EU moving towards a paperless customs clearance system from June 2024; Indian exporters need to comply

Indian exporting firms must prepare themselves to comply with new EU regulations, as the European Union is moving towards a paperless customs process starting from June 3rd of this year. This is significant for domestic exporters since the European Union accounts for about 17% of India’s total merchandise exports. In the financial year 2022-23, India exported goods worth USD 75 billion to the EU, which is approximately USD 451 billion in total exports for that same year.

The EU has proposed to implement the second phase of its Import Control System (ICS) from June 3rd of this year. ICSD 1 applied to air mail and express deliveries starting from March 15th, 2021, and then it was extended to air cargo from March last year.

The ‘ICS2’ will now be extended to cover all types of imports using ships, trains, and trucks starting from June 3rd, 2024. The first two phases covered 15% of imports into the EU, while the third and final phase will cover the remaining 85% of imports by value.

EU has introduced a new system called ICS2 that requires economic operators transporting goods by sea, inland waterways, road, and rail to provide a complete Entry Summary Declaration (ENS) dataset. This system applies to all goods, including physical goods like manufactured products, raw materials, agricultural products, live animals, letters, parcels, and express deliveries.

The new system aims to move towards paperless and risk-based import compliance, simplifying the customs clearance process based on risk assessment and eliminating the need for paper declarations for most goods.

According to the Global Trade Research Initiative (GTRI), Indian exporters, EU-based importers, and carriers will now need to submit data electronically through the ICS2 system, replacing older paper-based declarations.
The new customs system has been designed to streamline the customs clearance process by eliminating the need for physical paperwork at borders, except for a small category of specific types of goods or certain trade lanes. Although the EU customs is going digital, it acknowledges that some international trade may still require paper documents like bills of lading or commercial invoices.

Ajay Srivastava, co-founder of GTRI, has stated that the European Union’s new system will focus on checking high-risk goods, allowing safe goods to move through customs faster. Each shipment will be assessed for risk based on several factors, including the type of goods, the countries of origin and destination, the compliance history of the trader, and any intelligence or risk indicators available.

Indian exporters must be prepared and compliant with this new system, which will be implemented on June 3, 2024. They must provide accurate and complete commodity information, including the Harmonized System (HS) code, detailed descriptions, value, and weight for the product being shipped. The data provided to ICS2 should be consistent with the information on commercial invoices, bills of lading, and other accompanying documents.

As per the new system, it is mandatory to upload the data to ICS2 before the goods arrive in the EU. This is usually done through the carrier’s system, and any delay in submission can lead to potential penalties and delays. Exporters need to keep copies of all submitted data and related documents for potential inspections or audits. They should be prepared to answer questions and provide further information if requested by customs officials. If the information submitted is inaccurate or incomplete, it can cause delays in customs clearance and impact shipping deadlines, potentially adding extra costs. Therefore, ship or air carriers and postal operators must ensure that all data is accurate and timely, as they face penalties for non-compliance. Even though carriers are responsible for filing the ENS and face penalties for non-compliance, the accuracy of the information ultimately comes from the exporter. Hence, both parties have a vested interest in ensuring data quality and timely submission to avoid delays and potential fines. According to GTRI, Indian exporters should start their preparations to comply with ICS2 regulations, as non-compliance or errors in data submission could lead to delays in customs clearance and potential fines, resulting in financial losses and operational disruptions.

Indian exporters must register in the ICS2 system and train their personnel on the new requirements and procedures to avoid potential issues, according to Srivastava. This may require payment of fees for registration and training programs. Additionally, they need to upgrade their existing software and IT infrastructure to comply with ICS2 data formats and electronic submission requirements.

Srivastava warned that some Indian exporters may need professional help to navigate the complexities of ICS2 and ensure compliance. Smaller businesses with limited resources might face difficulty adapting to the new system, potentially putting them at a disadvantage compared to larger competitors.

To benefit from the new system, Indian exporters can invest in technology solutions and seek guidance from relevant trade bodies Adapting to the new system is not only a requirement but also an opportunity for Indian exporters and the Indian government to streamline their export processes. The EU is one of the largest trading markets for India. To boost trade ties, both sides are also negotiating a free trade agreement.