Customs legislation relates to the importation and exportation of goods into the customs territory of a certain country or group of countries. It is enforced by the customs authorities, who are responsible for collecting and safeguarding customs duties and for controlling the flow of goods into and out of a country or group of countries. Customs legislation not only relates to tariff measures such as customs (and similar) duties, but also to non-tariff trade measures such as import quotas as well as various other measures to safeguard public health and the economy of the country involved (through the use of import restrictions etc).

This section provides a general overview of the taxes applicable on and the customs procedures available for the foreign investor involved in importing goods into and distributing goods via Flanders (Belgium).

Why import and/or distribute via Flanders?

• The business-orientated approach of the Belgian customs authorities, who are very approachable to companies wishing to discuss and resolve possible customs-related issues;
• Various VAT incentives, which are of particular benefit to companies importing and distributing via Belgium

In 2008 the Authorized Economic Operator (AEO) accreditation (an important new customs concept) has been implemented in Belgium and the other EU Member States. This accreditation (which is valid in the entire EU and is recognized by all the Member States) provides for the simplification of various customs procedures and a smoother supply chain (with less interference from customs for AEO-accredited companies). In future, real "green trade lanes" with none (or very little) customs control will be created between countries (regions) with similar AEO accreditations (e.g. the US C-TPAT program).

Importation in Flanders (Belgium)

What are the general principles governing Flemish (Belgian) customs legislation?

Belgium (and consequently also Flanders) is part of the European Union (EU), which consists of 27 Member States. The EU is built on a customs union between its member states, which implies that: 1) no duties or other trade-restrictive measures are imposed on trade between the member states (intra-community trade) and: 2) a common external tariff (customs duty) is imposed on trade with third countries (import and export transactions). Consequently, internal and external trade of the EU member states as well as the main customs procedures are governed by European legislation. The main EU legislation can be found in the Community Customs Code (CCC) and its Implementing Provisions (IPCC). In 2008 the old 1992 CCC has been replaced by the Modernized Customs Code, which will be fully applicable as soon as its new IPCC has been published.

However, some aspects such as administrative law, the payment of duties and the preservation of law are still organized on a national (Belgian) level.

The customs authorities are responsible for supervising the importing and exporting of goods as well as for the collection of duties. In Flanders this task is performed by the Federal Public Service - Finance - Customs and Excise Administration (see www.belgium.fgov.be).

How are customs duties levied when shipping goods to or from Flanders?

Although customs duties can be imposed upon imports and/or exports, in practice, customs duties are mainly imposed on imports of goods into the EU (Belgium). In addition to customs (import) duties, there are also import-VAT and ultimately other national taxes (such as excise duties, environmental taxes etc), which are levied upon importation of goods. These national taxes (as well as import-VAT) may vary between the various member states.

How are import duties calculated in Flanders?

At the time of importation into the EU, goods are subject to customs control and customs duties are imposed. In all EU member states the calculation of import duties is governed by the same European principles (these being the nature, value and the origin of the imported goods). Import duties can be expressed as an ad valorem percentage, a fixed rate or a mixed rate.

How do you determine the nature of the imported product?

The nature of the imported goods are determined by their classification into the Combined Nomenclature (CN), in accordance with globally accepted principles. The CN is a standardized list of commodities and their 8 digit CN codes. The CN code of the particular imported product determines the appropriate rate of import duty, as well as other trade measures such as quotas, exemptions, suspensions etc which are applicable to that particular category of goods.

The applicable customs duties and national taxes (as well as the related European and national legal provisions), are listed per CN code (product type) in the "Applied Customs Tariff Database" issued by the Belgian Government (this is freely available on the Belgian Federal Public Service - Finance website).

How do you determine the customs value of the imported product?

The rules for determining the customs value of imported goods are based on European legislation (and developed in line with the WTO customs valuation agreement). The basis for determining the customs value of imported goods is their transaction value. If such a transaction value is not available (or if not all the requisite conditions are satisfied), then the regulations dictate which other valuation method should be used.

For certain types of products such as agricultural or excise products, fixed amount duties are applied to the imported quantity of the goods.

How do you determine the origin of the imported product?

Origin is the "economic" nationality of goods in international trade. There are two types of origin, namely:

• Non-preferential origin. This confers an economic nationality on goods, and is used for determining the origin of products subject to various commercial policy measures (such as anti-dumping measures, quantitative restrictions or tariff quotas), as well as for statistical purposes;
• Preferential origin. This confers certain benefits, e.g. entry at a reduced rate or zero rate on goods traded between particular countries with whom the EU has preferential trade relations.

