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THE ROLE OF INTERNATIONAL FREIGHT FORWARDERS IN THE REPORTING OF SHIPMENT AND DELIVERY OF GOODS IN THE EUROPEAN
UNION OVER THE INTRASTAT
Jadranka BendekovicFaculty of Economics and Business Zagreb, Croatia
Dora NaletinaFaculty of Economics and Business Zagreb, Croatia
Aida BojicMetro sped d.o.o Zagreb, Croatia
ABSTRACTBy entering the European Union, the Republic of Croatia has undergone many changes regarding international forwarding agents. The obligation for application of customs regulations in line with the EU Legal Acquest has arisen. Bearing in mind that the trade of local goods between the EU member countries is exempt from customs formalities and control, forwarding companies lose a large portion of their business. Most of international forwarding companies had to commit themselves to carrying out other general and specific lines of work instead of import duties, in order to compensate for the loss of the market space. The EU membership has brought the duty of Intrastat reporting, i. e. statistical research of trade in goods between the EU members. In this way, there arises the opportunity for authorized customs representatives to perform a new type of business, if the business entities delegate their duty of Intrastat reporting to the customs broker. In this way the international forwarding companies can compensate for the market space they lost when Croatia entered the EU. The goal of this paper is to give basic insights into the international forwarding companiesʼ features, specificities of their business activities and their emergence as authorized representatives in Intrastat reporting on dispatches and arrivals of goods for the EU customers. This paper will serve as a guide to better understanding the role of international forwarders in reporting on dispatches and arrivals of goods in the European Union through Intrastat, as well as give a clearer picture of the future international forwarders are facing.
Key words: international freight forwarding, Intrastat Form, Intrastat system
1. INTRODUCTIONInternational forwarding refers to a set of specific functions, operations and rules which ensure dispatches of goods from the home country to foreign countries, arrival of goods from foreign countries to the home country and transit of goods between foreign countries across the home country.
With the accession to the European Union (EU), the Republic of Croatia has become a part of a single customs territory of the Union, and therefore has the duty of applying customs supervision in line with the EU Legal Acquest.
Many changes have occurred concerning international forwardersʼ business activities. As the borders concerning customs duties between the member states are disappearing, the aspect of customs procedures with the business entities from other EU member countries, as well as with non-member countries, is changing significantly.
As we have entered the EU, all local goods trade within the EU is no longer subject to customs formalities duties, nor to customs control of those goods. For this reason, most of forwarders had to choose other general and specific lines of work instead of import duties. Data about the flow of goods within the EU are gathered by means of Intrastat System, and therefore, international forwarders are focusing on providing Intrastat reporting services as well.
International forwarding includes economic services of foreign trade, i. e. dispatches of goods from the home country to foreign countries (export forwarding), arrivals of goods from foreign countries to the home country (import forwarding), and transit of goods between foreign countries across the home country (transit forwarding). These services are provided by international forwarders, which also undertake other specific activities regarding dispatches, arrivals or transit of goods (Zelenika, 1996, p. 52).
2. INTERNATIONAL FREIGHT BUSINESS ACTIVITIES AFTER THE ACCESSION OF CROATIA TO THE EUROPEAN UNION AND THE GLOBALIZATION OF THE MARKETToday, when big globalization changes take place, there is a need for transformation of classical forwarders into logistic forwarders, ready to perform numerous, more complex activities and functions in order to survive in the competitive market (Bendekovic, Vuletic, Gotovac, 2013, p. 1).
Namely, as Croatia has become a full member of the European Union, most of international forwarders have lost their businesses. By entering of Croatia into a new territorial zone and customs regime, borders are being erased, and consequently, there is no more need for most services provided by forwarders. Nevertheless, this does not suggest that this type of activities will stop, because they are being and will be performed in other places, connected with the goods which are exported into, or imported from the EU countries (Basic, 2011).
