The free movement of goods between member states was one of the core objectives of the European Economic Community (EEC) from its founding in 1957, and this naturally remained a key value with the establishment of the European Union in 1993 – a union intended, amongst other things, to ensure that businesses in all member countries have the same access to opportunities for trade.
In this article, we take a look at the principles and rules that govern trade between EU members, and where you can go to learn more.
What is free movement of goods?
Free movement typically means that you don’t have to submit a customs declaration when trading with a customer in another member state, and that no customs duty needs to be paid. But this doesn’t mean there are no rules governing such transactions.
For example, individual countries are entitled to prevent the trade of goods that have impacts on health or safety, or the environment. This can include products such as medicines, alcohol, tobacco and narcotics.
Some goods also need to display a particular mark (such as the CE mark), while others are subject to export restrictions.
And if you export or import more than a certain value of goods per year, you have to submit a report on your trade flows.
CE-marked products
The CE mark indicates that a product fulfils current EU regulations with regard to health, safety and the environment. It is mandatory to apply the mark to certain categories of goods, such as electronics and toys, which will be sold within the EU, regardless of where they are manufactured, but also forbidden to apply it to goods that don’t fall within these categories.
The manufacturer is responsible for checking whether their product must be CE marked, and what requirements it must meet.
Export restrictions
Although there’s no need to pay customs duties or submit a declaration when exporting a product to another member state, export restrictions still apply in some cases, and you may need an export licence or other permit. This generally affects dangerous items such as radioactive waste, used refrigerants (including refrigerators, freezers and air conditioning systems), hunting weapons and ammunition, but also endangered plants or animals, and cultural objects.
Reporting goods movements
Even for non-dangerous items, if your exports and/or imports within the EU exceed a certain value, you must submit a report on your intra-EU trade flows. The value thresholds are set every year by each EU country separately, and may differ for imports and exports.
Which countries?
In fact, it isn’t only EU member states that are covered by EU trade regulations. Some non-EU states, such as Norway, Iceland, Lichtenstein and Switzerland, participate in the single market via a number of other agreements, and Georgia, Moldova, Turkey and Ukraine also have limited access to the free movement of some goods.
Perhaps surprisingly, there are also some parts of EU countries that don’t fall within the EU’s fiscal territory. Of course since Brexit, the mainland UK is no longer part of the EU, but Northern Ireland has a special status that means EU rules apply for much of its trade with the Republic of Ireland and beyond to the rest of the EU. Other territories where the trade rules are different include the Canary Islands and the French overseas regions, but also Åland (a partially autonomous archipelago in Finland) and Germany’s Heligoland archipelago. Specific rules apply to these territories, and it’s advisable to get specialist advice before embarking upon trade with any of these areas.
But what about services?
In these days of digitisation, many EU businesses sell services rather than goods, and they too are governed by regulations that establish a level playing field for companies across the union.
Generally speaking, if you’re already providing a service in one EU country, you can offer that same service in other member states. However, some sectors, such as financial, legal or medical services, may be subject to different regulations in other countries.
VAT
When trading inside the EU, there are a number of different VAT obligations that you must observe. These vary depending on who you’re selling to, where they are based, where you are sourcing your products and whether you’re trading in goods or services.
For example, when selling a product to another EU-based business that’s registered for VAT, you don’t charge VAT on the sale. Meanwhile, if you were to sell the same product to an end client – in other words, to an individual not registered for VAT, you might need to charge them VAT at the rate applicable in their own country. And even in the former case, the buyer would have to declare both input and output VAT at the rate in their country.
This is what’s known as the reverse charge mechanism, which means that, instead of having to register for VAT in every country you trade with, you need only register in your home country.
Venturing beyond EU borders
With 195 countries in the world and only 27 in the EU, it’s pretty obvious that there’s a vast market outside the borders of the union. But equally, the rules governing imports and exports can vary significantly.
To find out more about the rules affecting third country trade, visit the EU’s Access2Markets site.
Where to find information
You can find lots more advice and information through the EU’s various sites, or the tax, business and customs organisation in your country. For example, the European Commission has a very useful site about doing business in the EU, visit the webiste here.
And don’t forget that you can also tender for public procurements in other EU countries, for example through Tenders Electronic Daily (TED) – and also apply for funding through a range of EU programmes.