What is the initial customs treatment of goods entering Belgium (Flanders)?

From the moment goods are introduced into the customs territory of the EU they are subject to customs supervision, and must be taken to a customs office or to a customs-approved location to be submitted to customs authorities. Goods transported by a sea vessel can be kept in storage for 45 days in a customs-approved location. All incoming goods transported by another means of transportation (airplane, inland marine vessel or truck) can be kept in storage for 20 days.  Within this timeframe, the goods must be declared for an approved treatment by customs (either a customs procedure, entry in a free zone/warehouse, re-exportation or destruction/abandonment to the Exchequer).

Which customs procedures can be used when importing products into Flanders?

Goods which enter the customs territory of the EU can be declared for one of the following customs procedures:

1. Release for consumption - importation
2. Transit
3. Temporary admission
4. Customs warehousing
5. Inward processing
6. Processing under customs control

Each of these procedures is discussed below. With the exception of release for consumption, the above mentioned customs procedures provide the option of suspending the payment of import duties.

1. Release for consumption - importation

An import declaration needs to be made at an EU customs border office (at a seaport, airport or any other office in Belgium). After acceptance of the import declaration by the customs authorities, the goods are released into the EU for consumption. However, the declaration will only be accepted provided that the duties (import duties, import-VAT and other possible national taxes) are paid, and all other import requirements (e.g. non-tariff measures such as quotas or public health requirements) are fulfilled.

In principle, import duties and import-VAT are paid at the office of importation. If the import declaration is made by a licensed customs broker appointed by the importing company, the broker can pre-pay the duties and VAT to the customs authorities. Providing certain conditions are met, the deferred payment of duties can be permitted.

Upon customs authorization, simplified procedures may be applied at the time of importation. These simplified procedures may permit companies to release the goods without the customs authorities undertaking physical checks at the company's premises. Furthermore, exported goods that are re-imported can benefit from duty exemption provided certain conditions are met (goods should not be altered and must return within a period of three years).

When importing goods into Belgium, companies can obtain rulings from the Belgian Central Customs Administration regarding issues such as the tariff code of the imported goods, the origin of the goods, the customs value of the goods, customs warehouses and other customs procedures. Tariff and origin rulings are binding across the entire EU.

In principle, when goods are released for consumption VAT also becomes due. However, depending on the circumstances, various procedures exist in Belgium for the import-VAT to be exempted or deferred:

• In accordance with specific Belgian regulations, the exemption of import-VAT can be granted if the goods are immediately supplied to another EU country, or when the goods are placed under the VAT warehousing procedure;
• If special Belgian authorization has been obtained, companies (including non-resident companies with a Belgian VAT number), are allowed to declare the import-VAT in their monthly or quarterly Belgian VAT return. This implies that the import-VAT can be declared as VAT due and VAT deductible in the same VAT return (i.e. a virtual payment with no effect on cash flow). However, in order to apply this ruling the VAT authorities request a limited pre-payment of import-VAT.

In some cases a refund or remission of import duties and import-VAT is possible. This applies for example to defect goods at the time of importation, or to goods rejected because they do not conform to the purchase contract

In addition to import duties and VAT, other taxes such as excise duties, energy or other taxes may be due upon importation. However, various warehousing facilities exist in Belgium to defer or avoid the payment of these taxes. E.g. products subject to excise duties can be released for consumption without the immediate payment of the excise duties, by entering them into an excise warehouse.

2. Transit

The European Community transit system allows both community and non-community goods to be transported across the EU and the EFTA countries (Iceland, Norway, Liechtenstein and Switzerland), with the suspension of all taxes upon importation.

Under the transit system the transport requires a community transit declaration, which will be lodged (and discharged) electronically via the New Computerized Transit System (NCTS). Depending on the customs status of the goods, a distinction is made between the T1 external transit procedure (non-community goods), and the T2 internal transit procedure (community goods). A deposit equal to the import taxes involved covering the entire itinerary must be paid (if certain conditions are met this may be reduced to 30% or 50% of the amount at stake). However, this deposit is released when transportation is completed and the transit system is discharged at the country of destination of the goods.

