the EU

742

1 130

197

239

298

249

274

8 255

41 576

Total

708

841

128

265

263

306

362

9 140

46 066

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

IT

CY

LV

LT

LU

HU

MT

NL

RO

AT

PL

PT

SI

SK

FI

SE

UK

1 861

45

1 928

717

68 163

21

5 707

40

2 995

23 207

847

25

436

389

36

609

11

12 943

14

2 851

2 541

898

847

803

1 379

1 781

36 454

167 548

still valid 16 July 2007

of which older than 6 years

0

0

0

0

0

0

10 (1)

0

0

2 (2)

0

0

0

0

0

0

0

3 (1)

0

0

0

0

0

0

0

0

0

15

Source (data and explanations): European Commission/Directorate-General for Taxation and Customs Union/Unit B3.

Notes:
(1)
(2)

Ireland and the Netherlands: the BTI older than 6 years were reissued but the dates of issuing were not changed.
France: there was a typing error in the date of issuing 2 BTI.

24.4.2008

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ANNEX II

OVERVIEW OF OBSERVATIONS FOR THE COMMISSION AND THE SIX MEMBER STATES VISITED

COM

DK

DE

EL

HU

SI

UK

Management of BTI by the Commission

The Customs Code Committee procedure can
lead to statutory deadlines not being met

Financial responsibility after issuing an incorrect
tariff classification in a BTI is not systematically
followed-up

The user interface of the public EBTI database is
not entirely translated into the languages of those
Member States that have acceded since 2004

No systematic use of the EBTI-3 database

Thesaurus in EBTI-3 database has not been
updated

Weaknesses in the legislation (non-obligation to
declare BTI; periods of grace; time limits)

×

×

×

×

×

×

General management of BTI by the Member States

Technical difficulties in the interface between the
national database and the EBTI-3 database

Issue of BTI

Consultation of the EBTI-3 database not done or
not documented

Economic operators not notified about the
receipt of complete application

Slow transmission of BTI applications or issued
BTI to the EBTI-3 database

Refusal to issue BTI

Applications not entered in the EBTI-3 database

Annulment/Invalidation of BTI

Delays when updating the EBTI-3 database

The EBTI-3 database not updated

BTI was revoked instead of being annulled

Slow notification about inconsistent BTI to the
Commission

Extension of validity of BTI (period of grace)

Period of grace not updated in the EBTI-3
database

Use of BTI

Use of BTI not cross-checked with import
declarations or no evidence available thereof

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

×

C 103/14

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THE COMMISSION’S REPLIES

SUMMARY

II.
Although the existence of the BTI system demonstrates the uniform application of policy throughout
the union, the primary purpose of BTI is to provide traders with legal certainty with regard to the tariff clas-
sification of goods.

BTI has proved to be a success as witnessed by the continuous annual increase in numbers of BTI

III.
issued, and the Commission and Member States are constantly endeavouring to improve the BTI.

(a) As long as an issue of classification is before the Customs Code Committee, the Administrative Guidelines
instruct Member States that no other BTI should be issued until the matter is resolved. The time needed to
resolve such cases in the Committee is due to the procedures involved in the Comitology Decision (Coun-
cil Decision 1999/468/EC of 28 June 1999 (OJ L 184, 17.7.1999)).

(b) Uses of incorrect BTI with a negative effect on Traditional Own Resources (TOR) are pursued by the Com-
mission where it becomes aware of them via its inspections, investigations and documentary controls. The
amounts of TOR potentially involved are very variable and the numbers limited so any estimate is not
likely to be meaningful.

(c) Within the limited human resources available, EBTI-3 database consultations are made on the basis of risk

analysis.

In June 2007 the Commission initiated the first phase of an EBTI monitoring action to examine how Mem-
ber States issue BTI. So far six monitoring visits have been undertaken and a further eight such visits are
foreseen for 2008.

(d) The Commission continuously exhorts Member States to verify whether or not BTI applications or diver-
gent BTI exist by consulting the EBTI-3 database. Given the complexity of, and the many technical ele-
ments involved in, tariff classification there can be a variety of reasons why the issuing of BTI may take
time.

(e) The current legislation does not impose an obligation on a trader who holds a BTI to declare or use that
BTI when clearing his goods through customs. However, the Modernised Customs Code (MCC), which is
expected to be adopted in 2008, will make the BTI binding on the holder. The Implementing Provisions
of the MCC will lay down the conditions for the declaration of BTI.

