# EUR-Lex - 52013SC0483 - EN

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# 52013SC0483

**COMMISSION STAFF WORKING DOCUMENT Impact assessment Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EC) No 515/97 of 13 March 1997 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs and agricultural matters /* SWD/2013/0483 final */**

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TABLE
OF CONTENTS

1      Introduction.................................................................................................................... 1

2      Procedural issues and
consultation of interested parties................................... 2

2.1    Identification............................................................................................................... 2

2.2    Organisation and Timing............................................................................................. 2

2.3    Consultation of the IAB.............................................................................................. 2

2.4    Consultation and Expertise........................................................................................ 3

2.4.1     Member States customs
authorities................................................................................. 3

2.4.2     World Shipping Council............................................................................................... 3

2.4.3     Data Protection bodies................................................................................................. 4

2.4.4     Other expertise used..................................................................................................... 5

3      Problem definition.......................................................................................................... 6

3.1    Problem introduction and measures in place.......................................................... 6

3.2    Current legal instruments and structure of the system...................................... 7

3.3    Problem description..................................................................................................... 7

3.3.1     Core problem.............................................................................................................. 7

3.3.2     Other problems.......................................................................................................... 12

3.4    Overview - Problem description................................................................................. 16

3.5    Coherence with other Commission policies............................................................. 16

3.6    Main actors affected by the current situation.................................................... 17

3.7    Baseline scenario........................................................................................................ 18

3.8    Subsidiarity, proportionality and fundamental rights...................................... 19

4      Objectives....................................................................................................................... 20

4.1    General objectives...................................................................................................... 20

4.2    Specific and operational objectives......................................................................... 21

5      Policy options................................................................................................................ 21

5.1    Options addressing the core problem (operational
objective 1, 2 and 3).............. 21

5.2    Options addressing other problems (Objective 4).................................................... 25

6      Assessment of impacts of the
policy options........................................................... 26

6.1    Impact related to operational objectives 1, 2 and 3.............................................. 29

6.1.1     Option 0: Status Quo.................................................................................................. 29

6.1.2     Option 1: Soft law...................................................................................................... 30

6.1.3     Option 2: EU centralised
approach (Commission is responsible and uses a central database). 31

6.1.4     Option 3: National approach
(Member States are responsible and use national databases)... 36

6.1.5     Option 4: Mixed approach
(shared responsibility between the MS and the EU).................... 38

6.1.6     Assessment and comparison of
the proposed options........................................................ 39

6.2    Impact related to operational objective 4 (speed up
OLAF investigations)......... 41

6.2.1     Option 0: Status quo.................................................................................................. 41

6.2.2     Option 1: Soft law...................................................................................................... 41

6.2.3     Option 2: Direct access............................................................................................... 42

6.2.4     Option 3: Increase resources........................................................................................ 43

6.2.5     Option 4: Returning to
pre-2010 situation..................................................................... 43

6.2.6     Overview of costs per option........................................................................................ 43

6.2.7     Overview assessment and
comparison of the proposed options........................................... 44

6.3    Conclusions on preferred options............................................................................ 45

7      Monitoring and Evaluation......................................................................................... 45

7.1    Monitoring................................................................................................................... 46

7.2    Evaluation.................................................................................................................. 46

Annex
1: Glossary.................................................................................................................. 48

Annex
2: Scale of the problem............................................................................................. 49

Annex
3: Working document: Commission requirements for the Container Status Messages       50

Annex
4: Anti-fraud Information System (AFIS).................................................................. 54

Annex
5: Need for Container Status Messages and the ways to obtain them.............. 59

Annex 6:
References to official documents:...................................................................... 60

Annex
7:  List of formal consultations with Member States conducted in preparation of
the Impact Assessment.............................................................................................................................. 62

Annex
8: Questionnaire.......................................................................................................... 63

1 
Introduction

Financial fraud has existed and evolved throughout the economic
history, adapting to the changing environment and trading conditions.
Therefore, it is important to continuously apply a zero-tolerance policy and
alleviate consequences of fraud by reducing the profitability of committing
fraud and the likelihood for it to go unpunished.

It is no different in the context of the EU and its
resource-generating activity of applying customs duties to trade crossing the
EU borders. Customs duties and the need to practically implement them create
both possibility and opportunity to reap unlawful benefits by circumventing the
applicable rules. To mitigate this phenomenon, the EU and its Member States
have put various measures in place in order to detect, prosecute and deter
fraudulent behaviour.

· 
Importance of cooperation with regard to
fighting customs-related fraud and protecting the Union's financial interests

Customs fraud is a growing phenomenon which causes serious damage to
the Union's financial interests because customs duties are own resources of the
EU budget. Customs fraud also has negative consequences
for the Internal Market because it creates an unfair advantage for operators
who avoid duties. The rapid
growth of international trade and the increased need for acceleration of trade
flows has strengthened the role and importance of cooperation (mutual assistance) between Member States and the
Commission in fighting customs-related fraud. The
damage resulting from the three most common types of customs-related fraud
(i.e. mis-declaration of origin, mis-description of goods and misuse of the
transit system, see: Problem Definition) is estimated at around 185 million EUR
per year.[1]

· 
OLAF as a service platform for national
customs authorities

Already in its Communication of June 2000[2] on "The fight against
fraud", the Commission had recognized the need for a "new culture of
operational cooperation" with Member States. Specifically, the need was
acknowledged for an enhanced exploitation of intelligence in partnership with
Member States. To achieve this strategic objective in line with Regulation
515/97, designed to ensure the correct application of customs legislation, and
in accordance with Article 1 of Regulation 1073/1999, which lays down the
objectives and tasks of OLAF, OLAF is expected to provide services and
assistance to the relevant national bodies or authorities in organising close
and regular cooperation, coordinating their activities and contributing to the
design and development of methods of fighting fraud and any other illegal
activity affecting the financial interests of the Member States as well as the
EU.

· 
Background of this initiative

One of the main tools used by customs authorities to detect
customs-related fraud is a risk assessment. The customs officers analyse
various pieces of information in order to develop risk profiles that can help
them to ultimately identify suspicious consignments. The mutual assistance
between the Commission and the Member States to combat customs-related fraud is
mainly based on the exchange and sharing of information. Today, various types
of information are used to combat customs fraud. For the fullest exchange of
information and proper functioning of mutual assistance, a central database (the so-called CIS[3])
was created as a platform for Member States and it helps to prevent,
investigate and prosecute breaches of Union customs legislation. This system is
complemented by the FIDE[4],
a database put in place to facilitate investigations carried out by the
national competent authorities as well as the Commission. These databases include information on customs
fraud cases and on-going cross-border investigations[5] and are considered by its users
(Member States) as being useful. Nonetheless, recent pilot projects show that
there are other types of information that could further facilitate the work of
customs officers and investigators across the EU, by increasing the
possibilities of threat assessment and identification of suspicious shipments.
Hence, even though customs cooperation in the EU is
generally considered to be successful, there is a great potential for further fraud prevention and more efficient investigation based on novel
means.

The focus of this Impact Assessment lays on analysing alternative and
complementary measures that can be used to further improve the detection,
investigation and ultimately prosecution of the customs-related fraud.
Furthermore, the problem of delays in OLAF investigations is examined and
possible solutions are assessed.

Based on a careful analysis of the drivers behind these problems and
the objectives, possible solutions are identified. Finally, the Impact
Assessment presents policy options designed to address these objectives and
compares their expected impacts.

2 
Procedural
issues and consultation of interested parties 
2.1 
Identification

Title: Impact
Assessment on the Amendment of Council Regulation (EC) No 515/97 on mutual
assistance in the area of customs.

2.2 
Organisation
and Timing

The Impact Assessment process for the review of Regulation 515/97
commenced in autumn 2011 with the submission of the IA Roadmap.

The inter-service steering group was convened for the first time on
2 March 2012 and met again on 20 April, 12 July and 5 September 2012. The
following Commission services participated in the steering group chaired by
OLAF: SG, SJ, HOME, JUST, TAXUD, BUDG, AGRI, JRC and MOVE.

2.3 
Consultation
of the IAB

The Commission's Impact Assessment Board met on 3 October 2012. The
comments received on 5 October 2012 were incorporated into the new version of
the document and were resubmitted on 18 October 2012. The Impact Assessment
Board provided its second opinion on 15 November 2012. Additional
recommendations from the Impact Assessment Board have been taken into account
in this revised version of the Impact Assessment. The main changes are:
strengthening the problem definition; presenting clearer intervention logic;
better distinguishing between the issues regulated at the EU level and those
addressed at the Member State level; reinforcing the baseline scenario and
clearly defining the scope of the initiative. In addition, the proposed options
were redesigned. Finally, the assessment of the options has been strengthened.

Final comments from the Impact Assessment Board were received on 23
July 2013. Following the Impact Assessment Board's recommendations, a number of
issues were further improved. With regards to the description of the policy
options substantial effort was put into presenting the exact scope and
practical implications of each option. The report now also discusses the risks
related to data security and legal implications of requiring data from
operators that have contractual obligations not to disclose it. In addition,
the assessment and comparison of the proposed options has been strengthened. In
particular, the assumptions made when estimating the costs and benefits of
different options are clarified. Finally, the presentation of the views of
stakeholders was improved and all the abbreviations and technical terms were explained.

2.4 
Consultation
and Expertise 
2.4.1 Member States
customs authorities[6]

Member States expressed their views regarding the proposed amendment
of Regulation 515/97 in a questionnaire.[7] The questionnaire asked Member States about their needs for access
to customs data (import, transit and export) concerning transactions in other
Member States and about the perceived usefulness of information such as
Container Status Messages (CSMs) [see Glossary], etc. Furthermore, Member
States' views on the preferred way of collecting, storing and analysing such
information were gathered. The main results of the consultation are as follows:

· 
22 out of 24 Member States stated that they need
access to customs-related data (import, export and transit) relative to
transactions which occurred in a different Member State and 18 out of 19 Member
States were in favour of creating a central repository on import, export
and transit data as opposed to the alternative of connecting 27 different
national customs systems;

· 
23 out of 25 Member States were of the opinion
that timely access to CSMs would improve fraud detection and 22 out of
24 Member States were in favour of creating a centralised EU
repository of CSMs

2.4.2 
 World Shipping Council

About 90% of the world's cargo is transported in maritime
containers. Therefore, this Impact Assessment focuses in particular on
combating fraudulent activity involving movements of maritime containers. Since
the Members of the World Shipping Council (WSC) are individual shipping
companies which represent approximately 90% of the global liner vessel
capacity, it was considered appropriate to include the WSC in the consultation
process.[8]
A meeting in March 2012 was a major consultation of the shipping industry,
since not only the association representatives but also the WSC's Member Lines
participated. The aim was to inform carriers about the envisaged changes to
Regulation 515/97 and to obtain their feedback on the possible provision of CSMs
to the Commission. The outcome of the discussions is summarised in a working
document[9]
addressing the following: minimum data that container carriers shall provide to
the European Commission; events to be reported; time limits for reporting; time
period of reporting; content of messaging; message formats; and methods of transmission
of CSMs.

For all these issues, the Commission was able to secure general
agreement with the industry. The only aspect still flagged by the industry as
problematic concerns the reporting obligation in case of a container that is
already laden when the reporting starts. While the shipping companies consider
it additional burden to report also about the period from the time when the
container was laden, such information is crucial for the Commission. For the
sake of the analysis and better fraud detection, it is important to use the
information about the container (and goods) movements from the beginning of
their movement until its end. This is critical information for establishing the
real route to be compared with the one declared. The solution to this concern expressed
by the industry is that the shipping lines send the required data by way of the
(recommended) global submission of data, the so-called “global dump” (global
dump involves the submission of all information including irrelevant data; selection
of what is relevant is to be done by the Commission). In those cases, the issue
of excessive burden would no longer be relevant because the companies would
"dump all data" including data relating to the period from the time
when the container was laden.

During the discussions, the industry also emphasised the need to
ensure that both financial and administrative burdens triggered by the
obligation be minimised to all possible extent. In particular, they expressed
their support to the idea of one centralised database of CSMs as it would allow
them to submit data in question only once. The industry also specifically
requested that, once the information is transmitted, it should be up to the
Commission to disseminate it to MS and to EU organisations, so that they would
not need to re-submit the data.

The intention of the Commission was to involve the industry in the
consultation process, so as to ensure that the voice of the industry affected
is carefully considered and an easy implementation of its proposal can be
swiftly achieved[10].
For that reason the opinion of the industry has been consolidated and is reflected
in the above-mentioned internal working document.

2.4.3 Data
Protection bodies

Because of different legal bases, the CIS system is split into two
parts, one containing information relating to the exclusive EU competence,
supervised by the EDPS, based on Regulation 515/97; and one containing
information relating to the Member State competence, in the context of law
enforcement cooperation, supervised by the Customs Joint Supervisory Authority
(CJSA), based on Council Decision 2009/917. Meetings[11] with both bodies responsible
for the data protection in this area were organised and their views have been
taken into account in the preparation of this Impact Assessment. The discussion
focused primarily on the need to ensure better cooperation between the two
bodies. The EDPS suggested as a best option the so-called 'coordinated
supervision' referring to the example of Eurodac (i.e. large database of
fingerprints of applicants for asylum and illegal immigrants found within the
EU).

2.4.4 Other
expertise used

Additional expertise used for the purposes of this Impact Assessment
was derived from two initiatives: (1) the ConTraffic project and (2) ATIS
(Anti-Fraud Transit Information System). Both initiatives were launched to
examine the problems which are within the scope of this report (i.e. customs
fraud in the area of transit and customs fraud related to goods origin). The
experience gathered on the basis of these initiatives and the results available
provided major input for this Impact Assessment.

In particular, the ConTraffic project confirmed the usefulness of
the so-called Container Status Messages (CSM), information crucial to the
success of this initiative. It also revealed that the situation under
Regulation 515/97 can be further improved. While the current Article 18a of
Regulation 515/97 empowers the Commission to "establish and manage a
directory of data received from public or private service providers active in
the international supply chain", it does not legally oblige the
companies/economic operators to provide the Commission with CSM. The feedback
from the relevant companies was that in general they would be able to provide
this information but only in response to an explicit obligation in the
legislation.

ATIS, on the other hand, illustrates the importance of information on
transit for detecting customs-related fraud. The engagement of the Member
States in the project (see below) confirms its usefulness.

2.4.4.1 ConTraffic

· 
A joint-intelligence exercise conducted by OLAF
together with the Joint Research Centre (JRC), and with the participation of
several national customs authorities;

· 
Aims to detect new cases of commercial fraud of
the type "false declaration of origin";

· 
ConTraffic-SAD automatically verifies the origin
of goods using i) import declarations (SAD)[12]
for containerised cargo which are voluntarily provided by some Member States
and ii) CSMs where the status and location of a container is registered along
with the time and date;[13]

· 
"Potentially suspicious" transactions
are automatically identified based on discrepancies between the origin of the
goods declared by the importer and the respective origin derived from trace
& tracking of the physical movements of the container(s);[14]

· 
In the two years of its operational phase
(2011-2012), ConTraffic-SAD has identified 338 suspicious transactions
related to EU importation of containerised cargo, leading to 14 investigation
cases being opened by Member States. Out of these 338 suspicious
importations, 80 proved to be related to existing OLAF cases to which the
project provided support. These results from ConTraffic-SAD clearly demonstrate
that risk-analysis based on container-movements is effective in what concerns the
detection of fraud of the type "false declaration of origin";[15]

· 
The project proves the usefulness of import
declarations and the CSMs. As regards the latter, the Commission's current
approach[16]
only yields information on the movements of less than 30% of containers
crossing the EU external border. As a consequence, a large part of the
necessary information (i.e. CSMs) is still missing. This fact prompted further
reflections on the current framework.

2.4.4.2 
Anti-Fraud Transit
Information System (ATIS)

· 
A joint project between OLAF, DG TAXUD and
Member States operated by OLAF;

· 
Used for analysis of transit-related data in
order to detect abnormal patterns in the transit movement and diversion of
destination;[17]

· 
Operational since 1st July 2009, originally with
sensitive goods data (1%) and extended to all goods as of 1st September 2011 –
with ca. 11 million movements / year (~30.000/day);

· 
As a fully automated system, it collects
transit-related information on sensitive and non-sensitive goods. This
information is obtained through information transfer (copy) from a TAXUD
environment[18]
directly to OLAF; hence creates no costs for Member States;

· 
ATIS is a non-binding agreement currently based
on Art. 15(2) and Art. 17(1)(a) third indent of Regulation 515/97 and Art. 13
of Regulation 2913/92. However, some Member States question whether these
articles in fact provide sufficient legal basis;[19]

· 
While ATIS provides useful analysis in support
of fight of the customs fraud in the area of transit, it reveals some
shortcomings, which served as one of the reasons for further reflection on the
current framework.[20]

3 
Problem
definition
3.1 
Problem
introduction and measures in place

Various measures have been adopted by both the EU and Member States
in order to detect, prosecute and deter fraud. However, as it will be
demonstrated in the following chapters, these measures have some shortcomings
which render the EU's and Member States' efforts to combat fraud sub-optimal. The
main problems identified by this Impact Assessment are instances of customs related
fraud that continue to go undetected.

OLAF has analysed the identified cases of fraudulent behaviour,
which can be broadly categorized into three types: (1) mis-declaration of
origin; (2) mis-description of goods; and (3) misuse of the transit system.
These three types of customs fraud[21]
are well known to the Commission and the alarming effects they create call for
further action. The losses to the EU budget resulting from these illegal
activities are substantial.[22]

Further to the issues raised above, this document addresses also
additional problem of the existing regulatory set up causing delays in OLAF
investigations. This issue is not included in the core problem but is presented
in a separate chapter.

The assessment conducted in the preparation of this document
revealed also other shortcomings. In particular, as regards the databases (i.e.
CIS and FIDE), there is currently no technical possibility to restrict inserted
information to selected group of users, which creates an obstacle when using a
database. As regards the data protection supervision, the recommendations
issued by two different competent supervisory bodies overlap and create
inefficiencies. Additionally, there is a need to clarify the use of information
exchanged via mutual assistance and its respective admissibility in the
national courts. These problems are however not addressed in this Impact
Assessment as they are considered to be matters of mere clarification.

The problems identified and discussed in this Impact Assessment
relate only to the customs domain and not to the agricultural domain which is
also covered by Regulation 515/97.

3.2 
Current
legal instruments and structure of the system

The main legal instrument[23]
to address breaches of customs legislation in the context of international
cooperation is the Council Regulation 515/97 on mutual assistance
between the administrative authorities of the Member States and cooperation
between the latter and the Commission to ensure the correct application of the
law on customs and agricultural matters. It is accompanied by the Council
Decision 2009/917/JHA on the use of information technology for customs
purposes. While both instruments aim to assist in preventing, investigating and
prosecuting serious breaches in customs (and agriculture), the Regulation
governs matters of the exclusive EU competence (breach of EU legislation),
whereas the Decision addresses matters of Member States' competence (breach of
national laws in the area of customs).

3.3 
Problem
description 
3.3.1 Core problem

To fight customs-related fraud, i.e. to early detect and
successfully investigate potential fraud cases, it is imperative to have
indications about trends and changes of import, export and transit behaviour,
analysis of the profiles of suspected traders, effective risk management, etc.
The following sub-chapters describe the shortcomings of the currently available
measures, which hamper the detection of customs related fraud in the form of
mis-declaration of goods origin, mis-description of goods and misuse of the
transit system.

3.3.1.1  Mis-declaration of goods origin

· 
What does mis-declaration of goods origin
entail?

Several fiscal and economic EU policies, such as custom duties and
quantitative importation restrictions, depend on the origin of the imported
goods. Mis-declaration of goods origin can give significant undue market
advantages to economic operators implicated in the fraudulent transactions,
such as: i) circumvention of anti-dumping levies; ii) illegitimate use of low
rates of customs duty intended for products originating from a preferential
country; iii) and avoidance of quantitative limits imposed by importation
quotas.

