European authorities are in the process of reforming the customs code and tackling fraud on e-commerce platforms. An exemption measure should increase the price of your online purchases…
With the advent of digital technology and the health crisis caused by Covid, online commerce has experienced exponential growth. Growth which has been accompanied by numerous standards, prohibitions, obligations and sanctions, which have been put in place in recent years, making the work of customs authorities ever more difficult. Also, the European authorities have decided to simplify customs procedures, clarify data processing and create an IT platform for whistleblowers who would like to report potential tax fraud by certain online sellers. For this, the EU Internal Market Commission, attached to the European Parliament, voted on Thursday February 22 what it describes as the “EU’s biggest customs reform since 1968”, which plans multiple changes aimed at adapting to the rise of online commerce. And this could have consequences on your purchases made on platforms installed outside Europe…
The reform addresses in particular the problem of customs duties. Currently, there is a deductible of 150 euros for remote purchases. Beyond this value, the customs duty rate depends on the nature of the goods and their origin. However, to optimize expenses and to attract consumers with attractive prices, many companies installed outside the European Union, and in particular in China, defraud by voluntarily devaluing their packages in their declarations so that it is exempt from customs duties. The technique is simple: they just need to indicate on the slips intended for customs a value much lower than the real price of the products. As long as they are not checked, the items escape customs fees. Neither seen nor known !
65% of packages entering the Old Continent would thus be affected. But this exemption comes at the expense of European Union companies, in particular SMEs, which find it difficult to compete with the resulting lower sales prices. Not to mention that these companies do not hesitate to split larger shipments into smaller packages, which increases packaging and harmful emissions. But things are about to change.
With this reform, European authorities intend to require e-commerce platforms to provide information on goods shipped to the European Union, within one day of purchase. In addition, the current exemption threshold of 150 euros will be removed, which will require platform operators to collect VAT and customs duties on all distance sales of imported goods. We should therefore expect an adjustment from e-retailers, who will compensate for customs fees by increasing the price of their products.
Another change, positive this time: for the first time, online platforms that sell goods in the EU will become the so-called“alleged importer” instead of buyers. They will therefore be responsible for ensuring that customs duties and VAT are paid at the time of purchase and for remitting this revenue to their Member State of registration. Concretely, they will therefore have to take care of all customs formalities and all payments on behalf of consumers. This will prevent them from being faced with hidden charges when the package arrives.
The European Union expects one billion additional customs revenues per year generated by this new “tailor-made e-commerce scheme”. The text must now be adopted in plenary assembly next month before continuing its journey.