EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION. Contents 1. INTRODUCTION ABBREVIATIONS & TERMINOLOGY...

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1 EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Customs Policy, Legislation, Tariff TRANSITION STRATEGY FOR NCTS PHASE4 TO PHASE5 Contents 1. INTRODUCTION ABBREVIATIONS & TERMINOLOGY PROBLEM STATEMENT APPROACH FOLLOWED GAP ANALYSIS Business Processes Information Exchanges (IE) COMPATIBILITY ASSESSMENT & BUSINESS IMPACT OF THE CHANGES TRANSITION OPTIONS Scenario 1: Pure Parallel Run of the NCTS Phase4 and NCTS Phase5 systems Scenario 2: Secured and Controlled Big Bang Scenario 3: Progressive Start of Operations PROPOSED TRANSITION SOLUTION REQUIREMENTS SUMMARY ANNEX I - SWOT ANALYSIS OF THE TRANSITION SCENARIOS Scenario 2: Secured and Controlled Big Bang Strengths Weaknesses Opportunities Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel

2 Threats Scenario 3: Progressive start of operations Strengths Weaknesses Opportunities Threats ANNEX II - GAP ANALYSIS Business Process Gap Analysis Core NCTS Transit Movement Sensitive goods for transit (A) Risk Management (B) Declaration lodged prior to presentation of the goods (C) Transhipments and incident registration (D) Time limit for sending the control results (Rail) (E) Enquiry/Recovery/Query/Cancellation Time Limit for enquiry procedure (A) Guarantee Management Monitoring of the guarantee reference amount Guarantee type Functional interface between NCTS and AES Information exchange gap analysis ANNEX III - MORE ILLUSTRATIONS OF THE SCENARIOS Secured and Controlled Big Bang Progressive start of operations Pure parallel run of Phase4 and Phase5 systems Table of Figures Figure 1 - Process evolution... 5 Figure 2 - Information Exchange evolution... 5 Figure 3: NCTS Transition - Exchanges after Secured and Controlled Big Bang Figure 4: NCTS Transition - Secured and Controlled Big Bang Time sequence Figure 5: NCTS Transition - Exchanges during the Progressive Start of Operations Figure 6: NCTS Transition Progressive Start of Operations Time sequence Figure 7: Process Compatibility Result - Transit Declaration Figure 8: Process Compatibility Result - Enquiry/Recovery/Query/Cancellation Figure 9: Process Compatibility Result - Guarantee Management Transition Strategy for NCTS Phase4 to Phase5 page 2 of 28

3 1. INTRODUCTION The Union Customs Code introduced a number of legislative changes which made necessary to update the NCTS system specifications. 2. ABBREVIATIONS & TERMINOLOGY AES BPM CD CD convertors CT D.E. D.E. Downgrade Automated Export System Business Process Model Common Domain The applications that converts Common Domain messages, under the responsibility of the NA. Conformance Testing Data Element Data Element in the message Conversion of Phase5 message to Phase4 messages. ECS P2 Export Control System phase 2 ED ED convertors EUCDM NA NA NCTS NTA NTA-P4 NTA-P5 UCC DA/IA Upgrade External Domain The applications that converts External Domain messages, under the responsibility of the NA. European Union Customs Data Model National Authority National Administration New Computerised Transit System National Transit Application NTA in NCTS Phase4 NTA in NCTS Phase5 Union Customs Code Delegated Act / Implementing Act Conversion of Phase4 messages to Phase5 messages. 3. PROBLEM STATEMENT The UCC DA/IA Annex B introduced updated requirements for declarations. New data elements were introduced, others are not used anymore, the format of certain data elements had changed, and a number of them are grouped differently in the new structure, while the cardinality of some of them was increased significantly. The introduction of the EU Customs Data Model changed not only the format of certain data elements, but the structure of the declaration messages. Besides the information exchanges, the business processes had to be aligned to reflect the new legislation. Not only existing BPMs were amended, but new BPMs were Transition Strategy for NCTS Phase4 to Phase5 page 3 of 28

4 introduced. These have certain functionalities that are not present in the current specifications. These changes mean a major update of the NCTS. Information exchanges are substantially different between the current system (Phase4) and the future one (Phase5), they are not interchangeable. There are also incompatible processes, and new ones that do not exist in the current system. The smooth continuation of the transit operations across all Europe depends on the transition plan, to migrate 35 National Transit Applications from Phase4 to Phase5. This document highlight the possible and recommend scenario to ensure the continuity, with the minimum level of risk, while offering the expected flexibility in terms of National planning and reducing the impact on traders. 4. APPROACH FOLLOWED In order to identify the difference between the Phase4 and Phase5 systems, gap analysis was performed on the business processes and information exchanges. The process gap analysis identified which processes are compatible and which ones are not. The Figure 1 shows the ratio of the unchanged, amended and new business processes. This transition paper aims to find a transition solution for the application of the amended and new processes. The information exchange gap analysis looked into the data elements and the structure of the messages. The most important change is that the EU Customs Data Model is introduced. On data element level the main differences between the phases are: new data elements are introduced in the UCC DA/IA, currently existing data elements are deleted, a number of data elements are renamed, there are differences in the format, optionality and cardinality, the rules and the conditions are modified, new ones are introduced, there are new code lists, and a number of them is modified, there is a new, reduced dataset. In relation to the structure of the messages the main difference is that the Consignment view of the EUCDM replaces the current structure. It means that instead of the current "Header" and "Item" level new levels are introduced: "Declaration", "Consignment and Consignment item" and "House consignment and House consignment item". These changes made the complete reconstruction of the declaration message necessary (and the reconstruction of those messages that repeat of the declaration dataset). The Figure 2 shows the ratio of the amended and new messages. Transition Strategy for NCTS Phase4 to Phase5 page 4 of 28

