New assault on transit fraud

Date: 04/09/1997

By Rory Watson

PLANS to stamp out transit fraud which costs EU governments millions of ecu in lost revenue and is threatening to undermine the single market are due to emerge within the next few weeks.

After an in-depth investigation by MEPs which listed almost 40 ways of tackling the lucrative black-market trade in stolen cigarettes, alcohol, textiles and other sensitive goods, the Commission is finalising the first major shake-up of the overstretched system in more than a decade.

The financial consequences of failure to plug the loopholes are huge. The Commission estimates that national and EU budgets have lost more than 1 billion ecu in unpaid taxes during the past seven years, with the freight forwarding industry suggesting the loss could be as high as 20 billion ecu.

There are also fears that the very concept of a border-free internal market could be threatened unless the system allowing goods to cross national frontiers and pay tax at their destination is made more watertight.

“What is at risk - quite apart from the transit arrangements themselves - is the homogeneity of the customs union, and that concerns every single member state,” warns an internal Commission paper.

Such warnings have been heeded by national authorities, who appear to be taking an increasingly hard line against fraudsters.

Earlier this year, the Commission's own anti-fraud squad UCLAF and Spanish customs cooperated in 'Operation Columbus', successfully intercepting a boatload of contraband cigarettes. UCLAF and the Belgian authorities are now involved in a legal inquiry into possible transit fraud in Antwerp.

Pressure is also growing on the EU's neighbours suspected of providing a base for criminal activities. During the MEPs' year-long inquiry, Switzerland emerged as one target. Now the spotlight is being put on Cyprus. The Commission has regularly warned the island, which will open EU membership negotiations in January, that it must bring its financial regulations up to Union standards and improve its cooperation on all areas of justice and home affairs.

The reforms being drafted by the Commission rely heavily on more effective coordination between national customs services, rather than on establishing new rules. They will run in tandem with computerisation of a system which has traditionally processed 20 million transit documents a year by hand.

The proposals, which are likely to lay down specific timetables for each measure, include a recommendation that every member state appoint a national transit coordinator as well as local transit contacts. The Commission will also suggest setting annual national transit management plans and, drawing on the experience of a pilot programme involving six EU members, the establishment of a community risk analysis unit.

The range of measures has already been floated with national customs officers and with the Union's partners in the European Free Trade Association (Switzerland, Norway and Liechtenstein) so that the reforms can be introduced in parallel.

Efforts by the Commission to tighten up the transit system are receiving cautious approval from MEPs. “It is a different ball game now. Proposals are beginning to emerge and we are being kept in close touch,” said British Socialist MEP John Tomlinson, who has played a leading role in championing transit reform.

The freight forwarding industry also welcomes the planned reforms, but believes they could be more ambitious. “We feel that there should be closer integration between the transit regime and import and export procedures. If you are going to combat fraud successfully, then you need to bring the two together,” said a spokesman for FreightForward Europe.