- November 12, 2020
- Posted by: Florence
- Categories: Brexit, Customs, VAT
At a Glance…
The new European Commission management framework and Brexit heavily affect the use of tariff rate quotas, especially for food and agricultural products, as well as steel.
Companies benefiting from tariff rate quotas should watch developments closely and assess the impact of upcoming changes on their operations. Forewarned is forearmed: companies may need to apply immediate changes to secure quota eligibility in the future.
Authors: Yves Melin, Philippe Heeren, Bérengère Vigneron
Background to tariff rate quotas
Tariff rate quotas (TRQs) allow for the importation of products at a lower than normal duty rate. These concessions exist by virtue of the EU’s WTO schedule of concessions or bilateral trade agreements concluded by the EU, or, exceptionally, they could take the form of autonomous concessions to make up for insufficient production in the Union.
The European Commission manages TRQs through two methods: one based on the chronological order of dates of acceptance of customs declarations (‘first-come, first-served’) and the other based on the volumes requested when the applications were submitted (‘simultaneous examination’). The Directorate-General for Taxation and Customs Union (DG TAXUD) manages the majority of tariff quotas on a first-come, first-served basis.1 A notable exception is agricultural tariff quotas, which are managed by the Directorate-General for Agriculture and Rural Development (DG AGRI) through the simultaneous examination method and the granting of import licences.
Quota management reform
Since 2014, the European Commission has been working on a reform of the legal framework for quota management. The existing rules were covered in a multitude of legal acts, adding to the general complexity. The new, harmonised management frameworks – one for first-come, first-served TRQs, one for simultaneous examination TRQs – apply to tariff quota periods starting from 1 January 2021 onwards.
For first-come, first-served TRQs managed by DG TAXUD, the new framework establishes common rules for the lodging, release and forfeiture of securities.2 For agricultural TRQs managed by DG AGRI, the new framework is more far-reaching, including new rules on quota eligibility, application, allocation, and utilisation.3 For tariff quotas for poultry meat and fruits and vegetables, prior electronic registration may be required. Quota applicants must demonstrate volumes traded in the past in a particular manner, and supportive evidence must meet new invoicing requirements. The European Commission has transferred the management of some tariff quotas from DG AGRI to DG TAXUD.
For simultaneous examination TRQs, rights deriving from quota licences become generally transferable to other economic operators. Transferring companies must carefully consider the contractual provisions governing the transfer, in order to be able to draw on quotas in future years.
Brexit: new guidance published
On 15 September 2020, the European Commission issued its revised Brexit notice on tariff rate quotas to stakeholders. Brexit will bring about some minor, yet impactful changes for those operators who are currently using tariff quotas.
The EU has apportioned the tariff quota amount under its WTO schedule to take account of the UK’s withdrawal from the EU. Companies should be aware that import licences issued by the UK or for UK operators are only valid until the end of the Brexit transition period. After the end of the transition period, customs authorities in EU member states can only accept licences issued by EU licensing authorities and held by EU operators. Deviations apply for Northern Ireland. The transition period is due to expire on 31 December 2020.
Steel safeguards: EU vs. UK
Importers of steel into the EU will also feel the impact of Brexit. Since 2018, the EU has levied additional duties of 25 percent on 26 categories of steel product.4 The safeguard measures came into place in response to the U.S. Section 232 tariffs on steel, which triggered a diversion of trade flows into the EU. The tariff quotas are allocated on a first-come, first-served basis.
In order to reflect the UK’s withdrawal from the EU, the European Commission will reduce the volumes available under the quotas. Hence, fewer imports will be able to enter the EU before hitting the level at which the additional duty of 25 percent is imposed. At the same time, the UK will introduce a very similar regime for 19 of the 26 categories of steel product.5 The transition review is ongoing.6
Managing the change: immediate action required
The new European Commission management framework and Brexit heavily affect the use of tariff rate quotas. We recommend that you (i) map the tariff quotas that are of relevance for your organisation, (ii) assess the impact of the changes on these tariff quotas, and (iii) take immediate action to secure quota eligibility in the future. Our Brussels-based customs and trade lawyers, with the support of our Greenlane network of customs and trade lawyers, are readily available to assist with a workshop or tailored advice on tariff quota developments, anywhere in the EU.
- Articles 49 to 54 of the Implementing Act to the Union Customs Code.
- Commission Delegated Regulation (EU) of 14 July 2020, C(2020) 4688 final. Note that the ratification process of this regulation is yet to be concluded.
- Commission Delegated Regulation (EU) No. 2020/760 of 17 December 2019 and Commission Implementing Regulation (EU) No. 2020/761 of 17 December 2019.
- Commission Implementing Regulation (EU) 2018/1013 of 17 July 2018 imposing provisional safeguard measures with regard to imports of certain steel products; Commission Implementing Regulation (EU) 2019/159 of 31 January 2019 imposing definitive safeguard measures against imports of certain steel products.
- Notice of determination 2020/06: safeguard measures on certain steel products – application of tariff rate quotas (as published on 30 September 2020).
- Notice of initiation of transition review of safeguard measures on certain steel products (TF0006).
This post was initially published here.