New Definition of Exporter of Records

A new definition of exporter is given by the Delegated Act (DA) of the new Union Customs Code applicable since May 2016.

The new definition may impact on -mostly but non only- non EU Principal Supply Chain Structures. The DA was approved by the EU Council on July 2015 and finally published in the EU Journal last December 29th 2015.

Before explaining the potential impact, we would like highlighting that one of the requirements regarding the definition of exporter already existed in the previous Community Customs Code but it has never been applied by almost no EU member state since the entry into force of the Community Customs Code in 1992.

Therefore on the one hand no alarm should be created but on the other hand this new definition of exporter cannot be just ignored and must be deeply analyzed and closely followed up to know its real final impact, if any.

The Delegated Act of the new Union Customs Code published on December 2016 gives 3 definitions of exporter of records. 

First requirement

The exporter needs to be established in the EU

Community Customs Code art. 788.2: "Where ownership or a similar right of disposal over the goods belongs to a person established outside the Community pursuant to the contract on which the export is based, the exporter shall be considered to be the contracting party established in the Community".

This requirement exists in the current Customs Code under some scenarios and the definition about what should be understood as a person (legal or natural) established in the EU remains the same under the new Customs Code. However this requirement has been never applied so far by almost any EU member state.

A legal person established in the EU means (under the Current Community Code and under the new Union Customs Code): "A person who has its registered office, central headquarters or permanent business establishment in the EU"

Nowadays to be identified with an EORI number  it is being in principle enough for a non-EU foreign entity in order to act as exporter (a few exceptions apply).

What it makes things interesting it is that the new Code gives as well a definition about what it should be deemed as "permanent business establishment". This definition about what it should be understood as permanent business establishment does not exist in the current  Customs Code.

Permanent business establishment under the new Union Customs Code means: "a fixed place of business, where both the necessary human and technical resources are permanently present and through which a person's customs-related operations are wholly or partially carried out".

There is a recommendation from the Commission to EU Customs Authorities based on the lack of the definition of permanent business establishment in the current Customs Code, regarding Customs Regimens with Economic Impact ("CREI"). The EU Commission states that a permanent business establishment for VAT purposes should be considered enough to grant a CREI.

Welmory case is remarkable with this respect.

Second requirement

Under the new definition the fact of taking title on the goods -or a similar right of disposal- has been eliminated. Instead of that under the new definition to hold the contract with the consignee in the third country out of the EU is required.

Which contract are they referring to? Who should be deemed as consignee in the third country? What will happen with transfer of own stock?

Falling this it seems in principle that the fact that the exporter has enough power to determine that the goods are to be brought out of the EU may be considered enough to act as exporter from a customs perspective.

This requirement resembles some current and local customs regulations of certain EU member states. The reason for this restriction was in most of the countries a clear intention of control on export. 

So many questions arise:

1. Potential impact on e.g. sales under EXW Incoterm where the seller is acting as exporter.

2. How about current customs or regulatory licenses held based on the fact of acting as exporter?

3. Potential impact on non EU Principal structures with no EU entity involved in the Supply Chain?

4. What are the differences between this new definition of permanent establishment and the one from VAT and direct tax perspective? If different, can this new definition of permanent establishment triggers a permanent establishment from another tax perspective?

5. VAT / Excise treatment on the sale for export?

6. This definition of permanent business establishment is not applicable only to the person acting as exporter from a customs perspective. The definition may impact as well on e.g. any customs procedure/regime that requires to be established under the new customs legislation.

There are other potential impacts some of them critical ones that must be carefully considered. Of course there are solutions if this definition is finally applied. The solution/solutions must be aligned with new functions and risk undertaken and therefore e.g. transfer pricing policies, customs/regulatory licenses or VAT treatment must be reviewed.

We have to wait and to see the real final impact and how it will be implemented if finally implemented but a previous analysis is recommended to be done by any company potentially impacted.

NEWS regarding the exporter of records & the requirement to be established in the EU

The EU Commission on the draft of the guidelines states that a non-EU established natural-legal person may use indirect customs representation in order to export goods out of the EU.

The EU established indirect representative should act as a declarant and as holder of the export procedure, other potential alternatives are set up as well. Regarding the need for the exporter to have the power for determining that the goods are to be brought out of the EU, the draft gives a few examples.We still have to wait and see how the final guidelines will implement the new definition.

The new definitions set up new requirements in order to act as exporter from a customs perspective. One of the definitions refers to personal goods carried by travelers. I will focus on the other two definitions, one of them it seems in our opinion applicable falling the previous one.

The definition of exporter is also relevant to determine the customs office where the export declaration must be lodged and therefore who is responsible for export formalities. This is a vast topic I am not going to analyze here. The exceptions determined by the EU Commission are critical.