EU transport firms scrutinise new transit fraud proposals

Date: 05/11/1998

By Chris Johnstone

TRANSPORT companies across the EU are examining the European Commission's latest plans to clamp down on fraud which costs Union taxpayers millions of ecu every year.

The fifth version of the Commission's plan to tackle transit fraud is being studied carefully by transport firms which savaged the institution's earlier proposals as unpractical and excessively costly compared with the promised savings.

They will deliver their formal verdict at a two-day consultation meeting with the Commission on 18 and 19 November.

Companies have been demanding wholesale changes to the Commission's clamp-down on fraud, which will have an impact across all transport modes in a sector which contributes around 7% of the EU's annual economic turnover.

Transit fraud, which occurs when goods on which duty or tax has not been paid 'disappear' in mid-journey, has been highlighted as a black spot in the Union's system of financial control, with criminals making huge amounts of money by reselling untaxed goods on the black market.

However, the transport companies which will have to put any new rules into effect have in the past accused the Commission of exaggerating the problem and being too heavy handed in its response.

EuroCommerce, the lobby representing European retailers, argues that the problem of transit fraud has been overstated. "Less than 1% of all transit goods go missing and most of these are covered by bank guarantees," said the organisation's spokesman.

The Commission is hoping to complete its consultations with transport firms and middlemen, known as freight forwarders, and come up with a final draft of proposals for reform by the end of the year.

Although the Commission has moved over the last year to meet some of the transport industry's objections, critics say many outstanding problems have yet to be resolved.

These include the Commission's proposal to require transport companies to provide a detailed description of the route cargoes will follow in certain circumstances, and demands that cargoes be sealed and a six-figure code accompanies all goods on their journey.

Industry argues that providing detailed route plans to customs officials would be an unnecessary brake on companies' ability to make en route stops to collect new cargo, something which the Commission's transport officials would like to encourage. They also say sealing goods is no guarantee against fraud and claim the new code will mean high additional costs for firms.

Transport companies and manufacturers are also worried about the need to provide high cash guarantees to customs authorities for expensive consignments, such as alcohol and cigarettes, in case they go missing. These guarantees could be called on to compensate customs authorities for lost revenue if goods disappear.

The Commission sets broad guidelines for national authorities on how exacting such guarantees should be. Tax companies say more leeway on guarantees should be written into the new rules and argue that the requirements imposed on firms should be reduced for companies with a good security record.

They also claim that the six-month 'probationary period' before which new companies could apply for simplified transit procedures would impose such an initial burden in paperwork and time on newcomer companies that they would be lucky to survive the first few months.

The Commission has already bowed to some of the industry's demands, abandoning earlier plans for lorries transporting untaxed goods across borders to carry special 'T' plates. Industry said this would simply alert criminals as to which cargoes to target.

The computerised code will be voluntary until the end of 2004, with a further report due in 2003 outlining how it should proceed from then.

Transport companies admit the introduction of computerised systems could bring long-term benefits for their businesses.

EuroCommerce has given the Commission's willingness to change its original proposals a grudging welcome. "It has moved quite a lot compared with what it originally proposed. The original ideas were far removed from economic realities," said a spokesman.