3. Temporary admission

When goods are temporarily imported (or imported with an "ATA carnet"), they can be granted a partial or total exemption of import duties (provided the goods are subsequently re-exported without having undergone any transformation). For temporary imports the "ATA carnet" issued in the country of dispatch can replace EU customs documents.

4. Customs warehousing

A customs or bonded warehouse is a facility where imported goods can be stored without being subjected to import duties, VAT and other import taxes and non-tariff trade policy measures. Bonded warehouses allow importers to postpone the payment of import duties and import-VAT, until the final destination of the goods is known. This means that no import taxes are due as long as the goods are not released for consumption in the EU. If the goods are immediately exported to destinations outside the EU no taxes are paid.

Two main categories of bonded warehouses exist:

• Company-operated private bonded warehouses, which are located across the country;
• Customs authorities-operated public bonded warehouses. These bonded warehouses are located primarily at ports and airports or in transport zones

There are three types of private bonded warehouses: type C (standard), type D (allowing customs valuation upon entry of the goods) and type E (non-physical warehouses, in which bonded goods can be stored in any of the storage facilities of the warehouse keeper, and not just in the one customs-approved warehouse). The customs authorities will focus on the warehouse keeper's stock movement records for their controls, rather than perform physical inspections of the goods.

There are three types of public bonded warehouses: type A (monitored by the customs authorities on the basis of the warehouse keeper's stock records), type B (monitored on the basis of the entry and discharge documents) and type F (managed directly by the customs authorities themselves).

When operating a bonded warehouse a stock control system needs to be kept, and depending on the type of bonded warehouse and the authorization obtained from the customs authorities, the inbound and/or outbound movements need to be reported periodically to the customs authorities. In addition, some well defined approved 'usual forms of handling' (e.g. re-packing, testing, marking etc) may be carried out on the goods.

A company can obtain a Single European Authorization (SEA) to operate various bonded warehouses in different EU Member States, if required. Such SEA can allow for the customs clearance from the warehousing regime at a central point.

Non-EU goods can also be stored in a VAT warehouse or excise warehouse at the time the goods are released for free circulation (payment of import duties, if any). This makes it possible to store the free goods without payment of import-VAT or excise duties.

5. Inward Processing Relief (IPR)

The IPR procedure is a customs procedure which allows goods due for processing operations (which are to be performed within the EU customs region) to be imported with customs duties suspended or repaid, provided the processed goods are then exported outside of the EU. Processing operations can comprise an industrial upgrade or the alteration of an imported product to increase its value. However, it can also involve smaller operations such as repairs, fine-tuning or other improvements where the economic impact is negligible.

There are two main types of inward processing relief:

• IPR (Suspension System): Under this IPR system non-community goods can be brought into the customs region for processing operations without them being subject to tariff and non-tariff import measures, insofar as the processed goods are intended for export outside the EU (with the possible exception of some agricultural products). This implies that neither import duties nor import-VAT will have to be paid on the imported goods, insofar as the processed goods resulting from it are exported. If the processed goods are not exported, the initial import duties/VAT (as well as compensatory interest) will become due;
• IPR (Draw-back System):  Under this IPR system the import duties and import-VAT on imported goods have to be paid before the goods undergo processing operations in the EU. However, if the processed goods are exported from the EU the importer can reclaim the import duties and import -VAT paid on the imported raw materials. This method could be beneficial for companies who do not know how much of the imported goods will be exported and how much is for use in the EU. Under this system a company will not be charged compensatory interest on the goods released into the EU.

6. Processing under customs control

In general, raw materials are subject to lower import duties than semi-finished/finished products (in order to attract processing operations to the EU). However, tariff discrepancies still exist, with higher rates of import duty on raw materials than on the finished products.

Processing under customs control (PCC) is a customs procedure which allows raw materials to be imported under suspension of import duties, in order to be processed under customs supervision in the EU. After the processing the finished goods can be imported at the lower rate of import duty.

Intra-community supply and exportation from Flanders (Belgium)

Why is importing goods into Flanders appealing if the goods are ultimately destined for another EU Member State (intra-community supply)?

When importing goods into Flanders (Belgium), the importation can be exempt from import-VAT if the goods are subsequently sent to another Member State (intra-community supply), and if the required (but simplified) conditions have been complied with. In addition, other procedures exist to exempt goods from import duties (transit procedure) and excise duties (suspension procedure) when they are shipped to another Member State.