Example: Mis-declaration of origin of textile products

In 2007, OLAF was informed about doubts relating to the origin of textile products imported into the EU. The subsequent investigation revealed that textile products originating from country B were wrongly declared as originating from country A. By claiming false origin, the economic operators involved could fraudulently enjoy a 0% preferential rate of duty instead of 12%.[24] In March 2007, an OLAF-led EU administrative cooperation together with the support and cooperation of the local authorities identified around 1.400 forged or invalid proofs of origin declarations. The estimated amount of EU own resources (customs duties alone) evaded on these consignments was 5 million EUR.[25]

These examples show how important it is for the EU to detect and
investigate cases of mis-declaration of origin, resulting ultimately in
financial losses to the EU budget.

Yet another example on customs fraud of type ‘false declaration of
origin’ is provided below.

Example of usefulness of import declarations when combating breach of customs legislation of type ‘false declaration of origin’

Fasteners other than stainless steel are subject to an Anti-Dumping Duty (ADD) for imports from the People’s Republic of China to the EU since February 2009. Once this measure had entered into force, imports of such goods from China declined substantially, while at the same time statistics reported a considerable increase of imports from another ASEAN Member Country (Asian country 1). This is shown in the graph below. Investigations carried out by OLAF in the second half of 2010 caused a subsequent shift of imports from Asian country 1 to Asian country 2. A full follow-up on Import-Export information proved the shift and hence the false declaration of origin.

Effects of introduced Anti-Dumping Measures

Figure 2: Effects of introduced Anti-Dumping Measures   Legend: · Imports from China · Imports from Asian country 1 · Imports from Asian country 2

· 
What are the loopholes in the current system?

In order to verify the authenticity of the declared origin of the
goods, customs authorities perform a document-based check, relying on
supporting documentation such as the invoice, certificate of origin and bill of
lading. However, none of these documents contain detailed information about the
full transport-logistic steps followed by the sea-container transporting the
goods; hence the customs officers do not have the means to verify whether the
declared origin of goods is consistent with the route actually followed by the
sea-container which transported the imported goods. This makes the
identification of potential cases of mis-declaration of origin very difficult.
In order to make a full use of the existing risk assessment methods, one needs
to know ‘who is moving what, to whom, from where’. Data on the real parties
behind the transaction and the movement of goods (buyer and seller or owner),
and on the precise goods involved, is essential but so is
information on the routing of the goods throughout the supply chain.[26]

· 
Scale

While Member States reported 186 cases of detected fraud and
irregularities amounting to a damage of 17.6 million EUR, related to incorrect
origin or country of dispatching in 2011[27],
in reality such breaches of the customs rules are likely to be considerably
more numerous. Analysis for evaded duties indicates that there must have been
in 2011, for EU27, more than 1.500 cases of false declarations of origin which
resulted in loss of revenue for the EU for the total value of at least 25
million EUR and likely to exceed 100 million EUR[28].

Example: Preliminary results of ConTraffic

After a quick automatic analysis of a huge number of declarations (over 230.000 import declarations – ca. 30% of the 2011 import declarations for containerised goods for one MS) 42 highly suspicious cases have been identified. The total evaded duties for these cases were estimated at around 3 million EUR. The cases found involved evasion of import duties, anti-dumping duties and VAT payment.

The values provided above
illustrate the magnitude of the problem. Overall estimation of losses incurred
due to the relevant type of the customs-related fraud is provided under the
scale of the problem analysis.

· 
Drivers: Gaps in the existing system for the
detection of mis-declaration of origin.

There exist various duties, taxes, rates and quantitative limits
which have to be respected by traders in order to carry out legitimate trade in
the EU. The financial benefits resulting from the avoidance of these charges
constitute an incentive for fraudsters to commit fraud in the form of
mis-declaration of origin. As already explained, there are currently limited
means of checking true origin of imported goods and it is not possible for the
customs officers to verify whether the declared origin of goods is consistent
with the route followed by the sea-container transporting the imported goods.
Such information is crucial for detecting cases of mis-declaration of origin.

3.3.1.2 Mis-description of goods

· 
What does mis-description of goods entail?

“Mis-description of goods” means that the
goods are classified incorrectly. The classification of different goods largely
determines what duties and controls will apply to them. Member States use
commodity codes found in the TARIC[29]
to classify individual products. The correct description of goods ensures that
correct amounts of duty and VAT are paid. Many goods are subject to specific
controls – e.g. those falling under the Common Agricultural Policy of the EU or
those subject to anti-dumping duties or tariff quotas. Incorrect classification
has a negative impact on the EU budget as illustrated by the examples below.

Examples: Mis-description of goods

In 2010, OLAF received information that fresh garlic of the species Allium Sativum was suspected to have been mis-declared as Allium Ampeloprasum. More than 1.200 tons of fresh garlic had been mis-declared for an estimated loss of 1.5 million EUR to the EU budget.[30] In 2011, six containers containing a total of 144 tons of smuggled fresh garlic disguised as onions have been intercepted in Poland. The financial impact on the EU budget of the garlic seized is 180.000 Euro in terms of customs’ duties - this loss has been prevented. However, the total impact, in terms of evaded customs’ duties for garlic declared as onions in this way, is estimated at more than 1 million EUR.[31]

· 
What are the loopholes in the current system?

In order to verify the authenticity of the declared description of
the goods, customs authorities perform a document-based check, relying on
visual check of goods as well as supporting documentation such as the invoice
and the bill of lading. The selection of suspicious cases is based on possible
notifications received from various sources (such as for example other customs
authorities or economic operator) and analysis based on limited data available.
The main drawback of the current procedure is that the targeting of such controls
is not systematically based on broad analysis using global data. For this
reason the investigations in this area can only be performed sub-optimally. In
order to strike the right balance between the security and trade facilitation,
the customs authorities cannot check every single consignment and therefore
they must base their work on the risk assessment. This risk assessment approach
helps to select the suspicious cases. However, in order to create risk
profiles, different Commission services make currently repetitive requests for
the same data. This creates an unnecessary burden for the Member States and
negatively influences their efficiency.

· 
Scale

Member States reported 1.905 cases of detected fraud and
irregularities amounting to a damage of 107.7 million EUR, related to
mis-description of goods in 2011[32].
This is, however, only a damage detected by the Member States and the
Commission. The actual losses are most likely substantially higher.

The values
provided above to illustrate the magnitude of the problem may to a certain
extent overlap with the numbers provided in the examples illustrating the
problem.

· 
Drivers: Gaps in the existing system for the
detection of mis-description of goods.

As already explained, classification of goods constitutes a basis
upon which the applicable duties and controls are determined. Therefore,
similarly to the cases of mis-declaration of origin, there is a great scope for
undue financial benefits resulting from incorrect classification of goods.
Fraudsters have a great incentive to profit from the existing gaps in the
system which unless addressed will continue to be used to commit
mis-description of goods.

3.3.1.3 Misuse of the transit system

· 
What does the misuse of the transit system
entails?

The main risk related to the misuse of the transit system is that
goods are incorrectly declared or partially or completely unloaded or loaded
without authorisation. Misuse of the transit system can take place at the start
of the transit procedure, during the transport and at the end of the transit procedure.

Example: Misuse of the transit system

In recent years, significant quantities of fresh garlic of Chinese origin had entered the European Union and had been declared for transit to consignees in third countries. It was established that a large number of these consignments were unlawfully cleared at customs offices located at the external borders of the European Union and that these consignments in fact remained within the European Union with the aim of evading the applicable customs duties. Based on transit data received from Member States, OLAF discovered more than 1.400 suspicious shipments which included more than 300 concerning garlic. The standard average of 30.000 EUR per truck results in the loss of 9 million EUR to the EU budget.[33]

· 
What are the loopholes in the current system?

In order to verify the goods in transit customs authorities
perform a document-based check and visual check. However, these methods are
limited, as far as their effectiveness and efficiency is concerned, by the
available man-power. They also miss the opportunity to profit from the
technical development allowing automatic analysis, as demonstrated by
ConTraffic. Without proper analysis it is necessary to carry out more controls
which in turn may lead to serious disruptions of trade flows and would
encounter staff constraints. It is certainly an advantage that Member States
and OLAF can use ATIS which is a system for the analysis of transit-related
data in order to detect abnormal patterns in the transit movement and diversion
of destination (as described in chapter 2.4.4.2). This system
suffers, however, from two main shortcomings. Firstly, information available is
limited to movements between Member States and does not include the movements
inside one Member State (national movements). This means that a suspect
movement of a transit consignment inside a Member State cannot be detected. For
instance, goods from third countries can be temporarily imported at Marseille
without paying duties and put in transit to Le Havre where they can be exported
from the EU. A suspicious movement inside the country could mean that part of
the shipment has been unloaded and duties were avoided.
Secondly,
the administrative arrangement in place provides only for the insertion of the
initial transit information, thus important subsequent information is missing,
such as modifications in the routing schedule or results of controls. These
messages exist already and are stored in the national databases.

· 
 Scale

The overall results of cases detected in transit by OLAF from 2006
to 2010 show for EU27 more than 3.800 breaches of customs legislation related
to the transit movements which resulted in loss of revenue for the EU. The
total value of those detected cases appears to be around 60 million EUR. On average,
this would imply a loss of more than 12 million EUR per year. Importantly, this
sum represents only the losses that can be traced back to detected cases of
misuse of the transit services as identified by Commission Services. The scale
of the actual damage caused by the misuse of transit system is arguably much
higher.[34]

The values
provided above to illustrate the magnitude of the problem may to a certain
extent overlap with the numbers provided in the examples illustrating the
problem.

· 
Drivers: Gaps in the existing system for the
detection of misuse of transit

As is the case with two previous problems, also here the main
drivers behind the misuse of the transit system are the existing loopholes in
the procedure.

3.3.2 Other
problems
3.3.2.1 Delays in OLAF investigations

Until recently, the documentation related to the customs operations
has been kept by the responsible national authorities. From 2011 on, to
simplify the customs processes and communication, e-Customs[35] has been introduced. Since
then, a substantial part of these documents (i.e. declarations) is recorded and
shared in the electronic customs database[36]
and the other part – the so-called supporting documents – is kept by the
economic operator for 3 years.[37]
Up until now, if needed in the course of OLAF investigations, OLAF approached Member
States to receive the necessary documentation (supporting documents - i.e. invoice, certificate of origin, etc.)
and received it in due time as it was already in possession of the Member States.
However, since 2011, the procedure is prolonged by several months as the
national authority is no longer keeping those supporting documents, and has to
approach the economic operator first to be able to provide them to the
Commission/OLAF. Importantly, the fact that Member States are no longer in
possession of the supporting documents means that they are often unable and
sometimes even reluctant (due to the fact that they may not be directly
involved in the investigation in question) to assist OLAF in obtaining them.

There are several examples, demonstrating the difficulties related
to obtaining supporting documents which prolong the process of investigation
and hence hinder the possibility to recover the amounts related to relevant
fraud. One example is the difficulty to retrieve the information in cases where
several Member States and several companies are involved, often further
complicated by the involvement of subcontractors or forwarding companies. In
such cases not only a lot of time may be lost but the relevant information may
not become available at all.

Example: Problem of obtaining supporting documents

A company established in MS1 imported aluminium road wheels from Malaysia, allegedly evading anti-dumping duties. The goods were declared by a customs agent for free circulation in MS2. OLAF requested documents related to the importation, but customs authorities from MS2 were not able to provide them because the customs agent did not possess them. In this case, there is of course a possibility to send a request to MS1 authorities but since they have no knowledge about the importation in question it will further prolong the whole procedure.

The importance of fast procedures for obtaining supporting documents
is linked to the possibility of proving the breach of legislation and
recovering financial losses before they are time-barred. To be successful, the
investigation related to customs area must be closed within three years from
the moment the fraud is discovered.[38]
The first challenge is the fact that the allegation often comes to the
attention of OLAF only about a year after the fraud has happened. Thus, one of
the three years has passed already. The next problem with the current system is
that, for the time being, OLAF investigators have to wait 3 to 7 months out of
this three year period for obtaining supporting documents from the Member States.[39] This is because OLAF cannot
obtain this information directly from the private companies. Additionally,
several more months are needed for obtaining translations of the relevant documents
once they have been provided to OLAF. Moreover, as the examples demonstrate, Member
States may finally not be in the position to assist OLAF in obtaining the
documents in question because the importing company is established in a
different Member States. In view of the above, sometimes a case might not even
be opened because the prospects of closing it before the deadline are small.

The established practice of OLAF investigators is to respect the
time limits by calculating approximately how long the investigation is likely
to last. They then focus on the fraudulent activity that will fall within the
prescribed time frame by deducting from the time limit period time to be spent
on the investigation. This assumption as to the length of the investigation
takes into account the time needed for obtaining supporting documents. Hence,
the time lost with Member States for obtaining supporting documents is actually
money lost to the EU budget because the longer the investigation the shorter
the period of the actual fraud that can be addressed.

· 
Scale

OLAF's experience shows that obtaining documents
supporting imports and exports takes between 3 to 7 months. The European Court
of Auditors, in a 2010 audit[40] , found that “In the 274 declarations
checked, 49 errors[41] were found, giving rise to 558 000 EUR of loss of duty. These amounts are
time-barred and therefore can no longer be recovered and are definitively lost
for the Community budget.”

· 
Drivers: No legal provision accommodating the
need for faster procedures relating to OLAF investigations

The recent introduction of the e-Customs provides that the import
supporting documents (i.e. invoice, certificate of origin, etc.) are kept by
the economic operators and not by the customs administrations. This introduces a
time loss since a variety of actors need to contribute/respond to the request
before the documents become available to OLAF. There is currently no provision
in the legal framework which could be used to accelerate procedures related to
OLAF investigations.

3.3.2.2 Issues requiring further clarification

As mentioned in the introduction, other issues were identified that
would need further clarification. Due to their technical nature and/or being
formal clarifications, they will not be discussed in this Impact Assessment.
Nevertheless, the main points concerning these issues are briefly explained
below.

· 
Restricted visibility as a technical feature
in databases

Feedback from the database users revealed the lack of possibility
for the user to select who will be able to access the data inserted in
databases established on the basis of Regulation 515/97. However, given the
fact that this is a problem of a purely technical nature which requires
technical changes of the already existing system, it is not further considered
in this report. For the sake of clarification and to raise awareness, an
explicit reference to the possibility of the so-called "restricted
visibility"[42] will be inserted in the modified legislation.

· 
Data protection supervision and related
recommendation

As already described in chapter 2.4.3, the central databases CIS[43] and FIDE[44] are split into two parts and governed by different supervisory
bodies.  Applying recommendations of one of the two bodies affects both
databases. Consequently, the approval of the other supervisory body needs to be
sought before any recommendation can be implemented. This causes inefficiency
and generates additional costs in terms of resources and time. Carrying out the
recommendations can continue even one year after the audit took place. Given
the fact that this problem is of a purely internal nature, it will be addressed
via encouraging a closer collaboration of the two supervisory bodies. Therefore,
this problem will not be discussed further in this Impact Assessment.

· 
Admissibility of evidence in national courts

The objective of mutual assistance is to provide other Member States
with information and documents. This, as a matter of principle, should include
the possibility of using such information and documents as evidence in criminal
proceedings. However, on a number of occasions OLAF was informally notified
that there are cases of reluctance to use documents obtained via mutual
assistance channels as evidence in criminal proceedings because the provisions
of Regulation 515/97 are not sufficiently clear on this point. This inevitably
causes delays in proceedings or may even result in the dismissal of the case
due to time barring. Importantly, it also undermines the principle of legal
certainty given the fact that relevant provisions of Regulation 515/97 are
subject to differing interpretations. In particular, Article 12 of Regulation
515/97 which merely provides that "Findings, certificates, information,
documents, certified true copies and any intelligence obtained [...] may be invoked
as evidence by the competent bodies of the Member States of the applicant
authority". It appears that the term "competent bodies of the Member
States" needs clarification. Consequently, this issue will be addressed in
the proposal for the amendment of the regulation but will not be furthered
discussed in this Impact Assessment.

3.4 
Overview
- Problem description

Below
is an overview of problems which will be discussed in this Impact Assessment.

Figure 1: Overview of drivers, problems and consequences

Source: Analysis by OLAF (2013)

The problems of mis-declaration of origin, mis-description of goods
and misuse of the transit system are interlinked in the above graph because
they essentially concern instances of customs fraud (albeit in a different
form).

3.5 
Coherence
with other Commission policies

Action against customs fraud is an important part of the Union’s
overall activities against fraud and contributes to the overarching objective
of protecting the Union’s financial interests as enshrined in Article 325 of
the TFEU. The customs cooperation is premised on Article 33 TFEU.

This Impact Assessment has been drafted in line with various
Commission policies in order to ensure complementary approach across the Commission's
departments.

· 
Risk analyses in the area of customs fraud

Strategic objectives of the EU Customs
Strategy include, inter alia, developing effective risk assessment (in order to
contribute to the fight against terrorist and criminal activity) and enhancing
effective and systematic sharing of risk information.[45] The proposal discussed in this
Impact Assessment would complement the work of the Commission in the area of
risk analysis.

Furthermore it is in line with the recent
Directive 2010/65/EU on reporting formalities for ships arriving in and/or
departing from ports of the Member States and provides for a more complete data
picture.

· 
Protection of the EU's financial interests

The protection of the
EU's financial interests is an important element of the Commission's political
agenda, in order to consolidate and to increase public trust and give assurance
that taxpayers' money is being used correctly.[46]
Importantly, information on transit declarations can be
helpful in ensuring that Member States' procedures comply with the relevant
regulations and that traditional own resources (TOR) have been properly
calculated, established and accounted. For the time being, information on
transit declarations is available to OLAF only partially and is usable for
strategic or operational analysis only. Broadening availability and sharing
collected information within the scope of the cooperation in this area
(protection of the financial interests) would lead to more efficient and
effective use of resources for both, the Member States and the Commission which
would contribute to the overall aim of protecting the EU's financial interests.

· 
Interoperability of electronic systems

Rationalisation of reporting formalities required by EU legislation
is an important consideration not only for OLAF but for the whole Commission.
In view of this, a careful consideration was given to the way in which the
possible new databases could be linked with the already existing ones and how they
may supplement each other.

3.6 
Main
actors affected by the current situation

· 
Industry & economic operators

The customs controls are
time-consuming for both the controller and the controlee. It is necessary to
concentrate on improving the risk-assessment approach because otherwise the
controlees who are compliant with the existing rules unnecessarily lose time
and therefore also money on controls that should rather be targeted at the
suspicious cases/consignments. The current situation is problematic not only
for the shipping lines but also for the economic operators/customers whose
consignments might be delayed due to these controls. It is also important to
note that by suffering from inefficient control measures, the compliant
controlees might perceive fraud as a relatively 'attractive and safe' method of
doing business. Therefore it is critical to ensure that the system serves as a
successful disincentive for potential fraudsters and protects traders from
unfair competition.

· 
Member States

Fraud not only affects the
EU budget but it is also a matter of great importance for the Member States'
national resources. Member States directly lose revenue in cases when
fraudsters avoid customs duties (and subsequently also the inadequately paid
VAT) by mis-description of origin, mis-declaration of goods and misuse of the
transit system.

· 
The European Union

The main reason
behind anti-fraud legislation is the need to protect the Union's financial
interests. Mis-declaration of origin, mis-description of goods and misuse of
the transit directly affect the EU budget by circumventing different types of
duties that should normally be collected by the EU such as for example
anti-dumping duties. The amount of money that is lost yearly due to these
illegal activities is substantial.[47]
However, it is also important to note that the protection of financial
interests has a much broader dimension in a sense that each
euro lost because of fraud can then not be invested into growth and jobs, which
is the main objective of the EU budget. In addition, benefits to EU citizens
and business, whether it is through blocking unsafe or illegal imports,
facilitating smooth trade and a strong Internal Market cannot be realised. Therefore, ineffective detection, investigation and
ultimately prevention of customs fraud not only undermine the budget of the EU
but also have a negative effect on the policies and initiatives of the Union
that are designed to benefit all European citizens.

· 
Commission (OLAF)

OLAF makes a
substantial contribution to the protection of the financial interests of the EU
and Member States' budgets every year by ensuring, through administrative
investigations and policy initiatives, that EU and national budgets are well
protected against fraudulent activities. However, as the preliminary results of
different pilot projects (e.g. ConTraffic) illustrate, there is a great
potential for more effective and efficient investigations.

