e-Origin is driving a R&D project mixing digital technology and legal framework in customs clearance related to e-commerce. The research is led by the Customs Trade Law Academy (CTLA) at the University of Liège, which has set up an educational course at HEC-Executive Education for professionals.
In Part 3 of our 4 part interview, CTLA point out the difficulties to manage risk in customs clearance related to e-commerce. Automated tools to manage risk could be a support to reach AEO certification. The CTLA members interviewed were:
What we can say is that e-commerce is an international environment that is not yet well regulated. At least the customs regulations are still not adapted. Customs brokers take a disproportionate risk and do not have the legal means and tools to effectively guarantee the regularity of shipments.
Some tools currently exist to help operators, such as TARBEL (AGDA website) for the classification of goods and the analysis of EU trade policy measures. But when it comes to customs value, it is already more complicated, because the valuation methods pose problems for the specificity of e-commerce. In recent EU case law, we find rather rules on statistical values, which also does not fundamentally address the actual determination of a customs value.
EU customs legislation requires member states to develop risk analysis for the processing of customs declarations and the effective management of controls. And among the missions of Customs authorities is the promotion of fair trade, i.e. tackling the fraud mechanisms used by some fraudulent traders. But we realize that many actors succeed to go through customs controls.
We are working on these regulatory gaps and we are checking how we can consider the most important actors in this chain responsible for customs formalities. We are talking about the marketplaces, which until now have been deemed to be VAT suppliers under IOSS from 1 July 2021. Marketplaces could, for example, be considered as deemed importers for customs processes, as they actually have the essential data for customs formalities. Marketplaces should therefore be obliged to be more transparent, especially with regard to Customs Representatives who are the guardians of tax compliance for transactions to the EU.
We also analyze how tools can be made available to these customs brokers so they can do their work in better conditions.
The problem is the volume of data for low-value packages, which would involve a lot of resources for few results. Strategically, it is before the declarative process that resources must use to help the declarant to make the right decisions. In this context, the e-Origin tool is an undeniable asset because it combines automated data management with anomaly correction, with an in-depth risk analysis based on possible fraud mechanisms.
We do not have a clear evaluation of the system, but many sales platforms have adhered to the regulation. This will indeed have generated revenue, as VAT has been paid from the first cent of a euro since 1 July 2021, whereas before, the exemption system allowed low-value shipments up to EUR 22 to be exempt from VAT. It will be necessary to verify whether these revenues are as high as expected. To verify the success, the real question is to cross-check of data between what is declared to customs and what is sold on the marketplaces during a given period. Making the balance between VAT collection related to IOSS and customs data would be a key element to have a clear view if it is a success or not.
To our knowledge, there are no operators who are exclusively or largely engaged in e-commerce activities and who have it.
Some operators have obtained an AEO certification (customs, security or full) in the context of their usual activities (importers, exporters, customs representatives) related to General cargo and they have then extended their activities to e-commerce without the certificate being questioned by the competent Customs Authorities.
And this follows a simple logic: the AEO is a certificate granted after a company has proven its control of the risks related to the flow of goods, paperwork and customs formalities. At this stage, no operator active in e-commerce can claim to master these aspects. Some large companies, aware of these risks, do not enter this market of e-commerce logistics precisely not to lose their AEO in case of additional audit of the customs.
The risk can hardly be covered by classic internal control procedures. Powerful technological tools are needed to control heterogeneous flow and data that brokers are handling to delcare e-commerce products.
Digital tools such as e-Origin will probably be essential to receive AEO in the e-commerce sector, but beyond the flow control tools, it is the concern for a general customs and tax compliance that will have to be implemented throughout the supply chain to be really efficient. This is also why customs regulations will also have to evolve to promote transparency for all the players involved.