The Swedish, Norwegian and Danish governments have announced cooperation in the e-commerce sector, with the intention ‘to bring a halt to products that are harmful to health and the environment’. The Norwegian Environment Agency, for example, has discovered illegal substances in 30 per cent of the products purchased from online stores. 

In their statement, the Scandinavian authorities highlight the ‘growing challenges’ presented by e-commerce platforms located outside of the EU, including in respect of products containing hazardous substances. ‘It remains a major challenge to hold global eCommerce platforms such as Temu, Shein and Wish responsible,’ said Norway’s Minister of Climate and Environment, Andreas Bjelland Eriksen.

The intervention by the Scandinavian governments was strategically timed, as the European Parliament continues to discuss the implementation of custom reforms that would abolish exemptions for goods worth less than €150, alongside other initiatives directly targeting e-commerce platforms. The European Commission presented its proposal to reform the Union Customs Code (UCC) in 2023. Denmark, Norway and Sweden would like to see the reform take place as soon as possible. 

‘Cross-border e-commerce is a fairly recent phenomenon,’ says Yves Melin, Co-Chair of the IBA International Trade and Customs Law Committee, particularly in terms of the growth of companies in China operating without a European distributor. While having someone responsible for ensuring that products were EU compliant ‘wasn’t perfect’, he says, airport customs brokers now grapple with ‘a zillion boxes’ and ‘billions of declarations a year.’

The big difference now, adds Melin, who’s also a partner in the Brussels office of Cassidy Levy Kent, ‘is that there’s no consumer-facing business in Europe other than the logisticians. And nobody is taking responsibility for compliance, because it can’t be controlled.’ And customs variability between EU Member States can also be exploited, he says, for example via loopholes in the time it takes to communicate the removal of value added tax (VAT) numbers to the EU’s central database.

In view of this, says Melin, central to the UCC reform is the creation of a new EU Customs Authority, which will oversee a data hub ‘replacing all of the existing member databases’ and ensuring that product data is immediately available centrally. The new Customs Authority will ensure that this information is accessible by all EU customs, tax, regulatory and anti-fraud authorities. ‘People are going to be able to use the data to improve enforcement at the border, which is the challenge today,’ explains Melin.

The European Commission’s proposal includes the creation of a ‘trust and check trade’ system, mostly focused on e-commerce. Designated individuals will ‘essentially be entrusted with functions that are today in the hands of customs,’ says Melin, such as being able to open boxes to check products. However, he cautions that as well as creating a speedier process, the reform would mean ‘increased liability’.

Looking at the broader picture of customs compliance, the EU Forced Labour Ban Regulation came into force at the end of 2024. It aims to prevent products made with forced labour from entering the bloc and will apply to all companies placing or making products available in the EU’s market from December 2027. 

Under the Regulation, before initiating enquiries or investigations, competent authorities will consider information regarding a company’s forced labour and human rights due diligence on a product when assessing whether there’s a substantiated concern of a violation of the legislation. 

Anna Kirkpatrick, an officer of the IBA Business Human Rights Committee, says major e-commerce companies will probably ‘be caught by the legislation because it’s broad enough to encompass distance sales.’ Where public consciousness might imagine customs officials seizing goods at physical borders, she explains that the reach of the Forced Labour Ban Regulation will also extend to products sold online ‘if the targeted end users are in the EU.’

It remains to be seen how EU Member States will implement this legislation, says Kirkpatrick, who’s a director at Clifford Chance in London. However, she highlights that for major distance sellers who are perceived to have elements of their supply chain in countries where the risks of forced labour are regarded to be high, ‘taking steps early to implement human rights policies and due diligence will be key.’ Companies have until the Regulation’s application date to ensure they have appropriate processes in place to mitigate the risk of investigation or enforcement.

Ennio Piovesani, an attorney specialising in international contract law at Italian law firm Ferritti, brings another perspective. While ‘real-time cooperation between national authorities and stronger enforcement on the customs level could address macro issues,’ he says, more robust contractual provisions between e-commerce platforms and their suppliers, such as the mandatory disclosure of manufacturing origin, may be a ‘contractual defence for addressing these issues in the first place.’

Melin says there’s an urgency to address the issues posed by e-commerce because of the supply chain. ‘Because, if you know how to do it, you will be able to import drugs and guns and all sorts of things. The market knows it,’ he says. While the finer details of the UCC reform may change in negotiation, Melin says that at an event he attended in December, ‘most Member States, the Commission and the Parliament Rapporteur were speaking the same language.’ 

Image credit: Layerform/AdobeStock.com