3.7 
Baseline
scenario

If no action is
taken, problems in the current situation are expected to evolve as follows:

· 
Customs-related breach of legislation would
continue to remain partially undetected, causing the continuing financial
losses to the EU and allowing a lower degree of implementation of related
legislation.

· 
Fraud related to mis-declaration of origin will
further increase. ConTraffic proved the usefulness of the Container Status
Messages but as a research project will arrive to its end soon. Until a new
method helping to detect mis-declaration of origin is adopted, fraud will
continue to occur. One can even expect that fraud will be growing with
fraudsters gaining experience. Hence the above mentioned 100 million EUR linked
to the mis-declaration of origin will not only remain but will most likely grow
even further.

· 
Similarly, no improvement in the fight against
the mis-description of goods and misuse of the transit system is to be
expected. The financial losses of about 110 million EUR for mis-description and
60 million EUR for cases involving misuse of transit might even be growing.

· 
As regards the transit, the current solution -
ATIS, despite being very useful, reveals also some shortcomings. Apart from the
fact that large parts of data remain outside its scope, the most important
shortcoming is that several Member States request that this arrangement between
OLAF and the Member States is formalised and based on an appropriate legal
basis, possibly in Regulation 515/97[48].
Not respecting this request could eventually lead to the annulment of the
current arrangement and thus an interruption of the functioning of the
database. With less means, the detection success may decrease; hence undetected
fraud will inevitably grow.

· 
The delays in OLAF investigations and the
related time-barring depend on each particular case. There are various factors
which affect the time devoted to a particular investigation, including timely
responses to OLAF requests. Unless a change to the existing procedure is made,
no improvement is to be expected in the near future. It is unlikely that the
situation will change without any action being taken.

3.8 
Subsidiarity,
proportionality and fundamental rights

· 
Subsidiarity and proportionality

The need for EU legislation on mutual
administrative assistance and customs co-operation was already recognized by
the European legislator with the adoption of Regulation 515/97 and Council
Decision 2009/917/JHA. The necessity of action at EU level continues to the
extent that the transfer of goods happens across borders of more than one
Member States. Consequently, Member States alone cannot efficiently observe,
detect and mitigate risks of breach of customs legislation; nor are they
capable of pursuing investigations properly if cross-border transfer of goods
is involved. Organising activities in the area of customs cooperation at
national level would further create significant practical challenges, lacking
coherence and coordination of activities.

It is also important to note that the
EU has an exclusive competence in fraud prevention and protection of its
financial resources in customs matters. Customs fraud has a cross-border
character and is a problem common to all Member States. Therefore, it needs to
be tackled collectively. The EU is best placed to serve as a driving force
behind such collective action because it already possesses the necessary
experience, systems and expertise to ensure proper gathering, communication and
sharing of information. It is also important to note that the fight against
customs-related fraud requires a broader European approach given its
international dimension. This view is shared by a majority of Member States as
confirmed by the questionnaire carried out by the Commission in which most of
them opted for the creation of necessary databases at the EU level.[49]

More
specifically the following should be mentioned:

· 
The establishment of trends by using transit information
or CSM is only possible by means of centralised processing, in order to ensure
the pan-EU view and an analysis free from national interests.

· 
EU-wide information on import, export and
transit which is needed for the global analysis and identification of trends is
by definition more efficiently collected centrally than at national level.

Effective sharing of information and large-scale fight against
breach of customs legislation cannot, at a reasonable cost, be conducted by
national customs authorities alone. Indeed, obtaining the data necessary for
the detection of fraud and identification of fraud patterns would be of
disproportional effort to 28 individual Member States and, if achieved, of
lower effectiveness and efficiency, compared to such action at EU level.

Following these arguments and given the EU's exclusive competence in
customs union matters, it can be concluded that the EU is both entitled to and
better placed to act than the Member States.

· 
Value added

Action at EU level would enable a significant improvement in the
fight against customs-related fraud, by increasing the available evidence,
improving the possibilities for detection and repression of fraud and rendering
the action more efficient and effective.

· 
Relations with Fundamental Rights

The initiative examined in this Impact
Assessment concerns in particular the fundamental right of the protection of
personal data. This right is enshrined in the Charter of Fundamental Rights of
the European Union (the Charter) and Article 16 TFEU, based on Directive
95/46/EC as well as in Article 8 of the European Convention on Human Rights.

Article 8 of the Charter reads that "everyone has the right to the protection of personal data
concerning him or her". The
Article lays down a number of criteria for the processing of personal data.
First of all, personal data must be processed fairly and lawfully. The
processing of personal data should also take place on the basis of legislation
defining in sufficient detail appropriate data protection conditions and
requirements. Moreover, personal data must be collected for specified, explicit
and legitimate purposes and not further processed in a way incompatible with
those purposes. The processing of personal data must also be adequate, relevant
and not excessive in relation to the purposes for which they were collected
and/or further processed. Finally, one of the requirements is that personal
data must also be accurate and, where necessary, kept up to date. To guarantee
the observance of all these requirements, individuals enjoy legally enforceable
rights, notably the right to access and rectify personal data relating to them.

The respect for the protection of personal
data has already been duly considered and applied in Regulation 515/97 and
Council Decision 2009/917/JHA through rigorous rules as regards the content,
coverage of data, data preservation and data protection supervision.

4 
Objectives
4.1 
General
objectives

· 
Reinforce the protection of the financial
interests of the EU (fraud detection and investigation).

· 
Strengthen customs cooperation between
Members States and between the latter and the Commission by ensuring the
correct application of law on customs.

4.2 
Specific
and operational objectives

Figure 2: Overview –From problems to operational objectives

Problem || Specific Objective ||   Operational Objective ||

Mis-declaration of origin and related financial losses   || Increase the detectability, prevention and prosecution of customs–fraud by enhanced collaboration between the MS and between the MS and the Commission (when fighting fraud  related to mis-declaration of goods origin, mis-description of goods and misuse of transit system) || 1. Create conditions for improved fighting of customs fraud related to mis-declaration of goods origin

Mis-description of goods and related financial losses || 2. Create conditions for improved fighting of customs fraud related mis-description of goods

Misuse of the transit system and related financial losses || 3. Create conditions for improved fighting of customs fraud related to misuse of the transit system

Delays in OLAF investigations (and time-barring) || Improve the process relating to OLAF investigations linked to R. 515/97 || 4. Speed-up OLAF investigations

5 
Policy
options
5.1 
Options
addressing the core problem (operational objective 1, 2 and 3)

The breaches of customs legislation mentioned in chapter 3
(mis-declaration of origin, mis-description of goods and misuse of transit) are
often interlinked, and so are the means to fight them. Hence they will be
addressed together. Nevertheless a distinction is made between three separate
operational objectives to demonstrate through the analysis of impacts to which
extent and how each of the problems will be solved. Several options proposed
are presented and analysed below.

· 
Option 0: Keep status quo[50]

This option follows a description of the baseline scenario. The
detection of fraud related to mis-declaration of origin will profit from
(limited) information available in ConTraffic, and the ATIS arrangement might
be additionally used to help to fight fraud related to misuse of transit. No
additional measures are envisaged as regards the mis-description of goods. The
work load of the customs officers and OLAF investigators is expected to remain
at the same level.

· 
Option 1: Soft law - With appropriate
recommendations increase the detectability, of customs fraud related to
mis-declaration of goods origin, mis-description of goods and misuse of transit

This option involves the introduction
of soft law measures (i.e. recommendations issued by the Commission to the Member
States) to achieve the objectives.

As regards objective 1 (mis-declaration of origin), the
difficulty is premised on the verification of the necessary documents. The
control requires a check of relevant documents which is a manual process
involving a cumbersome procedure vulnerable to human mistakes. A common method
used by fraudsters is to mis-declare the true origin of the goods by
"trans-shipping" containers via a third country. Therefore, as
demonstrated by ConTraffic results described earlier on, tracking the real
movements of containers transporting the goods can be an effective way of
identifying potentially fraudulent operations.

Data considered useful/necessary for the analysis of container
movements can be received from ocean (deep sea) carrier companies. It is data
on the status of the fleet of containers they handle. The companies store this
information in the form of CSMs where the status and location of a container is
registered along with the time and date. The companies use this information for
their own logistics as well as to inform their customers of the whereabouts of
booked containers.

The recommendation to Member States would focus on inviting Member States
to support the Commission in its attempts to obtain CSMs from economic
operators. It would be left to the Member States to decide on specific measures
that could be taken. For instance, Member States could adopt national rules
which would require shipping lines to provide the information in question
either to the Commission directly or to the Member State that would then
forward it to the Commission. It is also important to note in this context,
that for the time being contractual obligations vis-à-vis their clients prevent
economic operators from disclosing certain information which may also include
the required CSMs. In order to respond to this risk, Member States would be
invited to adopt relevant statutory obligation that would prevail over any
contractual duty of confidentiality.

In relation to objectives 2 and 3 the recommendation would
invite Member States to provide the Commission (OLAF) with the respective data.
In reality this means authorising OLAF to access/copy the data, provided by
Member States, which is currently available in another Commission platform[51] in a similar fashion to what
is done for transit data as illustrated by ATIS example. However, the
recommendation concerning the transit data would also include additional data
(on national transit and other subsequent transit information, such as
modifications in the routing schedule or results of controls), i.e. ATIS
arrangement would be enlarged.

· 
Option 2: Responsibility to increase the
detectability of customs fraud related to mis-declaration of goods origin,
mis-description of goods and misuse of transit is vested in the EU (Commission)

This option involves the creation of an EU central database for CSM
and data related to import, export and transit as a tool to achieve the
objectives 1, 2 and 3. The central database should be the basis for the
analysis related to the detection, prevention and prosecution of the three main
types of customs fraud by exchange of necessary data, new analysis,
identification of trends and international collaboration.

This database would build on experience gained from ConTraffic and
from ATIS. The national transit and other subsequent transit information, such
as modifications in the routing schedule or results of controls would also be
included in the EU central database.

The responsibility to
collect and analyse the data would be allocated to the Commission, which would
be obliged to regularly provide the Member States with the results of the
analysis and support them by targeting national controls of customs-related
fraud. It is envisaged that the new
databases will have analytical and reporting services available to the
competent Commission services and to the Member States via the AFIS platform.

The
use of the AFIS platform also guaranties the appropriate level of security for
data storage and transfer. AFIS implements a security policy approved by the
Member States and relies in the CCN network for secure data transmission to the
Member States customs authorities. In addition, AFIS is regularly audited by
the relevant data protection supervisory bodies (i.e. EDPS, CJSA).

The data would be obtained from the following data sources: CSMs –
container tracking systems operated by the shipping lines. Transit declarations
– New Computerized Transit System ("NCTS"). Import declarations –
Surveillance II. Export declarations – Export Control System ("ECS").[52] It should be noted that,
because the ECS does not contain data on direct export, these data would have
to be supplied by the Member States in addition to what is already included in
ECS. Centralised implementation of the system would
avoid any direct impact on the infrastructure of the Member States.  Option
2 is the preferred option both by the industry and by the Member States. In
particular, the industry recognises that formal obligation at the EU level
would resolve an issue of confidentiality which is currently preventing them
from sharing CSM data. In addition, it is envisaged that under option 2,
specific provision would be inserted in Regulation 515/97 providing for a
transitional period for economic operators which would give them additional
time to re-negotiate their existing contracts and change standard contract
clauses in full conformity with the new EU obligation.

· 
Option 3: Responsibility to increase the
detectability of customs fraud related to mis-declaration of goods origin,
mis-description of goods and misuse of transit is vested in the Member States

This option involves, contrary to the above, entrusting the Member
States with the responsibility for collection and analysis of additional data
(CSM, import, export and transit data). Therefore, each Member State would
create its own national databases for CSM, import, export and transit related
data. Regular exchange and open access should allow Member States to
communicate and exchange data and to prepare regular analysis. This option is
contrary to the wishes expressed both by the industry and the Member States,

This option would require Member States to make it obligatory for
the economic operators to provide CSMs to national databases. Such obligation
would most likely be enshrined in a statutory provision at national level and
it would override the confidentiality obligations which currently prevent
businesses from disclosing this type of information. Consequently, the risk
related to legal implications of requiring data (i.e. CSMs) from operators who
have contractual obligation not to disclose it would be mitigated. Under this
option, carriers would have to submit CSM data to 28 Member States. Since some
carrier may opt for selective reporting, each Member State would then have to
forward the CSM data received to other Member States in order to achieve an EU-wide
national CSM data repository.

It is expected that Member States would rely also on the CCN network[53] for secure data transmission
and that the security of the databases would be guaranteed by applying the IT
security standards in place for national customs IT systems.

Each Member State would have to adapt and extend its national
systems for import, export and transit data in order to forward to other 27
Member States its own data on a regular basis and to integrate the data
received. The case of transit is even more complex due to the involvement of
non-Member States. Potential overlaps could be avoided if Member States would
rely on the existing IT systems operated by the Commission (e.g. ECS or
Surveillance II) to partially lower the risk and cost of implementing this
option. In any case, Member States would have to implement their own reporting,
alerting and analysis system to exploit data. The use of different analytical
tools would represent a challenge when it comes to the exchange of results of
the analysis.

· 
Option 4: Shared responsibility between the
Commission and the Member States to increase the detectability of customs fraud
related to mis-declaration of goods origin, mis-description of goods and misuse
of transit

There are several possibilities how such a 'mixed' option could be realised
and there are various ways in which the responsibility between the national authorities
and the EU could be shared. Among those possibilities, some involve a very
disproportionate burden for MS and are manifestly inefficient and undesirable;
such are the possibilities that involve parallel creation of systems all doing
global analysis (for example one Contraffic per MS). These combinations were
not further considered.

To illustrate the possible operation of this option the following
mix of responsibilities is considered. The CSM and transit data would be
collected at the EU level and the Member States would be responsible for data
related to import and export. This is the most plausible mixture because it
takes into account the current settings (Commission handling the ConTraffic and
ATIS) hence, allocates the responsibility accordingly. The responsibilities
retained by the Commission would be implemented according to the principles of
option 2, whereas the considerations made under option 3 would apply to the
implementation of the competencies retained by Member States. The data security
considerations under options 2 and 3 are also applicable.

This option would require the Commission to make it obligatory for
the economic operators to submit CSMs. Such requirement would take a form of
legal obligation included in Regulation 515/97 and it would prevail over any
contractual duty of confidentiality.

· 
Option 5: Baseline scenario plus

This option suggests increasing (doubling) the man-power assigned to
the detection and prevention of the relevant customs fraud. The necessary
controls are carried out by a number of customs authorities using varying
techniques. By relying upon more
control officers and more investigators, it is expected that more fraud would
be detected and possibly also prevented. The proposed doubling of resources
could concern both Member States and the Commission (OLAF).

After thorough analysis this option is discarded at this stage.
First of all, suggestion of increasing the number of staff in Member States as
well as in the Commission, working on controls and investigations, appears
delicate in the time of the economic crisis and global resource constraints. In
addition, this option would inevitably impose a substantial financial burden on
both the Member States and the Commission. Finally, the main drawback of this
option is that it would not improve the efficiency of controls (by improved
targeting of controls) but it would rather increase the amount of controls and
investigations as such.

5.2 
Options
addressing other problems (Objective 4)

Difficulties related to the length of the investigation procedures
and the related time-barring of OLAF investigated cases contribute to the
continuous misuse of the existing rules and provide unfair advantages to
fraudsters, while causing financial losses to the Member States as well as to
the EU budget. Several options as to how this problem should be addressed are
presented below.

· 
Option 0: keep status quo

As already explained in the baseline scenario (chapter 3.6), OLAF
investigations cannot be conducted faster without additional measures and human
resources. Therefore no improvement can be expected in the near future. On the
contrary, due to "resource crunch" in public administration it is
expected that the situation may further deteriorate. Moreover, a reduction of
2% in the overall number of available posts in Commission was implemented in 2012.
Further reductions are foreseen for the future.

· 
Option 1: Soft law - Issue a recommendation
to speed up the procedure and request Member States to provide the supporting documents
within a deadline

This option suggests issuing a recommendation inviting Member States
to contribute to a faster procedure. A recommendation is a non-binding
instrument, which can be understood as an appeal to Member States to improve
the current practice and contribute to the process of speeding up the
investigations and fraud detection. The Member States would be invited to speed
up their national procedures in order to ensure that the Commission receives
the requested documentation in due time. It would be left up to the Member
States to decide how to meet the deadline imposed by the Commission. One
solution would be, for instance, to oblige the companies at the national level to
provide requested documents within a specified period of time so that the
Member State could meet its deadline.

· 
Option 2: Speed up the investigation
procedure by empowering the Commission to directly ask economic operator for
supporting documents

Similar to sectoral rules relevant for other OLAF investigations,
the Commission would be empowered to request supporting documents directly from
the economic operators. This option involves a change of the role of the Member
States in the communication chain. (Member States would be informed but would
not play an active role.) In practice, this option enables the Commission to
directly address the private sector operators with the request for the
provision of relevant documentation without the need for Member States'
intermediation.

· 
Option 3: Increase number of investigators in
Commission/OLAF

This option suggests the improvement of the working flow at OLAF by
increasing the number of investigators employed by OLAF. It is assumed that by increasing
the number of investigators working in OLAF, the time spent on investigation
should be shortened. It is expected that speedier work at OLAF would alleviate the
problem of lengthy investigations. This option presents a different solution as
compared to options 1 and 2 because it focuses on shortening the time spent by
OLAF on investigations, rather than shortening the time spent on obtaining
relevant documentation.

· 
Option 4: Request economic operators to
additionally provide information at national level through a modification in
the relevant EU legislation[54]

This option implies the return to the situation from before 2010
(i.e. before e-Customs was introduced). Under this option, economic operators
would be obliged to provide information and all supporting documents to their
respective national authorities, as they did before e-Customs was implemented.
Hence, when OLAF investigators would need such information, the national
authority should be in position to provide it immediately without the need to
contact relevant private sector operators.

· 
Option 5: Impose a deadline for providing the
supporting documents

This option suggests the imposition of a specific deadline for
Member States to provide the Commission with the relevant documents. However, such
a requirement may be considered by the Member States as too intrusive.
Moreover, a single deadline for all cases will fail to take into account the
fact that each investigative case is different; there are various degrees of
complexity of cases and therefore the types of documents and the volume differ
from one case to another. It is also assumed that the Member States provide the
requested documents as soon as they are available to them but the national
procedures, depending also on the above mentioned complexity of any given case,
can vary. Not respecting the deadline for justifiable reasons, would
nevertheless create the obligation for the Commission to start infringement procedure
against the Member State in question, resulting in additional administrative
burden on both sides. Therefore, this option was discarded at this early stage as
bringing fewer benefits than potential disadvantages and/or costs.

6 
Assessment
of impacts of the policy options

Common considerations

· 
Fundamental rights

All the options under this initiative
respect the fundamental rights, freedoms and principles contained in the Charter
of Fundamental Rights of the Union and in particular protection of
personal data, as described in the chapter 3.8. In this context it is important
to note that the envisaged CSM database would contain no nominal data.
Databases on import, export and transit would contain personal data and
protection of this data is to be monitored by EDPS according to already
applicable standards laid down in Regulation 515/97.

· 
Environmental impact[55]

There are no environmental impacts associated with any of the
options within this initiative. In theory there is a possibility, under options
3, 4 and 5 addressing the operational objective 1, that shipping lines may
shift a burden associated with additional reporting obligation on their clients
by increasing the prices for the services they provide and this price increase
may arguably initiate changes in trade patterns (i.e. a modal shift from sea to
less environmentally friendly means of transport such as road or rail).
However, such modal shift may occur
only if the relative price of shipping by sea increases sufficiently to cause
shippers to look for shorter sea routes and move more cargo by land. Since port
infrastructure is also a large determinant of freight costs, it may take
significant changes in relative freight rates to cause any modal shift.[56] In any case, given
the fact that proposal presented in this Impact Assessment should not in
practice result in freight rates changes, it is considered that no environmental
impacts would be caused by this initiative.

