The VAT laws of the EU require a charge of a certain VAT percentage to certain customers in the EU, and a 0% rate to all customers outside the EU. To avoid abuse of this 0% rate, sending companies must provide evidence of export. Which is not always easy.

Surprisingly, getting evidence of export to a country outside the EU can be quite hard. This applies especially to products that are best sent in envelopes for reasons like cost and environmental awareness.

The (Dutch) postal office has no service that gives evidence of export of normal (or priority) bulk mail to countries outside the EU, unless they also fall outside Europe. The only solution is to ship packages, or use the over-the-top service of recepient-confirmed mail. This not-good-for-anyone overhead is caused by unwise law-making practices.

The general problem seems to be that countries and the EU, when deciding to make demands on citizens or companies, do not take implementation concerns into account. If a law is decreed, then laws that make it straightforward to implement them should be decreed at the same time.

A task for the customs office

Implementation clearly was no concern when the law was decreed that export outside the EU may only be at 0% VAT if evidence of export can be provided. Clearly, because it is possible, in at least one situation, that a sender gets in trouble when exporting the "normal" way. This is the case with envelope-packaged goods that leave the EU, but not Europe.

Such goods cannot be sent with plain (or priority) mail service, because that yields no evidence of export. Clearly, nobody though of adding a suitable service requirement to either postal laws or customs laws. And all those small companies that want to export goods on a regular basis are now up to their neck in figuring out how to do it. Because bureaucracy was insufficiently bureaucratic when decreeing this form of bureaucracy.

However, all mail that leaves the EU borders is prone to inspection by customs officials. This is an excellent opportunity for them to generate evidence of the export, and send it to the originator of the mailpiece. This need not be complicated -- it can be an automatic procedure triggered by a 2D barcode on the envelope that describes the encapsulated goods and the originating address.

The message generated in this process need not be sent by regular mail. A simple, signed email message can be sent, containing something like:

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1

This is evidence that a parcel has left the European Union.

Time of export:      Wednesday March 28, 2006, 11:55 GMT
Sender:              OpenFortress Digital signatures
Bill number:         EXP-123
Value of goods:      EUR 100
Package weight:      35 grams
Package description: Sesame OTP
HS code:             999123123

-----BEGIN PGP SIGNATURE-----
Version: GnuPG v1.2.5 (GNU/Linux)

iQCVAwUBRCprORkR0SUDFqlQAQK6ugQAzHZPQ1yM871ZzqmNIpo9e61nxPtvX/50
gevjSxKsARNQypHDYzENnkgu2hTCuO8xGAQwgMD6BCtKyqtzZV8n7EtDV12H30WJ
BthCPtO2YWyLFE/x4ir4DKcwlePe8MhjguUjrdQXXQiXTg9QnTztyggdDbhv1f/J
di18SJTBvMA=
=HQ5Z
-----END PGP SIGNATURE-----

The digital signature makes such a message a strong proof of having exported a package outside the EU. We used PGP in this example, because it yields a practical, all-in-one textual format of such proof.

Additional benefits

The use of the proposed 2D barcode means that all parcels that leave the EU can be scanned. This is more than is currently possible, with a hand-written form on top of the exported parcel. For example, the HS-codes on the envelopes make good reading, possibly to select the parcels to investigate in more detail.

The use of a digital form also means that encryption can be applied, such that only customs officials are allowed to read what the parcel contains. Publishing this information on the parcel itself is sometimes a privacy-concern, and sometimes a theft-concern if the value contained is high.

To return to mail service, it is possible for mail offices to support bulk services that include these export statements on everything that leaves the EU. It would even be possible to distribute pre-scanned information (that would otherwise appear in barcodes) digitally, and offer it to the customs office for processing. The digital preparation could even be done by the sender. All this helps to grease the process of sending mail and parcels, and handling EU laws for VAT more efficiently, to the benefit of all parties involved.

Why is this fundamentally better?

The situation where the customs office relays evidence of export is better than the current situation because this actually makes it possible to implement the law's demands, without any force to use heavier-weight, less environmentally-conscious alternatives.

In taking their responsibilities to introduce demanding laws, the government should also take their responsibilities and make it possible to implement those laws. That is a fundamental viewpoint that is currently lacking in (most) governments.

It regularly happens that a company that wishes to implement a law faithfully calls government offices, only to receive replies like 'the implementation is up to you' even if there is no suitable way to do this properly. The only alternative is usually added cost (contrasting the EU idea of greasing trade) or added work (leading to added cost).

OpenFortress for Digital signing

There are many places where digital signatures can be put to good use, to grease mechanisms that now take mind-numbing manual labour, or that otherwise affect the ability to get reliable evidence. This is just one example.

OpenFortress is always on the lookout for places to implement better procedures by way of cryptographic mechanisms like the digital signature. Do not hesitate to contact us about opportunities to help you in this respect!

Sign of Leaving the EU

A task for the customs office

Additional benefits

Why is this fundamentally better?

OpenFortress for Digital signing