EU transit system stretched to limit

Date: 15/02/1996

By Rory Watson

A COMBINATION of a relentless increase in crime and a growing mountain of paperwork is undermining the internal market, threatening to tear apart the antiquated administrative system used to monitor the movement of freight from one EU country to another.

Spurred on by the need to protect its income from fraud and ensure the system's survival, the Union will next week examine a range of options to plug holes in its transit arrangements.

The European Commission is expected to endorse a strategy which includes a 23-million-ecu programme to computerise all transit operations involving EU countries, as well as Switzerland, Norway, Iceland and Liechtenstein.

“Frankly, the whole thing is now a shambles. Everything is done on paper and, as it is a lengthy procedure, lorries have enough time to disappear with their loads. The first thing we must do is computerise the system,” said one senior Commission official.

In a parallel move, the European Parliament's special committee of inquiry into transit fraud will start hearing its first evidence - from senior Commission officials and Court of Auditors President Bernhard Friedmann - in the next two weeks.

The transit system is buckling under the strain of issuing almost 20 million travel documents a year as it struggles to adapt a scheme designed for six EU countries in the 1960s to cope with 15 in the 1990s. The pressure is set to increase with its extension this year to include Poland, Hungary, Slovakia and the Czech Republic.

Industry experts warn that if the system collapses, 430 billion ecu of taxes and duties now channelled annually through the transit scheme would have to be paid at national borders, reintroducing costly and time-consuming barriers to the single market.

The lucrative trade in stolen goods is also costing the Union, national governments and, ultimately, taxpayers billions of ecus in lost revenue and raising the spectre of bankruptcy for many companies legally involved in the freight forwarding business.

The Commission estimates that since 1990, the EU's budget has been defrauded of at least 750 million ecu in unpaid duties and taxes, as containers of cigarettes, alcohol, textiles, frozen meat and even bananas failed to reach their stated destination and were sold on the black market.

Others put the level of fraud even higher as abuses are uncovered in the system which allows goods to be moved between EU countries without taxes or duties being paid until they reach their final destination.

It is estimated that freight forwarders, who put up guarantees when transit goods are transported and who are in the front line when customs officials look to replace the missing tax due on stolen goods, face demands for at least 8 billion ecu.

An industry source warned this week: “The figures are so high, they are almost theoretical. The risks now are so great it is almost a kamikaze business. We still do not know how many claims are pending by customs agents against freight forwarders. Recovering them will provoke many bankruptcies in the industry and that will affect transporters, importers, exporters and the insurance sector.”

The Commission is taking a tough line and pressing for the full collection of all outstanding claims. The strategy to be presented next week by the Internal Market and Anti-Fraud Commissioners Mario Monti and Anita Gradin will also recommend that all guarantees should cover the total tax eventually due on transit goods, rather than a percentage as now, and transit lorries should be forced to follow clearly designated routes.