From the day Croatia joined the European Union, there have occurred many changes concerning international forwardersʼ activities, relating to four areas (Bendekovic, 2014):
o new information system. Today, flows of information precede flows of goods, which considerably decreases time losses in the transport process, increases delivery speed and punctuality, enables reduction of necessary stock of goods in production and trade, production is conducted according to orders, i. e. according to market demand, and the finalization of the product is relocated from factories into logistics centres.
o structural changes of international forwarders. Structure of a company, concerning ownership and size, is under constant influence of competition and market efficiency. Large companies require advanced organization and management, where management is separated from the ownership structure.
o adjustment to the European Union Customs System. After the borders between the members of the EU have been erased and quantity of products limitations removed, a single customs EU territory has been established. Customs control and other limitations between the member states have been abolished, and each member state
generally applies the same customs rules to the EU non-members. Since the abolishment of the customs control between the Members of the European Union, many international forwarders have been facing decrease in the business volume because there is no more need for import duties, except with the countries which are not members of the EU. International forwarders have to channel their activities to providing other general and specific services. One of those services is to keep records of the flow of goods - INTRASTAT.
o creating strategic alliances between international forwarders and suppliers, as well as between international forwarders and internal and foreign partners. Today, when there is strong competition present in the trade in goods, low financial solvency (low capital) and conditions of complementarity in the markets, one of the most favourable models for development of Croatian companies is creating strategic alliances. Strategic alliances are seen as means of providing opportunities for survival in the international markets. Some of those opportunities are ownership integration or strategic alliances. Strategic alliance represents an ideal solution in high-risk situations of independent development. They are crucial for more rapid expansion, in situations where there is relatively low availability of equity shares and where there are complementarities between companies and great and rapid changes in the environment. Croatian companies are still revealing the world of strategic alliances, which will help in conquering markets and technologies.
3. INTRASTAT: THE SYSTEM FOR COLLECTING DANA ON THE TRADE IN GOODS BETWEEN COUNTRIES OF THE EUROPEAN UNION
On 1 July 2013, all customs formalities and controls on the flows of goods between the Republic of Croatia and other Member States of the EU were abolished. As a result, Single Administrative Document is no longer the source of information for producing statistics on the trade in goods with the EU members. A new kind of research - Intrastat is introduced, which is a system for a direct data collection from business entities that trade with the EU member states (DbSchenker, 2013).
Intrastat is the system for the collection of statistical information on the flow of goods between the EU members (Durdek, Ozimec, 2009, p. 24). Intrastat was introduced on 1 January 1993, thereby establishing a unique internal EU market and enabling free movement of goods (Polancec, 2013). Until then, data was received by means of Single Administrative Document (SAD), but since it was cancelled, there arose the need for yet another form of statistical data collection (http://www.carina.hr/e_carina/Intrastat.aspx).
The importance of statistical data on the trade in goods with foreign countries lies in the fact that this data is an important source for compiling the balance of payments and gross domestic product (GDP). It is also used when deciding on national or European monetary and economic policy, as well as for conducting macroeconomic analyses (The Republic of Croatia Government, Croatian National Bank - CNB, EU, UN, International Monetary Fund - IMF, The Organization for Economic Co-operation and Development - OECD, WTO); this data is also an indicator of a country’s economic success and development (Polancec, 2013). The statistics on the trade in goods with the countries that are not EU members is still collected by means of SAD. This portion of statistical data is called Extrastat, which, together with Inrtastat, represents the overall statistics on the trade of goods with foreign countries (Nova ICT, 2013, p. 6).
Regarding the non-member states, customs procedures are in line with the European customs regulations, and the point of customs clearance can be located in any of the EU member state. Business entities from Croatia can go through import or export customs clearance in any of the member states, but business entities from other member states can do the same in Croatia. It is commonly understood that Croatian business entities go through customs clearance in Croatia, as, in that way, a share of customs revenues collected stays in the country. The Republic of Croatia Customs Office can do customs clearance for the recipients from other member states as well. In this way, more customs clearances would be carried out, and therefore, more revenues collected for the national budget of Croatia (Buljan, 2013, p. 51).
By carrying out customs clearance of goods for the business entities from other member states, an opportunity opens up for customs brokers, which have actually lost the possibility of representation in the customs procedures in the trade between the EU member states, except for the submission of the Intrastat Form for business entities in Croatia. Thus, international forwarding agents have the opportunity to compensate for a portion of market lost due to the accession of Croatia to the EU (Buljan, 2013, p. 51).
3.1 Difference between the Single Administrative Document and the Intrastat FormSingle Administrative Document (SAD) is a customs document used for carrying out customs formalities regarding the exchange of goods with other, non-member countries, while the Intrastat Form is a statistical report by which the exchange of goods between the EU member states is monitored (DbSchneker, 2013).
Until the Republic of Croatiaʼs accession to the European Union (EU), concepts used in foreign trade dealings were known to all of us as import and export, but, since 1 July 2013, two groups of concepts have been used. The first group concerns trading with the EU members, with the concepts of arrivals i.e. buying of goods from suppliers from the EU, and dispatches i.e. selling of goods to the buyer from the EU. The other group refers to the trade with non-member countries, where concepts of import and export are used (Buljan, 2013, p. 1-2).
