Amending the Union Customs Code
Why ship supply guidance is no longer enough
The integration of customs legislation into a single community customs code and the provisions regulating value-added tax and excise duties on petroleum, alcoholic beverages and tobacco products, combined with the work of the European Ship Suppliers Organization (OCEAN), have highlighted the need for harmonised ship supplying procedures in all EU Member States for the surveillance of products delivered to ships.
N. Mavrikos, the Chair of the Hellenic Ship Suppliers Association and OCEAN Board member reflects on why the current EU ship supply guidance is no longer enough.
EU Member States regulate ship supply such as fuel, lubricants, commodities, food, drink and tobacco products, amongst many other products. Careful monitoring of amounts and types of goods delivered to sea-going vessels allows the EU, in line with most other nationals worldwide, to offer delivery free of customs duties and other tax charges. However, the EU Member States have introduced different customs procedures, despite harmonised framework legislation from Brussels. There are various documents and forms to complete and there are different ways of monitoring the products delivered to ships. They all have several aspects in common – one of them is that all processes and procedures related to ship supply deal with export formalities. Delivering goods on board of a vessel as ship supply is associated with these goods leaving the EU. They can only be consumed on board of the vessel.
Past ship supply rules in the Community Customs Code
In 2010, the European Commission, by Regulation 430/2010 reintroducing Article 786 (2) (b) of the Implementing Provisions of the Community Customs Code (IPCCC) 2454/93, established uniform customs procedures for the supply of ships and aircrafts.
In particular, the new provision provided:
"2. The formalities regarding the export declaration set out in this Chapter will also be used in cases:
(a) where Community goods are to move to and from territories within the customs territory of the Community where Directive 2006/112/EC or Directive 2008/118/EC does not apply;
(b) where Community goods are delivered tax-exempt as aircraft and ship supplies, irrespective of the destination of the aircraft or ship."
This procedure shall also apply to non-Community goods delivered on board of ships or aircraft. The provision of Article 841 of Regulation 2454/93 as amended by Regulation 430/2010 provided:
"1. Where re-export is subject to a customs declaration Articles 786 (1), (2) (b) and 787 to 796e shall apply mutatis mutandis, without prejudice to any specific provisions which may apply, when the customs procedure with economic impact preceding re-exportation of goods is discharged."
It is clear from the provisions of Articles 786 (2) (b) and 841 1 of Regulation No 2454/93 that the formalities to be applied for the supply of ships are those for export or re-export for all goods exempted from customs duties, VAT and excise duties.
Present ship supply rules in the Union Customs Code (UCC)
Since the adoption of the Regulation 952/2013, the provision for the application of export formalities in ship supply has been established by the Article 269 (2) (c) and (3).
"2. Paragraph 1 shall not apply to any of the following Union goods:
(a) goods subject to inward processing arrangements;
(b) goods leaving the customs territory of the Union after being assigned the procedure of destination;
(c) goods exempt from VAT or excise duty delivered for the supply of aircraft or ships, irrespective of the destination of the aircraft or ship, for which proof of supply is required;
3. The formalities for export customs declaration provided for in customs legislation shall apply in the cases referred to in paragraph 2 (a), (b) and (c). "
The provisions of Article 270 regulate the re-export of non-Union goods:
"1. Non-Union goods destined for exit from the customs territory of the Union shall be subject to a re-export declaration lodged with the competent customs office."
It is not clear from that provision that the re-export formalities also apply to non-Union goods delivered as ship supplies.
While Article 786 of Regulation 2454/93 is transposed into Article 269 UCC, Article 841 (1) of Regulation 2454/93 was not transposed into Article 270 UCC; therefore, there is ambiguity regarding the procedure for ship supply with non-EU goods, which are usually under customs warehousing, as well as under other Special Procedures (inward processing, temporary admission).
Ship supply guidance
The ambiguity of no reference about the formalities applied in ship supply with non-Union Goods was covered by the export guidelines (Annex B) (document Ares (2016) 2010194 - 27/04/2016) which included instructions on the application of the export and re-export formalities for goods delivered as ship supplies.
