Customs Union Basics
Customs Union
The European Union Treaties created a customs union between the member states. It applies to all trade in goods which have monetary value and are the subject of commercial transactions. Goods for the purpose of the customs union includes everything capable of having value and being exchanged.
What goods are supplied ancillary to the provision of services, the matter is dealt with in the context of the provisions on the freedom to supply services. Finance and monetary instruments including securities are dealt with under free movement of capital.
It is a fundamental principle that EU states may not impose customs duties on imports or exports between them. Charges having an effect equivalent to a customs duty are also prohibited. This includes quantitative restrictions or measures having an equivalent effect.
A common customs tariff has been adopted by the EU relative to third countries. The common customs tariff prescribes the custom rates on goods. Goods are classified in accordance with the system of nomenclature which accords with International Convention on Harmonised Commodity Description and Coding System. The European Union classification conforms to the internationally used classification.
In addition to the combined nomenclature, the EU uses the integrated tariff known as the TARIC. This is a databank which is used by customs authorities with information on rates of duty, preferential rates and measures adopted by the European Union under the commercial policy relative to the goods etc. concerned. This includes levies, antidumping levies, quotas, probations, imports and exports bans etc.
Customs Code
A new community custom code was adopted upon the commencement of the single market in 1993. It was revised in 2016. The legislation provides a single framework for both the import and export of goods into and out of European Union. It provides rules on classification, valuation, determination of origin, recovery, appeals etc.
The code provides for the determination of the classification of goods, the application of the relevant rates and rules for valuation. See generally the separate sections on customs.
The customs code is administered by national Revenue authorities. Customs duties comprise part of the EU’s own resources. The proceeds of customs less an administration charge is remitted to the European Union. This together with part of the proceeds of VAT constitute the principal sources of the EU’s own resources.
The customs union was established between the six original EEC states on 1st July 1968. Ireland, United Kingdom, and Denmark joined in 1973, and subject to a transitional period, the customs union applied to them after 1978.
Effective Barriers Prohibited
The European treaties prohibit measures and charges having an equivalent effect to customs duty. This is to negate the temptation for states to impose levies and charges that have the effect of customs duty, although not so described. In one of the very early and leading cases, the European Court of Justice held that the EEC Treaty prohibition on charges having an equivalent effect was directly effective. Accordingly, it applies directly to all states and states are obliged to give effect to it.
A charge having an equivalent effect is a monetary charge howsoever described imposed on goods by reason of their crossing a frontier. It need not be revenue collecting, nor need it be protective in effect. There is a separate prohibition, and non-tariff barriers to the free movement of goods, which may apply to non-monetary impositions.
A measure may be subject to the Treaty provisions even if it does not involve a state at all, such as where private entities impose charges which have this effect. It does not matter who is the beneficiary of the charge. It does not matter what its description is. The charge may apply at any stage in the production, distribution, and marketing of goods. The critical factor is that it is applicable by reason of goods crossing a European Union frontier.
The most blatant breaches of the prohibition are those applicable to imported goods only. However, the prohibition may apply to charges imposed on both domestic and imported goods. If it is discriminatory, it may breach the prohibition.
Even if it is not discriminatory, it may still breach the prohibition if the proceeds are used to benefit domestic goods. If the charge has the purpose of financing activities for the advantage of domestic products, the provision may be breached. If domestic products achieve a refund or are otherwise benefited, the charge may be deemed to have an equivalent effect.
The prohibition may be breached even if the charges are imposed exclusively on domestic goods. There is nonetheless discrimination (notwithstanding that this would be unusual).
A charge which is levied for a genuine service may fall outside the prohibition. However, the exception is strictly applied. The service must be a genuine benefit. A specific benefit must be conferred. Charging for general assistance or quality control on all goods is insufficiently direct and specific. Charges which are part of the customs clearing process have equivalent effect if they are imposed solely for the completion of customs formalities.
Where the inspection is mandatory and does not provide a specific service, it is likely to be a charge having an equivalent effect. It does not have the requisite individual benefit. Where a charge can be justified, it must be proportionate to the actual cost of the relevant service.
Where the service is required under EU or international law, a state may charge for that service. Charges for the purpose of health and safety inspections required by EU law will not breach the prohibition provided that they do not exceed the costs. They are obligatory and uniform are prescribed in the general interest of the community and promote free movement.
Single Regulatory Market
After completion of the customs union, there remained a range of practical barriers to trade. These included technical requirements, provisions relating to VAT and restrictions on free movement of capital. Physical borders still remained between most states. In Ireland, customs post remained along the land border with Northern Ireland.
The Single European Act adopted in 1986 facilitated completion of the internal market. It removed most internal borders. Checks still exist in the context of immigration and in relation to various public health and other excepted matters. However, routine border posts have been abolished for the most part.
At the start of the millennium, measures were taken to ensure a modern customs code using electronic systems used to its greatest extent. Customs cooperation was enhanced between authorities.