Table 1: Comparison and differences between the SAD and the Intrastat Form (Polancec, 2013)
Single Administrative Document INTRASTAT FORMIMPORT/EXPORT ARRIVALS/DISPATCHES
All dispatches/transactions records + submitting of customs declarations for each
All dispatches/transactions records + submitting monthly, cumulatively
All entities trading with foreign countries Only those entities which exceed the exemption threshold value
Greater amount of data, greater accuracy and control
Reduction of workload placed on the reporting units
Filing of a paper document can be done electronically
Submitting only electronically to The Customs Administration G2B Service
Every export/import Obligatory, even when no tradeCarrying out customs clearance Statistical report
The major differences between the SAD and the Intrastat Form are as follows (Croatian Bureau of Statistics, 2013):
o The SAD is filled out and submitted for every transaction, while the Intrastat Form is submitted monthly;
o The SAD is filled out by every business entity that exchanges goods with foreign countries, while the Intrastat Form only by those which exceed the exemption threshold value;
o The SAD contains greater amount of data required in relation to the Intrastat Form, which means reduction of load for the data providers (DbSchenker, 2013).
In Table 1, the SAD and the Intrastat Forms have been contrasted and the differences have been listed. Besides the major differences already mentioned, they differ in the way of submitting as well. Regarding the SAD, it is done in paper and electronically for carrying out customs formalities, while the Intrastat Form is submitted only electronically, and is obligatory, even when no trade is done, with the purpose of statistical reporting.
3.2 Institutional responsibility for Intrastat in the Republic of CroatiaIn line with The Agreement of International Cooperation, Croatian Bureau of Statistics is the holder i.e. the institution responsible for the Intrastat research, methodology, statistical processing and dissemination of data, while the Customs Administration collects and controls data for the research (Polancec, 2013).
Croatian Bureau of Statistics is in charge with the preparation and execution of statistical activities, fulfilment of international obligations regarding official statistics from the work scope set in The Statistical Activities Programme of the Republic of Croatia, and for the Intrastat research.
In 2008, the Customs Administration and Croatian Bureau of Statistics signed The Agreement of International Cooperation on the introduction of the Intrastat research into Croatian statistical system (Croatian Bureau of Statistics, 2014, p. 11). Both institutions have developed a long standing cooperation in carrying out the existent statistical research Extrastat, which represents a solid basis for a successful introduction of new research (DbSchenker, 2013, p. 1)
3.2.1. Intrastat reporting obligation Reporting units have the obligation to report data. Those are companies which pay VAT, exchange goods with other EU member states, and those which have exceeded the exemption threshold value set for the current business year (Bozina, 2013, p. 155). The obligation of Intrastat reporting is established yearly, based on the information on the arrivals from other EU members and dispatches of goods into other member states, on which a business entity was reporting through the Intrastat forms, as well as on the deliveries and revenues declared on the VAT forms for the prior fiscal period (twelve months). Croatian Bureau of Statistics and the Customs Administration inform a business entity if the obligation started or ended, and the reporting unit is then obligated to submit the Application Form for Intrastat within ten days since the receipt of the information. If a reporting unit does not have any transactions in a given month, it is still obligated to send an empty Intrastat Form (Croatian Bureau of Statistics, 2014, p- 10).
A reporting unit is obligated to report data if its value of trade in goods in the prior fiscal period exceeds the exemption threshold for dispatches or arrivals, or for the both trade flows. It also has the same obligation if the cumulative value of the trade in goods from the VAT.
Form exceeds threshold value for either of the flows. A business entity is then obligated to report data to Intrastat since the month in which the value of the trade in goods exceeds the threshold value (Croatian Bureau of Statistics, 2015, p. 8). The provider can provide the data on its own, or it can transfer this obligation onto another party i.e. customs agent (Croatian Bureau of Statistics, 2014, p. 10).
3.2.2. The exemption thresholdThe exemption threshold is the value set for every statistical year, for arrivals and dispatches separately. It is the basis for defining business entities with the obligation of reporting data to Intrastat. The providers of statistical information are those business entities whose value of trade in goods exceeds the exemption threshold (Nova ICT, 2013, p. 6). The data on arrivals from other EU members and dispatches to other EU members, on which the provider reported on the Intrastat forms, as well as the deliveries and revenues reported in the VAT forms for the prior fiscal period, is the basis for setting the exemption threshold (DbSchenker, 2013, p. 3).
