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1 KLUWER LAW INTERNATIONAL Customs Law of the European Union Second Revised Edition Massimo Fabio '**). Wolters Kluwer Law & Business AUSTIN BOSTON CHICAGO NEW YORK THE NETHERLANDS

2 Table of Contents About the Author Foreword xxix xxxi Chapter 1 European Community Law and the Customs System Introductions Some Notes on the European Community Integration Process The Organization for European Economic Cooperation The European Communities: ECSC, EEC and EAEC/Euratom The Relationship between Community Law and National Law The Direct Applicability of Community Law Customs Law Current Legal Context Sources of Law Basic Legal Provisions The Modernized Customs Code in Force since 24 June The Customs Union and the Community's Customs Territory The Enlargement to the East 'Own Resources' and the Community Budget Customs Taxation References 23 Vll

3 Chapter 2 Classification Introduction The Harmonized System The Customs Tariff of the European Communities The Annex to Regulation (EEC) No. 2658/ Rules for the Interpretation of the Combined Nomenclature The Tariff and the Court of Justice The Role of the Court of Justice The Court of Justice's General Approach and the Requirement of Objectivity Time That Objective Characteristics Considered Evidence of Objective Characteristics Advances in Medical Science Artistic Value Breeding Methods Functions That the Product Facilitates Geographical Origin The Intended Use of Products Manufacturing and Processing of Products Sight and Sensory Perception Technological Innovation TARIC: The Integrated Tariff of the European Communities Binding Tariff Information The BTI Regime New Developments since The US Customs Tariff (HTSUS) and the Textile Sector The Structure of the HTSUS and Relevant Rules of Interpretation The 'BTI' in the United States Classification of Garments 'Knitted' Goods and 'Non-knitted' Goods Use of Different Fibres Metallized Textile Material The Tariff Classification of Trousers Jeans Trousers Trousers Other Than Jeans Trousers of Wool Trousers of Cotton Trousers of Viscose and Cotton Trousers of Leather 35 Vlll

4 2.10 References Trousers of Trousers of Trousers of and Viscose Trousers Trousers Trousers Trousers of of of in Mohair and Wool Polyester Acetate Silk Rayon and Linen Linen Polyamide Chapter 3 The Origin of Goods Introduction Rules of Origin Non-preferential Origin Preferential Origin Determining the Origin General Rule: 'Direct ' Origin 'Indirect' Orisin: Three Reauire:me:nts Substantial Processing or Working Economic Justification and Equipped Undertaking The Change of Tariff Heading (or CN-Code) The Ad Valorem Percentage Rule Roll-Up Roll-Up: The Honda Case The Acquisition of Origin in the Modernized Customs Code Special Rules Bilateral Cumulation Bilateral Cumulation in the Agreement between the European Union and Croatia: National Courts and the European Court of Justice in Multilateral Cumulation Regional Cumulation Full Cumulation Diagonal Cumulation Extended Diagonal Cumulation Diagonal Cumulation of Origin between the Community, Western Balkan Countries and Turkey Accessories, Sets and Exhibitions IX

5 3.4.8 'No Drawback' Rule The Generalized System of Preferences Regulation (EC) No. 881 of 21 May 2003 and No. 980 of 27 June Venezuela Is No Longer Part of the Generalized System of Preferences Certificates of Origin Certificate of Origin EUR 1 (Annex 21 to Regulation (EEC) No. 2454/93) Certificate of Origin EUR Certificate of Origin Form A (Annex 17 to Regulation (EEC) No. 2454/93) Invoice Declaration (Annexes 18 and 22; Articles 91 and 117 of Regulation (EEC) No. 2454/93) Certificate ATR Binding Origin Information References 34 Chapter 4 Customs Value Notion Determining the Value of Goods The Transaction Value The Significance of 'Relationships' between Buyer and Seller Alternative Measures of Value The Value of Identical Goods The Deductive Value The Computed Value The Value Based on the Data Available in the Community Additions to the Transaction Value Exclusions from the Transaction Value Case Study: Referring to the CCC Only: Italian Tax Commission's Decision on Appeal No. 195/08, Delivered 16 October First-Sale Price The Present Rule The Potential Perspective First Sale Rule in the United States 10