· 
Impact on SMEs

The impact on SMEs is relevant only for that part of the options
addressing the operational objective 1. However, the ocean carrier companies
are already obliged to submit similar data to the US authorities.[57] Therefore, in principle these
companies should not be burdened with additional costs. In any case, it appears
that no SMEs are present in the relative branch of industry (i.e. shipping
lines). WSC which represents 90% of global liner vessel capacity is composed of
29 companies none of which can be considered as SMEs. However, there are also
freight forwarders companies (sometimes renting containers from the shipping
lines) that may be also burdened with the new obligation. Therefore, in order
to avoid potentially negative impacts on SMEs in freight forwarding sector, it
is envisaged that the only obligation which directly affects economic operators
(i.e. obligation to provide CSM related data) should apply exclusively to
economic operators who already possess this data. Since all companies other
than SMEs are already producing this information (for their own analysis and for
their clients) such condition would ensure that SMEs are not negatively
affected by the proposal.

For all other objectives, the impact on SMEs is out of the scope, as
the SMEs are not concerned.

· 
Social impact

No specific social impacts can be associated with any of the
options under this initiative. The proposal will neither lead to new job
creation nor to job losses. In other words, the proposal will not affect the
functioning of the labour market.

However, some general positive impact created by the reduction
of smuggled goods onto the EU market could be envisaged. Such reduction may result
from an increased targeting of customs-related fraud (in particular IPR related
infringements). An in-depth analysis related to this phenomenon was conducted
by DG ENTR. It is important to note that original products must pass a number
of quality controls to ensure their conformance with safety measures. These
controls are in most cases not respected by fake products, therefore
counterfeit goods do not offer any guarantee for public health; they in fact
can even be dangerous for the consumers.

In particular, one could speak of potential aspect of health
hazard, especially in the context of smuggled food products, medicines and
cosmetics. They may cost less, but they can have serious adverse effects as
they can be of poor quality, made of the wrong components/ingredients and have
questionable effectiveness, if any. An increased risk can also be associated
with the products where the risk is less obvious, for example car parts, toys
or even shoes and garments.

Last but not least, it is also recognised that trade in counterfeit
goods also increases citizens’ tax bills; EU residents pay taxes and get public
services in exchange, but their honest contribution is increased because of counterfeit
goods. Therefore, the increased and better targeted actions against customs
fraud (related to IPR) would have a broad positive social impact.

· 
Impact on sector competitiveness

No negative impacts on sector competitiveness are expected to
arise from this initiative. The proposal does not affect in any way the costs
of doing business or the international competitiveness. As already explained,
the only obligation affecting directly the industry (i.e. obligation to provide
CSMs) should not in principle impose additional financial burdens on the
companies, as there is a way for a quasi no cost option, building on the
experience these companies have with the reporting of the CSMs to the US
authorities. In addition, no impact on international competitiveness can be
associated with this proposal because the obligation to provide CSMs would not
only be limited to companies in the EU. In addition, the obligation to provide
CSMs also applies in the US.

It is expected that less fraud will have a positive impact on the
fair competition of the market, in particular thanks to better targeting of
customs fraud related to IPR infringements. This is because counterfeit
products do not usually follow the requirements of the internal market
resulting in a situation whereby the economic operators and fraudsters compete
under unequal conditions.

· 
Simplification potential

Simplification potential is the main reason behind the proposal
addressing delays in OLAF investigations. Faster procedures would simplify the
current system for conducting OLAF investigations as much as the administrative
burden on Member States would be decreased as the Commission would take care of
obtaining the necessary documents directly. In addition, albeit to a lesser
extent, the successful achievement of objectives 1, 2 and 3 would create a
simplification potential in the process of identifying customs fraud, which is
mentioned below, where pertinent, under the option-specific assessment of
impacts.

Final
assessment

In relation to the objectives,
the criteria for assessing the policy options used include:

· 
effectiveness
– the extent
to which options are expected to achieve the objectives. In particular, this
criterion measures the expected contribution to achieving operational
objectives. If an option contributes more effectively, it will receive a higher
score.

· 
efficiency
– the extent
to which objectives can be achieved for a given level of resources/at least
cost (cost-effectiveness).

· 
coherence
– the extent
to which options are coherent with the overarching EU objectives, strategies
and priorities (e.g. Strategy for the evolution of the Customs Union, Better Regulation
initiative).

In addition to the above
described common impacts, the options were assessed according to the economic
impacts they are deemed to generate and their simplification potential.

6.1 
Impact
related to operational objectives 1, 2 and 3 
6.1.1 Option 0:
Status Quo

Overall: While no additional
costs would be created, one could not expect any positive evolution as regards
losses to national and European budgets. Furthermore, it is important to bear
in mind the need to continuously expand the existing processes for the fight
against fraud. The option of keeping the status quo could result in a situation
whereby fraudsters would increasingly take unfair advantages from the loopholes
in the current procedures. In addition, this option fails to take into account
the need for simplifying the processes as envisaged by the Better Regulation
initiative. Furthermore, it is incoherent with the Strategy for the
evolution of the Customs Union which recognises, inter alia, the need for
continuous adaptations and improvements in the common working methods for
customs and the fact that only continuous development and strategic investment
in resources can maintain customs efficiency and effectiveness.

· 
Objective 1: Create conditions for improved
fighting of customs fraud related to mis-declaration of goods origin

Without any intervention, no improvement of the current situation
can be expected. On the contrary, ConTraffic, being a research project, will at
certain point come to an end (depending on the achievements, progress as well
as financial resources). In general, economic operators expressed their
reluctance to provide the Commission with CSMs on a voluntary basis (as
envisaged in Article 18a of Regulation 515/97). Indeed, the representatives of
the companies argue that contractual obligations with their clients (obligation
of confidentiality) do not allow the disclosure of these data. Nevertheless,
there is some information about container movements freely available online,
depending on shipping carrier. There is however a growing trend to limit the
availability of this information, which already creates a burden for the
project. While, during the years of the ConTraffic project, a number of
cooperating companies remained stable, there is a significant risk that the
lack of progress in creating a solid legal framework would discourage companies
from allowing the Commission to obtain the data necessary for the functioning
of the ConTraffic project.

The financing of the ConTraffic would
continue as long as the initiative is still on-going.[58]
The effectiveness of this solution is therefore limited in the long-run by the
fact that the project would end at some point in time.

· 
Objective 2: Create conditions for improved
fighting of customs fraud related to mis-description of goods

Due to the currently prevailing financial
constraints, there is no indication that the existing practice will change. Therefore,
no improvement in the achievement of objective 2 can be expected. The
mis-description of goods would continue to be addressed by document-based
check, visual check of goods as well as the examination of supporting
documentation such as the invoice and the bill of lading. The selection of
suspicious cases would continue to be premised on risk assessment systems
founded on incomplete information and porous risk profiling.

· 
Objective 3: Create conditions for improved
fighting of customs fraud related to misuse of the transit system

As is the case with the achievement of objective 2, also here the
current global economic situation would imply that there will be no improvement
in the existing practices. For the time being, there is no indication of any
planned changes that could be introduced into the customs procedure in order to
facilitate the fight against misuse of the transit system. Nonetheless, the
ATIS system would continue its operation at least for a certain period of time.
However, without any additional action being taken, there is a substantial risk
that the situation would deteriorate given the fact that six Member States have
expressed strong disagreement on the current legal basis of the ATIS
arrangement (see chapter 2.4.4.2).

6.1.2 
Option
1: Soft law

Overall: This option is expected to have
a positive economic impact since it would create some conditions
for an improved fight against customs fraud and recuperation of the customs
induced financial losses. It is nevertheless estimated that this economic impact
will be lower than in the best-case scenario (option 2 as described below) as
it is likely that not all Member States would commit themselves to follow the recommendation.

As far as simplification is concerned, the positive
impact in this context is similarly reduced. Such partial contributions would
additionally create a risk of incomplete data picture, which would hamper the
effectiveness of the entire initiative. This option has a positive impact as
far as the coherence with overarching EU strategies is concerned. Assuming
that at least some of the Member States decide to follow the recommendation, this
option would contribute to Better Regulation initiative and would be in line
with the Strategy for the evolution of customs which, inter alia, aims at enhancing
effective and systematic sharing of risk data.

With regard to the operational objectives that this option should
aim to satisfy, the following specific benefits, costs and impacts can be
identified:

· 
Objective 1: Create conditions for improved
fighting of customs fraud related to mis-declaration of goods origin

The main drawback of this option, as mentioned above, is the fact
that such recommendation would most likely be followed only by some of the Member
States. Also, the Member States would face similar difficulties in obtaining
data from the companies which would create a risk of incomplete data sets. On
the other hand, however, the introduction of a soft law is a relatively
straightforward and inexpensive solution; this option would not imply substantial
costs on the part of the Member States; the only cost would relate to the
actual implementation of the recommendation.[59]

· 
Objective 2: Create conditions for improved
fighting of customs fraud related to mis-description of goods

The same considerations related to the take up of the recommendation
by the Member States apply to Objective 2. And just as above, this option constitutes
a relatively fast solution that can be quickly and easily incorporated by the Member
States. Moreover, the supply of relevant information would not create any costs
as this information already exists and is exchanged among Member States in
another Commission's platform[60]. However,
despite of this possibility, the information in question cannot be accessed by
OLAF because currently OLAF lacks the legal bases for doing so. Therefore, the
supply of data would simply take the form of the Member States' consent to copy
the existing data, similarly as was done in the ATIS case. Importantly, there
is still a risk that the Member States might feel dissatisfied with the
adoption of only a temporary solution. [61]

· 
Objective 3: Create conditions for improved
fighting of customs fraud related to misuse of the transit system

Currently ATIS is based on a voluntary agreement and so far it has proved
to be a useful and effective method of detecting customs fraud related to
misuse of the transit system. Member States certainly use ATIS in their
investigations, and currently a PCA is taking place for which the ATIS is used.
However, as it was already explained in the problem description (section 3.3.1.2),
the experience gained since the creation of ATIS reveals certain shortcomings
which to a certain extent impede its effectiveness (i.e. unavailability of data
on national movements and subsequent transit information). Moreover, under this
option a clear need expressed by several Member States to formalise ATIS by
giving it a legal base would be disregarded. For this reason, soft law approach
does not appear to be in line with the wishes of the Member States.

· 
Costs

Figure 3: Overview – Costs related to option 1 (objectives 1, 2 and 3)

Actor || Objective 1 || Objective 2 || Objective 3

MS || Costs of implementing recommendation  - negligible || None – MS provide solely their assent to copy/use data managed by TAXUD || None – MS provide solely their assent to copy/use data managed by TAXUD. Costs for providing remaining data (on national transit) are negligible as the data exist on national level already

Commission || Administrative cost of issuing a recommendation || Administrative cost of issuing a recommendation || Administrative cost of issuing a recommendation

Economic operators || If global dump: no costs If selective reporting[62]: 3.000 to 200.000 EUR[63] || n.a. || n.a.

6.1.3 Option 2: EU
centralised approach (Commission is responsible and uses a central database)

Overall: This option is expected to have
strongly positive economic impact, since it would maximise the
opportunity for an improved and effective method of detecting customs fraud and recuperation of the customs induced financial losses. The estimated revenue recuperation is detailed below under each of
the operational objectives that this option aims to achieve.

The adoption of a centralised (EU-level) approach will also provide a
substantial simplification in the area of customs. One
centralised system with common features and interface would significantly
improve the processes and both the collection and utilisation of relevant data.
In addition, it is also sound to collect data centrally given the fact that
trade is usually trans-national and so it requires a global overview.
Centralised approach would also ensure that EU customs legislation is applied
in a uniform way, so that treatment of traders, fraud prevention, and legal
obligations do not vary. Importantly, centralised approach is considered by the
Member States as well as the industry as the most efficient and least
burdensome option.

Moreover, this option offers a solution which is coherent
with the overarching EU objective of ensuring Better Regulation and reducing
the "red tape" by creating centralised databases and eliminating the
encumbrance on Member States and the industry. The creation of centralised
databases on CSMs, import, export and transit data is also coherent with the Strategy
for the evolution of the Customs Union which recognises the need to improve the
capacity in the fight against customs-related fraud by, inter alia, streamlining and improving current IT systems. In particular, the Strategy stipulates that an approach must be
developed to further adapt and advance the common working methods for customs.

With regard to the operational objectives that this option should
aim to satisfy, the following specific benefits, costs and impacts can be
identified:

· 
Objective 1: Create conditions for improved
fighting of customs fraud related to mis-declaration of goods origin

The Commission has proved to be in a good position to collect data
and maintain the ConTraffic database which can be considered as a basis for
tracking the container movements and should provide the possibility to verify
the declared origin of the goods. Based on the results of ConTraffic project,
the JRC has estimated that if all EU imports were cross-checked using the full
range of CSM data more than 100 million EUR could be recovered
per year from the importers that have mis-declared the origin of goods.

Furthermore, from the experience of OLAF and of national customs
authorities, it has been proven that the use of CSM data can help in their
investigations. If it becomes mandatory for ocean (deep sea) carrier companies
to provide their relevant CSM data, then: (i) it will become possible to
cross-check all EU imports regarding the declared origin and identify the
highly suspicious cases based on the route followed by the container; and (ii)
the quality of analysis will increase, so that the patterns for container
movements will become more precise and will also cover geographical areas that
are currently not available.

The centralised option offers a great advantage in terms of costs.
It appears more efficient to create one single database for the whole EU in
order to avoid repetitive set up and maintenance costs by the Member States.
The positive impacts of shared IT databases are also sought in the
harmonisation of the interface for the shipping lines, with one interface for
the whole EU rather than 28 separate ones. This would trigger further reduction
in administrative burdens on businesses.

· 
Objective 2: Create conditions for improved
fight against customs fraud related mis-description of goods

Centralised database on import and export would allow the Commission
to base its analysis of market behaviour on data covering the whole EU. Given
the sophisticated techniques used by fraudsters to commit fraud (i.e. using different
routes, transiting goods via numerous countries, etc.) it is imperative to have
a complete picture of movements of the goods in all 28 Member States in order
to be successful in the fight against mis-declaration of goods.  The estimated
recuperation of lost revenues for this type of customs breach is estimated at 107.7 million
EUR[64]
that are currently incurred.

Given the fact that the data in question already exists and it is
proposed to obtain only consent to copy that data, no extra costs would accrue
to either Member States or economic operators. Also, there would be no need to
impose new reporting obligations because the data is already existent and
shared on the common platform used by the Member States.[65]

· 
Objective 3: Create conditions for improved
fighting of customs fraud related to misuse of the transit system

ATIS may be considered as a proof of the effectiveness of a
centralised approach. The regularly provided reports developed on the basis of
this database are much appreciated by the Member States as they support them in
carrying out further analysis of fraud. In the 2012 questionnaire (Q9), 22 out
of 24 Member States confirmed that these data are necessary. 18 out of 19
welcomed such a centralised approach and 18 out of 21 would like the Commission
to take the lead on this. Among main comments, the Member States requested that
a solid legal basis is in place and that the purpose of this database is
clearly defined. It is worth noting that both the
European Parliament[66]
and the European Court of Auditors have offered support to the prospect of the
Commission obtaining access to import, export and transit data. The European Parliament
stated that it “notes the Court of Auditors' request that the Commission be
granted full access to information systems available or foreseen for all kinds
of goods - not only for sensitive goods - for the purpose of operational and
strategic analysis and risk management, while ensuring adequate protection of
personal data". The adoption of a centralised approach would facilitate a
significant minimisation of the yearly financial losses of 60 million
EUR currently incurred as a result of the misuse of the transit system.[67]

The advantage of
this option is the already available expertise and information. The EU possesses
the necessary infrastructure and systems to successfully run the proposed
database, hence creates an added value. The impacts of
shared IT databases will also reduce the costs for Member State governments
thanks to the possibility to use compiled EU analyses. As a result of improved
detection of customs fraud, the legitimate trade will be supported by faster
and better targeted customs controls.[68]

A short description of the prospective databases is given in Annex
4.

· 
Costs

The establishment of the new databases for Import/Export and CSMs
rely on the existing AFIS infrastructure and the experience built up by OLAF
and TAXUD by setting up the ATIS database. The new databases project must be
seen as an extension of ATIS that leverages on the existing services from the
AFIS platform (further details can be found in Annex 4: Anti-fraud Information
System).

For the development and operation of the future databases for
Import/Export and CSMs, the starting point is a retrospective cost analysis for
the development and operations of ATIS:

Figure 4: Overview – ATIS costs

ATIS Costs || 2008 || 2009 || 2010 || 2011 || 2012 || Total || Av./Year

Development || €3.850 || €113.300 || €47.300 || €201.300 || €11.550 || €377.300 || €75.460

Operations || N/A || €82.726 || €23.461 || €139.625 || €142.559 || €388.372 || €97.093

The table above
shows that the accrued development costs of ATIS for the period 2008-2012 are
in the region of EUR 400.000 and the average operational costs per year is in
the region of EUR 100.000. The total costs for objective 2 (Import/Export) plus
objective 3 (additional transit data) is a cost similar to the cost of ATIS[69]. That is why cost estimations
for objectives 2 and 3 together are set at the level of the ATIS costs. The
breakdown of estimated cost is 80% for import/export and 20% for transit.

The CSM database implementation project has significant elements in
common with the implementation of ATIS. Similarly to ATIS, where the data are
pushed in an automated manner from an existing system (NCTS[70]) to AFIS/ATIS using an
existing network infrastructure (CCN[71]);
in the case of the CSM database, the data source is the Logistical Information
Systems of the shipping lines which will push the data over an existing
infrastructure, encrypted transfer over the Internet. Both the shipping lines
and OLAF would be ready to use an existing and proven solution (public internet
with standard data encryption) at no additional cost for OLAF and minimal
set-up cost for the carriers.

Once the data are being received by OLAF, the CSM will have to be
processed and loaded into the database. This database will be a repository of
known containers identified by their unique container number. The theoretical
limit is 20 million entries as this is estimated size of the fleet of
containers in circulations worldwide. Each time a CSM is received, the entry in
the database corresponding to the container mentioned in the CSM will be
created (or updated if it already exists in the system). The volume of CSMs to
be processed per year is estimated to range from 100 to 500 million (depending
on whether the carriers finally perform data dump or apply a selective approach
submitting only CSMs with the EU nexus). The volume of data processing and data
storage is expected to be similar to that of the ATIS system currently operational.

The ATIS project has demonstrated that the data processing and
storage volumes are not the main cost drivers for the implementation of such a
database. Instead, the main cost driver is the complexity of the incoming data,
which need to be decoded, parsed and validated prior to loading into the
database. Once again, there is an important similarity between the ATIS database
and the future CSM database - the incoming raw data follows the EDIFACT format.[72]

Based on the above-mentioned commonalities between the ATIS and CSM
implementation projects, OLAF concludes that the retrospective costs analysis
of ATIS is a solid basis for the estimation of the CSM database implementation
costs. However, the CSM database has an additional degree of complexity as the
data will come from economic operators (shipping lines) rather than from IT systems
operated by DG TAXUD. This results in the potential risk of having to process
the incoming data in multiple formats. For this reason, the development cost estimation
for the CSM database is set at EUR 450.000 (ATIS implementation costs plus 20%
to account for additional complexity and potential risk), while the yearly
operational costs are estimated at the same level (100.000 EUR/year) as ATIS or
Import/Export.[73]

The Import/Export and CSM and additional transit data will increase
the amount of data to be stored in comparison to the data currently stored in ATIS
by factor 10. The cost of the necessary upgrade of the AFIS storage
infrastructure is foreseen as part of the development costs of the new
databases, therefore in reality, these costs would not cause any increase in
the AFIS budget.

The table below summarises the cost estimates for the new databases
in terms of one-off development expenditure and yearly recurrent operational
costs:

Figure 5: Overview – Costs related to option 2 (objectives 1, 2 and 3)

Actor || Objective 1 || Objective 2 || Objective 3

MS || 0 || 0 || 0

Commission[74] || 450.000 EUR -development of the database 100.000 EUR – maintenance cost (yearly) || 320.000 EUR – establishment of the databases 80.000 EUR– maintenance cost (yearly) || 80.000 EUR– establishment of the database 20.000 EUR– maintenance cost (yearly)[75]

Economic operators || If global dump: no costs If selective reporting:  3.000 to 200.000 EUR || n.a. || n.a.

