World Shipping Council

Brussels, 14 September 2022 WSC RESPONSE TO THE EUROPEAN COMMISSION CALL FOR EVIDENCE ON THE REFORM OF THE UNION’S CUSTOMS LEGISLATION The World Shipping Council (WSC) provides a coordinated voice on global regulatory affairs for the liner shipping industry, operating principally containerships, vehicle carriers, and roll-on/roll- off vessels. The Council has offices in Brussels, Washington D.C and Singapore and its members account for approximately 90% of global liner shipping capacity. This includes several of the world’s largest lines that are headquartered in the European Union. WSC member companies transport over 40 million TEUs of European export and import cargo each year or roughly two-thirds of the EU’s seaborne trade by value. WSC member companies play a pivotal role in European and global logistics. Their operations and investments extend beyond ships to port terminals,…

…for EU logistics and supply chains. The WSC is inscribed on the EU Transparency Register under number 32416571968-71. 1. General Remarks: The WSC is pleased to respond to the European Commission (EC) ‘Call for Evidence on the Reform of the Union’s Customs Legislation’. This is a time of significant challenges for the EU’s trade and economy, as it recovers from the continuing impacts of the COVID-19 pandemic and endures additional pressures arising from the ongoing war in Ukraine. WSC also recognises the need for the EU’s customs framework to take account of market place transformations, the evolution of new digital data submission solutions and the growth of e-commerce: a major driver of the current reform process.

…of new digital data submission solutions and the growth of e-commerce: a major driver of the current reform process. Taking the Customs Union to the next level as pledged by President Von der Leyen, should equip the EU to better withstand present and future challenges, while protecting its citizens and harnessing the economic opportunities of the 21st century. To do so Europe will continue to rely on its external trade and maritime commerce. The future Customs Union needs to be better configured for that trade to flourish securely. The completion of a genuine Customs Union characterised by the seamless application of its rules across all EU Member States, the operation by default of common EU IT systems and innovative processes remains a key priority. A closer tripartite cooperation between the Commission, Member States and the business community is vital to achieve this.

…tripartite cooperation between the Commission, Member States and the business community is vital to achieve this. Industry and business stakeholders as represented in DG TAXUD’s Trade Contact Group (TCG) need to be better integrated into the customs policy design process. However, while general policy goals and areas of concern are elaborated in the consultation document, concrete policy proposals or specific options for achieving these goals are entirely absent or presented without detail. There needs to be consultation with industry about the legislative means Ref. Ares(2022)6439861 - 18/09/2022 of achieving desired policy outcomes not simply the policy end goal. This is where industry expertise and knowledge of their sector can prove most useful to regulators, in the design of measures tailored to achieve the EU’s policy objectives.

…sector can prove most useful to regulators, in the design of measures tailored to achieve the EU’s policy objectives. This engagement is currently lacking from the UCC consultation process. We urge the Commission to consult with industry on specific policy measures and potential legislative proposals before they are published as draft legislation. The proposed timeline for the EC to adopt draft legislation in Q4 2022 would seemingly preclude the possibility to discuss any proposals in sufficient detail with the TCG. Such an ill-considered short cut, risks negatively affecting the quality of the legislation and its ability to meet EU policy goals. The timetable for UCC reform needs to be reconsidered. Above all in such an important area as customs – a cornerstone of the European economy - new legislation needs to be more carefully prepared.

…area as customs – a cornerstone of the European economy - new legislation needs to be more carefully prepared. Due to the absence of policy details in the consultation, WSC will also take the liberty to comment in this response on some of the proposals contained in the Wise Persons Report on the Reform of the EU Customs Union1, particularly where they correspond to policy goals and objectives identified by the EC in its Call for Evidence. 2. Prioritising the Unfinished Business of UCC Implementation While looking to the future of the Customs Union, the EU cannot neglect the unfinished business of implementing the UCC. Vast sections of its legal provisions remain unapplied while the necessary national and EU IT systems are not deployed.

Vast sections of its legal provisions remain unapplied while the necessary national and EU IT systems are not deployed. Despite progress in some areas, the UCC’s flagship safety and security system (ICS 2) remains only one third implemented, despite the EC calling its advance cargo risk assessment system ‘deficient’ in 2012. We certainly do not advocate a rushed implementation but it is vital that the new customs reform agenda consolidates and prioritises the outstanding IT implementations2 as per the UCC Work Programme and course corrects where necessary. A specific case in point concerns the UCC National Entry System (NES) which should be implemented by 31 December 2022. In March 2022 WSC alongside 8 other major trade associations wrote to DG TAXUD highlighting the unavailability in most Member States of vital IT specifications for the new IT systems (see annex I).