6 4.4 Declaration of Particulars Relating to Customs Value (D.V. 1 Form) Case Study: How Royalties Related to Imported Goods Affect VAT and Customs Duties How Royalties Affect VAT on Imports Self-Billing in Respect to Royalties Arising from a Supply of Services - Double Taxation - Taxable Base for VAT on Imports Conditions under Which VAT on Imports Is Payable. Determination of the Dutiable Amount Correct Calculation for VAT Purposes: Supply of Services Correct Calculation for VAT Purposes: Supply of Goods Relevant Doctrine and Case Law Identity and Double Taxation The Point of View of the Italian Tax Authorities in Royalties and License Fees Added to the Customs Value First Requirement To Be Met Second Requirement To Be Met Royalties and First-Sale Price in the Transactions between Associated Entities Customs Value and Transfer Pricing Two Sides of the Same Coin A New Trend: The Holistic Approach Arm's Length Principle: A Shared Principle? Controls of Transactions: An Operational Convergence How to Reconcile the Methods for Determining the Customs Value and the Transfer Pricing References 34 Chapter 5 The Jurat Relationships in Customs Law Introduction Concept of Person Residence in the Community Customs Authorities and Offices 2 XI

7 5.2 The Customs Debt and the Debtor The Time at Which a Customs Debt is Incurred Calculating the Customs Debt Time Limit and Procedures for Payment of the Amount of the Duty Extinction of a Customs Debt Revision of the Customs Valuation Customs Litigation Revision of the Customs Valuation The Revision at the Request of the Declarant Refusal of the Request for Revision The Revision upon the Customs Authorities' Own Initiative Drawing Up the Minutes Relating to the Revision of the Customs Declaration Results of the Revision of the Customs Declaration References 10 Chapter 6 The Customs Declaration Introduction The Written Declaration Normal Procedure Content of the Declaration The Customs Authorities Other Declarations Electronic Entry and Exit The Single Administrative Document The Community Form The Structure of the SAD The Purpose of the Declaration: Customs-Approved Treatment EORI Number: The 'Customs Name' of the Economic Operators (Established and Not Established in EU Territory) References 10 Chapter 7 Customs Representatives Introduction Direct and Indirect Representation 1 Xll

8 7.3 Responsibility of the Declarant and His Representative Representation Anomalies: The Service Provider References 5 Chapter 8 Import Practice Concept Release for Free Circulation and Clearance for Home Use Operation of the Regime Reliefs from Customs Duty Regulation (EEC) No. 918/ Court Case: Goods of a Negligible Individual Value Dispatched as a Grouped Consignment Import License Double-Checking System Validity and Use of Import Licenses Electronic Licenses Relating to Products under the Double-Checking System Special Provisions Relating to Imports of Textiles Value Added Taxation Tax Representative and Direct Identification The Taxable Base for VAT Purposes and Discharge of the Goods EU Council Adopts Measures against Tax Evasion Linked to Import References 9 Chapter 9 Permanent Export Notion Operation of the Procedure Exporter Export Procedure When the Customs Office of Departure is Different from the Customs Office of Exit Customs Office of Exit Goods under Excise Duty Export Declaration The SAD for Export Instructions to Complete the SAD Form 4 Xlll

9 9.4 A Member State Perspective: Italian VAT Provisions Relating to Export The Export Relief (Plafond) and the Habitual Exporter A Plafond Covering All Goods: An Opportunity? Some Examples of Triangular Operations Alternative Evidence of the Physical Exit of Goods from the Customs Territory of the Community Special Cases: 'Groupage' Consignments The Export Refund Definition Products Entitled to Refunds Types of Export Refund Export License to Be Presented for the Purposes of the Refund Relating to the Goods Covered by Annex I to the Treaty of Amsterdam Rules to Be Applied to the Goods Not Covered by Annex I to the Treaty of Amsterdam Differentiated Refunds Request for an Export Refund Documentation to Be Attached to the Application Export Declaration Exceptional Measures Regarding Refund Certificates for Granting Export Refunds Automatic Export System: The New System Contained in Regulation (EC) No. 1875/ Export: The Export Control System Local Clearance Procedure at Export Formalities in the ECS The Evidence of Exit of the Goods outside the Community Territory Movement Reference Number Export Control System: 'Follow-up Procedure' The EAD and Other Accompanying Documents Split Exportation References 44 xiv