6.1.4 Option 3: National
approach (Member States are responsible and use national databases)

Overall: This option
addresses the problem in the same way as option 2 (i.e. collecting and
using/analysing additional data). Therefore, the economic impacts
are considered to be equivalent to these generated under option 2.The main difference
is with the distribution (and ultimately multiplication) of respective financial
and administrative burdens. As it is demonstrated in Figure 6 below, the
economic benefits will come at a much higher cost for the Member States and the
potential of the economies of scale and added value of acting at the EU level
will not be exploited. In addition, under this option also the simplification
element is reduced due to multiplicity and therein complexity of any procedures
based on different national approaches and systems adopted by the Member States.
This may arguably add even further to the overall complexity of the existing
customs system. It is important to emphasise that Member States expressed their
reluctance to the establishment of national databases (see Annex 8: Questionnaire).
The industry is also against the adoption of the national approach as it would
create significant burden on the shipping companies and would add unnecessary
layer of complexity to the system of transmission of data. Because this option
involves the imposition of a heavy burden on various stakeholders, it is
considered as incoherent with the Better Regulation initiative
and with the Commission Action
Programme for Reducing Administrative Burdens in the EU.[76]

With regard to the
operational objectives that this option should aim to satisfy, the following
specific benefits, costs and impacts can be identified:

Objectives 1, 2 and 3
would be achieved by ensuring that Member States are in possession of all data
concerning the entire EU, not only data that may potentially be relevant for
their national controls and investigations. The maximum possible effectiveness
of the implementation, operations and inter-operability of the national systems
is here assumed. However, the danger associated with this option is that Member
States may nonetheless tend to give priority to national interests and loose
from sight the EU dimension of the problem. This risk can manifest itself
through setting wrong priorities. Furthermore, as the
Commission will in this case neither develop nor operate the IT systems to be
used by national administrations, it will inevitably create some divergence in
the applied approaches. While mere existence of divergence must not necessarily
hamper the overall effectiveness of this option, the establishment of 28
separate databases with different interfaces and procedures poses however a greater
risk of underexploiting the intelligence. It also possibly distorts
competition[77] and
the functioning of the Internal Market and ultimately undermines the effectiveness
of this approach in combatting customs-related fraud and safeguarding the financial
interests of the Union. On the other hand, the Member States will be in
possession of all the information that can be utilised for a more successful
fight against mis-declaration of origin, mis-description of goods and misuse of
the transit system.

Inevitably this option creates additional burden on the Member
States because a new obligation to collect data would have to be put in place. This
runs counter to the Better Regulation initiative which aims at simplifying the
procedures and reducing the administrative burdens. The
total amount that would have to be spent by each Member State on the
establishment of all databases amounts to approximately 850.000 EUR. In
addition, each Member State would have to face yearly maintenance costs of all
databases amounting to approximately 200.000 EUR. This option shifts the financial burden from the Commission to the Member
States. The data to be collected and the process for the establishment of
patterns and detectability of fraud as well as the structures in each of the Member
States should be similar to the one that would have been established by the
Commission under the centralised approach. Consequently, the structures and
costs would be multiplied, the analysis would inevitably be divergent and
action to be taken would have to be coordinated among Member States through extensive
cross communication.[78]
It is therefore assumed that the costs for the establishment and operation of
the national systems would be corresponding to the estimated costs incurred by
the Commission. Importantly, not only does this option imply the replication of
a set-up costs but it also means that yearly maintenance cost would be 28 times
higher compared to maintenance costs of one central database. There would also be a significant administrative burdens imposed on
the businesses because they would have to face different interfaces for
databases in all 28 Member States[79].
This would entail a significant loss of resources and
unnecessary duplication of efforts. Consequently, this option is highly
inefficient (see Figure 6).

· 
Costs

Figure 6: Overview – Costs related to option 3 (objectives 1, 2 and 3)

Actor || Objective 1 || Objective 2 || Objective 3

MS || (per MS) 450.000 EUR -development of the database 100.000 EUR – maintenance cost (yearly) || (per MS) 320.000 EUR – establishment of the databases 80.000 EUR– maintenance cost (yearly) || (per MS) 80.000 EUR– establishment of the database 20.000 EUR– maintenance cost (yearly)

Commission || 0 || 0 || 0

Economic operators || If global dump: no costs If selective reporting:  3.000 to 200.000 EUR || n.a. || n.a.

The IT
infrastructures of the 28 Member States customs administrations are very
heterogeneous and diverse in terms of size and technologies employed.
Therefore, the implementation of new databases at national level would vary
greatly, which also makes it difficult to establish precise cost estimates on a
case by case basis. The table above is based on the assumption that the
implementation and operation costs at national level would be on average
similar to the costs of the central implementation by the Commission; although
Member States already possess their national portion of import and export data,
the effort to collect and integrate in a national database the data originating
from the other 27 Member States (plus in the case of transit also from participating
EFTA countries) would be similar to the effort incurred by the Commission if in
both cases the source of the data is an existing IT system (e.g. ECS or
Surveillance II).

6.1.5 Option 4:
Mixed approach (shared responsibility between the MS and the EU)

Overall: This option is a
mixture of options 2 and 3. For the achievement of objectives 1 and 3, the
Commission will be responsible for the relevant database on CSMs and therefore
the same considerations apply as mentioned under option 2. The achievement of
objective 2 will be vested in Member States thus the same considerations apply
as mentioned under option 3. In terms of economic impacts it is
therefore justified to assume the same level of potential benefits to the
national and EU revenues stemming from better detection of customs-related
fraud. The simplification potential in turn, will be realised
only to a certain extent, depending on the specific objective in question, i.e.
for objectives 1 and 3 simplification potential identical to the one of
option 2; for objective 2 similar to option 3. Similar division will apply in
the context of considerations relating to coherence.

This option seeks to assign the respective
responsibility for the databases to both the Commission and the Member States.
The idea is to profit from the Commission's experience as far as the collection
of CSMs and transit data is concerned, and build on the experience of the
Member States and their national systems with regard to collection of import
and export data. In this context, the Commission is considered to be better
placed to be responsible for the relevant databases (i.e. CSM and transit)
because it already possesses the necessary experience, expertise and systems to
store and process this information, while continuing collection of import and
export data at the Member State level as it has been done till now. However, with
regards to the latter, the Member States would still have to obtain information
from the remaining 27 counterparts on movements relevant to them. The collection,
processing, interpretation and communication of that data to other Member States
increases the administrative burden and puts a greater risks of
underexploiting the intelligence and ultimately undermining the effectiveness
of this approach in combatting customs-related fraud and safeguarding the financial
interests of the Union. This split approach would also bring additional
operational challenges in the context of carrying out effective analysis for
fraud prevention and detection since this requires cross analysis involving
different sets of data (e.g. import data needs to be correlated with CSM data
in order to detect anomalies pointing out to mis-declaration of origin).

Given the fact that responsibility is to be shared the
same principle applies to financial burdens. The costs of setting up and
running necessary systems will be shared between the Member States and the
Commission. By consequence, the overall efficiency of this approach will be
hindered accordingly.

· 
Costs

Figure 7: Overview – Costs related to option 4 (objectives 1, 2 and 3)

Actor || Objective 1 || Objective 2 || Objective 3

MS || 0 || (per MS) 320.000 EUR – establishment of the databases 80.000 EUR– maintenance cost (yearly) || 0

Commission || 450.000 EUR -development of the database +100.000 EUR – maintenance cost (yearly) || 0 || 80.000 EUR– establishment of the database 20.000 EUR– maintenance cost (yearly)

Economic operators || If global dump: no costs If selective reporting:  3.000 to 200.000 EUR || n.a. || n.a.

6.1.6 Assessment
and comparison of the proposed options

Figure 8: Overview of the overall assessment of options (related to
objectives 1, 2 and 3)

Criteria Option || Effectiveness || Efficiency (all objectives) || Econo-mic impacts (all objectives) || Simplification || Coherence (all objectives) || Overall assess-ment

Obj. 1 || Obj. 2 || Obj. 3 || Obj. 1 || Obj. 2 || Obj. 3

Option 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || -- || 0

Option 1 || + || + || + || + (Total cost: negligible) || + || + || + || + || + || +

Option 2 || +++ || +++ || +++ || ++ (Total cost for the Commission:  850 000 EUR – set up 200 000 EUR – yearly maintenance Total cost for economic operators: If global dump – no cost, if selective reporting - 3 000 to 200 000 EUR ) || +++ || +++ || +++ || +++ || +++ || +++

Option 3[80] || ++ || ++ || ++ || --- (Total cost for the MS: 850 000 EUR – set up 200 000 EUR – yearly maintenance Total cost for economic operators: as per Option 2 || +++ || ++ || ++ || ++ || _ || +

Option 4 || +++ || ++ || +++ || - (Total cost for MS: 320 000 EUR – set up 80 000 EUR – yearly maintenance Total cost for the Commission: 530 000 EUR- set up 120 000 EUR – yearly maintenance Total cost for economic operators: as per Option 2 || ++ || +++ || ++ || +++ || + || +

Annotation: Magnitude of impact indicated
compared to the baseline scenario:

+++ strongly positive, ++
quite positive, + positive, 0 like baseline scenario, - negative, -- quite
negative, --- strongly negative

As illustrated in the baseline
scenario, option 0 will not only fail to achieve the objectives but it would
also possibly lead to worsening of the current situation due to ignoring the
Member States' wish as well as the position of the industry, both calling for a
legal base as regards obtaining and use of information in question.

Option 1 is considered as
positive because it would improve to some extent the situation as compared to
status quo. However, its assessment is not higher than positive because the
voluntary nature of this option inevitably creates a risk of incomplete data
which undermines its overall assessment.

Option 2, on the other hand,
is considered as strongly positive because the Commission is already in
possession of the necessary systems and experience to run successfully the
databases in question. Moreover, option 2 is preferred not only by the Member States
but also by economic operators as it creates a cost-efficient and effective
solution to the problem of customs-related fraud. The questionnaire[81] carried out
earlier in 2012 confirms that Member States share the view that real-time
availability of such data, in a synchronised format, would be very useful to
fight fraud related to mis-declaration of origin; 22 out of 25 Member States
that responded to the question, expressed their appreciation to the ConTraffic
project and confirmed that such a database is needed and should be run by
the Commission. Importantly, the industry shares the view that this initiative
provides a great advantage to the ocean carriers of offering just a single EU
interface for data filing, rather than 28 interfaces with their own
individual technical and functional specifications and data formats.[82] It is the most
effective option in achieving all three objectives as it would offer Member
States and the Commission a complete data picture that could be used for
detecting customs-related fraud. This option is also considered
as the most coherent with the overarching EU objectives, strategies and
priorities.

Option 3 is considered as
positive but, unlike option 2, the idea is to create separate national
databases which will create overlaps and would also add a layer of complexity
as the same data would be gathered, processed and interpreted by several Member
States.[83] Even though economic impacts are
considered to be equivalent to those generated under option 2, option 3 imposes
a substantial financial burden on the Member States, which diminishes its
overall attractiveness. The effectiveness of this option is lower than in
option 2 also because of the substantial administrative burdens which render it
unacceptable not only for the Member States but also for the industry. Moreover,
the overall assessment of option 3 had to be lower because of its low rank in
relation to the coherence with overarching EU objectives, strategies and
priorities.

In this sense, option 4,
avoiding the imposition of excessive financial burdens on Member States and
sharing them with the Commission, appears to offer a better solution. However,
when compared to option 2, it risks loosing sight if the EU dimension in the
context of collection and use of data on imports and exports. It also presents additional operational
challenges in the context of carrying out effective analysis for fraud
prevention and detection since this requires cross analysis involving different
repositories. In addition, option 4 takes into account views of the stakeholders
only partially (i.e. the preferred option for the industry relating to the CSMs
would be maintained, however, decentralised approach for import and export data
would be contrary to the explicit wish of the Member States). Also, similarly
to option 3, option 4 leads to potential duplication of data on import and
export in multiple national databases. Given all these considerations the
overall assessment of option 4 is ranked as simply positive.

On the basis of the above comparison of the options, option
2 is considered as the preferred option.

6.2 
Impact
related to operational objective 4 (speed up OLAF investigations)
6.2.1 Option 0:
Status quo

Overall: While no additional costs would
be created, one could not expect any positive evolution as regards recuperation
of the losses incurred to the European budget currently caused by the prolonged
procedures.

6.2.2 Option 1:
Soft law

Overall: As explained in the description
of the problem, timely availability of supporting documents is currently
causing unnecessary delays during OLAF investigations. This option presupposes
a recommendation issued to the Member States to provide the Commission with the
requested documents within a prescribed deadline.

As with option 1 for the objectives 1-3, here too the positive economic impacts as regards recuperation
of the financial losses to the EU budget would be limited by the fact that most
likely not all of the Member States would commit themselves to follow the recommendation
and even if they did, this tool’s effectiveness would be limited.

Firstly, it is unlikely that such a non-binding deadline will indeed
ensure speedier investigations as it is assumed that Member States are
providing OLAF with relevant documents as soon as they receive them and are not
causing intentional delays. In this context, one must keep in mind the fact
that after the introduction of the e-Customs, Member States are no longer in
possession of the supporting documents and consequently they have to first
obtain them from the relevant economic operators themselves. Therefore, an
appeal for faster provision of the documents will have a small chance of
effectively shortening the time of the estimated 3 to 7 months that is
currently needed for obtaining supporting documents.

As far as the simplification is concerned, the
positive impacts that can be associated with the best-case scenario under
option 2, are similarly reduced. The soft law option is however coherent with
the principle of sincere cooperation as it would ensure (at least to a certain
extent) that those Member States who decide to follow the recommendation are
cooperating with the Commission by means of better facilitating its work in the
field of investigations.

This option would not imply substantial direct costs on the part of
the Member States; the only cost would relate to the actual implementation of
the recommendation. Other potential costs related to implementation of any
internal procedures are not considered here as they are uncertain and quasi
impossible to estimate not knowing the exact mechanisms.

6.2.3 Option 2:
Direct access

Overall: This option presupposes empowering
the Commission to directly ask economic operators for supporting documents,
eliminating the intermediary of the Member State. It is expected that this
option may generate the greatest economic impact amongst the
considered options, leading to recuperation of losses currently caused by
prolonged procedures. Based on the experience of OLAF investigators, it is
expected that shortening of the investigation process would avoid one-quarter
of the time-barred cases which amounts to approximately 140.000 EUR being saved
each year.[84] This greater potential creates the opportunity to reduce the
average time of 3 to 7 months waiting time for the supporting documents to 2 months[85], making it possible for OLAF
to conclude investigations on time or even to launch investigations which might
have been deemed so far unfeasible (as described in chapter 3.3.2.1). In
addition, this option would greatly contribute to the simplification
of the process, by eliminating a need to unnecessarily engage a third party
(i.e. the Member States). This option is coherent with the
Commission's Communication on Customs Risk Management and Security of the
Supply Chain[86] which emphasises the need for enhanced cooperation with legitimate
business to target illicit traffic. Under this option, currently applicable
electronic system governing customs declaration (as explained in section
3.3.2.1) will remain intact which is coherent with the e-Customs Decision and
with Modernised Customs Code (both instruments support the idea of
computerisation of customs declarations).

Economic operators would not be burdened with any additional costs
for storing relevant data as they are already obliged to keep relevant
documentation for 3 years. Nor will there be a requirement for automatic
reporting from their side. This option was discussed with experts from Member
States at the AFIS conference of April 2012. Member States were cautious about
OLAF obtaining direct access to information from private sector operators but
they acknowledged the need for such access.

6.2.4 Option 3:
Increase resources

Overall: This option foresees an
increase of a number of investigators working in OLAF and will thus have a substantial
impact on OLAF resources. More man-power would inevitably increase chances of
speedier conduct of investigations, at least on the OLAF side and thus may lead
to a higher level of recuperated revenues. However, timely investigations
depend not only on how quickly OLAF processes the files but to a large extent
on the fast reactions of other actors (i.e. Member States and economic
operators). As a consequence, this option would not address the issue of late
responses to information requests.

It is also worth noting in this context that any increase of staff would
be incompatible with the medium-term staff reductions planned by the Commission.

6.2.5 Option 4:
Returning to pre-2010 situation

Overall: This option implies that delays
could be avoided because the Member States would automatically be in possession
of the supporting documents and so they would be able to quickly communicate
this data to OLAF. The economic impact associated with
recuperation of due customs duties thanks to successful (i.e. timely)
investigations would be equal to the one analysed under option 2. On the other hand,
however, this option would not only be costly in terms of reversing the
investments made for introducing e-Customs but mainly it would mean doing away
with wide-ranging policy options taken by the Member States and the Commission.
In addition, it would add extra burden on the Member States related to the unnecessary
collection (and creation of electronic versions) of all supporting
documents, of which the costs can be considered disproportionate (as not all of
them would be needed/used).

The simplification potential is substantially hampered
under this option as it would be required from the Member States to return to
the procedure that has already been once changed by the EU. Moreover, this
option would create a possible incoherence with the e-Customs
Decision and with the Modernised Customs Code which emphasise the need for
computerisation of customs declarations.  Returning to paper-based system would be against Commission Action Programme for Reducing
Administrative Burdens in the EU.[87]

This solution is not expected to affect business because they are
already required to keep the relevant documentation for a period of 3 years.
Nonetheless, they would have to face some administrative costs of supplying all
the documents to the relevant customs authorities.

6.2.6 Overview of
costs per option

Figure 9: Overview – Costs related to proposed options (linked to objective
4)

Actor || Option 1 || Option 2 || Option 3 || Option 4

MS || 0 || 0 || 0 || Costs of possible expansion of IT systems to store electronic versions of supporting documents

Commission || Administrative cost of issuing a recommendation – negligible cost || 0 || The exact cost estimation depends on the extent of the increase in resources, difficult to quantify. || Administrative cost related to the amendment of the current customs system (R.515/97 and/or E-Customs Decision).

Economic operators || No additional costs to store relevant information as economic operators are already obliged (by the Customs Code) to keep these documents for 3 years. || No additional costs to store relevant information as economic operators are already obliged (by the Customs Code) to keep these documents for 3 years. || 0 || Significant costs for economic operators of providing all supporting documents to MS. Such costs are difficult to quantify as they depend on the size of the enterprise and the number of operations.

6.2.7 Overview
assessment and comparison of the proposed options

Figure 10: Overview of overall assessment of options (related to objective 4)

Criteria || Effectiveness in achieving objective || Efficiency || Economic impacts || Simplification || Coherence || Overall assessment

Option 0 || 0 || 0 || 0 || 0 || 0 || 0

Option 1 || + || + || +- || + || + || ++

Option 2 || +++ || ++ || +++ || ++ || + || +++

Option 3 || ++ || -- || + || 0 || - || +

Option 4 || +++ || --- || - || -- || - || -

Annotation: Magnitude of impact indicated
compared to the baseline scenario:

+++ strongly positive, ++
quite positive, + positive, 0 like baseline scenario, - negative, -- quite
negative, --- strongly negative

Option 1 is considered as quite positive because firstly it creates a
potential for simplification of the procedures in cases where Member States
would follow the recommendation and secondly it should not impose any
significant financial burdens on the stakeholders concerned. In addition, it is
considered as quite positive as far as the coherence is concerned. However, since
it is expected to bring about only limited positive impact and achieve the
objective to a low extent due to the voluntary nature of the solution proposed
therein and the current legal set-up (i.e. the e-Customs), it is ranked lower
than option 2. Option 2 is expected to bring the greatest economic results in
the form of recuperated revenue from unduly evaded customs duties, at the
lowest price; by eliminating the intermediary of a third party, i.e. the Member
States, it presupposes that the only time spent on obtaining relevant documents
would be the time needed by economic operators to supply information which they
already have to OLAF. Also, the problem that OLAF is currently facing (namely
cases where MS are not in position to assist OLAF in obtaining those documents
– see example in the problem definition) would be eliminated by addressing
requests directly to those who are in possession of the documents in question. This
option is considered as positive from a coherence perspective because it is in
line with the Commission's Communication on Customs Risk Management as well as
e-Customs and the Modernised Customs Code. For these reasons, option 2 is
regarded as strongly positive in the overall assessment. Option 3 is marked as positive
because it has the potential of addressing the problem of speeding up OLAF
investigations. However, because of the significant financial burden, in
overall it is considered less beneficial than option 2. Moreover, it can
potentially encounter low acceptability in the time of global ‘resource
crunch’. Option 4 is perceived to be least attractive because despite its high
potential for speeding up the investigations thanks to the direct access to the
supporting documents, it requests a disproportionately high price, can create
legal hurdles and is incoherent with the existing legislation governing the
computerisation of customs declarations.

