Customs implications of the Agreement between the EU and the United Kingdom in respect of Gibraltar

The Agreement between the European Union and the United Kingdom in respect of Gibraltar, published at the end of February, establishes a specific regime concerning customs, indirect taxation and the movement of goods between Gibraltar, and the customs territory of the Union, that is expected to be applicable as of 10 April.

Gibraltar is a small territory located at the southern tip of the Iberian Peninsula, bordering Spain. Although it is geographically attached to Spain, Gibraltar is a British Overseas Territory under the sovereignty of the United Kingdom. It has its own government and a high degree of self-governance, while the UK is responsible for defense and foreign affairs. Gibraltar is not part of the EU, or the United Kingdom, nor is it an independent country.

Its status has been the subject of a long-standing dispute between Spain and the UK, but in practice it functions as a separate jurisdiction with close economic and social links to both.

From a customs perspective, the Agreement establishes an EU–Gibraltar customs union, but does not immediately eliminate customs formalities or controls, as it provides for two distinct phases: a transitional period and a definitive period, with different effects on the operations of economic operators.

Transitional period: maintenance of formalities and controls

During the transitional period, Gibraltar retains the status of a third territory:

although EU tariffs do not apply, Gibraltar may apply its own import duties or taxes
customs declarations and controls are maintained

During this period, goods released for free circulation in Gibraltar will have third-country status, although no tariffs will apply in bilateral trade.

The Agreement establishes specific transitional measures:

movements initiated before entry into force will continue under previous legislation
duty exemption certificates issued by the United Kingdom before entry into force will remain temporarily valid
goods already lawfully marketed in Gibraltar may remain on the market for three months without full application of Union rules
goods in temporary storage or under a special procedure will remain subject to UK legislation until the procedure is discharged or up to two months after entry into force

Definitive period: creation of an EU–Gibraltar customs union

In the definitive period, the Agreement provides for:

the removal of physical barriers to the land movement of goods between Gibraltar and the EU, while maintaining the controls and formalities necessary to protect the single market and financial interests
no customs duties or quantitative restrictions will be applied

Access to the definitive period will occur once the EU–UK Cooperation Council adopts a decision that:

specifies the date from which provisions of Union law (Annex 20 of the Agreement) will apply to the United Kingdom in respect of Gibraltar and in Gibraltar, and
declares that border control posts and customs offices at the port and airport have been established and are operating in accordance with that decision, and that the competent authorities within the Union have been designated

Summary table: transitional vs definitive period

Key Aspect	Transitional Period	Definitive Period
Status of Gibraltar	Third territory	Integrated into the customs union
EU–Gibraltar customs union	No	Yes
Customs duties	Applicable	Not applicable
Customs declarations	Required	May be removed
Customs controls	Maintained	May be removed
Application ⁽¹⁾	From entry into force	Only after Cooperation Council decision

⁽¹⁾Until the Cooperation Council decision is adopted, the transitional period applies.

New developments in customs under the Agreement

The main customs aspects affected by the new Agreement are as follows:

1. Designated Customs Points (DCP)

Customs formalities must be carried out exclusively at the following points:

Customs and Excise Administration of La Línea de la Concepción
Customs and Excise Administration of Sagunto
Decentralised Customs and Excise Office of Algeciras

Additionally:

A branch of the La Línea DCP will operate at Gibraltar airport for formalities and controls
An alternative DCP in Portugal is foreseen in case Spanish points become inoperative

2. Movements of goods between the EU, Gibraltar and third countries

As a general rule, goods may only enter and leave Gibraltar by land.

However, certain exceptions allow entry and/or exit by sea:

Supplies (ship/aircraft stores) at Gibraltar port and airport
Discharge of special procedures
Sea transport from Algeciras to Gibraltar (less than 2 hours) is allowed under T2GI transit, provided that the goods are fully unloaded in Gibraltar.

Exports from the EU to Gibraltar

Goods from the EU customs territory must:

be declared for export (direct if lodged at a DCP, indirect otherwise)
physically exit through the La Línea or Algeciras DCPs (Sagunto does not act as DCP in this flow)
move under T2GI transit via NCTS, with the DCP as office of departure and Gibraltar customs as office of destination

Gibraltar customs will confirm:

arrival of goods
results of transit discharge
proof of release for free circulation or placement under a special fiscal regime

If transit is not properly discharged, the DCP will assess VAT and excise duties due to presumed irregular entry into the Union.

Exception: entry by sea is allowed for Union goods shipped directly from the Algeciras DCP under T2GI, provided the vessel arrives within two hours and all goods are unloaded in Gibraltar.

Movements from Gibraltar to the EU

Goods destined for the EU must:

be presented to Gibraltar customs
move under T2GI to the relevant DCP
be covered by an Entry Summary Declaration (ENS)

Once transit is properly discharged, goods at the DCP may be:

re-exported
released for free circulation or consumption
placed under T1 to another point in the Union

Third-country goods destined for Gibraltar

Goods from third countries must:

be presented at the DCP with an H1 import declaration

Sanitary and phytosanitary controls are carried out at the first point of entry into the Union, without prejudice to licences or authorisations required by UK authorities in respect of Gibraltar.

Not all tariff quotas, preferences or suspensions apply, except those under the EU–UK Trade and Cooperation Agreement.

One of the following procedures must be declared:

40: release for free circulation
51: inward processing
53: temporary admission
71: customs warehousing

After clearance, goods move under special transit T1GI to Gibraltar.

If procedure 40 is declared, the DCP will collect import duties as UK own resources.

Exports from Gibraltar to third countries

Goods must move to the DCP under:

T2GI (free circulation or fiscal regime goods)
T1GI (goods under special customs procedures)

The customs declaration is then lodged at the DCP.

3. Temporary storage and special customs procedures in Gibraltar

Goods located in Gibraltar before entry into force:

in temporary storage, or
under a special customs procedure

will remain subject to UK legislation in respect of Gibraltar until discharge.

Only operations initiated after entry into force will fall under the new framework.

Customs procedures with fiscal effects

Customs procedures with fiscal effects in Gibraltar are equivalent to those in the EU for suspending indirect taxes.

Types:

Temporary admission (fiscal)
Inward processing (fiscal)
Fiscal warehouse

Maximum time limits:

Temporary admission / inward processing: 3 months (incident recorded after 9 months unless extended)
Fiscal warehouse: 1 to 9 months

Discharge may occur through:

release for free circulation in Gibraltar
re-export
destruction

4. Indirect taxation provisions in Gibraltar

Indirect tax on goods equivalent to VAT

Gibraltar must introduce an indirect tax on goods equivalent to EU VAT to avoid distortions.

Minimum rate: 15%
Within 3 years: alignment to 17% or the lowest EU rate

Reduced rates:

5% (reduced)
0% (super-reduced) for goods listed in Annex 24 to the Agreement

Excise duties

At entry into force:

EU minimum rates apply
Within 3 years: alignment to 94% or within 6 percentage points of Spain

Exceptions:

Hydrocarbons → must reach EU minimum levels
Tobacco → minimum EU levels apply; cigarettes ≥ €115 per 1,000 units
Price difference vs mainland Spain ≤ €0.80 or 15% per pack

Operators handling excise goods must be registered with UK authorities for Gibraltar.

A system equivalent to EMCS will apply.

The number of changes due to come into effect on 10 April is significant and will have practical implications for customs operations in these territories. It is therefore advisable to review current procedures and ensure that all relevant processes comply with the new requirements, in order to avoid any disruption in trade operations.