10 Chapter 10 The 2001 Reforms and Pan-European Authorizations Background The 2001 Reform Retroactive Authorization Other Procedural Modifications Single European Authorization The Cross-Border Warehouse: A Warehouse without Frontiers Processing under Customs Control Authorized Economic Operator The New Security Provisions within the European Union The Idea Was Born in the United States The European Union, the AEO and Data Exchange between Customs Authorities Certification of Reliable Subjects The AEO 'Club' The Exchange of Information between Customs Authorities Conditions for Granting the AEO Certificate: Subjective and Objective Criteria Clean Record of Compliance with Customs Requirements A Satisfactory System of Managing Commercial Records The Financial Solvency of the Applicant during the Last Three Years The Applicant's Security Standards Procedure for the Issuing and Legal Effects of the AEO Certificate Operative Comments: From the United States to China for a Secure, Fast and Simplified Global Market 'Certified' Customs System: The US Experience, the Italian Approach and the Dutch Incentives AEO and C-TPAT: European Union as the United States The C-TPAT Who Are the Certified Companies in the United States? What Is the Cost/Benefit Ratio? Which Guidelines Should the EU Follow? xv

11 Analysis and Comments of the Results of a 2007 US Survey Conducted by the University of Virginia Profile of the C-TPAT Authorized Operators Analysed by the Survey Knowledge Level of the Arrangements before Applying for the Certification Why Companies Should Apply for the C-TPAT Arrangements. Reduction of Customs Clearance Procedures and of Subsequent Controls Implementation and Maintenance Costs of the C-TPAT Certification Benefits Deriving from the C-TPAT Certification, Higher Than Costs and Increase in Turnover Impact of the Certification on Risk Management Conferences and Events on C-TPAT Relations with the Authorities Necessary and Qualified Relation General Evaluation of the Certification Mission Accomplished: Benefits Outnumber Costs Evaluations on the American Survey Results. AEO as C-TPAT: An Opportunity for Everybody: Fewer Controls and More Profits Circular Letter No. 36/D Dated 28 December 2007, Issued by the Italian Customs Authorities Verification of Requisites and Conditions and Filing of the Application Different Areas of the Customs Compliance Involved in the AEO Certification (Security, Privacy, Human Resources, Etc.) Impact on Customs Simplifications and Benefits for AEO Subjects Dutch Incentives: AEO Status to Become More Attractive AEO in MCC, Regulation (EC) No. 450/ References 42 XVI

12 Chapter 11 Transport and the TIR Regime Transit Procedures Community Transit The External Transit Procedure The Internal Transit Procedure Description of the Procedure The Guarantee Individual Guarantee Comprehensive Guarantee Guarantee Reduction Guarantee Waiver Non-discharge of Community Transit Procedures Simplified Procedures The TIR System The TIR Carnet Functioning of the TIR Procedure Ingoing Outgoing Transit Control Prescribed Transport Route Transport Operations Carried Out under Cover of a TIR Carnet New Computerized Transit System Functioning of the NCTS Simplified Procedures Advantages of the NCTS Andorra Goods Falling within Chapters 1-24 HS Goods Falling within Chapters HS San Marino Goods Moving from Designated Community Offices in Italy to San Marino Goods Moving from the Community to San Marino Goods Moving from San Marino to the Community Other Transit Regimes Non-fiscal Territories Internal Community Transit Procedure 22 xvn

13 Customs Status Documents References 23 Chapter 12 Warehousing Customs Notion Purposes of the Procedure Types of Warehouses Warehouse-Keeper Authorization Authorization Procedure Application for Authorization Declaration of Entry to Customs Warehousing and Following Removal Stock Records Handling of the Goods Temporary Removal Special Warehouses: Type D and Type E Type D Warehouse Type E Warehouse The Pan-European Virtual Warehouse: The Honda Case Guarantee VAT Warehousing: The Italian Model Notion and Legal Framework Persons Authorized to Manage a VAT Warehouse Accounting Procedures for the Management of a VAT Warehouse Accounting Procedure at the Entry of Import Goods to a VAT Warehouse Accounting Procedure at the Removal of Goods from a VAT Warehouse References 17 Chapter 13 Inward Processing Notion Different Systems of Inward Processing Suspension System The Drawback System 4 xvm