…highlighting the unavailability in most Member States of vital IT specifications for the new IT systems (see annex I). In June the EC acknowledged, that due to lack of progress they were awaiting derogation requests from Member States to postpone implementation. This highly unsatisfactory situation remains unresolved, generating considerable uncertaintinty for industry. There is a high risk of significant costs for trade if implementation in different Member States proceeds in a disordered and uncoordinated way, with little or no lead time for carriers and other economic operators to implement costly system changes, when NES system specifications finally arrive.

…and other economic operators to implement costly system changes, when NES system specifications finally arrive. Over the medium to long term the NES case strongly supports the ambition indicated by the Commission in its call for evidence and the Wise Persons Report to move towards EU level deployment of common customs IT systems as the default approach, replacing the mosaic of different Member State implementations and building on the success of the existing Trans-European systems.

…mosaic of different Member State implementations and building on the success of the existing Trans-European systems. The status quo, even when not beset by the delays experienced under NES implementation, imposes 1 Report by the Wise Persons Group on the Reform of the EU Customs Union – Brussels March 2022 – Link 2 In that sense we welcome the statement highlighted in the call for evidence that the new reform must ‘….leverage the foundations laid and investments made under the current UCC, and provide for a clear transitional path from the current environment, over a 10-year period (2025-2034)’. unnecessary costs on both national administrations and economic operators, particularly those active in more than one Member State.

…costs on both national administrations and economic operators, particularly those active in more than one Member State. The Customs Union acting currently as 27, generates one off system development costs for each national system as well as recurring costs every time those individual systems are changed or updated. This is wasteful for all concerned. In the short term to help deal with the breakdown in progress toward implementing the UCC Work Programme, WSC advocates postponing for maritime transport, the mandatory filing of the declarations linked to the NES systems (Arrival Notification, Presentation Notice and Temporary Storage) until the implementation of ICS 2 Release 3 in March 2024. This is the most logical course of action in view of the interdependent nature of the data used in the declarations sent to ICS 2 and the NES systems.

…of action in view of the interdependent nature of the data used in the declarations sent to ICS 2 and the NES systems. Moreover, faced with considerable delays, aligning the NES changes with ICS 2 would allow for the development, proper testing, and implementation of the new message sets and processes within a reasonable timeframe. A number of Member States have already chosen this path. But it requires the coordination and leadership of the European Commission to manage that process efficiently EU wide; a role that is indispensable to take the Customs Union to the next level. 3.

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WSC POSITION ON THE REFORM OF THE UNION CUSTOMS CODE 6 November 2023 I. Executive Summary - The Customs Union Acting as One: WSC supports the proposed UCC Customs Data Hub with a Shared Trader Interface. The current mosaic of divergent national customs systems generates significant costs, duplicate IT developments, additional functional data sets, contradictory submission processes and uncoordinated system deployments. This represents a significant economic drag for Europe. - A Stable Legal Transition: Until deployment of the EU Customs data hub, the existing UCC secondary legislation and data annexes need to be maintained to enable the core UCC IT Entry Systems, including ICS2 to function. The EC draft proposal lacks adequate transitional provisions for the Entry Processes.

…including ICS2 to function. The EC draft proposal lacks adequate transitional provisions for the Entry Processes. - Cargo Security: New importer/exporter obligations, including provision of advance cargo security data are an important step forward. But powers to prevent a carrier from unloading the goods, in case of missing data could severely disrupt trade. - Provision of Advance Cargo Data on Arrival: Parties other than the carrier also need to be legally required to provide missing advance cargo data once the goods have arrived. This would mirror the current UCC and the new proposal’s pre-loading ENS filing requirements. - Port of Arrival vs Port of Discharge: The reform proposal does not distinguish between cargo remaining on board a vessel and cargo to be unloaded in a specific EU port.

…proposal does not distinguish between cargo remaining on board a vessel and cargo to be unloaded in a specific EU port. Cargo should only be placed in temporary storage or under a customs procedure at the intended port of discharge not the first EU port in a vessel rotation. - Temporary Storage: Proposed reduction of temporary storage from 90 days to 3 days is likely to have serious negative implications for import and transhipment processes in EU ports. The objectives of this change remain unclear. II. Introduction The World Shipping Council welcomes the published reform’s goal of introducing a new, data-driven vision for EU Customs, replacing traditional declarations and divergent national processes with supply chain based controls centred on an EU Customs Data Hub.