The provider of information is obligated to report statistics to Intrastat for the flow of trade in goods whose value of the annual trade in goods with the EU members in the prior fiscal period exceeds the set exemption threshold value for that specific flow, or for both trade flows, arrivals and dispatches. The obligation can also arise during the year, when the cumulative value of the trade in goods of a business entity obtained from the VAT Form exceeds the exemption threshold value. For arrivals, the exemption threshold value for the year 2015 is 1.800 000 Croatian kuna, for dispatches 1.000 000 Croatian kuna (Croatian Bureau of Statistics, 2014, p. 5).
3.2.3. Reporting periods and deadlines for submitting the Intrastat formsReports to Intrastat are submitted on a monthly basis. The reporting period is a calendar month in which arrivals and dispatches take place i. e. it is a month in which goods physically enter or leave statistical territory of a member state which reports to Intrastat. The Intarstat report for the month in which arrivals or dispatches took place must be submitted in the next month at the latest. It is submitted, regardless as to whether or not the payment has been made. The submission deadline is on the15th of the month for the last month, and if the 15th is a non-business day, the deadline becomes the next business day (Croatian Bureau of Statistics, 2015, pp. 5-8).
The scope and responsibility of Intrastat reportingIntrastat reporting encompasses all data on dispatches of goods from Croatia to other EU members, as well as data on the arrivals from other EU member states. This includes supply, sale, or return of goods i.e. goods sent to be improved or the return of goods that was being improved, except in the case of repair or maintenance of goods. Intrastat report is not submitted for the trade in services, as it is not the object of statistical exchange of goods with foreign countries. The relevance of the Intrastat research is in monitoring of physical movement of goods, not in monitoring the course of payment. If the payment is made before the goods are physically delivered, the data on that goods will be submitted for the Intrastat research in the month of the actual dispatch or arrival of the goods, not in the month the payment is made (Croatian Bureau of Statistics, 2015, p. 2).
For the Intrastat System, the data is filed on the following:
o commercial transactions of goods, which include the transfer of property designated for use, expenditure, investments or resale;
o transactions which include the transfer of property with no financial compensation, nor payment in kind;
o the flow of goods from one member state to another with no transfer of property, like, for example, storage, flow of goods before and after the improvement, and
o the return and replacement of goods (DbSchenker, 2013, p.2).
4. THE ROLE OF TAX DATA IN THE INTRASTAT SYSTEMOne of the key characteristics of the Intrastat system is the connection to the tax data. This data represents an important part of the Intrastat system. Along with the new VAT Form, two more forms, in which transactions with entrepreneurs from other members of the European Union are filLed, have been introduced. It is the ZP-VAT Form for the deliveries of goods and services and the VAT-S Form for the acquisition of goods and the received services (Mijoc, 2013, p. 42). From the VAT Form, the VAT-S Form and the ZP Form, tax administration uses data from companies on the movement of goods with the EU members, and these tax data are submitted on a monthly basis to Croatian Bureau of Statistics, using OIB (Personal Identification Number) of the companies (DbShenker, 2013, p. 1). Tax administrations of the EU members are obligated to exchange data on the VAT by means of V.I.E.S (VAT Information Exchange System). The data from the V.I.E.S. System are compared to the data from the Intrastat System. The Intrastat data and the data on the VAT compared in the same time period have approximately the same value (Nova ICT, 2013, p. 7).
Tax data is used for determining the exemption threshold values in the Intrastat System, for defining new reporting units, for the assessment of irresponsibility and the value of trade below the exemption threshold, for the updating of the Intrastat Register, and for the control of the validity of the Intrastat information. This control is assumed by summarizing and comparing the Intrastat and tax data, using OIB, as well as the flow and the period, and if there is significant difference between the data, the company is contacted in order to determine data accuracy and the source of discrepancy (Croatian Bureau of Statistics, 2014, p. 31).
