Home > EU Customs Procedures > Malta Transitional Arrangements (Enlargement of the EU and Malta)

DEPARTMENT OF CUSTOMS

ENLARGEMENT OF THE EUROPEAN UNION AND MALTA’S MEMBERSHIP

This Business Brief provides information about the enlargement of the European Union (EU) and how this will affect Maltese businesses. It contains a summary of how the changes will impact upon Customs and International Trade, Excise and Intrastat. The Department of Customs has published a series of Questions and Answers which can be accessed through the following websites : www.ces.gov.mt/index.jsp and click on EU Customs Procedures and www.mbb.org.mt. Eighteen documents on PREPARING FOR MEMBERSHIP are also available on these sites.


Background
On 1 May 2004 an additional 10 countries, Cyprus *, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia will become part of the European Union (EU) increasing the total number of Member States from 15 to 25. 

(* Whilst the entire island of Cyprus will join the EU on May 1 2004, the application of the EU aquis (EU laws, practices, principles and obligations) shall be suspended in those areas of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control.)

2. EU ENLARGEMENT – CUSTOMS AND INTERNATIONAL TRADE (CIT)

The following provides an outline of how Malta’s membership will affect Maltese businesses from a Customs procedural perspective. 

Imports
Where goods depart a present Member State (EU15) or an Accession State prior to 1 May 2004 and arrive in Malta on/after 1 May 2004 a customs import declaration will be required when the goods are entered to free circulation whether or not import duty is payable. This also applies to goods which have departed a present Member State or an Accession Country and on 1 May 2004 are still not released for free circulation in Malta. ‘COM’ must be entered in Box 1 of the import declaration if the goods are proven to have Community status – and will therefore be free of customs duties (there are some exceptions for certain agricultural products – see details below), but liable to import VAT. If they do not have Community status then ‘EU’ or ‘IM’ as appropriate must be entered. In these particular circumstances i.e. where an import declaration must be submitted, a separate Intrastat record is NOT required during this transitional measure.

Note 1: Following the completion of movements under the ‘old rules’, as above, the trade in goods (in free circulation) with the EU Member States (EU25) will become intra-community as is the case with the current 15 Member States i.e. ‘arrivals’ as opposed to ‘imports’.

Note 2: As from 1 May 2004 Proof of Community Status must be produced to Customs before goods leave a Customs area.

Imports of goods to a Customs Procedure with Economic Impact, Free zone or End-Use
Goods imported from EU15 and the Accession Countries prior to 1 May 2004 under these procedures can be entered to free circulation free of customs duties and other customs measures on accession, if they have proof of preferential origin or Community status. A customs import declaration indicating the Community status of the goods will be required to enter the goods to free circulation. Proof of Community Status must be provided (T2L or equivalent).

Temporary storage 
All goods that are eligible for free circulation in Malta at the date of accession must be assigned to free circulation by the end of the laid down time limit for goods in temporary storage. As described above an import declaration for free circulation, accompanied by all relevant documents normally required, and proof of Community status are to be provided.

If the goods do not have proof of preferential origin or Community status, they will remain non-community goods and the normal requirements of the procedure including discharge of the procedure will continue to apply to those goods. If, for example, goods imported from Hungary to Inward Processing Relief (IPR) suspension in Malta prior to 1 May 2004 are diverted to free circulation after accession without any proof of preferential origin or Community status, duty and import VAT will be due on the diversion in the normal way.

Returned Goods Relief (RGR)

• Except for certain agricultural products (see details below), goods exported to a third country from Malta prior to 1 May 2004 are eligible for RGR if returned to Malta from the third country on or after that date, subject to meeting the relevant conditions laid down in Customs legislation, including providing proof of export from Malta and duty status at that time.
• Except for certain agricultural products (see details below), goods exported from Malta to another Accession State prior to 1 May 2004 are eligible, subject to meeting conditions, for RGR if declared for free circulation in Malta or another Accession State on or after that date. This is because the goods have been returned to the enlarged Community.

Import VAT
Goods exported from Malta prior to 1 May 2004 which arrive in the EU 25 on or after that date, or goods which have been removed on or after 1 May 2004 from a specified Customs procedure, will be subject to import VAT.

There is no chargeable event when:

• the goods are exported out of the enlarged Community or; 
• the goods (other than means of transport) are re-exported to the country from which they were imported to the person who originally supplied them or;
• the goods are means of transport and they were acquired or imported before 1 May 2004 under the general conditions of taxation applicable in the country concerned and provided the VAT was not exempted on the basis of exportation or was not refunded or;
• the means of transport took place before 1 May 1996.

Note: Following the completion of movements under the ‘old rules’ including their liability to import VAT, the trade in goods (in free circulation) with the EU25 will become intra-community as is the case with the current 15 Member States.