…declarations and divergent national processes with supply chain based controls centred on an EU Customs Data Hub. Economic operators wish to be able to interact with a genuine Customs Union rather than a collection of differently functioning parts. Establishing properly harmonised processes, requirements Ref. Ares(2023)7536907 - 07/11/2023 and systems via a Customs Data Hub will facilitate EU trade and remove economic drag on the single market. Notwithstanding, the need for this reform, the EU should ensure the current UCC IT systems many of which are in mid-deployment can continue to be relied upon by trade and Member States, until the new Customs Data Hub is deployed. The reform process should fully preserve the current legal basis for those IT systems, their filing processes and data sets for as long as they remain in use.

…the current legal basis for those IT systems, their filing processes and data sets for as long as they remain in use. Business needs a stable and legally certain transition to the proposed new customs environment. Finally, the new UCC proposals require amendments to ensure better adaptation to key operational differences between the transport modes carrying EU trade. Maritime commerce accounts for 90% of the EU's external trade and needs a well-adapted legal basis. New models for the cargo entry processes appear inspired by road or air cargo models. But these are not necessarily suitable for maritime commerce, which operates on a very different scale, and with multiple port calls on each voyage. The World Shipping Council1 is a non-profit trade association representing the liner shipping industry.

…on each voyage. The World Shipping Council1 is a non-profit trade association representing the liner shipping industry. WSC members carry over 90% of the world’s containerised trade and a substantial share of the world’s roll-on/roll-off cargoes. WSC members’ operations and investments extend well beyond ships to port terminals, warehouses, truck companies and the information technology systems that are critical for EU logistics and supply chains. III. A Customs Union Acting as One and Moving Forward with Trade WSC is inspired by the vision of unified EU customs environment embodied by the Data Hub, but trade needs a legally stable transition to reach it. a. The EU Customs Data Hub: the Customs Data Hub will be made operational in stages from 2028 – 2038. Ultimately, it will process and manage all UCC customs data exchanges with trade, replacing most national IT interfaces and systems.

…will process and manage all UCC customs data exchanges with trade, replacing most national IT interfaces and systems. Data relating to individual shipments will be collated from multiple supply chain parties. The ‘Hub’ will house the new ‘engine’ that processes and stores customs data and runs EU level risk analysis. Under the current UCC framework, individual Member State IT systems each with their own national or locally developed trade interface, generate considerable costs for economic operators (EOs) dealing with customs. EOs active in several Member States are obliged to develop and maintain multiple IT connections across the EU or pay commercial third parties to transmit their data. Divergent systems generate new functional data requirements - undermining the nominally harmonised EU Customs Data Model.

…systems generate new functional data requirements - undermining the nominally harmonised EU Customs Data Model. Contradictory submission processes, varied certification requirements and uncoordinated implementation schedules across the EU create serious economic drag. An EU level IT interface embedded as proposed in the hub would be a rational solution to the fragmented, costly and inefficient status quo. WSC Position: WSC firmly supports the introduction of an EU Customs Data Hub which will allow better supply chain visibility and enable Customs controls to become more 1 EU Transparency Register: 32416571968-71. targeted and strategic. Above all WSC fully endorses the move to replace the current mosaic of costly and divergent national customs IT systems with a centralised interface that manages all data exchange with trade. b.

…and divergent national customs IT systems with a centralised interface that manages all data exchange with trade. b. Legal Certainty for the Transition: Until the Customs data Hub is deployed EU trade will depend on the current UCC IT systems, many of which are in mid-deployment. Core cargo systems such as ICS 2, MS and the EOs that use them depend entirely on the existing legal framework and the data requirements contained in the UCC and its Implementing and Delegated Regulations. This extensive legal basis has been carefully developed in consultation with Member States and industry. However, legal transitional provisions for the UCC Entry Processes are missing in Title VI of the EC proposal. On adoption of the new reform proposal the old UCC will be repealed and replaced.

…in Title VI of the EC proposal. On adoption of the new reform proposal the old UCC will be repealed and replaced. As it currently stands the core UCC IT systems will continue to be in operation but their legal basis will have lapsed. One provision to extend the legal framework in Article 80 (9) of the new reform proposal is insufficient. It states that until deployment of the EU Customs Data Hub, ‘..the entry summary declaration shall be considered the advance cargo information.’ However, what entry summary declaration does this refer to? It should be clarified that the ENS is constituted by the data requirements currently listed in Data Annex B, filed according to the same detailed multiple filing rules and timelines set down in the Delegated and Implementing Acts. Without those provisions economic operators will not be able to use those core UCC IT systems.

