European Smoking Tobacco Association

…1 ESTA Feedback – EU Customs Reform 06/11/2023 ESTA E.E.I.G. Rond Point Schumanplein 9, box 1 B - 1040 Brussels EC Reg. No: 0138855852-93 Tel : +32 2 230 80 92 E-mail : [email protected] Website: www.esta.be Twitter: ESTA_EU ESTA’s Feedback EU Customs Reform 06/11/2023 About the European Smoking Tobacco Association (ESTA), E.E.I.G. ESTA represents the interest of its members, which are mainly smaller and mid-sized tobacco companies that manufacture and/or distribute fine-cut tobacco (FCT), pipe tobacco and traditional European chewing tobacco and nasal snuff tobacco. Many of these companies are family-owned, and have been for multiple generations, with several for more than a century. Many ESTA members are still rooted in their original locality and have moved from manufacturing and selling only locally, to truly European companies selling across the EU and beyond.

…have moved from manufacturing and selling only locally, to truly European companies selling across the EU and beyond. ESTA therefore represents a tobacco entrepreneurship whose values are tied to traditional products and a longstanding European cultural heritage. General Observation on the European Commission’s legislative proposal for a comprehensive EU Customs Reform ESTA welcomes the general direction which the proposed reform is aiming at. ESTA also welcomes that, while being ambitious, the proposal foresees simplified procedures catering for the specific needs of SMEs.

…that, while being ambitious, the proposal foresees simplified procedures catering for the specific needs of SMEs. However, ESTA believes more could be done to ensure smaller companies are not left behind with the digitalized and real-time customs procedures in the future, for example by extending some of the simplified procedures and user-interfaces to smaller midcaps, which are particularly vulnerable when implementing such policies1. Besides, it is clear from the draft proposal that the new EU Customs Authority, a key aspect of this reform, is not meant to have “boots on the ground”. This constitutes somehow a missed opportunity to assist smaller companies as such an Agency could play a pivotal role in solving potential issues and arbitrations by allowing traders to have one single point of contact when an issue concerns several Member States.

…and arbitrations by allowing traders to have one single point of contact when an issue concerns several Member States. ESTA appreciates the ambition of the European Commission to take the successful cooperation between businesses and customs to the next level with the introduction of a new status of Trust and Check (T&C) trader. We, however, believe that in the spirit of assisting smaller companies with the implementation of the customs reforms, the current AEOC status and benefits should be continued under the current conditions, simultaneously to T&C. This proposal contains dozens of Implementing and Delegated Acts that will be crucial to materialise the ambitions of this customs reform.

…dozens of Implementing and Delegated Acts that will be crucial to materialise the ambitions of this customs reform. A key condition for a successful implementation is to ensure legal clarity within an appropriate timeframe, giving operators (especially the smallest) and authorities sufficient time to make necessary adjustments. Learning from past experiences (e.g. implementation of the UCC, or that of the Tobacco Track & Trace), ESTA recommends that co-legislators not only delegate power to the European Commission, but also indicate clearly the appropriate timing for adoption, taking into due consideration the date of entry in application of the new provisions, already indicated in the legislation. 1 European Commission, Study to map, measure and portray the EU mid-cap landscape, November 2022 Ref.

…the legislation. 1 European Commission, Study to map, measure and portray the EU mid-cap landscape, November 2022 Ref. Ares(2023)7553091 - 07/11/2023 2 ESTA Feedback – EU Customs Reform 06/11/2023 ESTA E.E.I.G. Rond Point Schumanplein 9, box 1 B - 1040 Brussels EC Reg. No: 0138855852-93 Tel : +32 2 230 80 92 E-mail : [email protected] Website: www.esta.be Twitter: ESTA_EU Abolishment of the “de Minimis’ threshold for customs duty ESTA welcomes the European Commission’s proposal to abolish the minimum threshold (‘de Minimis’) for customs duty as this was demonstrated to potentially foster illicit trade. ESTA also takes note of the simplified customs tariff for B2C transactions and the exclusion of goods subject to harmonised excise duties.

…of the simplified customs tariff for B2C transactions and the exclusion of goods subject to harmonised excise duties. However, ESTA would like to point out that the accompanying 4-tier bucket tariffs (bucket E) does not include certain tobacco products that are not subject to harmonised excise duties. This is the case for certain traditional and niche products such as chewing tobacco or traditional European nasal snuff, for which an harmonised excise duty has always been considered (and rightly so) unjustified and unnecessary. Creation of a EU Customs data hub Another key and ambitious aspect of the customs reform is the creation of the centralised EU customs data hub, which can be an unprecedented step forward.