14 13.3 Processing Operations 13.4 The Equivalent Compensation and Prior Exportation Systems The Equivalent Compensation System The Prior Exportation and Triangular Traffic Systems Special Provisions Concerning the Equivalent Compensation System 13.5 Authorization Standard Procedure Single Authorization Simplified Procedure Retroactive Authorization Identification of Competent Customs Offices Economic Conditions 13.6 Operation of the Procedure 13.7 Rate of Yield 13.8 Movement of Goods 13.9 Provisions on Taxation Assessment of Customs Debt Compensatory Interest on Customs Duties Applied to Goods Released for Free Circulation Discharge The Suspension System The Drawback System Administrative Cooperation References Chapter 14 Outward Processing Notion Authorization Operation of the Procedure The Aggregate Discharge Procedure The Standard Exchange System Advantages of the Procedure Temporary Export References 6 xix

15 Chapter 15 Processing under Customs Control Notion Scope of the Procedure Authorization Application for Authorization Types of Authorizations Operation of the Procedure National Taxation Movement of Goods Customs Value of Processed Products The Modernized Customs Code References 5 Chapter 16 Temporary Admission Notion Temporary Importation with Total Relief from Import Duties Temporary Importation with Partial Relief from Import Duties Operation of the Procedure Movement of Goods Discharge of the Procedure ATA Carnet ICC Urges Expanding the ATA Carnet System to All APEC Countries CPD Carnet VAT Treatment References 8 Chapter 17 Free Trade Zones Notion Operation of the Procedure Entry to Free Zones Removal of Goods From Free Zones References 4 xx

16 Chapter 18 Free Trade Warehousing Notion Entry to a Free Warehouse Operation of Free Warehouses Stock Records Removal of Goods Customs Value and Customs Debt References 5 Chapter 19 Movement of Excise Goods Introduction Legal Framework Administrative Accompanying Document The Consignor's Obligations The Carrier's Obligations The Consignee's Obligations Discharge of the AAD Failure to Return Copy 3 of the AAD Computerized Procedures for the Movement of Excise Goods under Suspension of Excise Duty: Regulation (EC) No. 648/2009, of 24 July Simplified Accompanying Administrative Document New Computerized Anti-fraud System The Rationale of the New System The Excise Movement Control System New Rules for Value Added Tax and Excise Duty on 'Energy Products' References 16 Chapter 20 Simplified Customs Procedures Simplified Customs Procedures Procedure For an Incomplete Declaration Procedure for Simplified Declaration 2 xxi

17 20.4 Provisions Applicable to Incomplete and Simplified Procedures Local Clearance Procedure Authorization Content of the Authorization Entry of Goods for Customs Procedures at the Operator's Own Premises Movement of Goods under the Local Clearance Procedure Treatment of Goods on Import Treatment of Goods on Export Accounting Advantages Checks Approved Exporter Invoice Declaration National Approved Exporter Community Approved Exporter Approved Exporter in the Pan-European Cumulation The Use of Local Clearance Procedure by an Approved Exporter Simplified Procedures in Regulation (EC) No. 450/08 (MCC) References 12 Chapter 21 Electronic Data Exchange Notion Operation of the System Authorization Authentication for the Computerized Customs Clearance System Scope of Application The Customs Declaration Summary Declarations and Temporary Storage Intrastat Declarations Excise Declarations Electronic Debt Account The Customs Control Selection Procedure Acceptance-Registration Formalities at the Centralized Control System xxii

18 21.12 Intellectual Property Rights Application: Fight Against Counterfeiting Specific Provisions The Local Clearance Procedure Using the EDI and a Customs Control System The EDI and the Computerized Transit Exchange and Storage of Data in Regulation (EC) No. 450/08 (MCC) 9 Chapter 22 Incoterms Introduction Incoterms EX Works (EXW) The Seller's Obligations The Buyer's Obligations Observations Free Carrier (FCA) The Seller's Obligations The Buyer's Obligations Free Alongside Ship (FAS) The Seller's Obligations The Buyer's Obligations Free on Board (FOB) The Seller's Obligations The Buyer's Obligations Observations Cost and Freight (CFR) The Seller's Obligations The Buyer's Obligations Cost, Insurance and Freight (Cif) The Seller's Obligations The Buyer's Obligations Carriage Paid to (CPT) The Seller's Obligations The Buyer's Obligations Carriage And Insurance Paid to (CIP) The Seller's Obligations The Buyer's Obligations Delivered at Frontier (DAF) The Seller's Obligations The Buyer's Obligations 9 XXlll