5 1% 18% 4% 81% New Amended Unchanged Figure 1 - Process evolution 96% New Amended Figure 2 - Information Exchange evolution 1. Based on the gap analysis, multiple transition scenarios have been drafted to identify the various possible transition solutions. 2. The most important constraints related to the transition have been identified and listed. 3. Taking into account those constraints, some of the scenarios have been eliminated because they were not feasible or not matching the constraints. 4. The transition scenarios that were found feasible have been further analysed. A SWOT analysis has been created to compare the attributes of those scenarios. 5. The transition scenario which gives the most advantages while having the least constraints, is documented in the section Proposed Transition Solution of this document. 5. GAP ANALYSIS 5.1. Business Processes An extensive analysis of the complete set of Business Processes as it is currently in Phase4 and the envisioned Phase5 has been performed to identify the functional delta between the two Phases, the details are included in Annex II. At this stage, it appears that the impact of the changes at Business Process level on the choice of the transition scenario is very limited. The main recommendation is to ensure that all National Transit Applications (NTA) are in Phase5 before activating the new 'En Route Event' process, to ensure efficient implementation for this exceptional procedure [unless an NA decides to handles both processes and to report any incident according to the Phase (4 or 5) of the Country of Departure]. If the transition scenario adopted by NAs is the Progressive Start of Operations, then it is strongly recommended to scope NCTS with a Phase5.0 and Phase5.1. Transition Strategy for NCTS Phase4 to Phase5 page 5 of 28

6 The NCTS Phase5.1 would consist in the activation of some specified 'features' on a single day, after the end of the transition period. This Phase5.1 would have a limited scope, including: - the synchronised activation of the 'En Route Event' in all countries, - the activation of the role 'Office of Exit for Transit' Information Exchanges (IE) A detailed analysis was performed to compare the Phase4 information exchanges to the ones aligned with the UCC, and to find the gaps between the two. The analysis took the data elements and examined the changes, taking into account the format, optionality and cardinality, and also the rules and conditions. The details of the mapping of the Data Elements and data Groups between the two Phases are included in Annex II. The preliminary conclusions from this IE gap analysis at this stage are that - the current Functional Specifications will require the switch from Phase4 to Phase5 on a single day, for all 35 countries; - the interfacing of NTA-Phase4 and NTA-Phase5 will require some modifications of the Functional Specifications, to ensure the conversion of some IE from one Phase to another. 6. COMPATIBILITY ASSESSMENT & BUSINESS IMPACT OF THE CHANGES [This section will list the main changes that are required to enable the scenario 'Progressive Start of Operations', in terms of process scoping and message conversion. To be completed while progressing further with the analysis.] Transition Strategy for NCTS Phase4 to Phase5 page 6 of 28

7 7. TRANSITION OPTIONS From the analysis of the business process and information exchange compatibility three main transition options arose: The analyses are based on the following Constraints (facts known): 1. Some NAs (including DE) have allocated resources according to previous MASP version already and will be ready with the development and testing at an early stage of the deployment window (2021Q1); while some NAs (e.g. CH) officially announced that they will be ready to start Phase5 operations in 2023; 2. The transition period within each country will be as short as possible, to minimize the impact on the Customs Officers and on the Traders; 3. Some ('smaller') countries i.e. countries with a limited number of traders active in NCTS have experience of earlier migrations of their traders to the next Phase via a big bang. Some other ('bigger') countries i.e. countries with the highest number of traders active in NCTS are always offering a National deployment window to their traders / software providers (e.g. about one year in DE and FR); 4. One trader can have only one system at a given time (i.e. operating two applications in parallel is not feasible for traders); 5. The traders that remain in Phase4 during the National transition period will not be impacted at all by the decision of their NA or of another NA to switch to Phase5; 6. Movements started on Common Domain in Phase4 by one country (i.e. CD001B or CD003B sent) must be closed in Phase4, i.e. CD018B sent by any other country, following the current legal basis; 7. Movements started on Common Domain in Phase5 by one country (i.e. CD001C or CD003C sent) will be closed in Phase5, i.e. CD018C sent by any other country that is already in Phase5, following the new legal basis; 8. In order to be able to close the 'old open movements', the NA can choose between various options, including: a. keeping the NTA-Phase4 alive and unchanged, next to the NTA-Phase5, both being interfaced to manage the request from actual country of destination, b. importing the Phase4 data into the new NTA-Phase5, and stopping the NTA-Phase4, This is a national decision, which must be taken by each NA; 9. Where needed, old NCTS P-4 movements [that were released before the switch to NCTS P5 at the trader] will be written-off/completed manually at the Customs Office; 10. A matrix/routing table about the status/system of all traders in EU and Common Transit Countries is (almost) impossible to keep up to date among all National Administrations having altogether thousands of traders; 11. A matrix/routing table with the Phase4/Phase5 switch date (planned/actual) of all the NA will be maintained and published; 12. The channel for the asynchronous communication on the Common Domain remains unchanged: CCN queues; 13. The format of the Phase5 messages on the Common Domain will become XML & UTF-8 (i.e. EDIFACT will be used on the Common Domain only for the Phase4 messages); 14. Minimum three countries have to be ready before any progressive start of the Phase5 operations; 15. The same transition strategy will be applied on NCTS P4/P5 and ECS P2/AES, but the timeline can be different; Transition Strategy for NCTS Phase4 to Phase5 page 7 of 28

