On March 23, 2020, Dutch Customs Authorities updated their last revised communique from November 18, 2019. The communique from November 18, 2019 stated that as of April 1, 2020 only EU-established entities can be mentioned as exporter on the customs declaration for exports from the Netherlands.
In line with the more general trend to ease burdens for businesses during the corona pandemic, this new update gives businesses time to adjust their systems until the 15th of the month following the month in which the Cabinet measures against corona are no longer in force (contrary to the original communique which requested an implementation by April 1, 2020). Given that the current measures against corona in the Netherlands are scheduled to be ceased as of May 31, 2020 – for now –, thus as of June 15, 2020, only EU-established entities can formally act as exporter within a supply chain from the Netherlands.
This development is especially noteworthy in light of pending hard-Brexit as of January 1, 2021, when 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.
Should you require assistance in this regard, our customs team in Amsterdam is happy to help. Due to our proven network of customs lawyers in EMEA, we can also coordinate the review in other EU member states for you.
For ease of reference, we below quote the Legal Framework, the impact of change on filing customs declarations for non-EU established entities and recommended actions as described in our prior updates on the enforcement of the exporter definition in the Netherlands:
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 of 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. In this respect, the Dutch Customs Authorities have now expressly stated 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 of the correctness for the export declaration towards 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 the VAT exemption for the export sale of the non-EU established company.
Nevertheless, the definition of exporter under the customs regulations on the one hand and the assignment of the VAT exempt export on the other hand follows different set of regulations that 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 programming 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 to review 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.