On the basis of the above comparison of the options, option 2
is considered as the preferred option.

6.3 
Conclusions
on preferred options

Following
careful assessment of various proposed policy options from the perspective of
their effectiveness, efficiency and potential impacts they are likely to
generate, the following options were selected as preferred:

Figure 11: Overview of preferred options for each (set of) objective(s)

Operational objective || Preferred option

Objective 1,2,3 || EU approach involving the creation of  a central database for CSM, import, export and transit related data

Objective 4 || Direct access to supporting documents

It is considered that the mixture of
preferred options presented in the above table is the most suitable and
proportionate for the purposes of achieving operational objectives. The system
for fighting customs fraud is hampered by insufficient information available, hence
the intention is to make the current framework more effective (by making the
necessary information more easily available) without however imposing
unnecessary burdens on both the Member States and the businesses. Therefore, as
far as the fight against customs-related fraud is concerned, it is suggested
that the centralised EU approach is to be adopted. This will ensure that
corresponding administrative burdens of providing relevant data are minimised
to the highest extent possible. Both the Member States and economic operators
will be required to provide information in question only once to the Commission,
so that it can be used for the purposes of fighting customs fraud and will
therefore benefit the entire EU. The intention to minimise administrative
burdens and facilitate simpler processes is also behind the preferred option
for speeding up OLAF investigations. In this context, the preferred option is
seeking to ensure that economic operators can be directly approached with a
request to provide supporting documents when, and only then, there is an added
value on the part of OLAF to obtain them (i.e. when the documents are
considered as necessary for the purposes of OLAF investigations).

7 
Monitoring
and Evaluation

This section describes the monitoring and evaluation indicators that
need to be put in place in order to check if the implementation of policy is on
track and the extent to which the policy is achieving its objectives, with
emphasis on the monitoring of the effects resulting from the implementation of
the policies. The approach to monitoring and evaluation is outlined with
respect to the policy objectives pursued.

7.1 
Monitoring

Timing:                        yearly

Scope:                         monitoring
the effects of the policy objectives by means of various indicators presented
below

Nature of evaluation: presentation of
the results in the Mutual Assistance Committee by                                             
OLAF

The table below provides the effects of the implementation of the
policy objectives which will be monitored by means of the indicators below.

Figure 12: From problems to operational objectives

Objective || Indicator

Increase the detectability, prevention and prosecution of customs fraud related to mis-declaration of goods origin || Export/import/transit data/CSMs: number of detected breaches of legislation, number of investigations opened based on these data, number of requests for use of data by investigators, amounts recovered on the basis of such information

Increase the detectability, prevention and prosecution of customs fraud related to mis-description of goods

Increase the detectability, prevention and prosecution of customs fraud related to misuse of the transit system

Speed-up OLAF investigations || Duration of related OLAF investigations (whether the change resulted in faster procedures but also whether it increased the number of investigations and the amounts recovered)

The data on
investigations would be collected by OLAF. New statistics will be produced
focusing on specific investigations related to Regulation 515/97. As regard the
databases, its use can be measured by reports prepared on data stemming from
this database and cases opened on the basis of these reports (as well as
related amounts recovered). Annual questionnaire with the MS should be prepared
to confirm the use of the reports for detecting fraud and results to be
reported to the Mutual Assistance Committee as well as to the Council group.

7.2 
Evaluation

With respect to the operational objectives, the Commission services
responsible (OLAF), will ensure that evaluation is carried out every 5 years.

Timing:                        every 5
years

Scope: results and impacts related to
the increased detectability of fraud thanks to the database and the analysis
carried out on the basis of the available data and information (effectiveness);

efficiency
and relevance of the introduced measures.

Nature of evaluation: presentation of
the results in the Mutual Assistance Committee by                                             
OLAF

The evaluation will be premised on data gathered during the
monitoring activities.

Annex 1: Glossary
 AFIS – Anti-Fraud Information System; an umbrella term for a
  set of anti-fraud applications operated by the Commission (OLAF) under a
  common technical infrastructure aiming at the timely and secure exchange
  of fraud-related information between national and EU competent
  administrations. AFIS includes CIS, FIDE and ATIS, as well as a number of
  specialised applications.
 ATIS – Anti-Fraud Transit Information System; a system operated
  by OLAF used for analysis of transit-related data in order to detect
  abnormal patterns in the transit movement and diversion of destination.
 CIS – Customs Information System; an automated information
  system which helps to prevent, investigate and prosecute breaches of
  customs legislation. This database contains both data relating to the
  exclusive and the shared competences of the Commission.
 CJSA – Customs Joint Supervisory Authorities; established by
  Council Decision 2009/917/JHA on the use of information technology for
  customs purposes. CJSA is responsible for supervising the CIS part related
  to Member States competence. The Authority inspects the central CIS
  database, offers advice and can examine issues relating to access requests
  by data subjects.
 CSM – Container Status Message(s); detailed information on the
  movement and status changes of a container as it travels through certain
  parts of the supply chain.
 EDPS – European Data Protection Supervisor; an independent
  supervisory authority devoted to protecting personal data and privacy and
  promoting good practice in the EU institutions and bodies. It does so by
  monitoring the EU administration's processing of personal data; advising
  on policies and legislation that affect privacy; and co-operating with
  similar authorities to ensure consistent data protection.
 FIDE – (Fichier d'Identification des Dossiers d'Enquêtes
  Douanières – Customs files identification database) is a database which
  facilitates investigations carried out by the Commission and the competent
  national authorities. It brings together files relating to persons and
  businesses that have been suspected or found guilty of offences. This
  database contains both data relating to the exclusive and the shared
  competences of the Commission.
 MS – abbreviation for Member State
 NCTS – New Computerised Transit
  System; electronic data interchange system for transit declarations; due
  to replace the traditional paper procedure in the Community as well as in
  the EFTA countries (Iceland, Norway, Switzerland) and two new members of
  the Common Transit Convention, Croatia and Turkey. 
 WSC – Word Shipping Council; industry trade group representing
  the international liner shipping industry. Its goal is to provide a
  coordinated voice for the liner shipping industry in its work with
  policymakers and other industry groups with an interest in international
  transportation.
Annex 2: Scale of the problem

The table below
provides a quantified summary of the scale of the problems areas addressed.

Table 1: Estimated scale of the problem

Problem || Scale

Mis-declaration of origin || - MS reported 186 cases of detected fraud and irregularities - 2011: damage of 17.6 million EUR - 2011, for EU27, more than 1.500 cases of false declaration of origin, estimates of losses: min 25 million EUR; more likely exceeding 100 million EUR.

Mis-description of goods || - MS reported 1905 cases of detected fraud and irregularities - a damage of 107.7 million EUR

Misuse of the transit system || - 2006 to 2010 for EU27: more than 3800 breaches of customs legislation - damage around 60 million EUR (related to transit)

Delays in OLAF investigations and the resulting time-barring || - 2010 audit: In the 274 declarations checked, 49 errors were found, giving rise to 558 000 EUR of loss of duty. These amounts are time-barred and therefore can no longer be recovered. - IPR example: 2011: 91 000 cases with almost 115 million articles involved, retail value of the infringing articles: over 1.2 billion EUR.

Annex 3: Working document: Commission
requirements for the Container Status Messages

Subject:            Working document addressing the collection of the CSM (Container
Status Messages) under the to-be-revised Regulation 515/97 – Requirements for container transport operators (container carriers)

Reference:        Draft Version 3.1

DISCLAIMER:

This
is a working paper. It has been drafted with the aim of promoting discussions
with the relevant stakeholders. The requirements expressed in this paper do not
necessarily embody future rules of law, and should not be presented as such.

SECTION 1: REQUIRED
DATA

a) Container Status
Messages (CSMs)

Ocean carriers shall,
subject to the general conditions set forth in Section 2, submit[88] to the central repository
created for this purpose by the European Commission / OLAF Container Status
Messages (CSMs) for all containers laden with cargo destined to arrive within the limits of an EU port from a third country port by vessel:

· 
Whenever occurs an event specified in b),

· 
Within the time limits specified in c1),

· 
During the time period specified in c2),

· 
Reporting the data elements specified in d),

· 
In the message formats specified in e), and

· 
By means of a data-interchange communication
protocol specified in f).

b) Events to be reported

The following events must
be reported if the ocean carrier creates or collects a container status message
in its electronic equipment tracking system reporting that event:

· 
When the booking relating to a container which
is destined to arrive in the customs territory of the Union by vessel is
confirmed,

· 
When a container, which is destined to arrive in
the customs territory of the Union by vessel, arrives or departs a facility[89],

· 
When the container, which is destined to arrive
in the customs territory of the Union by vessel, is loaded on or unloaded from
a conveyance[90],

· 
When a container which is destined to arrive in
the customs territory of the Union by vessel is confirmed stuffed or stripped,

· 
When a container which is destined to arrive in
the customs territory of the Union by vessel undergoes an intra-terminal
movement,

· 
When a container which is destined to arrive in
the customs territory of the Union by vessel is ordered stuffed or stripped.

NB: At its convenience, a
carrier may transmit other container status messages in addition to those
related to the events specified in paragraph (b) of this section.

c1) Time limits for
reporting

For each event specified
in b), the ocean carrier must transmit the CSM no later than 24 hours after the
CSM is entered into the ocean carrier’s electronic equipment tracking system.

NB: For containers
destined to arrive in the EU, and at its convenience, a carrier may postpone
the time of transmission of CSMs to the moment the transmission of the ENS
(Entry Summary Declaration) is due.

c2) Time period of
reporting CSMs

The time-period of CSM
reporting starts when the ocean carrier knows that the container is destined to
arrive within the limits of an EU port − that is to say, when an EU-nexus
can be established. If, at this point in time, the container is not empty,
carriers shall communicate − in addition and simultaneously to the first
reported event − all past CSMs related to the container, back from the
moment the container has been reported empty[91].

The time-period of CSM
reporting ends when the container is reported again empty after the arrival in
the EU.

NB: At its convenience or
in case it is not possible to determine specific "empty-container
events", a carrier may report CSMs corresponding to the following
time-periods: 3 months prior to arrival in EU and 1 month after the arrival or
when a non EU location is reached (whichever happens first).

d) Content of
messaging

Each CSM submitted to the
central repository operated by OLAF for this purpose must include the following
data fields:

1. Event code being reported as defined in the ANSI x.12 or UN EDIFACT
standards;

2. Container number;

3. Date and time of the event being reported;

4. Status of the container (empty or loaded);

5. Location where the reported event took place; and

6. Vessel identification (IMO number) associated with the CSM in case
the container is associated with a specific vessel.

NB: At its convenience,
the carrier may transmit other data fields in addition to those required
pursuant to paragraph (d) of this section.

e) Message formats

Commission’s preferred
format for messages is UN EDIFACT (namely COARRI, CODECO, COPARN, COREOR,
COSTOR and COSDCO). ANSI X.12 (namely 322 v4010/5010 and 315 v4010/5010) format
will also be accepted.

f) Methods of transmission:

Commission’s preferred
protocol of transmission is sFTP. Until January 2015, other communication
protocols will need to be agreed upon with the Commission.

SECTION 2: GENERAL CONDITIONS

Ocean carriers are only
required to submit CSMs that are created or collected in the carrier’s
electronic equipment tracking system.  Ocean carriers are not required to
create or collect any CSM data other than those the carrier already creates or
collects on its own and maintains in its electronic equipment tracking system.

An ocean carrier may, at
its convenience,

a) submit on a daily
basis, and in batches, all CSMs generated or collected in the carrier’s
electronic equipment tracking system within the last 24 hours,

b) submit all CSMs
generated or collected in the carrier’s electronic equipment tracking system
regardless of whether the CSM concerns a container which is destined for the
Union or not (“global data dump”).

c) provide the Commission
daily with a list of 'active' containers and with a password, hence enable the
Commission to (pull) obtain the necessary information through requests to
carriers online services for clients.

By submitting all of its
CSMs without pre-filtering for destination/origin, the container carrier
authorizes the European Commission and the competent MS' authorities to use the
“global data dump” in the same way and for the same purpose as the specified
requested data concerning EU destination. If the ocean carrier opts for this
mode of reporting, all information obligations are considered to be fulfilled.

Figure 13 - Reporting Time-Period

Annex 4: Anti-fraud Information System
(AFIS)

The current situation

OLAF has
developed, maintained and operated the Anti-Fraud Information System (AFIS) for
more than 10 years.

AFIS is an
umbrella term for a set of anti-fraud applications operated by the Commission (OLAF)
under a common technical infrastructure aiming at the timely and secure
exchange of fraud-related information between national and EU competent
administrations.

AFIS supports
Mutual Assistance in Customs Matters with collaboration tools like OCU (Operations
Coordination Unit) used for Joint Customs Operations; secure web mail
(MAB-Mail), specific information exchange modules and databases like MAB
(Mutual Assistance Broker), CIS (Customs Information System) and FIDE (Customs
Investigation Files Identification Database); and analysis tools like ATIS
(Anti-Fraud Transit Information System).

The mutual
assistance databases CIS and FIDE are in fact four databases (CIS-EU, CIS-MS,
FIDE-EU, FIDE-MS) due to the split between the EU exclusive competence (ex-1st
Pillar) and the MS shared competence (ex-3rd Pillar).

CIS is a
database where cases of customs fraud (established or suspected) are stored for
the purposes of discreet surveillance, specific controls and sighting,
reporting, operational analysis and strategic analysis. Its aim is to assist in
preventing, investigating and prosecuting operations which are in breach of
customs agricultural legislation by making information available more rapidly.

CIS cases may
contain (including personal data) the following data categories: commodities,
drugs, weapons, means of transport, businesses, persons, goods and cash
(retained, seized or confiscated), fraud trends and available expertise.

FIDE is a French
acronym derived from "Fichier d‘identification des dossiers d‘enquêtes
douanières". FIDE enables the identification of
competent authorities (and contact persons) of other Member States which are
investigating (or have investigated) the same legal or natural person in order
to coordinate their investigations. FIDE cases may contain (including personal
data) the following data categories: commodities, cash, drugs, weapons,
businesses, persons, suspicions, infringements and sanctions.

There is a major
difference between FIDE and CIS cases in practical terms, whilst the later can
be very detailed and may contain large amounts of information fields and
attached documents, the first are very succinct.

Financing

The funding of
the AFIS service platform is based on the Regulation 515/97 amended by
Regulation 766/2008, in particular its title VI, financing, article 42a.

AFIS has been
funded in the period 2007-2013 from the operational budget line 24 02 03, with
a funding of 6.2 million € in 2012 and 6.7
million € planned for 2013.

The planned
funding for AFIS in the new MFF 2014-2020 is earmarked at an average of 7 million
€/year. This level of funding is sufficient to
achieve the objectives of the reform of Regulation 515/97 and Council Decision
2009/917/JHA. The IT infrastructure costs of the initiatives proposed by OLAF
shall be borne by the planned budget and are designed to have minimal or no
impact on the IT infrastructure cost for the Member States combined with a
significant reduction in the operational costs of both the Commission and
Member States.

AFIS is
regularly audited by Data Protection supervisory authorities (EDPS, CJSA) as
well as audit and control bodies (ECA, IAS, IAC).

The need for restricted visibility for
Mutual Assistance databases

Progress towards
the establishment of restricted visibility would enable the Commission to
develop solutions for two problems inherent to the system, complexity and
trust; both represent severe obstacles preventing wider and smoother use of the
Mutual Assistance databases and information exchange modules as they are today.

The problem of
complexity arises from the fact the AFIS/MAB (Mutual Assistance Borker)
integrates different databases (CIS-EU, CIS-MS, FIDE-EU, FIDE-MS) and information
exchange modules to support the work of expert groups or user communities:
MARINFO for the illicit traffic by sea container, YACHTINFO for the illicit
traffic by small or pleasure vessels and CIGINFO for the illicit traffic of
genuine or counterfeit tobacco products.

The seizure of a
container of counterfeit cigarettes illustrates the problem of complexity that
both the users of the system providing the data and the analysts who have to
exploit it face today. Such a seizure can be potentially recorded in CIS-EU,
FIDE-EU, MARINFO and CIGINFO, one individual case can create up to four
different records. Although the current system has eased the input of the case
following the vision of "one seizure, one report" and the case can be
created in the four modules at once  (CIS-EU, FIDE-EU, MARINFO and CIGINFO),
the difficulties starts after the initial publication of the case, when it
splits into four different cases that have to be maintained separately.

Depending on the
nature of a case, the access rights of the user and the policy applied by each
Member State, a single case may be published in one or more, up to four,
different databases and/or modules. This variable multiplicity makes very
difficult the management of the case life-cycle (updates, cancelations, etc)
and it complicates enormously the exploitation of the data to fulfil the
purpose of the system as statistics and trend analysis often suffer from data
duplication and other quality issues.

Another inherent
problem to the system is that of trust. Some Member States have been reluctant
to use the database and exchange modules because they cannot control who can
have access to their cases, in other words, once a case is published, all EU
Member States have access to the data and even some Third Countries if MARINFO,
YACHTINFO and CIGINFO are used. Some Member States feel that the current model
is inappropriate to handle sensitive cases, hence the seldom use the system.

Restricted
visibility is the solution addressing problems, complexity and trust, explained
above. This mechanism would enable an individual case to be stored only once. A
single record to manage will make the system simpler and more user-friendly and
would also streamline its technical implementation and operational costs.

The restricted visibility
works through the application of two layers of constraints. The first layer of
constraints is automatically applied by the system based on a predefined set of
business rules on the basic parameters from the case, such as the fraud type,
the commodities or the means of transport involved. For instance, a case
involving drugs seized on a yacht can become a CIS-MS, FIDE-MS and/or YACHTINFO
case, but this case can never become a CIS-EU, FIDE-EU, MARINFO or CIGINFO
case.

The second layer
of visibility constraints is applied by the case owner, who will control who
can have access to his case. These visibility restrictions chosen by the case
owner can be applied with different levels: at user community / experts group
level, at Member State level and at organisation or service level. Using the
same example of a drugs seizure in yacht, the case owner will first decide who
can see the case at user community / experts group level, having the
possibility to choose one or more from the available options for this case:
CIS-MS, FIDE-MS and/or YACHTINFO. Further restriction of visibility can be
applied at Member State level, the users will be able to establish a list of
Member States who can access the case. And finally, if the sensitivity of the
case requires it, the user could specify specific services within Member States
who can have access to the case.

When a user
searches the system to retrieve cases from the new database with restricted
visibility, the system will take into account the organisation and Member State
the user belongs to as well as the access rights that he has been granted.
These user details will be crossed with the access restrictions of the cases in
the search results; the user will only have access to those cases where the access
restrictions are satisfied.

The search could
implement a "hidden hit" functionality, whereby the user will be
notified by the search results of those cases that match his search criteria
but he could not access due to unfulfilled visibility restrictions, the user
could still contact the data owner to request access to case. This "hidden
hit" function will provide transparency and foster cooperation amongst the
different national services using the system. This feature has been implemented
in other systems and has proved to be very useful.

