Excise Movement and Control System (EMCS): Kewill White Paper

The Excise Movement and Control System for the transport of excisable goods under duty suspension will be introduced on 1st April 2010. It represents an important development for guarantors usually the registered consignor - in particular, as the improved control of the transport of goods under duty suspension the new system will deliver should also help to prevent the loss of security bonds through fraud.

However, registered consignees will also benefit from the new procedure. Electronic handling will streamline in-company planning processes by providing preliminary information, for example estimated delivery dates.

Excise duties are taxes which are charged for the use and/or consumption of certain goods (such as alcohol and alcoholic beverages, tobacco products, mineral oil etc). In Europe, such goods are usually transported under duty suspension, which means that the taxes have to be paid only when the goods are sold for consumption. As long as excisable goods are under duty suspension, they can be stored and transported between excise warehouses or between excise warehouses and authorised recipients without tax being due.

The current paper-based procedure

Shipments currently require the presence of an Administrative Accompanying Document (AAD) based on the deposit of a financial security bond. The original AAD is retained by the registered forwarder, and three copies accompany the goods. One copy stays with the receiving warehouse, another copy is returned with a confirmation of receipt to the forwarder and discharges their responsibility for excise duty. A third, control copy has to be sent to the supervising authority which is HM Revenue & Customs in the UK.

This is the way excisable goods are currently supervised within the European Community, where no duties have yet been paid. The excise duty is only due when the goods are removed from the excise warehouse and no other process under duty suspension follows. Businesses can therefore pay the duties for the goods selectively. The security bond and AAD can only be released after receipt of the goods at the place of destination. In most cases, the forwarder is responsible for the correct handling of transport of goods under suspension.

Despite the supervisory measures described above, cases of fraud have increased using the paper-based procedure and there has been a corresponding shortfall in revenue. For example, excisable goods are exported from the EU with forged stamps, and subsequently cannot be traced. Increased cases of fraud with extreme loss of revenue are found particularly for tobacco products and alcohol. The revenue losses are suffered by the state, but the guarantor is also severely affected by the loss of the security bond caused by such cases of embezzlement.

Even where handling is executed correctly, the transport process and its supervision may take several days, weeks or even months as the process is not complete until the accompanying papers are returned correctly. If the goods are lost, the tracing procedure can commence only after a considerable delay, and the forwarder can only intervene once the usual transit time of the papers has been allowed for, even though a successful resolution of the issue is practically impossible by then.

This formed the legal basis for the development of EMCS was created with the Decision No 1152/2003/EC of the European Parliament and of the Council of 16 June 2003.

EMCS who is affected?

Are you preparing or receiving the Administrative Accompanying Document (AAD) for excisable goods at present? Then EMCS will affect you. Following implementation, the transport of excisable goods under duty suspension between member states will be supervised and traced electronically. This applies to goods which have been imported without the payment of the excise duty as well as to those which have been produced within the EU.

All parties involved proprietors of excise warehouses, registered consignees (authorised consignees at present), registered consignees in individual cases (authorised consignees in individual cases at present) as well as registered consignors (a new legal entity as from 1st April 2010), who participate in the transport of excisable goods under duty suspension have to apply EMCS to meet their the legal obligations. Exceptions include the transportation of alcopops and coffee under duty suspension, which will not be included in EMCS for the time being. The amount of taxation of the individual products will not change by the introduction of EMCS.

What are the new processes in EMCS like?

A registered forwarder issues an electronic accompanying administrative document (e-AAD) which must be declared valid by the member state of departure prior to the shipment of goods, through verification of the data. Following successful verification, a Europe-wide unique registration number (ARC number) is allocated. On receipt of the ARC number, the consignor prints the e-AAD with the registration data and the acceptance note. This is carried alongside the shipment during its entire journey. After a transitional period, the European Commission will decide whether this can be dispensed with.

The excise duty number or System for Exchange of Excise Data (SEED) number of the consignor and consignee are reconciled with the European register of authorised economic operators, and the e-AAD is then sent to the member state of destination electronically. It is subsequently sent to the consignee and any other interested economic operators (tax advisers, guarantors). On receipt of the goods, the consignee or their representative presents a receipt report, in which potential inconsistencies, such as excessive/short quantities, are listed.

Is EMCS a customs procedure?

No, EMCS is not a customs procedure, however the control is carried out by the customs authority and the process of the EMCS procedure is similar to the New Computerised Transit System (NCTS) at first glance. As with NCTS, the process is started and completed electronically, but the customs office cannot be addressed and the procedure cannot be terminated by a customs officer. The consignee has to be defined at the beginning of the process and only this consignee can receive the goods. Modification of the consignee requires a subsequent modification note to be sent to the customs authorities which causes the notice to be rerouted.

Another difference to NCTS is that the national or intra-community transport of excisable goods which have been manufactured within the community, have to be handled with EMCS (provided no excise duty has been paid yet). This means that companies have to apply EMCS that do not have any dealing with customs at present because they do not obtain goods from non-member countries or do not export them to these countries. Additionally in case of error-handling procedures, the process has to be followed up electronically, whereas with other procedures, a manual error-handling procedure completely replaces the electronic system.

Time schedule for the UK

HM Revenue & Customs has delayed the introduction of EMCS in the UK to generate movements (Functional Stage 1) until 1 January 2011. The existing paper AAD system should be used until then.

The system will however be available from 1 April 2010 to receive and receipt goods from operators in those Member States which are at FS1. From that date, where movements are received under EMCS, EMCS must be used to receipt and discharge those movements. If goods are received under the 'paper' AAD they should continue be receipted and discharged using the existing rules.