Bid to plug gaps in transit system

Date: 01/08/1996

By Rory Watson

THE European Parliament has begun identifying ways of closing loopholes in the Union's creaking transit system and clamping down on fraud which is costing taxpayers up to 2 billion ecu a year.

Details of the measures likely to be suggested are already emerging as the Parliament's special committee of inquiry reaches the halfway point in its year-long investigation into the system's failings.

“The work is going very well. We have now completed our examination of most national customs services and looked at the analysis. We are moving on to the prescription and the cure. We need to get down to basics and decide what we want the system to do 40 years after it was introduced for six countries,” explains British Socialist MEP John Tomlinson, who is chairing the parliamentary inquiry.

The system now covers all 15 EU member states, plus Iceland, Norway, Switzerland and Liechtenstein and, since 1 July, Poland, Hungary, Slovakia and the Czech Republic.

But it is collapsing under the annual burden of coping with 18 million transit documents and a fiscal liability of 450 billion ecu.

First-hand evidence given to the committee has revealed that the fraudsters' main targets are tobacco, alcohol, mineral oils, textiles, bananas and items such as milk powder, meat and sugar which receive EU export refunds.

The most glaring loophole is the absence of documents - or the use of fraudulently completed papers - to confirm that the goods actually reached their destination.

This failing enables the items to be sold in the EU without taxes or duties being paid. The duty on a single lorry-load of cigarettes is worth 1.5 million ecu.

“What is astonishing is the ease with which you can get forged stamps, stolen stamps or genuine stamps wrongly used and then you depend on one person in an office to recognise if the stamps are stolen or forged,” says Tomlinson.

Annual fraud is estimated to cost the EU budget at least 200 million ecu and to involve even greater losses for national exchequers.

The French government alone has tabled a lengthy list of 60 ways to remedy the present shortcomings. They range from the complete computerisation of the transit system within the Union to greater cooperation and harmonisation between national customs authorities.

Pressure is growing for road hauliers - and not just freight forwarders - to take some of the financial responsibility when containers disappear and the required tax has not been paid.

The possibility of designating specific routes or of setting maximum journey times for transit goods is also being investigated.

Support is growing for a time-limit to be imposed for the return of the forms confirming that the goods in transit have either left the Union or have reached their destination.

It is not uncommon for it to take up to 300 days for these to be returned, despite the general belief amongst those in the business that the task could be easily achieved within two weeks.

With the system struggling under existing pressures, Tomlinson and his colleagues are especially critical of the decision to extend it into Central Europe this summer.

“What most surprised us was that it was enlarged to take in four Central European countries without being reformed. No one could believe how this could have happened. The more we looked at it, the more we were convinced that we had to look at the decision-making process,” says Tomlinson.

The scale of the problem facing authorities tasked with trying to stamp out transit fraud was graphically demonstrated in evidence to the committee from Dutch director of customs affairs, Helma Nepperus.

“Each year we check 130,000 containers using three scanners. This is not enough given that four million containers arrive in our ports every year,” she told MEPs.

Nepperus estimated that in one year alone, tobacco fraud in the Netherlands resulted in a loss of 61.5 million ecu to the Union budget and a further 470 million ecu in unpaid excise duties and value added tax.

“We are also noting a trend away from road transport towards maritime transport for cigarettes and away from the port of Rotterdam towards the ports in Eastern Europe for alcohol,” she added.

While a significant guarantee has to be lodged for transit goods moved by road, it is not required for shipments by sea or rail.