The need to extend the transit database

OLAF has a
repository of transit declarations called ATIS (anti-fraud transit information
system) which is operational since July 2009, initially for movements of
sensitive goods only (goods involving higher risk of fraud, listed in Annex 44c
to Regulation 2454/93 and Annex 1 of Appendix 1 to the Common Transit
Convention) which represent less than 1% of the transit movements. Since fraud
cases often involve the false declaration of sensitive goods as non-sensitive
ones, ATIS was extended to transit movements of all goods as of September 2011.

The ATIS
repository is automatically fed from the NCTS (New Computerized Transit System)
system operated by DG TAXUD, which means that Member States incur no extra
operational cost to maintain this repository. In addition, the extension of
ATIS was implemented using message duplication services in the gateways of the
CCN network, thus no modification of the national transit systems was required,
the implementation took place with no cost for the infrastructure or IT budgets
of the National Customs Authorities.

The ATIS
database has proved to be very useful for OLAF analysis in the support of
investigations. ATIS is as an AFIS service, therefore the database and its
weekly analytical reports are available to the 27 Member States and
participating EFTA countries.

However there
are limitations and shortcomings. ATIS only covers 70% of the movements in the
transit regime; the majority of national transit movement (within only one
country) are not present in ATIS. OLAF receives the AAR (advanced arrival
record) of the transit movement and audit files from NCTS. Audit files allow
only limited tracking and tracing possibilities; for instance, changes of
destination while in transit and controls of the load are very important events
in anti-fraud analysis, the NCTS audit files allow the detection of such events
but the relevant details (new office of destination and control result) are
unknown.

Over the past
years, OLAF has performed operational analysis for a variety of cases involving
the withdrawal of goods from the transit regime. For a great majority of
transit movements either suspected or proven to be fraudulent, the transit
procedure had been 'broken down' into several smaller legs. An example of such
movements took place when a specific commodity carried out by one operator as
either consignor or consignee; whilst some consignments were shipped directly
from The Netherlands and Germany to the external Polish border, the vast
majority were literally transhipped via an internal Customs office to be put
immediately after in transit to the external border offices for export. No
considerable storage times took place in between the two transit procedures.

Due to the
absence of national movements in the current ATIS database, the intended export
of goods is not visible at the moment (including e.g. the information of the
intended final consignee of the goods). This is particularly vital for cases as
the example above, as it was suspected that the withdrawal of goods had taken
place during the second transit procedure destined for export.

ATIS is based on
an administrative arrangement approved by the Member States and participating
EFTA countries. However, further modification of the arrangement to realize the
full potential or to include new participating countries, for instance Croatia
before it becomes EU member, is almost impossible due to the fact that some
Member States have expressed that ATIS would require a more solid legal basis
than an administrative arrangement for further evolution or extensions, thus
any modification attempt risks to be blocked. In order to guarantee the needed
evolution, the legal basis for ATIS has to be migrated from its administrative
arrangement to the new regulation on mutual assistance.

New databases for import and export
declarations and container status massages

The ATIS
database contains as of October 2012 information on some 8.3 million transit
movements representing more than 40 million movements of goods, the database
grows at the rate of 600.000 transit movements (representing 3 million
movements of goods) per month.

The ATIS project
demonstrates that OLAF not only has the experience to set-up and to operate new
large scale databases. Furthermore, thanks to the excellent cooperation with DG
TAXUD, it is proven that this can be done in fast and cost effective manner
based on the interconnection of existing system.

The same way
that ATIS is automatically fed from the NCTS system, the table below shows the
intended automated data source for the new databases:

Database || Data Source || Operated by

Transit declarations || New Computerized Transit System (NCTS) || EC, DG TAXUD

Import declarations || Surveillance II || EC, DG TAXUD

Export declarations || Exports Control System (ECS) || EC, DG TAXUD

Container Status Messages || Container Tracking Systems || Shipping Lines

It is emphasised
that the new databases will be implemented as new services of the AFIS
platform, leveraging on an infrastructure that has been operational for 10
years for which governance and an IT security frameworks are in place. The use
of the AFIS platform also guarantees the user management, access to the
infrastructure and economies of scale by sharing common infrastructure elements
and management tools across multiple services.

The
implementation of the new AFIS databases for import and export declarations and
container status messages will be based on the same principles as the
implementation of the ATIS extension, these are:

· 
Automated data processing from existing systems
as data source (table above) to avoid additional operational costs for Member
States and redundant processing of the same data.

· 
Centralized implementation in cooperation
between OLAF and TAXUD with no direct impact on the infrastructure of the
Member States.

· 
The new databases will have analytical and
reporting services available to the competent Commission services and to the
Member States via the AFIS platform.

· 
The development costs and subsequent operational
costs are planned to be absorbed by the AFIS budget with no need to increase
the funding above the current level. The project of new databases will not give
rise to any costs for the Member States.

The table below contains the expected data
volumes to be gathered by the new databases:

Database || Volume || Development  Cost (one time) || Operational Cost ( per year)

Transit declarations (with national movements) || 11 Million / year || 400.000 € || 100.000 €

Import declarations || 37 Million / year || ||

Export declarations || 12 Million / year || ||

Container Status Messages (CSMs) || 20 Million * || 450.000 € || 100.000 €

- Based on the current estimation of the
number of containers in circulation worldwide.

Annex 5: Need
for Container Status Messages and the ways to obtain them

In its consultations with the deep sea carrier companies and the
World Shipping Council, the Commission put emphasis on the potential
administrative burden that the mandatory supply of CSMs could put on the
companies. It is noted in this respect that such a practice is already present
in US legislation, known as the 10+2 rule[92],
which requires cargo information,
for security purposes, to be transmitted to the authorities at least 48 hours
before goods are loaded onto an ocean vessel for shipment into the U.S. Ten elements are requested from the
importer and two from the carrier; one of these two are the ‘Container Status
Messages’.

Providing the required CSMs to the Commission would represent a very
limited burden on the carrier companies. This is partly because the companies
have already experience and, to some extent, the equipment necessary for
supplying such information; this is because this data is similar to the one
required under US law[93].
In addition, companies may choose to provide the required data in ways that are
less costly than others; for example, allowing the Commission to gain access to
the data through the use of a password, or providing the data through a 'global
dump' approach[94]
is clearly less expensive than supplying data specifically selected.

A measure that should definitely reduce cost of implementation for
the companies concerned is the intended centralisation of data on CSMs. It will
be more efficient and less problematic for companies to provide CSM data once
to the Commission, which would then be responsible for disseminating the same
data to each individual Member State. This was clearly stated during the
consultation with the deep sea carrier companies and the World Shipping
Council.

In addition, analysis of movements of containers, will allow a
better targeting of controls. In this way, there is a possibility that the
controls affect more the carriers for which no data is available. Consequently,
companies may benefit from providing data, in the way of avoiding time
consuming customs controls.

Annex 6: References to official
documents:

Legislation:

· 
Council Regulation (EC) No 515/97 of 13 March
1997 on mutual assistance between the administrative authorities of the Member
States and cooperation between the latter and the Commission to ensure the
correct application of the law on customs and agricultural matters

· 
Regulation (EC) No 766/2008 amending Council
Regulation (EC) No 515/97

· 
Council Decision 2009/917/JHA of
30 November 2009 on the use of information technology for customs purposes

· 
e-Customs Decision 70/2008/EU for a paperless
Customs environment

· 
Council Regulation No 2913/92 of 12 October 1992
establishing the Community Customs Code

Case Law:

· 
ECJ C 201/04 Molenbergnatie [2006] ECR I 2049

· 
Joint cases C 124/08 and C 125/08 Snauwaert and
Others [2009] ECR I 0000

Communications:

· 
Communication from the Commission to the
European Parliament, the Council and the European Economic and Social Committee
on Customs Risk Management and Security of the Supply Chain, COM(2012) 793
final

· 
Communication from the Commission, Strategy for
the evolution of the Customs Union COM(2008) 169 final

· 
Communication from the Commission, Protection of
the Communities’ financial interests, The fight against fraud For an overall strategic approach COM(2000)
358 final

· 
Communication from the Commission on the
protection of the financial interests of the European Union by criminal law and
by administrative investigations, An integrated policy
to safeguard taxpayers' money, COM(2011) 293 final

· 
Communication from the Commission on the
Commission Anti-Fraud Strategy, COM(2011) 376 final

Reports:

· 
Report of the European Anti-Fraud Office;
Summary version; 8th Activity Report (2007)

· 
OLAF Report 2011

· 
Commission Follow-up Report 2010 to European
Parliament Resolution P6 TA (2007 0432) of 11. 2007

Additional documents:

· 
ICTSD Background Paper, International transport,
Climate Change and Trade – What are the options for Regulating Emissions from
Aviation and Shipping and what will be their impact on trade?, available at: http://ictsd.org/downloads/2011/12/international-transport-climate-change-and-trade.pdf

· 
Member States’ Questionnaire: Member States
Responses to “Questionnaire regarding the upcoming AFIS conference on 10-11 May
2012 and the planned review of the Council Regulation 515/97 and the Council
Decision 2009/917/JHA”

· 
Documents related to the US 10+2 rule: “19 CFR
Parts 4, 12, 18, et al. Importer Security Filing and Additional Carrier
Requirements; Final Rule”, Federal Register, Department of Homeland Security,
25 November 2008

· 
Document “110621_1403 rev6 final ATIS
ADMINISTRATIVE ARRANGEMENT-original-for translation.doc”, the Administrative
Arrangement on the Anti-Fraud Transit Information System (ATIS)

Press releases:

· 
Press release: Chinese garlic smuglers
intercepted, OLAF/10/06 available at: http://europa.eu/rapid/press-release_OLAF-10-06_en.htm

· 
Press release: Smuggled garlic intercepted in
Poland, OLAF/11/1, available at: http://europa.eu/rapid/press-release_OLAF-11-1_en.htm

Annex 7:  List of formal consultations
with Member States conducted in preparation of the Impact Assessment

1. The "Mutual Assistance Committee”, also
called “Art. 43-Committee”, consisting of the representatives of Member
States responsible for mutual assistance matters, established by
Article 43 of Regulation 515/97, examines all matters relating to the
application of the Regulation. In its latest meetings in May and September
2012, Member States' representatives were informed about the state of play of
the review process for Regulation 515/97.

2. 
A consultation of the Member States by means of
a questionnaire was launched in February 2012.[95]

3. In May 2012, the Commission organised the AFIS[96] Conference to collect
feedback and suggestions from Member State experts on the overall functioning
of the Anti-Fraud Information System, also including the implementation and
prospects of Regulation 515/97. The discussions focused primarily on the
possible ideas for the improvement of Regulation 515/97. Germany, for instance,
emphasised the need to ensure that the Regulation contains clear legal
provisions. It also proposed to provide for the legal basis for coordinated
audits – similarly to what has been done in the area of VAT and excise duties.

Annex 8: Questionnaire

Questionnaire regarding the AFIS conference
on 10-11 May 2012 and the planned review of the Council Regulation 515/97 and
the Council Decision 2009/917/JHA

Questionnaire summary – 05.07.2012

Prepared by Gartner

Gartner reference: 33006852

Table of
Contents

1          INTRODUCTION

2          SET UP OF THE QUESTIONNAIRE

2.1        CONTENT
COVERAGE SECTION 1- AFIS CONFERENCE

2.2        CONTENT
COVERAGE SECTION 2- BUSINESS ISSUES

2.3        CONTENT
COVERAGE SECTION 3- IMPACT ASSESSMENT

3          KEY RESULTS

3.1        QUANTITATIVE
SURVEY RESULTS

3.2        QUALITATIVE
SURVEY RESULTS

1. 
Introduction

In accordance with the Commission Work Programme 2012,
the European Anti-Fraud Office OLAF has been reviewing the Council Regulation
515/97 and the Council Decision 2009/917/JHA (replacing the CIS Convention) on
the basis of the legal provisions of the Lisbon Treaty.

As part of this review, an impact assessment has taken
place. To gather evidence for this impact assessment, OLAF has further issued a
survey to all 27 EU Member State representatives to better understand the
representatives’ viewpoints on the recast.

This survey is the subject of the document at hand.

The survey took place in April 2012. The response rate
to it was 100%, meaning that all 27 Member State legates have responded to the
questionnaire.

The scope of the survey was limited to mutual
assistance in customs matters.

2. 
Set up of the questionnaire

The Member State
questionnaire was divided into three parts, covering:

1. 
The
AFIS conference;

2. 
Current
issues of concern for the fight against customs fraud;

3. 
Possible
amendments to the current procedures and means to fight fraud.

While sections 1
and 2 of the questionnaire contained open questions giving Member State legates
the possibility to provide descriptions and/or comments, section 3 of the
survey was composed of both quantitative binary (yes/no) questions as well as
comment fields for further annotations.

The survey
contained 12 questions (some of which were split into sub-questions) in total.

2.1 Content coverage Section 1- AFIS
conference

This first section of the survey covered off 2
questions (out of a total of 12 questions).

It focused on the AFIS Conference which was organised
by OLAF in May 2012 after more than 10 years of Anti-Fraud Information Services
being delivered to the Members States through the AFIS system.

The scope of the AFIS Conference was exclusively the
AFIS applications for mutual assistance in customs matters with the aim of
assessing together with a delegation from each Member State’s customs
administration the fitness-for-purpose of the services delivered and the
desired future evolution of OLAF’s Anti-Fraud Information Services from the
business, legal and technical perspectives.

The questions posed under this section looked into
identifying topics of interests among Member States as well as speakers for the
conference.

Question 1a. Do
you have particular requests to be included for discussion at the conference?

Question 1b. If
you were interested to participate as a speaker, on which subject would that
be?

2.2 Content coverage Section 2- Business
issues

This section covered off 5 questions (out of a total
of 12 questions).

This section of
the survey focused on business issues, i.e. matters which today reduce the
efficiency and effectiveness of the fight against customs fraud. The questions
of this section aimed at identifying shortcomings to the ways international
collaboration is organised, the availability of information, and overlapping IT
systems in the area of anti-fraud policies.

Question 2.
What do you consider the top-three shortcomings in the joint international
fight against customs fraud today?

Question 3.
What information do you typically lack when identifying customs fraud cases?

Question 4.
What information do you typically lack when investigating customs fraud cases?

Question 5.
What in your opinion are the primary reasons why joint customs operations are
not always initiated even though there is a well-founded suspicion?

Question 6.  Do
you experience difficulties due to potential overlaps between different IT
systems in the Customs anti-fraud domain offered to your Service by EU and/or
International Bodies? If yes, please provide details.

2.3 Content coverage Section 3- Impact
assessment

This section covered off 6 questions (out of a total
of 12 questions).

This section built
strongly on the previous one. Its purpose was to assess the extent with which
Member State legates would agree with possible amendments to the procedures, IT
systems and the availability of data in order to improve the fight against
fraud compared to the as-is situation.

The fraud
detection and investigation processes make use of information stored in
different repositories, governed by different legal regimes, prohibiting
updating and storage of these data and creating problems with synchronizing and
managing different versions of data. Question 7 reflected whether Member State
legates would be in favor of harmonizing and integrating the existing data
bases to obtain more user-friendly, higher quality and better protected
information as well as to integrate repositories.

Question 7.
Would your Member State be in favor of such a harmonization and integration
process?

Owners of data stored
in CIS and other MAB modules (CigInfo/MarInfo/YachtInfo) require an option to
specify user access rights to data, in order to ensure that information becomes
only available to relevant user groups or domains. Question 8 sought to know
whether Member States would be in favor of formally developing such an option
for restricted visibility in the CIS and MAB modules.

Question 8.
Would your Member State encourage the development of such an option in the CIS
and other MAB modules (CigInfo/MarInfo/YachtInfo)?

Import, export and
transit data are inputs into the fraud detection and prevention process.
Currently,  national customs authorities have access to customs-data
(declarations) regarding import, transit and export of goods only in case the
respective country is directly concerned as entry, transit, or exit point.
 In view of increasing the efficiency and effectiveness
of fraud-detection and fraud-investigation, Questions 9a-9c were asked to
find out to what extent Member State legates would require additional data and
in turn be in favour of centralized information improving the data’s
accessibility.

Question 9a. Do
you need access to customs-data (import, transit and export) relative to
transactions occurred in a Member State other than yours?

Question 9b. If
indeed needed, would you (in order to achieve access  to EU-wide
customs-declarations) be in favour of building a centralized database, where
customs data are gathered, normalized and stored in a central repository and
then made easily accessible to customs-authorities and EC services, as opposed
to the alternative which is to connect 27 different national customs systems?

Question 9c. Do
you believe that the Commission should take the initiative to build and make
available such a centralized database to give customs authorities access to any
import, transit or export transaction occurred within the EU customs union?

National customs
authorities today have access to data relative to movements of deep-sea
containerized cargo, but only in relation to the last part of the logistic
chain (following the loading operation in the declared foreign
port). Access to container status messages (CSMs) is believed to
improve fraud-detection and fraud-investigation, particularly with fraud of
the type "false declaration of origin". Questions 10a to 10c assessed
to what extent CSMs are perceived as valuable by Member State authorities and
how this information should be managed.

Question 10a.
Do you believe that a timely and easy access to container-status-messages
(CSMs) would improve fraud-detection and investigation?

Question 10b.
Would you prefer that CSMs are collected, normalized and stored in a central
repository, and then made easily accessible to customs-authorities and
Commission – as opposed to the alternative, which is to achieve the access to
CSMs by means of connecting to the container-operators information
systems?

Question 10c.
Do you believe that the EC should take the initiative to build and make
available such a centralized information system (database) to give customs
authorities timely access to CSMs?

Certain data may be beneficial to share with Europol and the
World Customs Organisation in order to increase the efficiency and
effectiveness of combating fraud in today’s cross-border context. Questions 11a
and 11b evaluated the extent with which Member States would provide their
consent for sharing data with the cited international organizations.

Question 11a. With your prior consent on a case by
case basis, would you be willing to share with Europol the nominal data from
CIS and other MAB modules (CigInfo/MarInfo/YachtInfo) under the exclusive
competence of the EU?

Question 11b. With your prior consent on a case by
case basis, would you be willing to share with WCO the non-nominal data from
CIS and other MAB modules (CigInfo/MarInfo/YachtInfo)?

Joint Customs
Operations are currently organized and set up on a case-by-case basis. Question
12 asked whether Member States would be in favor of a more permanent
organizational and operational structure to support Joint Customs Operations.
It described the option of a more permanent structure as a structure supporting
liaison officers from the Member States and, if appropriate, from other
organizations (e.g. Europol, Frontex, Interpol, WCO).

Question 12.
Would you consider such a permanent structure to be beneficial? Please explain
why?

3. 
 Key results

This section
presents the key results of the Member State questionnaire.

The response rate
to the survey was 100%.

For the
qualitative questions 1-6, the most frequent i.e. recurring topics highlighted
by Member State legates in their answers are summarized below.

For questions
7-12, both the key quantitative results as well as the main qualitative
feedback are provided.

As regards the
quantitative results, the percentage score obtained puts in relation the number
of affirmative (‘yes’) answers with the number of total answers provided. Where
a country did not provide an answer, this was disregarded in the calculation.

Example: In case a question was answered
affirmatively by 23 out 25 total responses (with 2 countries not providing any
answer), the score is calculated as 23/25 i.e. 92%.

The total number
of responses is always provided in addition to this calculation for information
purposes.

3.1 Quantitative survey results

The quantitative
results are provided per question below. Subsequently, the results are
represented graphically.

Question 7.

· 
26 Member States
answered this question.

· 
25 of these Member
States answered ‘yes’, which is a percentage of 96.2 %.

Question 8.

· 
26 Member States
answered this Question.

· 
22 of these Member
States answered ‘yes’, which is a percentage of 84.6 %.

Question 9a.

· 
24 Member States
answered this question.

· 
22 of these Member
States answered ‘yes’, which is a percentage of 91.7 %.

Question 9b.

· 
19 Member States
answered this question.

· 
18 of these Member
States answered ‘yes’, which is a percentage of 94.7 %.

Question 9c.

· 
21 Member States
answered this question.

· 
19 of these Member
States answered ‘yes’, which is a percentage of 90.5 %.

Question 10a.

· 
25 Member States
answered this question.

· 
23 of these Member
States answered ‘yes’, which is a percentage of 92.0 %.

Question 10b.

