Navigating EU Customs Requirements in Third Party Logistics (3PL): Charting your course
E-commerce companies shipping to the EU face an increasingly complex web of customs regulations. With the recent introduction of ICS2 Release 2, there are new requirements for inbound air shipments and updated rules for economic operators.
Failure to comply can lead to costly delays, fines, and damage to your business. This guide serves as your roadmap through the intricacies of EU customs, ensuring you remain compliant, efficient, and competitive in international trade.
Table of Contents
New EU Customs Requirements
The EU has implemented a new customs security regulation called ICS2 (Import Control System 2) Release 2 that applies to all postal and express shipments entering the EU by air. ICS2 Release 2 requires carriers and economic operators to submit advanced electronic pre-loading air cargo information (PLACI) on shipments before loading onto aircraft. This includes:
- Detailed descriptions of the goods including product name, characteristics, composition, brand, model numbers, size, type of packaging, and other identifiers. This allows customs authorities to thoroughly assess the contents.
- HS classification codes that categorize each product under the internationally standardized system for cross-border shipments. The accuracy of these codes is critical.
- Declared values of the goods for customs duties and tax calculations, as under or over-valuation can raise scrutiny.
- Consignee names and addresses for clearance authorization and delivery.
- Any supporting certificates required such as for origin, sanitation, CITES permits where applicable.
- Commercial invoice and freight details enabling reconciliation of the shipment data.
The goal is to identify any high-risk shipments early and enable better security risk assessment. ICS2 Release 2 is being phased in from March 2021 to March 2023 and applies to all companies shipping items by air to the EU, regardless of value or quantity.
Key Customs Rules and Regulations
Customs authorities enforce a range of rules and regulations to monitor and control the flow of goods across international borders. Key regulations governing EU customs include:
Businesses involved in international trade must ensure they understand and comply with all relevant customs regulations. Failure to do so can lead to:
- Delayed shipments from inspections, clearance issues, or customs inquiries, increasing costs.
- Outright confiscation of goods not declared properly or violating prohibitions.
- Fines and civil penalties for inaccurate or false declarations.
- Criminal prosecutions in severe cases of willful non-compliance or fraud.
- Suspension of import/export privileges causing major business disruptions.
Given the complexity and risks of non-compliance, traders should work closely with knowledgeable customs brokers and freight forwarders to ensure active compliance. Resources like the EU Export Helpdesk also provide comprehensive customs regulation information.
Preparing for Compliance
Businesses that engage in e-commerce shipping to the EU must ensure they are prepared to comply with the requirements of ICS2 Release 2. As the exporter, it is the economic operator’s responsibility to provide accurate and complete product data and HS classification codes to carriers submitting the PLACI. Any non-compliance can lead to:
- Shipment delays caused by missing or incorrect pre-loading data resulting in non-clearance through customs.
- Penalties in the form of customs duty fines or seizure of goods for significant data errors.
- Reputational damage to the company for repeated compliance failures, hampering future imports/exports.
- Increased costs to re-export or destroy rejected shipments.
It is advisable to work closely with your carriers early to test data reporting systems and integrate the necessary data requirements well in advance of the relevant deadlines. Customs brokers and consultants can also help advise on readiness for ICS2 Release 2 compliance both pre-shipment and during transit.
Understanding ICS2 Release 2
ICS2 Release 2 is the newest EU customs regulation focused on enhancing the safety, security, and risk management of air cargo shipments entering the customs territory of the EU. It replaces the previous Import Control System (ICS) with new requirements for:
- Pre-loading advance cargo information (PLACI) is to be submitted electronically by carriers and economic operators.
- Detailed shipment data must be reported prior to loading for transport to the EU.
This is a major change from the previous system. The aim is to identify any high-risk cargo early in the process and enable better analysis of security risks before the shipment departs towards the EU. Overall, ICS2 Release 2 allows EU customs authorities to implement more robust risk assessment procedures for air freight.
Harmonized System Coding
The Harmonized System (HS) is an international standardized system of numerical codes used to classify traded products in customs procedures. HS codes are required on customs documentation to indicate the type of goods being imported or exported:
- Each code consists of 6 to 10 digits that identify up to several thousand different categories of products.
- The codes provide customs authorities with precise details on what is being shipped so they can determine any applicable duties, taxes, controls, restrictions, or statistics.
- It is essential for businesses to classify their exported goods using the correct HS codes. Inaccurate coding can lead to shipment delays, seizures, fines or increased duty payments if the wrong codes are applied.
- HS codes can be researched on the World Customs Organization website or the EU Export Helpdesk.
This is a major change from the previous system. The aim is to identify any high-risk cargo early in the process and enable better analysis of security risks before the shipment departs towards the EU. Overall, ICS2 Release 2 allows EU customs authorities to implement more robust risk assessment procedures for air freight.
Conclusion
Coming to our final destination, compliance with EU customs regulations is mandatory for all businesses involved in the international trade of goods by air and post. By understanding the new ICS2 Release 2 requirements early, classifying goods properly with HS codes, providing detailed and compliant shipment descriptions, using appropriate Incoterms, and submitting accurate customs data, companies can avoid penalties and delays at EU borders. Work closely with experienced customs brokers and freight forwarders to ensure your imports and exports are fully compliant.
Keep up to date on any changes in customs requirements. Investing in customs compliance provides a competitive advantage and enables smooth trade with the EU.
Frequently Asked Questions (FAQs)
What is ICS2 Release 2 and why is it important for e-commerce shipping to the EU?
ICS2 Release 2 is a new EU customs security regulation that applies to all postal and express shipments entering the EU by air. It requires carriers and economic operators to submit advanced electronic pre-loading air cargo information. This regulation is important for ensuring that businesses comply with EU safety and security standards, avoiding costly delays and fines.
What are the main requirements of ICS2 Release 2?
The main requirements include providing detailed descriptions of goods, accurate HS classification codes, declared values for customs duties and taxes, consignee information, and necessary certificates. It’s aimed at identifying high-risk shipments early for better security risk assessment.
How can businesses prepare for ICS2 Release 2 compliance?
Businesses should work closely with carriers to test and integrate data reporting systems for PLACI, ensure accurate product data and HS codes, and potentially consult with customs brokers and consultants for compliance readiness both pre-shipment and during transit.
What is the Harmonized System (HS) and why is it crucial for international shipping?
The Harmonized System is a standardized numerical method for classifying traded products in customs. HS codes on customs documents specify the type of goods being shipped, which determines applicable duties, taxes, and regulations. Accurate HS coding is crucial to avoid delays, fines, and seizure of goods.
What consequences can businesses face for non-compliance with EU customs regulations?
Non-compliance can lead to shipment delays, customs duty fines, seizure of goods, reputational damage, increased costs for re-export or destruction of shipments, and in severe cases, criminal prosecution and suspension of import/export privileges.
What are Incoterms and how do they impact customs compliance?
Incoterms are international trade terms defining the responsibilities of sellers and buyers for the delivery of goods. Using appropriate Incoterms, like FOB, CIF, or DAP, can ensure that sellers handle customs formalities and transportation, aiding in EU compliance and smooth handling upon arrival.
Why is it important to provide detailed and precise shipment descriptions?
Detailed shipment descriptions are necessary for customs to accurately assess the contents of a shipment, determine if it complies with regulations, and identify any restricted or hazardous items. Vague descriptions can lead to shipment delays and penalties.
