On 18 May 2019, Dutch Customs Authorities updated their prior short communique from 1 October 2019. The communique from 1 October 2019 stated that as of 1 December 2019 only EU-established entities can be mentioned as exporter on the customs declaration for export. The update gives businesses time to adjust their systems until 1 April 2020 (contrary to the original communique which requested implementation by 1 December 2019). Therefore, as of 1 April 2020, only EU-established entities can formally act as exporter within a supply chain. This is especially noteworthy in light of Brexit, where UK-established entities will no longer qualify as EU-established and will therefore not be able to act as exporter for exports from an EU Member State anymore.
1. Legal framework
When the Union Customs Code (UCC) was implemented in May 2016, only an entity established in the EU can qualify as exporter for customs purposes if, in addition, this entity held a contract with a consignee in a third country and had the power to determine that the goods were to be brought to a destination outside the EU.
As of July 2018, the exporter definition was updated. Under Art. 1(19) UCC-DA a person can only act as exporter if it is established in the EU and:
I.has the power to determine that the goods are to be brought outside the customs territory of the Union or,
II.is a party to the contract under which goods are to be taken out of that territory
The conditions of the first possibility have to be assessed based on actual facts and circumstances. With regard to the second possibility mentioned above, business partners are free to designate a person as exporter in their contractual or business arrangements, provided that such a person is established in the EU.
Guidance of the European Commission expressly stated that the new definition of exporter should provide more flexibility to industry, but it still requires the exporter to be established in the EU. Despite this legal requirement, and during a transitional period, the EU Commission had given guidance that non-EU established companies may nevertheless be deemed to be an exporter, if they appoint an indirect representative that is established in the EU.
This guidance has been amended and no longer allows for this transitional period and, as such, non-EU established companies cannot act as deemed exporter any more. The Dutch Customs Authorities have now expressly stated this by publishing the aforementioned communique to enforce this change in guidance, thereby enforcing the legal framework as laid down in the UCC-DA.
2. Impact of change on filing customs declarations for non-EU established entities
2.1 Filing customs declarations
Since an EU-established entity has to act as exporter on the customs declaration, non-EU established entities should assign an EU-established (group) entity to act as exporter for customs purposes. Under the new "flexibility" provided by the interpretation of the new exporter definition, parties are contractually free to choose any person established in the EU to act as exporter. This person does not necessarily have to be a party in the sales chain.
Note that whoever is contractually assigned as exporter takes over the responsibility for the correctness of the export declaration toward the customs administration. The exporter is also the addressee of the customs administration for reviews or audits of the export declarations.
2.2 Possible VAT impact
If a non-EU established company sells goods from the EU to a customer established outside the EU, said company should still be able to apply the VAT exemption for its export transaction. However, having an EU-established (group) entity acting as exporter in a customs sense appears at first sight not in line with claiming VAT exemption for the export sale of the non-EU established company.
Nevertheless, the definition of exporter under the customs regulations and the assignment of the VAT-exempt export follow different regulations, which are not aligned. Still, the Netherlands refers to the export declaration as the proper proof to support the VAT exemption. For this reason, companies should be mindful to establish an audit trail from the export declaration to the invoice underlying the VAT-exempt sale.
3. Recommended actions
Non-EU established companies that currently function as exporter for exports from the Netherlands should review whether an EU-established (group) entity can take over the position of exporter. In this case, the contractual arrangements with such entity should include the exporter function. In addition, the current set up and programing of the export declaration has to be amended as well.
If the entity also exports from another EU Member State than the Netherlands, we recommend reviewing whether the EU Member State still makes use of the transitional period or, like the Netherlands, already enforces the new interpretation of the exporter definition. The impact on the VAT-exempt export and a possible change in the export declaration should be reviewed as well for such EU Member State.