8 16. Unless an unpredictable and urgent change of the legal basis, the DDNTA of NCTS P4 will be no more changed. The system is frozen and no change at all can be applied to it on the Common Domain; and on Recommendations: 1. The new NTA will include all functions (i.e. including those related to the new Business Process) of NCTS Phase5; 2. If some functions or message structure (e.g. cardinality) are activated under Phase5.1 only (at the very end of the Deployment Window when all NAs have switched to Phase5 and operations are stabilised), both configurations (Phase5 and Phase5.1) will be tested under the same CT campaign; 3. In each NA, the trader should be able to switch to NCTS P5 only when the NA is already exchanging NCTS P5 messages on the Common Domain; 4. Comparing the migration to Phase4 (in 2009) and the migration to Phase5 (in ), the risks are significantly higher: more NTA (35) in operations, EDI replaced by XML, structure of most messages changed, new processes, more messages on the Common Domain (over 9 million per month). The International Testing (after the Mode2 testing against DG TAXUD) should be extensive enough, before any NTA-Phase5 is authorised to start operations; 5. Considering the widespread impact of the new legal basis on the NCTS system, considering the new approach used for the production of the functional specifications, the NA should be ready to rapidly adapt their NTA, based on emergency correction of specifications; 6. The transition solution and planning should take into account the experience from the past, regarding the difficulty to get ready on the same day more than 30 countries (and their traders). and on Requests: 1. Traders involved in more than one NA are repeatedly requesting one single and short Deployment Window for all the NAs (ideally the External Domain at all NAs would switch from Phase4 to Phase5 within 3 months) Scenario 1: Pure Parallel Run of the NCTS Phase4 and NCTS Phase5 systems This scenario envisages that for each NA starting NTA-Phase5, the NTA-Phase4 remains active and both NTAs are used in parallel, without interaction between them (i.e. no conversion of messages). There is no simultaneous migration from Phase4 to Phase5 in all countries. This scenario works only in the 'best case'. For example, a movement is started by a trader in Phase5, processed by NTA-Phase5 at Departure, sent to country of Destination in Phase5 where the Authorised Consignee is already in Phase5. (Similar for Phase4.) But all other scenarios (a significant volume of all movements) cannot be completed. The analysis of the Commission concludes that this scenario is not feasible due to the following facts: The trader at Destination can be in a different phase than the trader at Departure. The restriction applied on the diversion on Common Domain is not acceptable (i.e. movement started in Country of Departure being in Phase4 could only be diverted to countries being in Phase4; similar for Phase5). For further details about this scenario, please read Annex III. Transition Strategy for NCTS Phase4 to Phase5 page 8 of 28

9 7.2. Scenario 2: Secured and Controlled Big Bang This scenario is based on the following approach: 1. Some NAs (the EarlyDevelopers) can start the development of the NTA-Phase5 as early as the Functional and Technical Specifications are stable enough to generate the National Specifications. 2. Some NAs (the LateDevelopers) can start the development with some delay. 3. To minimize the conversion of the Common Domain messages, the switch from Phase4 to Phase5 takes place on one day, the exact big bang date will depend on the readiness of the latest NA. It requires strict commitment of all NAs to produce the NTA-Phase5 that matches quality, while respecting the commonly planned and agreed date. 4. The conversion of the External Domain messages is required and managed by the NA, for a duration period depending on the number of traders to migrate, and the National policy applied for the transition. It can be a few days in case of National big bang transition, it can be one year in case of progressive External Domain transition. 5. The old Phase4 'open movements' are managed (for processing the CD018B received, for generating and sending the CD018B, and some other messages): - either by NTA-Phase4 kept alive, - or by converting the messages received / to be sent, using NTA-Phase5 database. This choice being a National decision (cf. Constraint #8). 6. As soon as three NTAs have passed the Conformance Testing Mode2 (with DG TAXUD), the International Testing (Mode3) between NTAs can be started, to verify/correct the NTAs (and to further improve the DDNTA, if needed). As soon as more NTAs are ready, more CT Mode3 can take place, to obtain the required stability of the trans-european system (i.e. to avoid rejections between NTAs). The tab of the NCTS Phase5 operations will be opened according to the planning agreed by all countries (i.e. after all countries are ready to process Phase5 messages). 7. The EarlyDevelopers that decides to offer a long National Transition Period can publish early the National External Domain (ED) specifications, and can start early to perform ED software certification. If the External Domain transition starts before the Common Domain Big Bang, the NTA must 'downgrade' the messages received from the traders who already migrated to Phase5, into Phase4 messages. 8. The EarlyDevelopers that decides to offer a short National Transition Period can publish early the National ED specifications, and can start early to perform ED software certification. The External Domain Big Bang transition must be synchronised with the Common Domain Big Bang. 9. For the LateDevelopers, they can also decide to offer a short or a long National Transition Period. The only constraint is that the date for the switch from Phase4 to Phase5 on the Common Domain will be the same as the EarlyDevelopers. If it is not possible to migrate all traders in big bang mode, then the LateDeveloper's Transition Strategy for NCTS Phase4 to Phase5 page 9 of 28