In the context of its trade facilitation function, the value of goods traded using BTI does not impact on the
efficiency of the mechanism itself.

(f) As the Court acknowledges grants of periods of grace are rare. However, the Commission is currently
examining how best to tighten up controls on them in discussions with the Member States in the Cus-
toms Code Committee.

IV.

(a)

In an effort to improve the functioning of the Customs Code Committee, the Commission has recently
introduced a standardised template for the submission of classification queries.

(b) Within the limits of available resources the Commission actively analyses data on EBTI-3 as far as the sys-

tem permits.

(c) As mentioned in the reply to paragraph III(e), the Modernised Customs Code will make the BTI binding
on the holder. The Implementing Provisions of the MCC will lay down the conditions for the declaration
of BTI.

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OBSERVATIONS

16.
The Commission is constantly striving to improve the
application of the legislation concerning the issuing of BTI. The
introduction of the Modernised Customs Code presents the Com-
mission with an opportunity to strengthen the implementing pro-
visions and the administrative Guidelines.

The BTI system is a vector for differences of opinion con-
18.
cerning classification being brought to light and resolved, prov-
ing that BTI is a useful tool in ensuring the Community complies
with its obligations under the GATT.

(a) To speed up the procedure, the Commission has introduced
a template for the submission of tariff classification queries.
This template requires that all information is provided at the
outset. The template has been operational since November
2007.

19.
In the context of the Modernised Customs Code, the
Commission intends to amend the relevant implementing provi-
sion to make the time limit more realistic.

20.
Uses of incorrect BTI with a negative effect on Traditional
Own Resources (TOR) are pursued by the Commission where it
becomes aware of them via its inspections, investigations and
documentary controls.

21.
The numbers of BTI invalidated due to incorrect classifi-
cation amount to less than 1 % of the total valid BTI in a given
year (there were approximately 170 000 valid BTI in 2007).

22.
The EBTI-3 database was designed to ensure the trans-
parency of customs information, to guarantee equality of treat-
ment for all economic operators and to allow customs authorities
to verify, when they have to classify specific goods, whether a
classification decision has already been taken for similar goods by
another European customs authority. It was designed to allow it
to fulfil these key aims — not as a means of checking Member
State activity.

Nevertheless, within the limited human resources available, the
Commission consults the EBTI-3 database on the basis of risk
analysis.

23.
Accurate and reliable data input is the focus of the Com-
mission’s guidelines and training and is an important element of
the monitoring visits. The Commission will continue to provide
assistance to Member States to achieve improvements.

The Commission provides training to those officials who are
nominated by their administrations. How this knowledge is dis-
seminated in the administration is the responsibility of the Mem-
ber States.

The Commission agrees that the public EBTI database
25.
should be available in 22 languages. This should be achieved in
the first quarter of 2008.

26.
The Modernised Customs Code (MCC), which is expected
to be adopted in 2008, will make the BTI binding on the holder.
The Implementing Provisions of the MCC will lay down the con-
ditions for the declaration of BTI.

27.
Despite the very small numbers of ‘periods of grace’
granted (348 in 2005 and 145 in 2006, representing approxi-
the approximately
mately 0,2 % and 0,1 % respectively of
170 000 BTI valid at any given time) the matter of tightening
control of the use of the ‘period of grace’ has been discussed with
the Member States in the Customs Code Committee. In particular
the use of a form to control the amounts which benefit from a
period of grace is being considered.

29.
The Commission will take up with the Member States the
shortcomings identified by the Court in relation to the process-
ing of BTI applications and the issuing of BTI. On the occasion of
the ongoing monitoring visits to Member States, the Commission
has received assurance that appropriate checks, although not
recorded, are carried out.

31.
The monitoring visits already carried out have revealed a
number of different approaches to this matter in Member States
ranging from formal checklists to informal notes of checks car-
ried out. However, the Commission shall continue to encourage
Member States to adopt a more formal approach to recording
them.

32.
The Commission, recognising the importance of enter-
ing BTI applications and issued BTI without delay in the EBTI-3
database, shall continue to impress on Member States their obli-
gations under the legislation and encourage best practice. The
Commission is already in the process of following up with the
Member States concerned the instances of non-compliance with
legal requirements reported by the Court.

35.
With regard to the interface problem of the 3 000 BTI
which were still recorded as being valid in the EBTI-3 database
although they had been invalidated by a Member State’s admin-
istration, the Member State concerned has reported that the tech-
nical problem has since been solved and the BTI concerned have
been invalidated in the EBTI-3.