Proof of Community status within the enlarged EU

• Proof of preferential origin issued prior to accession can be used as evidence of Community status (except Malta and Cyprus, as products covered by Forms EUR1 issued in these countries may include materials which have been subject to
• ‘drawback’ [suspension or repayment] of customs duties so in these circumstances normal proof of Community status will need to be provided e.g. T2L). Customs will be able to continue to request for a period of three years from the date of issue the verification of Forms EUR1 or invoice declarations issued in the new Member States prior to 1 May 2004.
• Normal proof of Community status (Art. 314c-323 CCIP), e.g. T2L, may be issued retrospectively. 
• Goods for which proof of Community status cannot be established will be subject to customs duty. Alternatively, the goods may be entered to a suspensive regime.

Exports
All export consignments destined for EU15 or new Accession States before 1 May 2004 must be declared before departing to an export procedure in Malta.

Note: Beyond this period, or if it has not been necessary to declare to an export procedure based on the above advice, the trade in goods (in free circulation) with the EU25 will become intra-community as is the case with the current 15 Member States i.e. ‘dispatches’ as opposed to ‘exports’.

Exports of Customs Procedures with Economic Impact (CPEI), Free zone & End-Use Goods
Goods may be entered to one of these procedures in Malta prior to 1 May 2004 (e.g. Inward Processing Relief or Temporary Importation) with the intention of re-exporting them or compensating products to the EU15 or the new Accession States. However, from accession on 1 May 2004, ‘exports’ to the new Member States will no longer discharge duty liability. After accession duty liability will only be discharged if the goods are transferred to a business that is also authorised to receive those goods under a suspensive procedure or re-exported outside the enlarged EU.

During the transitional period of 30 April/1 May, the point at which export is deemed to have taken place depends on the customs procedure the goods were under (e.g. IPR drawback, customs warehousing, temporary importation) and the method of export e.g. full SAD declaration etc.

Community/Common Transit (CT)
Goods for which CT is currently required must still be placed under CT if the movement starts prior to 1 May 2004: 

• All transit procedures started prior to 1 May 2004 to or from an Accession State (e.g. a common transit movement to/from Hungary, Poland, Czech Republic or Slovakia) must be ended properly even if the goods arrive at their destination on or after 1 May 2004; i.e. the goods and required documents must be presented to the Office of Destination or authorised consignee within the prescribed time limit.
• Goods which are moving under external Community transit (T1) as from 1 May 2004 will require proof of Community status in order to enter them to free circulation, free of customs duties and other measures.

From 1 May 2004 CT (T2) will no longer be required for movements to, from or via Hungary, Poland, Slovakia or the Czech Republic provided the goods are in Free Circulation in either, any of the 10 of the New Member States, or in the current 15 Member States, on or after 1 May 2004. (CT will still be required for movements to, from or via EFTA [European Free Trade Association] countries, i.e. Iceland, Norway, Switzerland and Liechtenstein). CT (T1) will still be required if the goods are not in Free Circulation in any of the 10 new Member States or in the current 15.

With effect from 1 May 2004 CT guarantees must provide cover in all 10 new Member States as well as the existing 15. A guarantee will not be valid unless it covers all 25 Member States. Traders must contact the Customs Free Zones/Transit Unit for more information.

Specific guidance on the movement of goods by sea and air (implications for shipping companies and airlines) to or from EU 25 has been issued in the Question and Answer Series.

Agricultural goods

Exports
Community goods declared in an existing Member State for export to a new Member State, which do not leave the EU 15 before 1 May 2004, are not entitled to export refunds.

Specific transitional measures for certain agricultural products

EC Regulation 1972/2003 – CAP products which before 1 May 2004 have been in free circulation in the 15 Member States or in the specified Accession States, and on 1 May 2004 are in either:

• Free Zone or Free Warehouse; 
• Transit; 
• Customs Warehouse; 
• Inward Processing; 
• Processing under Customs Control; 
• Temporary Admission; 
• Outward Processing; 
• Transport after having been subject to export formalities within the enlarged Community; 
• Or Temporary Storage, 

will be liable to import duty at the full third country rate applicable on the date of their release to free circulation.

Duty will not be payable on products exported from one of the 15 Member States if the importer can prove that no export refund was applied for. Importers will need to obtain an endorsement by the competent authority on the export declaration, that an export refund has not been claimed.

Subject to any future changes these arrangements will continue until 30 April 2007 and duty will be payable on release to free circulation from the above suspensive procedures.

Certain exports of CAP products from Malta to EU15 which are in either temporary storage, under suspensive regime or in transport before 1 May 2004 shall be charged the duty rate applicable on the date of release to Free Circulation. (Table with HS Codes can be provided).

EC Regulation 60/2004 – Similar arrangements will be applied in the sugar sector. 