10 application must convert (downgrade/upgrade) the External Domain messages for those late traders. 10. The greenlight for an NA starting International Testing will be given only after a full CT Mode2 is considered as satisfactory by DG TAXUD. 11. The greenlight for an NA starting Phase5 Operations will be given only after the International Testing is considered as satisfactory by DG TAXUD and by the partner NA including the EarlyDevelopers. 12. After Big Bang day, the message Phase4 (e.g. CD018B) can still be exchanged on the Common Domain, but only for the old Phase4 'open movements'. Analyses of the Commission conclude that this scenario is technically feasible under strict conditions that the National planning in all 35 NAs are aligned and will strictly respect the same date for starting Phase5 operations. After long International Testing, and progressive conversion of traders, once ALL countries are ready, the NCTS Phase5 will be used for all new movements. As illustrated below, in case some traders at Departure or at Destination are late to migrate to Phase5 (in blue), the NTA will have to manage the conversion of the External Domain messages. The 'old' Phase4 movements are not illustrated on this Figure 3. Figure 3: NCTS Transition - Exchanges after Secured and Controlled Big Bang For more examples of this scenario please see Annex III. Transition Strategy for NCTS Phase4 to Phase5 page 10 of 28

11 The time sequence of the Secured and Controlled Big Bang scenario in one image: Figure 4: NCTS Transition - Secured and Controlled Big Bang Time sequence Key elements: - The NAs develop as soon as possible. - The Conformance Testing activities are as extensive as possible, with a major focus on the International Testing (CT Mode3). - The EarlyDevelopers NAs with many traders (e.g. Country A in chart above) can start the National Transition Period as early as possible (i.e. before the Big Bang date). The messages from traders are downgraded to keep exchanges on the Common Domain in Phase4, until the Big Bang date. - The LateDevelopers NAs with many traders (e.g. Country C in chart above) can complete the National Transition Period after the Big Bang date. The messages from late traders are upgraded to keep exchanges on the Common Domain in Phase5 (except for old open Phase4 movements). - The NAs with few traders will offer a very short National Transition Period (few days), starting on the Big Bang date. The messages from traders are not converted. See the Figure 4 above: Country D = EarlyDeveloper with National Big Bang, Country G = LateDeveloper with National Big Bang). - All the functionalities defined in NCTS Phase5 can be activated on the Big Bang day. There is no need to define the Phase The effective start of Phase5 operations depends on the readiness of the 'latest' NA. Transition Strategy for NCTS Phase4 to Phase5 page 11 of 28

12 7.3. Scenario 3: Progressive Start of Operations This scenario takes into account the various constraints and most recommendations, to offer flexibility to traders (in countries with many traders) and to NAs (having different National constraints) while tackling the major evolution of the message structure between the Phase4 and Phase5 systems. For the External Domain, NAs may decide for a rapid transition (few traders to migrate) or a long transition (many traders to migrate), considering that the each individual trader will always benefit of a quick migration (to avoid running two software in parallel at trader side). Either the NA keep NTA-Phase4 alive while starting NTA-Phase5, with a national routing module, to re-direct the messages received from other NAs;. or the NTA switch to the new NTA-P4 that includes a module to keep managing the late traders and the 'old open movements' (Phase4 data and Phase4 business logic). This option does not impact the traders, nor the NAs. - In case one country decides to run NTA-Phase4 and NTA-Phase5 in parallel, there is no need for a conversion module of the External Domain messages, but a Conversion Module of the Common Domain messages is required. Once an NA started Phase5, it will exchange Phase5 with the other Phase5 countries. To facilitate it, a correlation table is needed to keep track which NA is in which phase. - In case Phase4 and Phase5 database are combined under the same application (example at Destination), traders communicate with the same system, which handles the messages according to their phase, and converts them when necessary. The analyses of the Commission conclude that this scenario is feasible. The Figure 5 below shows the various possible interactions for this scenario with NAs in different phases and also when they apply different approach to handle Phase4 and Phase5 data: having them in two separate applications or combine the two databases under the same application. Various simplified examples of this scenario are provided in Annex III, to illustrate various instantiations of this scenario. Figure 5: NCTS Transition - Exchanges during the Progressive Start of Operations Transition Strategy for NCTS Phase4 to Phase5 page 12 of 28

13 The time sequence of the Progressive Start of Operations scenario in one image: Figure 6: NCTS Transition Progressive Start of Operations Time sequence Key elements: - The NAs develop as soon as possible and will start Phase5 operations as soon as three NAs are ready. - The Conformance Testing activities are 'as usual', International Testing (CT Mode3) is important but less extensive than for the Secured and Controlled Big Bang scenario. - The EarlyDevelopers NAs with many traders (e.g. Country A in chart above) can start the National Transition Period as early as possible. The messages between Phase5 NAs are exchanged on the Common Domain without conversion. The messages exchanged with NAs in Phase4 are converted (downgraded if sent, upgraded if received, until the last NA is active in Phase5). - The LateDevelopers NAs with many traders should also be able to complete the National Transition Period before the end of the Common Transition Period. The External Domain messages from traders will be converted. - The NAs with few traders (e.g. Country E in the chart above) may offer a very short National Transition Period (few days) to their traders, either as early as possible (with conversion of Common Domain messages required) or on the last day of the end of the Common Transition period (without any conversion required any more). Transition Strategy for NCTS Phase4 to Phase5 page 13 of 28