…and Implementing Acts. Without those provisions economic operators will not be able to use those core UCC IT systems. (Please see the annex for a list of UCC provisions that should be maintained until deployment of the EU customs data hub). It is essential that carriers can legally rely upon those provisions, that determine precisely how carriers should file ENS, Arrival Notifications (AN) Presentation Notices (PN) and temporary storage declarations (TS). Based on the existing UCC legal provisions, carriers have made substantial investments and considerable changes to their commercial, operational and IT systems. The UCC should provide clarity that they will continue to apply at least until the EU Customs Data Hub is deployed.

The UCC should provide clarity that they will continue to apply at least until the EU Customs Data Hub is deployed. WSC Position and Proposal: The new UCC should provide legal certainty through the addition of transitional legal provisions to Title VI that would have the following effect: Until their replacement by the EU Customs data hub, the existing legal provisions of Regulation 952/2013 and its Implementing and Delegated Acts, relating to ENS, EXS, AN, PN and TS submission, will remain in force alongside the data requirements as set down in annex B of the UCC Delegated Regulation. IV. Advance Cargo Information for Secure Supply Chains Extending cargo security filing to importers will hugely improve cargo risk assessment but amendments are needed to prevent transport disruption and obtain data from the right party. a.

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…1 WSC ANALYSIS AND DRAFT POSITIONS ON THE EU CUSTOMS REFORM PROPOSAL 26 July 2023 I. Background On 17 May the European Commission(EC) published draft legislation described as ‘the most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968’. A major customs reform has been identified as a political priority by EC President Ursula Von der Leyen, notwithstanding the unfinished business of implementing the existing Union Customs Code (UCC). The UCC reform is intended to introduce a radically new, data- driven vision for EU Customs, replacing traditional declarations and divergent national processes with supply chain based controls and centralised IT systems. Other key reasons cited for the reform include the exponential growth in recent years of e-commerce and high volume, low value consignments that have challenged effective Member States controls.

…years of e-commerce and high volume, low value consignments that have challenged effective Member States controls. WSC will prepare to engage with the European Parliament (EP) and Member States (MS) in Council as they debate, amend and eventually adopt the reform package. The purpose of this document is to provide an analysis of the main changes and identify those issues and proposals on which WSC should seek amendments or clarifications during the upcoming legislative process. The first section below provides WSC analysis and draft positions on the major, ‘Headline’ announcements of the customs reform package. These have medium and longer term consequences. The second section deals with a set of issues and proposals that have more immediate impact and substantial relevance for maritime carriers.

…with a set of issues and proposals that have more immediate impact and substantial relevance for maritime carriers. Potentially of the highest significance is the need to secure legal certainty for the existing UCC IT systems, currently being deployed such as ICS2. II. WSC Analysis and Draft Positions on Key Proposals 1. High Level Objectives in the Reform Package with Medium to Long Term Impact: a. The EU Customs Data Hub: The Hub is described in Title III of proposed reform. It will be made fully operational in stages from 2028 – 2038 and will ultimately process and manage all UCC customs data exchanges with trade, replacing national IT interfaces and systems. Traders will be able to start using the EU Customs Data Hub as of January 2032 – starting with e-commerce shipments - and would be obliged to do so by 2037, when it will be fully operational.

…2032 – starting with e-commerce shipments - and would be obliged to do so by 2037, when it will be fully operational. Data relating to individual shipments will be collated from multiple supply chain parties, redefining how customs and other data is used for customs supervision, and shared with partner authorities. The ‘Hub’ will house the new ‘engine’ that processes, connects and stores the information and runs EU level risk analysis. This will allow better supply chain visibility for risk assessment and allegedly will enable Customs controls to become more targeted and strategic. WSC Observations: Fully replacing the current mosaic of costly and divergent national customs IT systems with a centralised EU system and set of services has been a longstanding WSC position on EU customs reform. Under the individual UCC national IT Ref.

…set of services has been a longstanding WSC position on EU customs reform. Under the individual UCC national IT Ref. Ares(2023)7515588 - 06/11/2023 2 systems, different functional and technical specifications generate huge costs through divergent data requirements, often contradictory submission processes, complex certification requirements and inappropriate implementation schedules. These all create unnecessary costs and impediments to trade, undermining the coherence and value of the Customs Union. System design and implementation details will need to be reviewed carefully, but as a response to the ‘collective failure’ of Member States to implement the UCC IT systems in a harmonised and coordinated way, the move to an EU Customs Data Hub should be supported in principle.

