EU enlargement
What will happen to goods traded between the current 15 and 10 new Member States on 1st May 2004? What preparations can traders make to ensure they benefit and are not caught out with higher import duty bills?

Unlike when the UK and other countries such as Spain and Portugal joined the EU, there are no interim Customs measures that will apply. Effectively, on 30 April 2004, the acceding countries, i.e. Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Malta and Cyprus, (which currently does not include the Turkish section of the island), will import products under their own national legislation and procedures. They will apply their own tariffs and rates of duty and the money will go into the national government’s purse. The following day, EU legislation and rates of duty will apply, with the money collected going (in the main) into the Brussels pot.

It is important that importers consider what these changes will mean in terms of where and how duty is paid and VAT is accounted for. In many cases, the changes will be procedural and it is important to get it right; in some cases, the changes will also have a monetary effect as duties are abolished or new rates apply.

If you currently import from one of the acceding countries, it is likely that you will currently import products duty free because they originate in those countries and the supplier issues you with an EUR 1. So no change there then, especially as the EUR 1 is also evidence that the goods are in free circulation (i.e. any imported parts have been duty paid) except in the case of both Cyprus and Malta.

If you buy dutiable product from an acceding Member then hold off supplies, where possible, until after 1st May 2004. You may still need to get the goods moved into the UK, or another EU Member State, where you can hold them in a warehouse until after 30 April.

If you currently buy product from third countries that is subject to high duty rates, consider whether the product can be taken into an acceding country where it will incur less duty and be transferred to the UK in free circulation after 30 April.

The new Member States will already be familiar with EU legislation and observers from the acceding countries have been attending Customs Code Committee meetings in Brussels to understand how they operate and get a flavour of the issues that are currently under debate. Of course, from 1st May, the acceding Member States will each have a voice in the various committees and there is some concern as to how this will affect their operations. New procedures may need to be adopted to ensure that the mechanism for discussion and agreement of new legislation is not overly hampered or delayed by having 25 participants and a variety of different languages!

Significant issues are likely to arise, for example, in respect of tariff classification as any national rulings issued in the acceding member countries will no longer be valid on 01 May 2004 and EU classification regulations and BTIs will apply. Differing opinions on product classification will undoubtedly cause problems.

So duty paid goods in the new Member States become Community goods and are in free circulation. Goods held in duty suspension become duty payable at EU rates or can stay in suspension but must comply with Community conditions for the specific suspension regime, e.g. Customs warehousing, inward processing relief etc. Traders should consider the effects of accession on any special Customs approvals they currently operate. For example, companies that have a Customs warehouse for storing product from Poland will no longer require this facility from 1st May 2004. Traders holding IPR stock covering trade with the acceding Member States should now start to consider the run out of that product and establish whether the use of IPR in an enlarged Community will still give them a economic gain.

The accession of the new Member States is not a simple matter. There will be benefits for cross border trade with less documentation and control and, in some circumstances, less duties to pay. UK importers need to assess how the new enlarged Community affects their current Customs procedures and discuss this with suppliers and processors in the acceding countries. These transactions will become an integral part of the Single Market and all that encompasses, by means of trade with third countries and internal VAT and excise duty requirements, must be analysed and new processes adopted to ensure smooth continuity of trade.

Barbara Scott
26 April 2004

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