14 - Once all NAs are in Phase5 and operations are stabilized, the functionalities defined in NCTS Phase5.1 are activated. It could be a few weeks after Phase5 is operational in all NAs, or after (almost) all Phase4 movements have been closed. - The effective start of Phase5 operations does not depend on the readiness of all other NAs. 8. PROPOSED TRANSITION SOLUTION DG TAXUD proposes to select the scenario 'Progressive Start of Operation' as the transition solution. This solution will allow MS to adapt their developments according to their resources, technical constraints and traders' constraints. Forerunners will exchange messages in NCTS Phase5 as soon as three of them are in operation. Late runner will adapt their developments regarding their national constraints. In order to be able to convert all messages and most particularly IE018, it may be possible that specifications of this message will have to be changed. 9. REQUIREMENTS [To be inserted] 10. SUMMARY [To be inserted] Transition Strategy for NCTS Phase4 to Phase5 page 14 of 28

15 11. ANNEX I - SWOT ANALYSIS OF THE TRANSITION SCENARIOS The SWOT analysis is only performed for the feasible scenarios: Scenario 2 (Secured and Controlled Big Bang) and Scenario 3 (Progressive Start of Ooperations) Scenario 2: Secured and Controlled Big Bang One of the possible scenarios of the NCTS transition from Phase4 to Phase5 envisages Big Bang Strengths The long Conformance Testing period will stabilize the trans-european system, before any Phase5 operations. No conversion of the Common Domain messages. Conversion of the ED limited to NA with many traders. Development by NA can start as soon as they want. Traders active in multiple countries can start Phase5 at the same time in all countries Weaknesses The exact date for the start of operations of Phase5 will depend on the readiness of the last NA. In case of problem in the specifications not detected during the CT Mode3, the operations in 35 countries would be impacted. The unexpected delay in one country will delay all other countries (NA + traders), with a high risk of global chaos in case of de-synchronised start of Phase5 operations Opportunities The cost of the ED conversion is the same as for the Progressive Start of Operations, but there are some savings on the conversion of the Common Domain messages. There will be no competition between countries to promote Phase4 transit against Phase5 transit. The period for having to operate/maintain two National applications at the same time will be limited (and similar for all) Threats There is no incentive to start early development, and most countries could opt for late development, and late Conformance Testing. The workload on TAXUD for CT could generate the risk of not detecting errors in NTAs. With possible (maximum) impact at the start of the operations. The late NA and DG TAXUD would be under pressure to validate the Conformance Testing despite errors remain in the software. The National Project Teams (and traders) will have to develop and start operations for one new system (NCTS Phase5) but it will be synchronised with other important developments (export, import, guarantee). The allocation of National and IT resources would be an important risk with impacts on delay and or quality, being difficult to mitigate when 35 NAs have the same deadline. Transition Strategy for NCTS Phase4 to Phase5 page 15 of 28

16 11.2. Scenario 3: Progressive start of operations One of the possible scenarios of the NCTS transition from Phase4 to Phase5 envisages the conversion of information exchanges Strengths NA can start development, testing and operation as soon as possible (and as defined in MASP). The start date of Phase5 in each country is not depending on the readiness of other NA. Only the activation of NCTS Phase5.1 depends on the readiness of all NAs. The issues detected when starting Phase5 will be limited to some few countries, offering the possibility to limit the impact of any problem. Major savings for the NA having migrated rapidly to the NTA-Phase4+Phase5 (without keeping two NTA in parallel). The National transit movements can already take full advantage of the UCC (if no diversion to Phase4 countries). The Phase5.1 will offer the possibility to activate smoothly all the remaining 'new' features Weaknesses The conversion of the common domain messages must be specified and applied strictly. The conversion module has some costs for the development and the maintenance. To avoid rejections or loss of messages, the functional specifications must be adapted (at least for the Common Transition Period). Some (few) new functionalities cannot be used during the deployment window because of the incompatible processes. The new functionalities cannot be applied and new messages cannot be exchanged until Phase5.1 starts Opportunities The definition of Common specifications for the conversion of the common domain messages and the external domain messages will facilitate the work of NAs (and the work of the traders' software providers). The progressive start of operations also offers the possibility for some countries with few NCTS traders and limited volume of operations to perform a rapid transition in a few days Threats The change management of the CD Convertors must be done with strict respect of the common specifications, and strict implementation of the changes (synchronised corrections). Transition Strategy for NCTS Phase4 to Phase5 page 16 of 28