The differences that occur between the tax information on the acquisition of goods from the EU, the delivery of goods into the EU and the Intrastat data can arise for different reasons, and those are:
o flow of transaction. It is understood that Intrastat follows the flow of goods, while tax data follows the financial course of transaction.
o the VAT number. For example, if goods are imported from the non-member states, but the invoice is issued with the VAT number of a member state. In that case, the necessary information for the statistics is found in The Single Administrative Document and distributed to Extrastat. The acquisition of goods from the EU member which authorized the VAT number of the company which issues the invoice is filed on the VAT Form for the Tax Administration. The differences may occur if the goods are received from one member state, and the invoice issued with the VAT number of another member state. These differences can be visible in the VAT forms.
o reporting period. It is understood that the dispatches of goods and the issuing of invoices do not have to occur in the same month. If, for example, the goods are physically dispatched in a certain month and the invoice issued subsequently, in the next month, the reporting unit will file the report to Intrastat in the month of the arrival
or dispatch, and the report on acquisition or delivery of the same transaction on the VAT Form in the next month.
o the scope. The statistics on the trade in goods with the foreign countries encompasses only the flows related to the movement of goods. The services, like repairs, sale of goods over the internet, temporary flow of goods for the period of up to two years, advertising materials and commercial sample are not included. When goods arrive for improvement, their value is indicated in the Intrastat Form. After the improvement, the value of goods on the Intrastat Form is the total value which comprises the value of the received goods, the improvement costs and the material used in the process of improvement. Contrary to the data submitted in the Intrastat Form, only the value of the improvement costs, not the receipt of goods for improvement, is submitted to the tax administration.
o the calculation of value for Intrastat and the basis of tax assessment. In the Intrastat reporting, the value of goods comprises only the costs of insurance and transport to the Croatian border, while in the case of the basis of tax assessment, the excise duties are included into the value of the received goods. The acquirer of goods for which excise duties have to be paid in the EU is obliged to pay them.
o the currency rate. In the Intrastat reporting, the values in the foreign currencies are converted to kuna based on the mean currency rate listed in the foreign exchange list of the CNB for the specific month i. e. for the month for which the report is filed. In the VAT forms for tax data reporting, the values in the foreign currencies are converted to kuna based on the mean currency rate of the CNB for the day when the obligation for filing the VAT is imposed (Croatian Bureau of Statistics, 2014, p. 32).
5. CONCLUSIONIt is difficult to choose from many definitions of international forwarding. They all have in common the fact that they define forwarding as a company which organises the dispatches, arrivals or transit of goods in the international trade for its client, and it also performs other general or specific activities connected with the dispatches, arrivals or transit of goods. From the day of the accession to the European Union, Croatia has become a part of a single customs area of the EU; it has entered a new territorial entity and a customs regime, where all borders are abolished and customs formalities between the EU member states cancelled. The domestic goods trade in the EU does not undergo the obligation of customs formalities, nor customs control over that goods; therefore, there is no more need for most services international forwarders provide. However, this situation does not mean these services are no longer active, for they are still being performed. International forwarders which have lost all, or a part of their business they have been conducting, most of all services related to customs representation, have been advised to transform into logistics operators and provide other general and specific services. The EU Membership has also brought the obligation of introduction of the Intrastat System i. e. statistical research on the trade in goods between the EU members, which replaced the customs declarations. The collection of statistical information in Intrastat is the main source for macro and micro economic analysis (balance of payments, national invoices), as well as an indicator of economic performance and support in carrying out trade, economic and monetary policy. Every business entity in the Republic of Croatia, if a VAT-rate payer, and whose value of trade in goods with the EU members exceeds the exemption threshold (for arrivals or dispatches, or both flows of goods), is obliged to report for Intrastat. Business entities are obligated to file the Form on a monthly basis. However, there is a possibility that a business entity transfers its obligation onto an authorized customs agent. Thereby, an opportunity opens up for the authorized customs
forwarders to provide another kind of services and, in that way, compensate for a portion of the market space they have lost due to Croatian accession to the EU.
Besides the participation in the Intrastat reporting, the European Union offers to international forwarders the possibility of clearance of goods for the recipients i. e. business entities from other EU members, which opens up a possibility to collect customs duties, a portion of which stays in Croatia. An opportunity surely opens up for authorized customs agents, which, for the most part, are concerned about their position after the accession to the EU. The very position of Croatia i.e. the fact that we are the external border of the EU raises those opportunities.
In the end, it can be concluded, although the accession to the European Union has brought many changes in the international forwardersʼ businesses, which have mostly downsized their activities, this does not mean that this type of business has come to an end. In the present conditions of fierce competition, only those who are flexible and quick to adapt to the market changes survive. Specifically, this means that international forwarders refocus and start providing other general and specific activities, to seize the opportunity given by the EU membership in order to compensate for a portion of the lost market. So, it is we who determine to which extent we are able to seize the opportunities the European Union membership gives us.
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