Tariff Preference
Importers will:

• Not have to make a claim to preference on goods originating in a new Member State which are released to free circulation on or after 1 May 2004. However, Community Status must be proved.
• Not have to present a Form EUR1 or invoice declaration as proof of preferential origin for goods exported from an old or new Member State, which will be released to free circulation on or after 1 May 2004. However, traders will be able to produce a Form EUR1 or invoice declarations issued in the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland Slovakia and Slovenia prior to 1 May 2004 as evidence of Community status for goods which are on the date of accession in transit, a customs warehouse, free zone or other duty suspension regime.
• Still have to make an import declaration for goods which leave the EU15 and any Accession Country prior to 1 May 2004 and which will be released to free circulation in Malta on or after that date even though traders will not have to pay import duty or make a claim to preference provided Community status is proved. 
• Still have to keep for a period of three years from the date of release to free circulation evidence to support the preferential origin of goods imported from EU15 prior to 1 May 2004.
  
  Note : Preference should not be confused with status. Status will be proved through a Coded Manifest, a T2L document or an invoice declaration (subject to limitations). One of the last two proofs has to be made available to Customs before goods leave the Customs area in the absence of a Coded Manifest. If proof of Community status is provided by a Coded Manifest the importer must also have available a T2L document or another acceptable document to confirm Community status when requested by Customs over a period of three years.

Exporters will: 

• Have to continue to issue a Form EUR1 for all eligible products destined for the EU15 which will leave Malta before 1 May 2004 provided goods are released for free circulation in the EU15 before that date (for Malta and Cyprus only). The goods will also have to be declared to an export procedure.
• Not have to issue a Form EUR1 for goods destined for the EU25, which leave Malta on or after 1 May 2004.

Note : Community status has to be proved at any time by the presentation to Customs when requested of a T2L or an invoice (with certain limitations) performing the functions of a T2L document. 

3. EU ENLARGEMENT – RECEIPT OF EXCISE GOODS FROM EU25

The following country codes should be used for the New Member States:

General principles
Until 1 May 2004, goods imported from the Accession States are (subject to any reliefs or customs suspension arrangements) liable to customs duty, excise duty and VAT. These are payable at the time of importation or when goods are released into free circulation / home use. 

On 1 May 2004 all goods that are in free circulation (customs duty-paid) in the new Member States will become “community goods”. Any goods liable to excise duty may travel in duty suspension between tax warehouses/registered/non-registered traders subject to existing rules.

Treatment of goods already in a Customs suspensive procedure on 1 May 2004
Goods already entered in Malta before 1 May 2004 from the new Member States under a customs suspensive procedure (Customs warehousing etc) can be entered to free circulation provided the requirements of that suspensive procedure are discharged.

A customs declaration (SAD) will be required to enter the goods to free circulation. If the goods become liable to a duty of excise on release, importers must either declare and pay the excise duty on the entry (SAD) used to declare the goods to free circulation, or enter the goods to excise warehousing in Malta.

For further details please contact Excise Unit of the Customs Department.

Movements of Community excise goods in duty suspension after accession.
Movements between tax warehouses in EU25 must be accompanied by an appropriate accompanying document (AAD). The two letter codes for the country of dispatch/destination of each new Member State are shown above, and are required for the completion of accompanying documentation. 

Treatment of excise goods dispatched from Malta or an Accession State to EU15 before 1 May 2004, arriving at its EU15 destination after that date

The same guidelines will be followed as have been followed for previous rounds of Enlargement. That is, goods despatched before 1 May 2004 will be deemed to be originating in a third country and an SAD must be lodged when the goods arrive at the place of entry in Malta or the other EU25. This entry may be for home use or excise warehousing.

Guarantees
Traders should ensure that any premises or intra-EU movement guarantees are adequate, bearing in mind that potential liability may increase as a result of trade with the new Member States. If you need to increase the level of your guarantee you should contact the Excise Unit of the Department of Customs.

Early Warning System (EWS)
Traders must remember that the requirements of the Early Warning System (EWS) enter into force from 1 May 2004 to cover movements of goods to EU25.


EU ENLARGEMENT & INTRASTAT
From 1 May 2004 all goods that are moved between Malta and the other Member States (EU25) will become Community goods. Trade statistics for trade with these countries will therefore be collected via the Intrastat system rather than through customs declarations. 

Importers and Exporters must ensure that this trade is included, along with any other trade with the EU, on the appropriate boxes of their VAT return. Some businesses may also be required to provide additional information regarding their Arrivals (imports) from and Dispatches (exports) to EU25.

Businesses who trade in goods with the EU25 should refer to Legal Notice 131/2004 for details of the provisions applicable in this area. 

Customs estimates that EU Enlargement will require a substantial number of businesses to start submitting Intrastat SDs (Supplementary Declarations) and is currently undertaking a publicity and education programme in conjunction with VAT and NSO to ensure that this happens with the minimum burden on business. 

Full guidance on Intrastat is also available on. www.nso.gov.mt

The views expressed in this Business Brief are those of the Department of Customs.

GENERAL ENQUIRIES: For general enquiries

• Please contact the Customs’ Info Service on 25685185 or e-mail malta.customs@gov.mt
• Or visit the following websites :
  • www.ces.gov.mt/index.jsp
  • www.mbb.org.mt