19 Delivered Ex Ship (DES) The Seller's Obligations The Buyer's Obligations Delivered Ex quay (DEQ) The Seller's Obligations The Buyer's Obligations Delivered Duty Paid (DDP) The Seller's Obligations The Buyer's Obligations Delivered Duty Unpaid (DDU) The Seller's Obligations The Buyer's Obligations 12 Chapter 23 Controls in the Context of Protection of the Financial Interests of the European Union Introduction The Evolving Concept of Intra-Community Fraud and Relevant Counteracting Measures Custom Cooperation The Treaty of Amsterdam and Naples II Action Programme: Customs 2000, 2002 and Actions Programme: Customs The Protection of the European Communities' Financial Interest The European Anti-Fraud Office National Systems Controls Customs Controls Controls Eurofisc: Proposes between in Regulation (EC) No. 450/08 (MCC) Fight against Tax Fraud - Commission Measures for a More Efficient Cooperation Tax Authorities Eurofisc Joint Responsibility for the Protection of Tax Receipts Direct Access to Databases Quality of Data Information to Taxpayers Report on the Functioning of Administrative Cooperation Background XXIV

20 23.7 New Online Service with a View to Increasing Legal Certainty for Traders Involuntarily Involved in Fraud (in Particular Carousel Fraud) Background 25 Chapter 24 Special Provisions The Elimination of Quotas on Textile Imports: Transitional Measures and Surveillance Systems Legal Framework Impact on the Community Market Transitional Measures and Surveillance Systems Opening of Certain Tariff Quota as of 1 July Non-tariff Barriers to Labelling and Free Circulation in the Single Market Community Law The European Commission The European Parliament The High Level Group National Bodies Solutions to the Conflict with the Free Circulation of Goods The Role of Customs Cooperation in Preventing Money Laundering Introduction Money Laundering as an Autonomous Crime in the International Context Community Law for the Period Obligatory Declaration Geographical Scope of Application Definitions Provisions Applicable to the Exchange of Information Powers of the Authorities and Penalties Directive 2005/60/EC National Intelligence Systems The Dual-Use System Council Regulation (EC) No. 1334/2000 of 22 June 2000 and Regulation (EC) No. 428/2009 of 5 June The 'Catch-All' Clause Dual-Use Regulation Amendments 18 xxv

21 24.5 Amendment of Single CMO Regulation Economic and Customs Partnership Agreements Update Signature of an EC-Switzerland Agreement Providing for a Waiver for Customs Security Checks between the EU and Switzerland European Union and Russia Make Progress on WTO Accession Background European Union and Southern African Countries Sign Interim Deal Background EU-SADC Trade Flows European Union-China European Union-China: JCCC European Union-China: High-Level Economic and Trade Talks Background EU Requests WTO Consultations with China over Export Restrictions on Raw Materials Background US Trade and Investment Barriers Background 26 Chapter 25 The Modernized Customs Code Document Taxud/458/2004-Rev The First Draft of the MCC The MCC, EC Reg. No. 450/08, Forty Years After the Creation of the Customs Union The New Role of Community Customs Authorities, Article 2 MCC Information Exchange, Articles 5-10, MCC Customs Representation, Article 11, MCC Decisions Relating to the Application of Customs Rules, Articles 16-20, MCC Penalties Application, Article 21, MCC Appeals, Articles 22-24, MCC Customs Controls, Articles 25-28, MCC Acquisition of Origin, Article 36, MCC Customs Value of Goods, Articles 40-43, MCC 7 XXVI

22 Centralized Customs Clearance and Special Arrangements, Article 106 and Article 135 and Following, MCC The Perspectives of the MCC 8 Appendix A i Appendix B 1 Index 1 xxvn

EC Customs Law OXPORD TIMOTHY LYONS. Second Kdition UNIVERSITY PRFSS

EC Customs Law OXPORD TIMOTHY LYONS. Second Kdition UNIVERSITY PRFSS EC Customs Law Second Kdition TIMOTHY LYONS OXPORD UNIVERSITY PRFSS Table of Cases from the European Court of Justice and Court of First Instance Table of Cases from Other Jurisdictions Table of European