Everything for healthcare
Since the outbreak of the corona crisis, Dutch Customs has made every effort to ensure a smooth and rapid import of personal protective equipment (PPE). Fiscal and non-fiscal complications should not, in times of high need, hinder the smooth distribution of, for example, facemasks to health care professionals. Several Customs specialists tell us about their efforts in this area in recent months.
“A special tax scheme can be used for the import of donated personal protective equipment, for example,” Hillary Dragtenstein, specialist adviser at the Customs National Office, starts. “Under certain circumstances, this scheme – laid down in a regulation – allows for exempting PPE from customs duties and VAT on import. A number of conditions have to be met in that case. One condition is that a disaster has occurred which affects several Member States at the same time, for example. And the goods must be imported by an organization falling within one of the following categories: government agencies, disaster-relief agencies or philanthropic institutions. Finally, there is the criterion that the relevant equipment should be donated to or used for the victims of the disaster. At the very beginning of the crisis, we asked the European Commission for permission to apply this exemption in our country; we already suspended customs duties for this type of consignments while awaiting the Commission’s reply. Brussels determined that the exemption scheme applies throughout the EU. Its term was recently extended to 31 October, and the measure may be continued for a further few months.”
“All this was and is good news for organisations and businesses that want to do something for society in these difficult times,” Dragtenstein continues. “Especially in the spring, many private parties wanted to contribute to the fight against the corona crisis, for example by importing facemasks, plastic aprons or disposable gloves from abroad and donating them to the Red Cross or a hospital. Many of them are quite willing to pay between 0 and 6.3% of customs duties on those goods, but for some – facing difficult economic times, for example – this is still rather difficult. The latter group had and has the opportunity to donate the products to an organisation from one of the above-mentioned categories before they are imported. Or to import them on behalf of that organisation. Customs, however, does check whether the importing organisation or service is actually an exempted party under European law. But we are doing everything we can to prevent this exercise from causing delays at the border. We do expect the focus on import to shift from PPE to test kits, and then to vaccines.”
Customs officer Michael Sjaardema spent months working intensively on the non-fiscal aspects of the import of personal protective equipment. “For example, if a facemask enters the country, it must comply with a variety of statutory provisions,” says the enforcement coordinator, whose portfolio includes health and intellectual property rights (IPR). “One can look at such products from different angles. One angle is IPR, other angles are product safety for consumers, product safety for professional use and the Medical Devices Directive. So these are four areas of control, and in all these areas we are dealing with instructions from different departments and enforcement partners: the Ministry of Economic Affairs and Climate and the Ministry of Health, Welfare and Sport, and the Netherlands Food and Consumer Product Safety Authority, the Inspectorate SZW and the Inspectorate for Health and Youth Care respectively. All these parties instructed us to assess exactly what they expected from Customs as supervisory authority during this period. All this in the light of the European Commission’s urgent appeal to customs administrations to ensure that personal protective equipment is made available as quickly as possible.”
“When PPE that infringes trademark rights crosses the border, the Ministry of Economic Affairs and Climate enters the picture,” Sjaardema continues. “Examples include counterfeit facemasks that show a brand such as 3M or Disney, but which have not been manufactured by these companies. Customs agreed with the ministry that we would enforce intellectual property rights at the EU’s external borders – largely at the request of the holders of those rights. We continued to do so during the corona crisis. In view of the seriousness of the situation – and for reasons of efficiency – the ministry instructed us to check suspicious and high-risk shipments for health aspects in particular, so in accordance with the agreements we made with the Ministry of Health, Welfare and Sport. For a lot of PPE is not also protected by a trademark or other IP right, while there was a great need to keep defective products off the market. For the other aspects I mentioned, we have had contact with the Ministry of Health, Welfare and Sport, the Netherlands Food and Consumer Product Safety Authority, the Inspectorate for Health and Youth Care and the Inspectorate SZW. They said that, for the time being, there was no need for any additional supervision at the external border. But this situation could change any day during the crisis. The Ministry of Health, Welfare and Sport could change its policy at any time, for example if it would receive more signals about batches of defective aids. That would not have been a problem for Customs. The Customs National Tactical Centre had made the necessary preparations. Our systems would be modified within fifteen minutes and our enforcement activities would be focussing on this risk within the hour.”
