Week two - Foreign trade regulation in the EU

Question 1

8 stages of the EU economic integration

Answer 1

1) preferential agreement
2) free trade area
3) tariff union
4) tariff and customs union
5) common market
6) economic union
7) monetary union
8) political union

Question 2

what is a free trade area

Answer 2

• prohibition between member states of custom duties (tariffs) and measures having an equivalent effect

Question 3

what is a customs union

Answer 3

• prohibition between member states of custom duties (tariffs) and measures having an equivalent effect
• common external tariffs in their relations with third countries

Question 4

what is a tariff and customs union

Answer 4

• prohibition between member states of custom duties (tariffs) and measures having an equivalent effect
• common external tariffs in their relations with third countries
• common customs legilsation: community customs code

Question 5

in the EU what was the transition of moving from a community customs code to a modernised customs code

Answer 5

• rationalise and reduce the number of customs procedures
• computerisation of all customs formalities
• centralisation customs system

Question 6

what are the objectives of the public offices located in borders, ports and airports in EU states

Answer 6

• control the transit of passengers and goods entering or leaving the EU territory
• to collect the export or import taxes from goods imported depending on the country of origin

Question 7

what is TARIC and its main components

Answer 7

• it is the main element of external commercial protection, three components:
  1) tariff nomenclator (tariff classification codes)
  2) common customs tariffs
  3) non-tariff measures established in the common EU commercial policy

Question 8

what is the tariff nomenclator and its objective

Answer 8

• description, order and methodical listing of goods that are traded internationally using a numerical code and description of product
• it comprises a set of rules and principles that help locate a product
• its objective is to identify goods easily

Question 9

what is a tariff

Answer 9

an external tax applied to goods imported to the EU

Question 10

what is the objective of a tariff

Answer 10

to protect the EU economic activity against the competition of foreign products

Question 11

four types of tariffs:

Answer 11

1) ad valorem - % of the customs value
2) specific - fixed quantity per unit or weight
3) mixed - ad valorem + specific
4) composed - ad valorem + max or min specific

Question 12

what is the value that’s used to calculate the tariffs

Answer 12

customs value - the price that is estimated to be set for the goods, at the point in time when customs duties are due, as a result of a sale occurred in free competition

Question 13

what is customs value equal to

Answer 13

customs value = transaction value: price actually paid or payable for the goods when they are sold to be exported to the EU common customs territory

Question 14

when is the transaction value not applicable

Answer 14

when there are special conditions that make the price actually paid does not correspond to a free competition sale price

Question 15

what are the subsidiary methods when it is not possible to apply the transaction value

Answer 15

• transaction value of identical goods or similar goods
• subtractive procedure
• reconstructive value
• combination of the above

Question 16

what does it mean by the origin of goods

Answer 16

• economic nationality of goods in international trade
• geographic link of a commodity to a given country which is considered to have produced that product or has transformed it

Question 17

how are origins distinguished

Answer 17

• preferential: gives tariff advantages
• non-preferential: applies third country tariffs

Question 18

what are the certificates of preferential/non-preferential origins

Answer 18

• preferential: the declaration of origin must be certified with a proof of origin (declaration in the invoice)
• non-preferential: certificate of origin from a specific country

Question 19

what is a customs duty

Answer 19

an obligation to pay import or export duties of goods (10 days, possible to extend this to 30 days)

Question 20

when are there customs duties on imports and exports

Answer 20

imports - since the goods are in free circulation
exports - since the customs declaration

Question 21

what are the customs destinations and customs regimes grouped into and what are they

Answer 21

1) general regimes (exports and imports)
2) special regimes: these make the general case more flexible to adapt to all possible economic situations

Question 22

examples of special regimes

Answer 22

• transit (internal and external)
• deposit (customs and free zone)
• economic regimes (active and passive perfectioning)
• special destinations (temporary imports, destruction, abandon and re-exports)

Question 23

what is meant by free circulation

Answer 23

free circulation of goods (imported from third countries) within the EU

Question 24

when will a foreign product be in free circulation

Answer 24

• it has fulfilled all import formalities
• has paid the customs duties and other equivalent taxes or duties

Question 25

once goods in free circulation have VAT applied, what are they called

Answer 25

community goods

Question 26

when is VAT applied for goods in free circulation

Answer 26

in the final destination

Question 27

when is VAT applied for goods released for consumption

Answer 27

in the entry country

Question 28

when is VAT due

Answer 28

• imports from third countries: same time as tariffs
• intra EU introductions (imports within the EU): liquidation of VAT is done by the importer/buyer in its country

Question 29

exemptions of VAT

Answer 29

• goods that are going to be exported
• goods in free duty zones
• temporary imports

Question 30

what is VAT

Answer 30

an indirect tax levied directly on consumption, taxing the delivery of goods and the provision of services

Question 31

why are exports free from VAT in the EU

Answer 31

to avoid double taxation, allowing EU goods to access international markets under the same condition as those in other countries

Question 32

what are the two categories of transit

Answer 32

• internal: community commodities, free circulation goods but no released for consumption
• external: non-community commodities

Question 33

define customs deposit

Answer 33

warehouses under customs control where goods remain for an unlimited time with no VAT, duty or tariff

Question 34

what are the benefits of customs deposit/warehouses

Answer 34

• at the time of importing the good, the owner may not know the final destination of the good
• firms can defer the payment of tariffs and VAT depending on whether they sell to EU or foreign customers
• goods can be preserved or prepared for distribution

Question 35

what are deposits in free zones

Answer 35

areas that are not considered to be within the EU community customs area

Question 36

what are temporary admissions on imports

Answer 36

allows using the EU customs territory but import taxes and duty are suspended

Question 37

what is destruction under customs control

Answer 37

the destruction of commodities implies no payment of duties or tariffs

Question 38

what are abandoned goods to the public treasury

Answer 38

once the goods are presented to customs, the consignee of the goods may decide to not give it a customs destination, it may be tacit or explicit

Question 39

what is re-exporting (outside the EU)

Answer 39

goods that exit from the EU common customs territory that had previously been imported through the temporary imports regime or introduced through a customs deposit or warehouse regime