Trading Environment for Mobile Operators
Created on 2nd March 2006 Last Modified on the 24th of August 2009
One of the UKTRF's principal objectives is to improve the regulations which apply to the supply and sale of duty paid excise goods on board ships and aircraft undertaking intra-EU journeys. The current law was never intended to cover on-board duty paid sales and its provisions are so onerous that very few airlines are currently able to undertake such sales. The UKTRF aims to rectify this situation.
After the abolition of intra-EU and duty and tax-free sales in July 1999, the duty-paid sale of excise goods on board ships and aircraft became subject to the provisions of Directive 92/12/EEC, commonly known as the Systems Directive. This Directive was designed to cover the commercial holding and movement of excise goods between Member States but it was never envisaged that it would also apply to retail sales on board ships and aircraft. The Commission and EU Member States were well aware that the Directive was unsuitable for this purpose and indeed this was one of the prime reasons why all Member States except Denmark supported a move to delay the abolition of duty-free in 1999, in order to provide time to develop new legislation. However, this move failed because of opposition from Denmark, such that the necessary unaminity could not be achieved.
From July 1999 on, therefore, Directive 92/12 applied by default. Recognising that the strict application of all the provisions of the Directive would make it impossible for mobile operators (ie ships and aircraft) to undertake any on-board sales, the Commission and Member States agreed a number of derogations from the precise legal text. Among these was the introduction of a simplified procedure, whereby operators could uplift excise goods from their home State under duty-suspension, and then account for the duty to be paid to the Member State in whose territory the sale was actually made. These derogations do permit mobile operators, principally those in the maritime sector, to undertake some on-board duty-paid sales, but there remains a major stumbling block, particularly for airlines. This is the requirement of some Member States that excise goods carried under duty-suspension must be unloaded and stored locally before they can be released for duty-paid sale. For example an airline operating a service between the UK and Spain (such routes account for approximately 60% of the total UK charter market), and carrying duty-suspended alcohol products, has to unload the goods on arrival in Spain, store them locally with a registered warehousekeeper for a minimum of 48 hours, and only then can the goods be reloaded onto the aircraft for sale at Spanish duty rates. This requirement for the double handling of goods makes it uneconomic for airlines to even attempt to sell duty paid goods in flight, and hence the vast majority of airlines do not have any on-board duty paid sales on intra-EU flights.
The UKTRF has therefore been pressing for some years for a change to these rules, to permit airlines to clear the goods on arrival in the destination State, without them having to be unloaded from the aircraft. Clearance on board, as this is known, may be permitted by means of a bilateral agreement between Member States, but as at August 2007, only two formal bilateral agreements have been implemented by the UK - with Portugal and Belgium. Negotiations for a bilateral with Spain commenced as long ago as June 2000, but despite strenuous efforts by UK Customs, no bilateral has yet been concluded, nor is one likely to be in the foreseeable future.
Further background on the UKTRF's efforts to resolve this problem is provided in the section on the Directive itself; click on EU Directives 92/12 and 08/118.