17 12. ANNEX II - GAP ANALYSIS Business Process Gap Analysis Core NCTS Transit Movement Figure 7: Process Compatibility Result - Transit Declaration Sensitive goods for transit (A) Since the sensitive goods are no longer defined in the UCC, the related data cannot be provided for DG OLAF. The IE011 is deleted in NCTS Phase5. (In the current phase of NCTS the sensitive goods are not defined, because they are invalidated in CS/RD, even though the IE011 is not yet eliminated.) Important elements for the transition scenarios: This change of process is purely technical. Today, in NCTS Phase4, the messages IE011 are no more exchanged. No impact on the transition scenario, and not blocking issue during the transition Risk Management (B) NCTS interfaces with the national risk analysis systems of the National Administrations and ensures that risk analysis is initiated once the transit data is received and validated by NCTS. The national risk analysis systems of the National Administrations carry out the risk analysis and send the risk analysis results together with control recommendations back to NCTS. Transition Strategy for NCTS Phase4 to Phase5 page 17 of 28

18 NCTS records the risk analysis results as well as the control results. This is then communicated to the other Customs Offices involved in the EU. The code list used to indicate the presence of the EXS and/or ENS data elements in the Transit Declaration has been updated with new values to show the type of the EXS and/or ENS data elements lodged with Transit Declaration (ENS or EXS or both). For the cases where the pre-departure declaration takes the form of a Transit Declaration, with the transit starting or/and ending outside the EU, CH or NO, new Data Elements have to be introduced to the Transit Declaration for safety and security purposes (UCC Annex B DA Columns A1/A2). These Data Elements then need to be communicated to the Actual Customs Office from where the goods leave the EU. A new Customs Office role Office of Exit for Transit was introduced in order to identify the Customs Offices to receive the IEs with EXS data. The new IE046 was created to send the Transit Declaration data including safety and security data (EXS) to the Office of Exit for Transit. Accordingly, the business models were modified to include this IE. For the cases where the goods are entering and exiting the EU and where ENS and EXS would have to be lodged together with the Transit Declaration both data sets need to be added to the Transit Declaration and communication of the data to all offices concerned defined. The changes on the Data Elements are described in the Section 5.2 Gap Analysis / Information Exchanges. Differentiation between NCTS Phase4 and NCTS Phase5, (please see also points E on Figure 7) In NCTS Phase5, the following functionality has been updated: Addition of Customs Office role Office of Exit for Transit; Addition of Information Exchange - IE046 AAR; Update of code list CL Security. Important elements for the transition scenarios: - Some few NTA are already sending in few cases the message IE050 to inform the Office of Exit (that is different from the Office of Transit and different from the Office of Destination), to avoid separate EXS. - Currently (NCTS Phase4) the Traders lodge a separate EXS, possibly when arriving at the Border. in theory, a work around (fallback) exists for this limited number of movements, this process should have no impact on the choice of the transition scenario (i.e. not obliged to opt for a big bang) Declaration lodged prior to presentation of the goods (C) As per Art. 171 of UCC and Art. 227 of IA, the customs declaration is allowed to be lodged, and then processed by the custom authorities for the purposes of the risk analysis within 30 days before the goods are presented. Transition Strategy for NCTS Phase4 to Phase5 page 18 of 28

19 The risk analysis could be performed in advance based on the LRN, and the MRN would be assigned when the goods are presented in the EU and the declaration is accepted. Differentiation between NCTS Phase4 and NCTS Phase5: (please see also point D on Figure 7) In NCTS Phase5, the lodgement of a customs declaration prior to the presentation of the goods is to be supported. The IE928 is created as a positive acknowledgement of the declaration to the Holder of the Transit Procedure. Unfortunately this function is not yet available, because the code "D" for the Data Element 1/2 Additional declaration type is not valid for transit. In order to make this function available the amendment of the Implementing Act is needed. The amendment is expected before the deployment of the NCTS Phase5, and in anticipation of that we keep the current BPM. Important elements for the transition scenarios: - The change does only impact the External Domain and the National Domain, not the Common Domain. No impact on the choice of the transition scenario Transhipments and incident registration (D) In NCTS Phase4, if a transhipment and/or incident occurred during the journey, the related information is a part of the arrival notification information (IE007.EN ROUTE EVENT) and is recorded into NCTS Phase4. Then it is forwarded (IE018) automatically to the Office of Departure with the destination control results. If some incidents occurred to the movement and the competent authorities (e.g. Police) provided the lorry driver with additional documents, then these documents are also provided to the Office of Destination. The Customs Officer records into NCTS the reception of these documents, a filing reference number is associated to the movement data that allows the filing of the received document(s) in the Office of Destination. In NCTS Phase5, a new Business Process is defined for incidents assessment during movement of goods under a Union transit operation (Art. 305 of the UCC IA). In that respect, a new Customs Office role is introduced (Customs Office of Incident Registration) for recording the incidents that occurred during the movement of the goods in the electronic transit system. If the procedure cannot continue (case A), the Customs Office of Incident Registration stops the Transit Operation and becomes the Actual Office of Destination and the process of arrival applies. This means that the IE002 is sent to and the IE003 is received from the Office of Departure. The process ends with the IE006 and IE018, containing the Incident information. The Office of Departure should disseminate the IE024 to the other involved offices. If it is decided that the Transit Operation may continue (case B), then the incident information should be registered and a new electronic message (IE039) is sent by the Customs Office of Incident Registration to the Customs Office of Departure. If the Office of Departure is informed with the new IE, it is responsible for dissemination of this information to the involved offices by forwarding a copy of the electronic IE received from the Customs Office of Incident Registration. The same information should be Transition Strategy for NCTS Phase4 to Phase5 page 19 of 28