Specifically, paragraph III 2 mentions an example of the ship supply with non-EU goods. The last subparagraph mentions that once delivered to the ship, regardless of the destination of the vessel, the re-export movement is closed by the export office. The responsibility arising from the customs warehousing procedure is successfully discharged.
"Once delivered on-board a vessel, regardless of the destination of the vessel, the re-export movement is closed by the export office. The duty liability under customs warehousing successfully discharged."
This paragraph covered the ambiguity of Article 270, resulting from a failure to refer to Article 269 (2) (c) and (3).
Revision of the paragraph III 2 of the ship supply guidance
With the revision of Annex B of the Guidelines made by the document Ares (2019) 4272890 - 04/07/2019, the paragraph has changed as follows:
"The customs warehousing procedure is discharged as soon as the goods are removed from the customs territory of the Union (Article 215 UCC). The records referred to in Article 214 (1) of the Code must provide information on the exit of the goods within 100 days after the goods have been removed from the customs warehouse (see Article 179 (4) UCC-DA)."
The new wording provides for the procedure of warehousing to be discharged when the goods leave the customs territory of the Union without any reference being made to the sentence of Article 269 (2) (c) UCC "regardless the destination of the vessel".
This wording and, in particular, the deletion of the sentence "regardless the destination of the vessel" creates confusion as to when supplies being delivered to a ship leave the EU customs territory.
A ship departing from the port where the supplies were delivered may be destined for a port of a third country or a port of an EU Member State or a port of the same Member State. In all three cases, the ship leaves the territorial waters of the EU.
Two questions now are often asked:
Can the exit from territorial waters be considered as an exit from EU customs territory?
The answer is: Given that the EU customs territory consists of the territory of the Member States which, in accordance with Article 4 (1) UCC, includes territorial waters, inland waters and airspace, exit from territorial waters means an exit from the customs territory of the EU.
But ships destined for a port of another EU Member State or a port of the same Member State re-enter EU territorial waters and customs territory. Does this mean that supplies received cannot be considered to have left EU customs territory?
The answer is: Ships operating Regular Shipping Services know in advance their port of destination. They are point-to-point operations, like ferries. Their route never changes. One can argue that they are never intended to leave the EU customs territory [even though they exit EU territorial waters]. They are different from international commercial vessels which call different ports every so often to pick up cargo and then will definitely head to international waters once their loading or unloading is completed. For regular shipping services, therefore, re-export cannot be closed as there is no actual exit from the EU customs territory.
Ships operating regular services may be regarded as operating between ports of the same Member States, as well as those operating between two or more ports of EU Member States after obtaining the relevant authorisation provided for in Article 120 of Regulation 2015/2446.
Other vessels departing from a port of EU Member State to a port of another EU Member State which do NOT operate a regular service should be considered to have left the EU customs territory once they have loaded goods on the sea-going vessel. These ships, even when approaching another port of the EU, are considered to bear non-EU goods (except for those that can prove Union status).
Furthermore, a non-scheduled ship can change the itinerary during the voyage to a third country port.
EU law in the revised vision of the guidance adds to the confusion and does not clarify it. Wording can be interpreted differently by each Member State. The results are different arrangement regarding the exit of ship supplies from the EU customs territory. Member States treat the closure of the re-export declaration. Differently, they discharge the customs warehousing procedure in various ways. They even apply the import declaration and require end-use for ship supplies delivered to vessels going to union ports. This is not harmony.
The lack of legal character of the ship supply guidance
The text guiding the Member States is not legally binding. If a customs authority requests a ruling from the court based on the guidance, the court is not obliged to take the guidelines into account.
Regulate the ship supply formalities for non-EU goods
OCEAN considers it important to convert the Annex B guidelines for the application of Articles 269 and 270 into provisions of the Delegated or Implementing Act. However, there is no provision in the empowering ship supply to be regulated by a Delegated or an Implementing Act. The UCC would need to be changed to establish similar requirements to those listed in Annex B of the export Guidelines.
If this cannot be done, then an amendment to Article 270 UCC should be sought to adopt a provision stipulating that the provisions of Article 269 (2) (c) shall also apply to non-Union goods delivered to ships, as it was provided under article 841 of Reg. 2454/93.
We thank Peter Hansen on Unsplash