Can customs status be lost?

Customs status is the status of goods as EU or non-EU goods. The distinction matters for a yacht because it determines whether the yacht is subject to customs formalities and procedures, and whether import duty is due.

The EU Customs Code defines EU goods as goods wholly obtained in the customs territory of the EU or brought from countries outside the EU and released for free circulation or produced in the customs territory of the EU from the foregoing goods.

The Customs Code also sets out the presumption that all goods located in the customs territory of the EU are deemed to be EU goods, unless it is established that they are not EU goods. “Unless it is established” justifies the role of the customs authorities. One aspect of their mission is to apply the customs controls which determine liability or relief to import duty on non-EU goods.

It follows from the Code presumption that yachts located in the EU, or released for free circulation, are deemed to be EU goods. The flag of the yacht is irrelevant to determine its customs status. The fact that a yacht is flying the Cayman (non-EU) flag does not necessarily mean that it is a non-EU yacht. Conversely, a Malta (EU) flag does not necessarily give such a yacht the customs status of EU goods.

A yacht that is EU goods can lose that customs status. This is notably the case where it is taken out of the EU customs territory, or where its EU goods status is invalidated – due to an irregularity, for example. However, these are avoidable causes within the control of owners and operators.

The trouble in recent years has been the inappropriate use of customs formalities to cancel the legitimate EU goods status of yachts. Yachts tend to be subjected unduly to formal export from the EU, for temporarily leaving the Mediterranean to Turkey, the North Sea, or the Caribbean.

Proponents of such export argue that yachts leaving or located outside the customs territory of the EU (especially if they fly non-EU flags) lose their customs status and automatically become non-EU goods. But this is a perversion of the Code presumption that all yachts located in the customs territory of the EU should be deemed to be EU goods regardless of their flag.

The reductivism driving this discriminatory approach is not without costs. Several owners of yachts that are EU goods currently pay for unwarranted export/import when their yachts exit/enter the EU between charter seasons.

Spain recognised the flaws in the practice and abandoned it in 2018. It seems the only EU Member State still condoning it is France. But that will likely change.  Brexit has challenged assumptions about automatic loss of customs status as EU goods. In its post-Brexit Note on Means of Transport, the European Commission, the EU’s executive branch of the EU, may just have dealt the last blow to the permissive use of the export procedure for yachts just going about their ordinary business.

The content of this article is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content herein.