Why the European Union’s UCC Matters to Global Trade

European Union (EU) Customs handles over €3,400 billion of goods per year and two billion tons of cargo annually. With the first phase of the new Union Customs Code (UCC) legislation coming into effect on May 1, 2016, the regulation is anticipated to have a substantial impact on global trade. With sweeping procedural modifications expected before the UCC’s full implementation in 2020, it’s clear that the legislation will influence the electronic customs systems landscape for years to come—and companies need to be prepared.

What is the Union Customs Code (UCC)?

The UCC is an update to customs legislation across the European Union (EU) that comes into effect on May 1, 2016. Full implementation is expected in 2020 after subsequent transitional phases as not all IT systems of member states are ready yet. One of the more important changes to trade regulations across the EU, the initiative aims to modernize trade by moving to more electronic formats to standardize customs procedures, synchronize processes across member states, introduce new simplified procedures cross border, provide companies with more clarity on tariff classifications and reduce paperwork.  

Why was the UCC created?

The UCC was enacted in order to simplify trade into and within the EU. It also aims to harmonize customs procedures across member states, increase the safety and security of goods, and streamline processes. The key principle of the UCC is that all customs declarations are electronic, which will mean for certain procedures a complete overhaul of manuals supporting long-established practices.

Who is affected by the UCC?

Nearly every party that imports and exports goods into and out of the EU will be affected in some way. UCC changes will affect shippers, warehouse operators, third-party logistics service providers (3PLs), freight forwarders, customs brokers, agents, intermediaries and others. These types of companies will face changes to customs procedures and authorizations, modifications to existing electronic procedures, and the introduction of new digital processes, including the Proof of Union status. For international businesses that operate in multiple countries, keeping pace with UCC changes poses a substantial challenge.

What are the benefits for businesses?

Companies will benefit by using simplified procedures such as Entry in the Declarant’s Records (EIDR), self-assessment and centralized clearance; however, to take advantage of many of these benefits, participants will need to be an Authorized Economic Operator (AEO). AEO status means having full control of electronic processes and ensuring that quality data is used in declarations and exchanged with third parties such as brokers. Making use of correct classifications, as well as applying compliance checks such as Denied Party Screening (DPS), will be essential.

What are the differences between EU member states?

The impact of the UCC will differ between member countries, depending on the extent to which specific procedures are already aligned with the legislation in a given country, and whether a country decides to make changes in an existing system or create a completely new solution. Additionally, the EU’s Implementing and Delegated Acts must be translated in the legislation of member states, which may lead to different interpretations.

What are the changes to safety and security?

One change is the introduction of multiple filings to obtain more detailed information for risk analysis. This initiative extends the current Import Control System (ICS) and related Entry Summary Declaration (ENS) to parties other than the carrier including freight forwarders, postal and express service operators and, potentially, importers. More detailed specifications will be defined in 2017 and 2018, with implementation planned for the end of 2020. On the technical side, the plan is to create a central European repository for all data.

What is the role of technology?

The UCC requires that all information exchange between companies and customs authorities is electronic. This includes customs declarations, applications as well as notifications. Companies may secure a reduced guarantee if advanced technology is in place to maintain sufficient audit controls as part of meeting AEO criteria or holding AEO status. The UCC also recognizes the growth of ecommerce and will allow for the remote retail sale of goods while they are in a customs warehouse. This will cover goods sold via the internet or any other distance-selling method.

What is the UCC technology roadmap?

As electronic procedures are fundamental to the legislation, businesses must assess the impact of UCC changes on their current technology environment. While some organizations may have the required level of competence internally to make the transition, others may need additional expertise. Some companies may elect to move to a new solution while others might consider modifying custom in-house developed software. Others still will contact software providers for on-boarding protocols and adapting to potential changes in interfaces or systems.

Eric Geerts-executive-headshot-photography-0002Eric Geerts is Director, Product Management, EU Customs, Ports & Ocean Shipment Services at Descartes. Eric drives product strategy and roadmap for Descartes’ EU Customs, ports and ocean shipment services. Prior to joining Descartes in 2010, Eric worked for Porthus, first as business analyst and consultant, and later as product manager of the Customs compliance and port/ocean applications, helping the company and its customers in the go live of different European Customs systems, and ocean carrier and port connectivity. Eric has more than 10 years experience in IT solutions for maritime logistics and Customs compliance, electronic messaging and beyond. Eric has a master degree of commercial engineering with specialization in IT management at the University of Antwerp, Belgium.