What is the European Union Customs Union?

The European Customs Union is a union that allows the free trade of goods among its members. It also implements a set of standardized tariffs for goods that come from outside the Union. Most people refer to it as the Customs Union or simply the Union.

Put simply, it is a trading area in which member states trade with one another with no tariffs or quotas.

Members created the Union as part of the European Economic Community (EEC) in 1958. The EEC subsequently became the European Union (EU). Before Britain’s Brexit vote in 2016, twenty-eight EU members have managed the Union.

Brexit stands for BRitain EXITing the European Union. In 2016, there was a referendum in the United Kingdom in which a small majority voted for Brexit, i.e., to leave the EU.

The European Union’s website says the following about the Union:

“The Customs Union is a single trading area where all goods circulate freely, whether made in the EU or imported from outside.”

“A Finnish mobile phone can be dispatched to Hungary without any duty or customs controls.”

Customs Union
Some small territories and states are also in the Customs Union through separate agreements. These include Monaco, Andorra, San Marino, Isle of Man, Jersey, and Guernsey. (Map: adapted from Wikipedia)

Customs Union – tariffs

The Customs Union allows countries to pay duty once, i.e., when goods first enter the EU. After entering, all processed goods can move freely within the EU.

For example, a Danish company can send a mobile phone to Spain tariff-free. There are no tariffs because both countries belong to the Customs Union.

Tariffs are import duties, i.e., import taxes.

All members of the Customs Union must follow a standardized set of tariffs for exterior products. In other words, tariffs on goods coming in from outside are the same in each member nation.

Tariffs on goods coming from outside the Union vary according to the type of product and country of origin.

Customs Union – rules

Member states manage the Customs Union. All 28 national customs services must enforce a series of rules to ensure the protection of the EU members. Below are details of some of the most important rules:

Health, safety, and the environment

Customs services must protect health, the environment, and safety by regulating the entry to possibly contaminated foodstuffs and damaged electrical goods.

Prevent illegal activity

They must collaborate with law enforcement agencies to prevent any illegal activity. Tax evasion, money laundering, terrorism, or organized crime, for example, are illegal activities.

Animals and plants

They must protect the environment by detecting the illegal trade of protected or endangered animals or plants.

Fraud prevention

An important duty is to protect members against fraud. The use of fake tax declarations and false certificates of origin are examples of fraud.

Fair and competitive market

Customs services must also make sure that imports do not undermine the EU’s fair and competitive market.

Video – the EU Customs Union

This BBC News video explains what the EU Customs Union is. The speaker says that there are five steps to undestanding what it is.