…the customs reform is the creation of the centralised EU customs data hub, which can be an unprecedented step forward. The success of its deployment however will rely on the appropriate collaboration of all authorities with economic operators, on the system’s reliability (considering its complexity) and the security of data. ESTA members still have in mind the intolerable challenges of implementing another unprecedented system: that of traceability for tobacco products. This should be borne in mind by the authorities as an example not to follow, in terms notably of timing for the adoption of relevant Implementing and Delegated Acts, and communication with economic operators to ensure smooth compliance.

…of relevant Implementing and Delegated Acts, and communication with economic operators to ensure smooth compliance. Additionally, ESTA is of the opinion that the authorities should investigate how synergies can be achieved between this customs data hub and the traceability regime (or other similar requirement in other industries) to mitigate the risk of duplicating reporting and unnecessarily increased compliance costs, especially for smaller businesses. Unfortunate changes ESTA regrets certain changes which would be introduced by this Customs Reform: • Reduction of the temporary storage of non-Union goods (Article 86.5) ESTA believes this measure, too drastic, was not sufficiently justified and can have very detrimental impacts on European businesses, not giving them the flexibility they need to make appropriate, rational and economically viable choices.

…businesses, not giving them the flexibility they need to make appropriate, rational and economically viable choices. In addition, ESTA is of the opinion that the provisions allowing for an extension of the storage time are not sufficiently clear and are likely to lead to inconsistencies in how these are applied across the Union. • Shift in compliance responsibility The proposal would transfer compliance responsibility from the declarant and carrier to the importers. Whilst ensuring importers are diligent is crucial, ESTA is concerned that this change could result in an undermined level of diligence and accountability for customs brokers (which the UCC regulations contributed to increase). ESTA therefore invites the European Commission and Member States to ensure a better balance of responsibility, ensuring the integrity of the customs system.

…and Member States to ensure a better balance of responsibility, ensuring the integrity of the customs system. 3 ESTA Feedback – EU Customs Reform 06/11/2023 ESTA E.E.I.G. Rond Point Schumanplein 9, box 1 B - 1040 Brussels EC Reg. No: 0138855852-93 Tel : +32 2 230 80 92 E-mail : [email protected] Website: www.esta.be Twitter: ESTA_EU Further clarity is needed ESTA believes that certain aspects of the Customs Reform would benefit from further clarification: • Simplified Guarantees ESTA welcomes the proposed change regarding the place where customs debt arises from “where declaration is lodged” or “where the events occurred” to “where the importer or exporter is established”.

…from “where declaration is lodged” or “where the events occurred” to “where the importer or exporter is established”. However, the success of such measure can only be achieved by ensuring the actual mutual recognition of guarantees, namely to ensure that a guarantee accepted or authorised by the customs authorities of one Member State is valid throughout the customs territory of the Union. • Definition of importer ESTA welcomes the efforts of the European Commission to align the definition of “importer” with that of the “exporter”. In order to ensure harmonised interpretation and successfully implementation, ESTA invites the Commission to consider developing a similar guidance document as for the definition of exporter.

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…1 27/07/2018 Rond Point Schumanplein 9, box 1 B - 1040 Brussels EC Reg. No: 0138855852-93 Tel : +32 2 230 80 92 E-mail : [email protected] Website: www.esta.be ESTA Feedback on the Commission’s proposal to recast the Council the Directive 2008/118/EC concerning the general arrangements for excise duty The European Smoking Tobacco Association (ESTA) represents mainly mid-sized companies including SMEs and several generation-old family-owned businesses. These companies manufacture and distribute fine-cut tobacco, pipe tobacco, traditional European nasal snuff and chewing tobacco. Many ESTA members are still rooted in their original locality and have moved from manufacturing and selling only locally, to truly European companies selling across the EU and beyond. Their traditional and artisan European tobacco products are part of European cultural heritage.