What are the advantages of exporting goods from Belgium?

When goods are exported from Flanders (Belgium), the sale of the goods can be exempted from excise duties and VAT, and refunds can be obtained for certain agricultural products with an EU-origin.

How are agricultural exports treated?

Agricultural export funds can be granted to exporters for the export of European (and European-processed) agricultural goods, even if the processed goods contain non-EU goods.

What are the main existing export procedures?

1. Exportation
2. Temporary exportation
3. Outward processing relief

1.  Exportation

The export procedure regulates the exporting of goods out of the EU customs region. In principle, and pursuant to EU provisions, an export declaration must be submitted to the customs office responsible for control at the place where the exporter is established, or where the goods are packed and loaded onto the outward-bound vehicle.

The exporter is the person on whose behalf the declaration is made, and who is the owner of the goods or has a similar right over the goods. The formalities are usually completed by means of a customs declaration accompanied by appendices (such as a copy of the invoice and possibly an export license or an export certificate).

2. Temporary export

Goods can be temporarily exported - e.g. in order to be exhibited or delivered abroad on a trial basis. Provided the export declaration is filed correctly, an exemption of import duties can be granted upon re-importation. In certain situations, the "ATA carnet" can be more beneficial and replace the temporary export declaration.

3.  Outward processing relief (OPR)

Outward processing relief is a customs procedure which allows EU goods to be temporarily exported to undergo processing operations outside the EU customs region. Afterwards, the processed goods can be imported into the EU with partial or complete exemption of import duties and VAT

Options for sales operations

What are the available options for setting up sales operations in Belgium?

Several options are available for setting up sales operations through third parties in Belgium. The most important middleman options are: the agency agreement, the distribution agreement and the franchise agreement.

1. Agency agreement

What is an agency agreement?

An agency agreement is a contract between an agent and a principal. The agent is an independent commercial intermediary who acts on a permanent basis for a principal to promote and sell the principal's products.

A disclosed agent reveals that he acts on behalf of the principal. He merely passes orders to the supplier of the goods and is not the contracting sales entity. He cannot act as the importer of the goods. In the case of a disclosed agent the principal/owner of the goods will have to act as the importer of the goods.

An undisclosed agent does not reveal his principal - he acts in his own name, but on behalf of the principal/owner of the goods. He contacts with the customers and can act as an importer of the goods.

How is the agency agreement regulated?

The status of the agency agreement is regulated in a flexible manner by European legislation. The law sets out the rules and duties of the agent and the principal. In particular, it covers the rules that govern the right to have an agency fee, how the amount of the agency fee is to be determined, and how an agency agreement is terminated.

2. Distribution agreement

What is a distribution agreement?

A distribution agreement is a contract between a distributor of goods and a manufacturer or supplier. A distributor is a commercial intermediary who sells to customers (in his own name and on his own behalf), products acquired from the manufacturer or a supplier. The distributor can act as importer of the goods. Distributors with limited functions and risks are entitled to small sales margins

How does Belgian law regulate distribution contracts?

Belgian law does not regulate distribution contracts as such, but provides several very specific rules with regard to their termination. Parties are still entitled (as they deem appropriate), to agree the terms and conditions of their relationship within the usual limits of the general principles of law and public order.

The law grants distributors specific protection from termination of the contract by the principal only when the distribution agreements are exclusive, semi-exclusive or impose such substantial obligations on the distributor that he would suffer considerable hardship in the event of termination. The law specifies that either a reasonable notice period be given, or adequate compensation be paid, to the distributor. To ensure that distributors benefit from this protection, a specific set of rules has been incorporated into law.

3. Franchise agreement

What is a franchising agreement?

Under a franchising agreement the "franchisor" makes available to the "franchisee" the proven methods and trademarks of his business, in return for a fee and a percentage of gross monthly sales.

What are the rules in Belgium with regard to franchise agreements?

Under Belgian law there are no specific rules governing franchising. Parties are thus free, within the framework of the general principles of contract law and public policy, to enter into contracts as they wish.

Please note that the Modernized Customs Code was published in June 2008. This Modernized CCC will amend the existing customs legislation and customs procedures. However, these rules have not yet been implemented as the new implementing provisions to the CCC have not yet been published. Consequently, we have not explained the new rules. Although the main principles will remain the same, some major changes are planned. Therefore, companies should verify the possibility of new customs legislation being implemented when applying customs procedures.