36.
The Commission intends to introduce a strict deadline
for replying to inter Member State consultation in the course of
revising the implementing provisions in the context of the Mod-
ernised Customs Code.

The Commission agrees that the thesaurus needs to be

24.
updated and is considering how best this can be achieved.

37.
The Member State concerned has confirmed to the Com-
mission that it has reviewed its procedures and is now in compli-
ance with its obligations. Follow-up action is continuing.

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Customs controls are frequently carried out in post-
38.
clearance verification and it is during such controls that the exist-
ence of a BTI is confirmed.

The current legislation does not impose an obligation on a trader
who holds a BTI to declare or use that BTI when clearing his
goods through customs. However, the Modernised Customs Code
(MCC) will make the BTI binding on the holder, see the reply to
paragraph 26.

CONCLUSIONS AND RECOMMENDATIONS

39-41.
BTI has proved to be a success as witnessed by the
continuous annual increase in numbers of BTI issued. The Com-
mission and Member States are constantly endeavouring to
improve the BTI system and where problems are detected there
are procedures in place to help resolve them.

(b) Training is provided by the Commission to those officials
who are nominated by their administrations. Following the
recommendation of the Court the Commission will continue
to impress on the Member States the necessity that the per-
sons they nominate to attend the training courses are
expected to pass on the information and training they receive
to their colleagues.

(c) The Commission recognises the importance of this recom-
mendation and has already discussed methods for updating
and further developing the thesaurus.

(d) The translation into 22 languages of the public EBTI data-
base interface will be completed during the first quarter of
2008.

47.

The expected adoption of the Modernised Customs Code in 2008
will deliver the legislative improvement to which the Court refers
in paragraph 41.

(a) The Modernised Customs Code, which is expected to be
adopted in 2008, will make the BTI binding on the holder.
The Implementing Provisions of the MCC will lay down the
conditions for the declaration of BTI.

The Commission has explained the action it takes as
42.
regards the possible effects on own resources, see e.g. the reply to
paragraph 20.

The Commission has recently taken steps to improve and
43.
streamline the efficiency of the decision-making process of the
Customs Code Committee, see the reply to paragraph 44(a).

(b) The Commission is discussing possible solutions to remedy
control deficiencies regarding the period of grace system with
the Member States in the Customs Code Committee. In par-
ticular the use of a form to control the amounts which ben-
efit from the rare periods of grace granted is being considered.
Furthermore, the provisions on the period of grace will be
tightened in the implementing provisions of the Modernised
Customs Code.

44.

(a) The Commission has taken steps to eradicate unnecessary
delays due to lack of information by introducing in Novem-
ber 2007 a template for the submission of tariff classifica-
tion queries.

(b) The Commission is considering amending Article 9 CCCIP in

order to make the time limit more realistic.

(c) As from 2008, the Commission will increase the number of

staff dealing with BTI.

45.
Uses of incorrect BTI with a negative effect on Traditional
Own Resources (TOR) are pursued by the Commission where it
becomes aware of them via its inspections, investigations and
documentary controls.

In the majority of cases Member States upload BTI appli-

46.
cations and BTI issued on a regular daily basis.

(a) Within the limited human resources available, EBTI-3 data-
base consultations are made on the basis of risk analysis.

(c) The Commission intends to introduce, in consultation with
the Member States, a strict deadline for replying to bilateral
consultations.

48.
The Commission will continue to encourage the Mem-
ber States to improve their implementation of BTI as recom-
mended by the Court.

(a) The Commission will continue to encourage and help the
Member States to remedy any systemic problems they
encounter. Only four Member States have their own national
BTI systems and those systems work along side the EBTI-3
which has been developed for and provided by the Commis-
sion. Consequently, all problems relating to the EBTI-3 sys-
tem are remedied by the Commission.

(b) The Commission shall continue to impress on Member States
their obligations under the legislation to enter BTI applica-
tions and issued BTI without delay in the EBTI-3 database.

(c) The Administrative Guidelines clearly instruct the adminis-
trations that they should check the database when they
receive an application and before they issue a BTI. How they
apply the Guidelines is a matter for each administration.

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Official Journal of the European Union

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(d) The Commission will continue to encourage Member States
to issue BTI as promptly as is commensurate with taking
properly-based accurate decisions.

(e) The Commission will continue to exhort the Member States

to continue to control the usage of BTI.