…the EU and beyond. Their traditional and artisan European tobacco products are part of European cultural heritage. ESTA appreciates and welcomes the opportunity to provide its views on the revision of Directive 2008/118/EC and to make further remarks on the content of the Commission’s proposal. ESTA welcomes the proposal for the recast of the Council Directive 2008/118/EC – “Horizontal Directive” – made by the Commission, starting with the alignment between the terminology used by the Directive and the Union Customs Code (UCC) as well as the solutions put forward to further streamline excise and customs procedures (both for importing and exporting). Amongst other, ESTA welcomes the automated interface between the EMCS (Excise Movement and Control System) and the AES (Automated Export System) as well as the automated data cross-check between electronic excise and customs systems.

AES (Automated Export System) as well as the automated data cross-check between electronic excise and customs systems. However, whilst welcoming the attempts of the European Commission to innovate and simplify, ESTA wishes to emphasise the need for Member States to consider the potential implementation costs for smaller and mid-sized companies, which very often use manual data entry due to limited resources. Innovation between excise and customs export systems can only be efficient if the Member States ensure that the current tools provided by national administrations and used by SMEs also take such changes into account.

…that the current tools provided by national administrations and used by SMEs also take such changes into account. ESTA also welcomes the Commission’s attempts to ensure harmonisation and legal clarity for both the law enforcement authorities and economic operators by clarifying the common list of alternative proofs of exit for export as well as the common requirements for duty exemptions at import. Regarding excise and customs interactions, ESTA concurs with Commission’s view that export followed by external transit should be allowed for excise goods. Unfortunately, the Proposal fails to cover deliveries of excise goods to special fiscal territories, which are considered part of the customs territory of the EU but are not included in the scope of the Horizontal Directive.

…are considered part of the customs territory of the EU but are not included in the scope of the Horizontal Directive. Therefore, movements to and from these territories require further clarification since exports followed by internal transit or single transport contract are not allowed for excise goods. Ref. Ares(2018)3984244 - 27/07/2018 2 27/07/2018 Finally, ESTA welcomes other innovations (in duty-paid B2B procedures) such as the extension of EMCS to cover cross border duty paid movements. ESTA however urges the Commission and the Member States to ensure that registration procedures remain clear, simple and harmonised throughout the Union to effectively participate in reducing the administrative burden for both the national authorities and smaller and mid-sized operators.

…in reducing the administrative burden for both the national authorities and smaller and mid-sized operators. Despite clear improvements, this Commission’s Proposal also misses the opportunity to tackle further issues that would benefit from clarification and harmonisation: 1. Exceptional situations (e.g. shortages, excesses, rejections or interruptions) Although exceptional situations concern a very small proportion of movements, they happen quite often, especially for smaller and mid-sized companies, which rely on human resources rather than full automation. For these reasons, exceptional situations represent a very important administrative and tax burden for these companies. Whilst acknowledging the Commission’s efforts, ESTA regrets the Commission’s decision not to propose a common approach in the Directive and to leave this to a delegated act to be adopted later.

…decision not to propose a common approach in the Directive and to leave this to a delegated act to be adopted later. ESTA also regrets that no harmonised approach has been proposed regarding the “right to be heard”. ESTA therefore suggests that Member States better acknowledge the human factor and risks associated with it, allowing for more flexibility and the possibility to correct potential mistakes in the e-AD, under the supervision and verification of national authorities. The importance of ensuring co-operation and exchange of information between national authorities in assessing and proving actual irregularities should take precedence over charging any excise duties.

…in assessing and proving actual irregularities should take precedence over charging any excise duties. Following human error, smaller and mid-sized operators receive too often tax assessments from national authorities although investigations have not been conducted and irregularities have not been proven nor clarified, whilst not having had the opportunity to justify or explain the situation. This also means that the Directive should include new provisions enabling the Member State of dispatch to reimburse or remit excise where goods involved in a discrepancy are proved to be held in an excise warehouse in the Member States of destination or proved to have left the EU. 3 27/07/2018

…to be held in an excise warehouse in the Member States of destination or proved to have left the EU. 3 27/07/2018 2. Guarantees (Art.18) and Excise Refund (Art. 11) ESTA regrets that the Commission does not improve and simplify the legal framework for the guarantees and excise refund procedures considering the principles of the EU Internal Market. Smaller and mid-sized operators face costly administrative burden as they are too often obliged to have several guarantees in several Member States or obliged to destroy the goods or tax stamps in the country of origin as the conditions for refunding excise are costly and time-consuming. The revision of Directive 2008/118/EC should ensure mutual recognition enabling guarantees to be provided by a financial institution in any EU country. Similarly, mutual recognition for tax stamps destruction should be promoted. Finally, it would be…

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