IT systems in a harmonised and coordinated way, the move to an EU Customs Data Hub should be supported in principle. It will be important to ensure that the Data Hub is seamlessly integrated with the EU Maritime Single Window (EMSW) as foreseen in article 29 of the reform proposal. From 2025 the EMSW will be available for carriers to use to submit Arrival Notifications, Presentation Notices and Temporary Storage Declarations (AN, PN, TS) to the customs National Entry Systems. b. An EU Customs Authority: The Authority is proposed to make the Customs Union act more uniformly through common risk management, and control processes. The Authority will be gradually established and assume its tasks from 2028. It may be given responsibility to develop and operate the EU Customs Data Hub. The Commission will set common risk criteria and common priority control areas.

…and operate the EU Customs Data Hub. The Commission will set common risk criteria and common priority control areas. Based on these the Authority will issue EU control recommendations to national customs authorities. These recommendations for controls will have to be implemented, or reasons provided as to why the control recommendation was not be applied. The Authority will also provide harmonised customs training for national authorities. WSC Observations: WSC can support the intention behind the EU Customs Authority to make further progress towards a more harmonised and centralised management of the Customs Union. Efforts to achieve more coordinated risk assessment and consistent treatment of economic operators would be beneficial.

Efforts to achieve more coordinated risk assessment and consistent treatment of economic operators would be beneficial. Unfortunately, no mechanism is outlined for how the Authority should engage with and ensure adequate consultation with economic operators, including with trade representatives at EU level. This should be remedied during the legislative process as the tasks foreseen for the Authority will require regular input from the private sector and their representatives. c. AEO plus regime: An important aspect of the reform package is the proposal to introduce an enhanced authorised economic operator (AEO) regime. So called ‘Trust and Check’ traders will need to meet existing AEO criteria in addition to granting customs full access to relevant parts of their IT systems.

…need to meet existing AEO criteria in addition to granting customs full access to relevant parts of their IT systems. In return for enabling customs to directly monitor their compliance and the movement of their goods, Trust and Check traders will enjoy additional benefits, notably the possibility to release the goods from customs supervision and defer payment of customs debt. WSC Observations: In principle the Trust and Check regime may provide benefits for those economic operators willing to provide direct access to their IT systems. However, it is difficult to see any specific additional benefits for carriers, unless they are offering customs clearance services to their customers in which case, they would be able to self- release those goods. 3 d.

…clearance services to their customers in which case, they would be able to self- release those goods. 3 d. Common Infringements and Sanctions: The reform proposes to introduce a minimum common core of acts or omissions that constitute customs infringements and a minimum common core of non-criminal sanctions and principles for their use. According to the EC the reform would not change the procedural legal order of Member States and would still allow them to apply additional customs infringements and national sanctions. The EU Customs Data Hub will collect all decisions linked to customs infringements and their sanctions for transparency purposes. WSC Observations: WSC can support this proposal in principle as it will assist the development of a more uniform and consistent handling of customs infringements, which WSC members have reported vary considerably across the EU. e.

…and consistent handling of customs infringements, which WSC members have reported vary considerably across the EU. e. Customs crisis mechanism: The EC proposes to include crisis provisions directly in the Union Customs Code. This would grant the EC emergency powers to adopt safeguarding measures for the customs union or to ensure free movement of goods when there is deemed to be serious threats. For different crisis scenarios the Commission and Customs Authority will develop protocols, procedures and mitigation measures. When the Commission, on its own initiative or based on the request of one or more customs authorities, or the EU Customs Authority, shall identify a crisis they shall choose from among the protocols and procedures prepared to address the crisis or to mitigate its negative effect.

…shall choose from among the protocols and procedures prepared to address the crisis or to mitigate its negative effect. WSC Observations: While reasonable in intent, the ability of the Commission and Customs Authority to accurately define and determine actions in advance for unknown future crises seems impractical at best. It could also remove the necessary flexibility to be able to respond appropriately to crises when they do occur. The absence of a legal crisis framework did not prevent the Commission and Member States from acting in response to the COVID pandemic. 2. Reform Proposals Highly Relevant to Shipping and with Short to Medium Term Impact a. Legal Continuity for Existing UCC Implementation: The European Commission has stated that implementation of the current UCC and the suite of major IT systems will not be impacted by the reform.

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