Sjaardema dedicated a lot of his time to informing customs colleagues of the agreements that were made with the policy departments. “I was in close contact with our IPR expert, team leaders and staff members of the Customs National Tactical Centre,” he says. “They all wondered how to deal with the theme of PPE in a safety context. They heard the news about potential shortages of materials in the healthcare sector, and at the same time they noticed that customs declarations were made for this type of goods. Moreover, at the beginning of the crisis, the European fraud organisation OLAF reported on a sudden increase in defective and counterfeit products, including disinfectants, COVID test kits and face protection. Customs officers are triggered by such signals and immediately sound the alarm. That did not surprise me, because our people in the field are highly committed – both to their work and to what is happening in society.”
Trade policy regulation
While many customs employees were and are doing their best to speed up the import of personal protective equipment, others helped minimising the export of such equipment, as did Willy Bleiij, policy adviser in non-fiscal matters. He was involved in the implementation of European Regulation 2020/402 – a trade policy regulation that suddenly came into force in mid-March (and has now ended). “It was in fact an export ban on PPE”, he explains. “From one moment to the next, the European TARIC system introduced two new document codes for this product group: one for goods subject to an export ban, and one for goods exempt from such ban, i.e. an alternative code so as to not completely disrupt trade in this particularly wide range of products. Of course, these two codes had to be implemented in our own systems, such as our AGS declaration system, so that we could achieve the aim of the regulation in the Netherlands. We also had to set up risk profiles to prevent abuse of the scheme. There was a risk that exporters would wrongly use the goods code for exempt goods to circumvent the export ban.”
Noise in the trade sector
“Customs was able to focus its enforcement activities on this by carrying out random inspections,” Bleiij explains. “At the beginning, however, there were no profiles to help us with this. To avoid the risk that our country’s doors would be opened wide, we temporarily stopped shipments of goods that had already been declared for export using the relevant code. That caused a lot of noise in the trade sector, and our service was reproached by many businesses. The main reason for this was that the regulation was broad in scope and covered a very wide range of products. However, we believed that the line we adopted was justified in view of the intended purpose of the regulation. Our Customs National Crisis Team shared that view and agreed. In the end, this situation lasted a few days; after that, the risk profiles were ready for use. Since then, there have been several physical inspections of goods, but no or hardly any cases of misuse were discovered.”
Role for the Central Import and Export Service
Regulation EU 2020/402 appeared to be rather more complicated. Bleiij: “So personal protective equipment, which is what the regulation was all about, was in fact subject to an export ban. However, businesses were able to apply for an export authorisation under certain conditions. The Ministry of Foreign Affairs, being responsible for the relevant policies, asked Customs whether our Central Import and Export Service – CDIU – could play a role in the issue of these authorisations. After all, it had a lot of expertise and experience in processing applications for authorisations. The CDIU’s management agreed to this, as these activities were in line with its daily operations. A new procedure was set up as a matter of urgency. An online application form for the relevant authorisation was developed which could be sent to a CDIU postbox that was set up especially for this purpose. The Inspectorate for Health and Youth Care – the national authority in this area and our help desk for any questions about personal protective equipment – assessed the applications and gave the CDIU a definitive answer. The CDIU then communicated the decision and issued the authorisation where applicable.”
“All in all, we can say that many customs officers from several departments have done their utmost to implement this exceptional regulation,” Bleiij concludes. “And many others have worked hard to enforce it. The fact that we were able to organise this process so quickly is indicative of the flexibility of our organisation.”
At the very beginning of the corona crisis, Customs came up with special arrangements for import and export companies. You can read more about these temporary measures in the article titled ‘Leniency for entrepreneurs in the time of corona’, which can be found elsewhere in this publication.