20 communicated to the Holder of the Transit procedure to inform him about the incident information. Differentiation between NCTS Phase4 and NCTS Phase5 (please see also points A on Figure 7) In NCTS P5, new functionality has been introduced regarding the incident assessment: Addition of Customs Office role - Office of Incident Registration; Addition of Information Exchange - IE039 Incident Notification; Addition of code list - CL 152 Incident Code; Addition of conditions (C0395, C0396, C0397, C0398); Update of existing IEs with incident information (IE003, IE115); Deletion of the NCTS Phase4 handling documents functionality. Important elements for the transition scenarios: - The case A remains unchanged between Phase4 and Phase5: If the procedure cannot continue, the Customs Officer stops the Transit Operation at this Actual Office of Destination and the process of arrival applies. This means that the IE002 is sent to and the IE003 is received from the Office of Departure. The process ends with the IE006 and IE018, containing the Incident information. The Office of Departure should disseminate the IE024 to the other involved offices. No impact on the choice of the transition scenario. - The case B could be managed without big bang, but it would force the Customs Officers on the field in the country where the incident occurred to apply different procedures (paper one vs. electronic one), depending on the NCTS Phase at the Country of Departure when the incident occurred. It is theoretically possible to avoid the big bang, but it is recommended to delay the activation of this process until all the NTA started the Phase5 on the Common Domain Time limit for sending the control results (Rail) (E) As per Art. 309(2) of UCC, in case the goods are carried by rail and one or more wagons or carriages are withdrawn, the control results should be notified to the Customs Office of departure on the 12th day following the day the first part of goods has been presented. In NCTS P5, the time limit for sending the control results is extended for exceptional cases in rail mode of transport based on the value of the new indicator to the IE006. Differentiation between NCTS Phase4 and NCTS Phase5 (please see also point B on Figure 7) In NCTS P5, the following functionality has been added: Extension of the timer for sending the control results for exceptional cases in rail mode of transport; Update of the IE006 with a new additional Data Element as an indicator. Important elements for the transition scenarios: Transition Strategy for NCTS Phase4 to Phase5 page 20 of 28

21 - This change impacts the Common Domain mainly. In case one country has not yet implemented this feature, the timer for those exceptional case, only will not be extended and consequently, the Enquiry would start. The impact on the workload of Customs Officers would be limited, the impact on traders would be close to zero (only if enquiry starts at trader). In theory, a work around (enquiry) exists for this limited number of movements, this process should have no impact on the choice of the transition scenario (i.e. not obliged to opt for a big bang) Enquiry/Recovery/Query/Cancellation Figure 8: Process Compatibility Result - Enquiry/Recovery/Query/Cancellation Time Limit for enquiry procedure (A) As per Art. 310(5) IA when the Customs Office of Destination has not provided sufficient information for the Union transit procedure to be discharged, the customs authority of the NA of departure shall request the Holder of the Transit procedure to provide that information, at the latest 35 days after initiating the enquiry procedure. Transition Strategy for NCTS Phase4 to Phase5 page 21 of 28

22 Differentiation between NCTS Phase4 and NCTS Phase5 (please see also point A on Figure 8) In NCTS Phase5, a new time limit is introduced for the notification of the Holder of the Transit procedure in case the Office of Destination has not provided sufficient info on the operation in relation to the enquiry procedure. Important elements for the transition scenarios: - This minor legal change is managed by the Competent Authority at Departure. If the movement started in Phase4, the movement will be closed in Phase4, and the value of the Phase4 timer (28 days is applicable). If the movement started in Phase5, the movement will be closed in Phase5, and the value of the Phase5 timer (35 days is applicable). This minor process change should have no impact on the choice of the transition scenario (i.e. not obliged to opt for a big bang) Guarantee Management Figure 9: Process Compatibility Result - Guarantee Management Transition Strategy for NCTS Phase4 to Phase5 page 22 of 28

23 Monitoring of the guarantee reference amount As per Art. 157 of the UCC IA, monitoring of guarantee reference amount is mandatory. Differentiation between NCTS Phase4 and NCTS Phase5 In NCTS Phase4, the guarantee monitoring type can be chosen when a guarantee is created, thus guarantee monitoring type 3 for guarantee types 1 and 0 is not mandatory. In NCTS Phase5, monitoring of guarantee reference amount is mandatory. Important elements for the transition scenarios: - This legal change may impact the Office of Guarantee of some countries. The 'Guarantee monitoring code' is used in the message IE037, without any rules and condition applied. To avoid some few rejections of some Phase4 messages by the Phase5 GMS, the new Rule should be enforced in the Phase5 only when all countries implemented the feature. - In 2016, only 301 messages were exchanged on the Common Domain. Only a percentage of those Phase4 messages are not aligned to the new legal basis to be implemented in Phase5. It is theoretically required to have this modified process in a big bang mode, but considering the very limited impact on the Common Domain, this process change should not influence the choice of the transition scenario (i.e. not obliged to opt for a big bang) Guarantee type As per UCC Annex B DA/IA, the guarantee types supported in NCTS P5 are 0, 1, 2, 3, 4, 5, 7, 8, 9 and B. Differentiation between NCTS Phase4 and NCTS Phase5 In NCTS Phase4, the guarantee types supported are 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, A and B. As a result, guarantee types 6 and A are not supported in NCTS Phase5. Important elements for the transition scenarios: [About the invalidation of Type 6 (Dispense de garantie article 95) and Type A (Dispense de garantie sur la base d'un agrément /) before Phase5 operations starts in some countries.] [It should be possible to stop supporting the guarantee types 6 at any time. The impact on the application of the Phase4 countries should be further assessed.] this process change should have limited impact on the choice of the transition scenario (i.e. not obliged to opt for a big bang) Functional interface between NCTS and AES In order to avoid open export movements, the Art. 329(5) and (6) of the UCC IA entails the requirement that the Customs Office of Exit shall be the Customs Office of Departure (in EU only) of the Transit Operation. Therefore, the NCTS needs to interface with AES when export is followed by transit. NCTS will inform AES by introducing new IEs: In case the goods are released for transit; Transition Strategy for NCTS Phase4 to Phase5 page 23 of 28

24 In case of no release for transit. That is the case when the control revealed major discrepancies or reasonable grounds for the Customs Office of Departure to consider that the Transit Operation cannot be started. Differentiation between NCTS Phase4 and NCTS Phase5 In NCTS P5, there is a new interface between AES (national export application) and NCTS (national transit application) for the processes when export is followed by transit. Important elements for the transition scenarios: - The exchange from NCTS to AES will be managed by the MS at National level. There will be no exchange on the Common Domain. It is expected that NCTS Phase5 and AES will become operational at the same time in one MS, there is no constraint to have the NCTS-AES interface becoming operational at the same moment in all MS. this new interface should have no impact on the choice of the transition scenario (i.e. not obliged to opt for a big bang) Information exchange gap analysis [To be inserted] Transition Strategy for NCTS Phase4 to Phase5 page 24 of 28

25 13. ANNEX III - MORE ILLUSTRATIONS OF THE SCENARIOS This section includes various examples that illustrate the configuration that could be observed in different countries, during or after the transition period Secured and Controlled Big Bang Example 1: Long National Transition at Departure (before Big Bang date) All NAs are still in Phase4, but there are traders at Departure who are already using the NTA-Phase5. [Figure to be inserted] Example 2: Late Traders at Departure All NA deployed the Phase5 system, but there are traders at Departure who still use the Phase4 system. Example 2: Late Traders at Destination All NA deployed the Phase5 system, but there are traders at Destination who still use the Phase4 system Progressive start of operations Example 1: Phase4 = Business As Usual NA who are still in Phase4 can keep sending Phase4 messages to each other, until the end of the Common Transition Period. Transition Strategy for NCTS Phase4 to Phase5 page 25 of 28

26 Example 2: Parallel run in one NA (Departure) with Destination in Phase4: Conversion of Common Domain messages. One NA with many traders deployed NTA-Phase5 and keeps also the NTA-Phase4 during the National migration. The NA offers two interfaces for the External Domain. For transit movements initiated by traders having migrated, the messages from NTA- Phase5 must be converted before it is sent to NTA-Phase4. Example 3: Parallel run in at Departure and Conversion of External Domain at Destination In this example, three types of NAs are combined: NTA-Phase4, NTA-Phase(4+5), NTA-Phase4+NTA-Phase5 (in parallel). NTAs databases under the same application (in this case it is at the destination). In case of NTA at Departure with parallel run, one movement could have one office of Transit in NA-Phase4, and one office of Transit in NA-Phase5. In such case, the country of Departure will convert the message before sending to the Office of Transit Phase5. The country of Destination convert the External Domain messages from/to Traders in Phase4. Messages coming from Phase5 systems can be received without conversion. Transition Strategy for NCTS Phase4 to Phase5 page 26 of 28

27 Example 4: No problem in case of diversion This example shows that NAs who deployed their Phase5 system can communicate with both Phase4 and Phase5 NAs no matter what approach they apply for the databases in different phases. In this example, the NTA-Phase5 must convert (upgrade/downgrade) any message exchanged with NTA-Phase4. One movement started by trader in Phase5 may have a declared office of Transit and declared office of Destination in Phase5 countries, but the actual office of Transit and actual office of Destination can be in Phase4 (or vice-versa). The conversion of the Common Domain messages is also applied. Transition Strategy for NCTS Phase4 to Phase5 page 27 of 28

28 13.3. Pure parallel run of Phase4 and Phase5 systems This scenario is excluded as from this stage of the transition study, because the analysis concluded that they are not feasible. Please find further details below. Scenario: Description: In this scenario NAs which deploy the Phase5 system also keep the current one. No conversion happens, it is not possible to send a Phase4 declaration / message to a Phase5 system. NAs in Phase4 can receive only Phase4 declarations from Traders and can communicate with other NAs only if those are also in the same phase. NAs which deployed the new system can receive both Phase4 and Phase5 declarations from traders, but these are sent to the system in the appropriate phase. The Phase4 messages related to the same transit movement stay in the same phase during the whole movement, and enquiry and recovery is done in Phase4. The same principle is applied for movements started in Phase5. Feasibility: NAs have to maintain two systems in the whole duration of the deployment window, and even after, until all the movements are closed (including the enquiry and recovery periods). Conversion remains required either at Common Domain level, or at External Domain level. Transition Strategy for NCTS Phase4 to Phase5 page 28 of 28