· 
23 Member States
answered this question.

· 
22 of these Member
States answered ‘yes’, which is a percentage of 95.7 %.

Question 10c.

· 
24 Member States
answered this question.

· 
22 of these Member
States answered ‘yes’, which is a percentage of 91.7 %.

Question 11a.

· 
25 Member States
answered this question.

· 
22 of these Member States
answered ‘yes’, which is a percentage of 88.0 %.

Question 11b.

· 
26 Member States
answered this question.

· 
25 of these Member
States answered ‘yes’, which is a percentage of 96.2 %.

Question 12

· 
21 Member States
answered this question.

· 
18 of these Member
States answered ‘yes’, which is a percentage of 85.7 %.

What now follows
are three visualizations for the above results.

First, the answers
are displayed as a traditional bar chart per question.

Second, the answers are
displayed per theme of questions, combining the answers to:

· 
Questions 7 and 8
(Member State support to changes in CIS and MAB modules);

· 
Questions 9a-c (access
to import, export, transit data);

· 
Questions 10a-c (access
to Container Status Messages);

· 
Questions 11 a and b
(information sharing with the World Customs Organization and Europol)

· 
Question 12
(Joint-Customs Operations).

Third, the answers
are grouped according to action or item they relate to:

· 
Whether a consolidation
is desirable (Questions 7, 9b, 10b);

· 
Whether the re-use of
existing data and systems should be favoured (Question 8);

· 
Whether the EC should
take a certain initiative (Questions 9c, 10c);

· 
Which needs Member
State have (Questions 9a, 10a);

· 
What the extent of
collaboration with other, non-EU actors should be (Questions 11a, 11b);

· 
The set up of a
permanent structure (Question 12).

3.2 Qualitative survey results

The following main
comments were provided per question:

Question 1a- Do
you have particular requests to be included for discussion at the conference?

Concerns- Overlap
in systems:

· 
High Member State
burden through redundant data entries;

· 
Decreased effectiveness
through search in multiple data bases

Concerns-
Delimitation of competences:

· 
Mutual Administrative
Assistance Committee versus other competent fora (CPG,...), OLAF versus TAXUD,...

Concerns-
Improvements to cooperation:

· 
Between MS; between EC
bodies and working groups  (TAXUD-OLAF-DAPIX); EC versus MS; with international
bodies (WCO); third countries

· 
The future of AFIS;
Recast of legislative acts Reg.515 and

· 
Council Decision 917

Others:

· 
Low usage of AFIS, CIS,
FIDE

· 
Including good
practices for usage, wiki, better usability through technical upgrades and
through manuals (CIS)

· 
Management of access
rights for MAB

· 
Quality and relevance
of data and cases in various data bases (CIS, CIGINFO, MARINFO,...)

· 
Analytical value of
data including Data mining, archiving and exporting functionalities,
translation capabilities

Question 1b-
Speakers

Germany and DK
proposed to speak at the conference.

Question 2-
What do you consider the top-three shortcomings in the joint international
fight against customs fraud today?

Lack of
comprehensive, timely, precise exchange of data:

· 
Quality of information
and intelligence; coverage of data: agent only, lack of data on real consignor
and

· 
consignee, real origin
of goods, insufficient data on suspicions, descriptions of goods, procedure
4200

Legal obstacles:

· 
Diverging competences
amongst MS;

· 
Diverging investigation
powers in law enforcement and criminal matters versus customs; and
investigation versus prosecution (reactive rather than proactive approaches);

· 
Overlap in 
organizations' activities

Financial and
staff constraints:

· 
Too few JITs;

· 
Long delays to launch
JIT as well as to obtain evidence;

· 
Lack of 'central'
coordinating authority

Limited scope of
collaboration:

· 
Neglected areas:
mineral oils, alcohols, eCommerce...;

· 
Divergent MS priorities

Question 3-
What information do you typically lack when identifying customs fraud cases?

· 
Fraud patterns, results
from controls, data on suspicions

· 
Persons, carrier,
activities of companies incl. production capacity and geographic pattern of
activity

· 
Real consignee and
consignor, passenger, description of goods (CN code and end use), real origin
of goods, transport routes, import/export data, railway

· 
Authenticity of
documents, existence of company

· 
Import statistics of
raw materials, cash, cigarettes, counterfeit-IPR

Question 4-
What information do you typically lack when investigating customs fraud cases?

· 
Holder of certificate
of vehicle registration

· 
Criminal records

· 
Telephones subscribers

· 
Nominative data

· 
Information on customs
procedures and transactions in other EU MS

· 
Real
consignor-consignee and origin of goods

· 
Movement of companies
located in 3rd countries

· 
Modus operandi

· 
Customs clearance data
including from 3rd countries

Question 5-
What in your opinion are the primary reasons why joint customs operations are
not always initiated even though there is a well-founded suspicion?

Complex
  application and financing procedure, time lag to set up (preparatory time)
 Overlap with
  other organizations' interventions (international, regional, etc.) and
  other intervention mechanisms (PCA-TAXUD)
 Lack of staff
  and resources (resource demands are high)
 Limited scope of
  JITs (control operations mostly)
 Diverging MS
  priorities
 Limited
  willingness of MS to effectively share information
 Lack of
  permanent organizational and operational structure
 Lack of legal
  basis for cooperation with third countries

Question 6- Do
you experience difficulties due to potential overlaps between different IT
systems in the Customs anti-fraud domain offered to your Service by EU and/or
International Bodies? If yes, please provide details.

Administrative
  burden on MS to enter the data in multiple data bases is disproportionally
  high.
 ‘One seizure-one report’ principle far
  from being achieved. 
 Complex, limited
  data exchange modalities with 3rd countries and parties (WCO)
 Redundant
  responsibilities within the EU (AFIS, RIF) 
 Responsibilities
  around data management, mining and analytics and similar are unclear,
  insufficiently centralized

Question 7- The
fraud detection and investigation processes make use of information stored in
different repositories, governed by different legal regimes, prohibiting
updating and storage of these data and creating problems with synchronizing and
managing different versions of data. The new Commission initiative intends to
harmonize the databases to get more user-friendly and better protected and to
integrate repositories, which would strongly add to the quality of available
information.

Would your
Member State be in favor of such a harmonization and integration process?

At practical
  level it is necessary to observe the principle “One case-one report”
  including providing data to Europol.
 More information
  on what data are exactly meant and how they are used is requested.
 Harmonization
  and integration would enhance fraud detection.
 Under the
  condition that there will be an adequate legal framework supporting such
  an approach. There should be a guarantee for a correct use of the
  information by authorized authorities.

Question 8-
From your feedback we understand that owners of data stored in CIS and other
MAB modules (CigInfo/MarInfo/YachtInfo) require an option to specify specific
user access rights of data, in order to ensure that information becomes only
available to the relevant closed user groups or domains. Would your Member
State encourage the development of such an option in the CIS and other MAB
modules (CigInfo/MarInfo/YachtInfo)?

In theory yes,
  draft amendments of legislative acts should be provided to MS. 
 We would agree
  only if by the above proposal is meant that all the MS will keep receiving
  all the exchanged information, and the data owner will only be able to specify
  specific users in each MS that are members of the relevant user-groups.
 Yes, indeed we
  would encourage this, as the MAR-Info group consists of Non-EU Member
  States, in which case we will be able to decide on a case by case basis,
  to which group a specific case should be made available.

Question 9-
National customs authorities have access to customs-data (declarations)
regarding import, transit and export of goods. This is only the case when
the respective country is directly concerned as entry, transit, or exit point.
 In view of increasing the efficiency and effectiveness
of fraud-detection and fraud-investigation:

Question 9a. Do
you need access to customs-data (import, transit and export) relative to
transactions occurred in a Member State other than yours?

Involve
  appropriate forum (CPG etc.)
 Much additional
  information is needed such as which information is included, criteria and
  specifications for use of the database, etc. 
 Occasionally in
  the course of an investigation
 Within the
  transit operations a very frequent problem is that a destination of
  concrete goods consignments of interest domestic company is in other MS. 
 Under the
  current system it is already possible to access this kind of data.

Question 9b. If
indeed needed, would you (in order to achieve access  to EU-wide
customs-declarations) be in favour of building a centralized database, where
customs data are gathered, normalized and stored in a central repository and
then made easily accessible to customs-authorities and EC services, as opposed
to the alternative which is to connect 27 different national customs systems?

As far as no
  restriction are raised in the analysis, by the Member States, of these
  data and that the use of these data is only for antifraud purposes.
 We are not against
  of the building of such centralised database, provided that other
  legislations, such as Personal Data Protection, are taken into
  consideration
 A centralised
  solution raises serious questions in connection with Art. 8 of the Charter
  of Fundamental Rights of the European Union. What is the position of the
  EDPS? What can be the legal basis for such a system?

Question 9c. Do
you believe that the Commission should take the initiative to build and make
available such a centralized database to give customs authorities access to any
import, transit or export transaction occurred within the EU customs union?

Involve
  appropriate forum (CPG etc.). Quid delimitation of competences Mutual
  Administrative Assistance Committee's competences
 No. A
  centralized database without a legal basis, without regard to existing IT
  structures and without any apparent need is not supported. 
 Yes we believe
  that it would be useful.

Question 10-
National customs authorities today have access to data relative to movements of
deep-sea containerized cargo, but only in relation to the last part of the
logistic chain (following the loading operation in the declared foreign
port). Access to container status messages (CSM’s) is believed to
improve fraud-detection and fraud-investigation, particularly with fraud
of the type "false declaration of origin". CSM’s are today provided
by operators to the U.S. Government.

Question 10a.
Do you believe that a timely and easy access to container-status-messages
(CSMs) would improve fraud-detection and investigation?

In this sense we
  welcome an initiative of the project Contraffic-SAD.
 OLAF is
  requested to explain the differences between CSM-messages and the Database
  “CONTRAFFIC” as it provides benefits to customs investigations now.
 It would improve
  the on-going investigation and tracking of containers. You would also be
  able to compare the tracking results with the data from CONTRAFFIC.
 No. The Entry
  Summary Declaration gives information which is considered to be sufficient

Question
10b.Would you prefer that CSMs are collected, normalized and stored in a
central repository, and then made easily accessible to customs-authorities and
Commission – as opposed to the alternative, which is to achieve the access to
CSMs by means of connecting to the container-operators information
systems?

If it would be
  possible to have all this data to one place in one format, yes it would be
  a good solution.
 With the
  perspective that the information will be available to MS in real-time.
 Cost efficiency

Question 10c.
Do you believe that the EC should take the initiative to build and make
available such a centralized information system (database) to give customs
authorities timely access to CSMs?

We support this
  initiative as it would enhance the fraud detection very much if the data
  in available easily.
 Define very
  clearly what the terms “under the exclusive competence of the EU” mean.
 No.A new
  information system without a legal basis and outside of a strategic
  concept is not supported.

Question 11- In
order to facilitate the sharing of data and avoid duplication of data entry,
OLAF would see an advantage in sharing some data from CIS and other MAB modules
(CigInfo/MarInfo/YachtInfo) with Europol and WCO.

Question 11a.
With your prior consent on a case by case basis, would you be willing to share
with Europol the nominal data from CIS and other MAB modules
(CigInfo/MarInfo/YachtInfo) under the exclusive competence of the EU?

· 
Yes, we would on a case
by case basis, but we are of course restrained by our national provisions
governing data processing.

· 
What kind of consent
from the member States would you intend to introduce in this case?

· 
The German customs
administration decides what information she gives to EUROPOL throughout the
national Central unit (BKA).

· 
Under the condition
that there will be an adequate legal framework supporting such an approach.
There should be a guarantee for a correct use of the information by authorized
authorities.

Question 11b.
With your prior consent on a case by case basis, would you be willing to share
with WCO the non-nominal data from CIS and other MAB modules
(CigInfo/MarInfo/YachtInfo)?

The German
  Customs Administration does already, on a case-by-case basis, share
  certain non-personal data with the WCO, either directly or via AFIS/ MAB.
 One information,
  one system. It would be useful if the information can be store only once
  and it could be transferred to other systems as well on case by case
  basis.
 Under the
  condition that there will be an adequate legal framework supporting such
  an approach. There should be a guarantee for a correct use of the
  information by authorized authorities.

Question 12- In
addition to the existing infrastructure available in OLAF, the Commission is
suggesting to set up a permanent organizational and operational structure to
support joint customs operations. This structure would support liaison officers
from the Member States and, if appropriate, from other organizations (e.g.
Europol, Frontex, Interpol, WCO). This would provide a more solid basis for improving
the efficiency of the international fight against customs fraud.

Would you
consider such a permanent structure to be beneficial? Please explain why?

· 
Under the condition
that there is an alignment with the joint customs operations (JCO’s) organised
by the Customs Cooperation Working Party (CCWP).

· 
A permanent structure
to support joint customs operations can have several advantages.

· 
The OLAF Helpdesk
significantly assisted during the operations which took place in the past.
Without additional information relating to a permanent organizational and
operational structure it is difficult to answer this question. Generally it can
be welcomed any initiative that is aimed to improve the functioning of the OCU
during the JCOs.

· 
It will mean that all
the future JCO’s can rely on experienced staff that have participated in many
different JCO’s and therefore are able to solve any problems that might occur
during a JCO.

[1]        Calculations are based on figures provided in Annex 2.

[2]        COM(2000) 358 final, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2000:0358:FIN:EN:PDF

[3]        CIS - Customs Information System based
on Regulation 515/97 and Council Decision 2009/917/JHA.

[4]      FIDE – Fichier d'Identification des Dossiers d'Enquêtes
Douanières – Customs files identification database under Regulation 515/97 and Council Decision
2009/917/JHA.

[5]        CIS database and FIDE database, respectively.

[6]        Other formal consultations with the Member States are listed
in Annex 7.

[7]        A consultation of the Member States
by means of a questionnaire was launched in February 2012, see Annex 8.

[8]        Meetings between the Commission services and representatives
of the WSC took place on 2 February, 15 March and 7 June 2012.

[9]        See Annex 3.

[10]       None of the members of the WSC can be considered as an SME
(Small and medium-size enterprises).

[11]       Meetings with the ESPD took place on 19 April 2012 and 14
June 2012; meeting with CJSA took place on 15 May 2012.

[12]       SAD: Single Administrative Document

[13]      CSMs are electronic messages
exchanged between transport operators of sea-containers (namely sea-carriers
and port operators), containing information about the movement and load status
of sea-containers as they move along the transportation chain. The companies
use this information not only for their own logistics but also to inform their
customers of the whereabouts of booked containers.

[14]       Initial results of the ConTraffic project show that the
analysis of the movements of containers is an effective way of identifying
suspicious cases. By analysing container movements, one can identify
inconsistencies between the origin declared by the importer and the
geographical origin/dispatch country derived from the container routing data.
These inconsistencies have proved to be strong risk indicators of potential
breach of legislation of the type mis-declaration of goods-origin. Preliminary
results have established that more than 50% of the cases identified using such
indicators are indeed cases of breach of customs legislation.

[15]       Source: OLAF.

[16]       A web-based open-intelligence approach systematically
"polling" carriers’ web-sites, and extracting from the web pages any
publicly available data related to container movements.

[17]       ATIS is a part of the Anti Fraud
Information System (AFIS).

[18]       The TAXUD's system mentioned is the so-called NCTS (New
Computerised Transit System) which is a Commission system of electronic
declaration and processing that enables traders to submit community transit
declarations electronically, operated by DG TAXUD.

[19]       Belgium, Netherlands, Denmark, Lithuania, Sweden and the UK
stated during the 33rd meeting of the Committee on Mutual Assistance
on policy matters covered by Article 43 of Regulation 515/97 and the 145th
E/EFTA Working group on "common transit" and "the simplification
of formalities in trading in goods" on 6 July 2011, that that they
"cannot support any administrative arrangement
which, according to our assessment, lacks a legal basis. The proposed legal
basis, presented by OLAF as Art. 15(2) and Art. 17(1)(a) third indent of R.
515/97 and Art. 13 of Regulation 2913/92 does in our opinion not suffice. That
said, we shall refrain from voting against or for the administrative
arrangement".

[20]       In addition to the MS requiring OLAF
to provide for a proper legal basis for this project, some important data is
still not available. See section 3.3.1.2.

[21]       These three types are chosen because they correspond to the
majority of OLAF cases in customs area, related to the losses for the EU
budget.

[22]       See figures in the scale of the problem in the Annex 2.

[23]       The legal basis for Union's action
against fraud is Article 325 of the Lisbon Treaty. Article 33 TFEU provides the
legal basis for the customs co-operation and Article 87 TFEU for the police
co-operation.

[24]       Preferential rate under the EU Generalised System of
Preferences (GSP) scheme.

[25]       Report of the European Anti-Fraud Office; Summary version; 8th
Activity Report (2007); page 53: http://ec.europa.eu/anti_fraud/documents/reports-olaf/rep_olaf_2007_en.pdf

[26]       Communication from the Commission to the European Parliament,
the Council and the European Economic and Social Committee on Customs Risk
Management and Security of the Supply Chain, COM(2012) 793 final.

[27]       OWNRES database; Period: 2011.

[28]       Analyses based on ConTraffic Project.

[29]       TARIC – When declared to customs in the Community, goods must
generally be classified according to the combined nomenclature or CN. Imported
and exported goods have to be declared stating under which subheading of the
nomenclature they fall. This determines which rate of customs duty applies and
how the goods are treated for statistical purposes.

http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en

[30]       http://europa.eu/rapid/press-release_OLAF-10-06_en.htm

[31]       http://europa.eu/rapid/press-release_OLAF-11-1_en.htm

[32]       OLAF Report 2011, page 18.

[33]       Example from OLAF investigation case.

[34]       Statistics provided by OLAF investigation units.

[35]       See e-Customs Decision 70/2008/EU for a paperless Customs
environment.

[36]       NCTS, ECS (export computer system)
and ICS (import computer system).

[37]       See Customs Code.

[38]       The time barring is based on Article
221 of the Community Customs Code. This  has been confirmed by the Court of
Justice of the European Union in ECJ C 201/04 Molenbergnatie [2006] ECR I 2049.

[39]       Source: OLAF experience.

[40]       European Court of Auditors, Special Report No 1 (2010),
available at: http://eca.europa.eu/portal/pls/portal/docs/1/7912988.PDF

[41]       Including errors because of missing documents.

[42]       Restricted visibility is a technical feature which allows users
to determine who will have access to data  they insert.

[43]       CIS – Customs Information System.

[44]       FIDE – Fichier d'Identification des Dossiers d'Enquêtes
Douanière, Customs Files Identification database.

[45]       See: EU Customs Strategy, available at: http://ec.europa.eu/taxation_customs/resources/documents/customs/com(2008)169_en.pdf

[46]       See: Communication from the Commission on the protection of
the financial interests of the European Union by criminal law and by
administrative investigations, available at:

http://ec.europa.eu/justice/criminal/files/comm_pdf_com_2011_0293_f_communication_en.pdf
Communication from the Commission on the Commission Anti-Fraud Strategy,
available at:

http://ec.europa.eu/anti_fraud/documents/preventing-fraud-documents/ec_antifraud_strategy_en.pdf

[47]       Annex 2 – Scale of the problem.

[48]       Some MS (i.e. Belgium, Denmark,
Lithuania, Sweden, the Netherlands & UK) stated that they "cannot
support any administrative arrangement which lacks a legal basis."

[49]       Annex 8 – Questions 9 and 10.

[50]       See Baseline scenario, chapter 3.7.

[51]       Transit data is currently contained in NCTS, import data is
stored in Surveillance tool system and export data is included in the Export
Control System. All three systems are operated by DG TAXUD.

[52]       All three systems are operated by DG TAXUD.

[53]       Common communication network is a private secure network
operated by DG TAXUD which is used by customs authorities of the Member States.

[54]       The legislation to be considered is Regulation 515/97 and/or
E-Customs Decision.

[55]       Environmental impacts are relevant
only in so far as a core problem is concerned.

[56]          ICTSD Background Paper, International transport, Climate Change and
Trade – What are the options for Regulating Emissions from Aviation and
Shipping and what will be their impact on trade? http://ictsd.org/downloads/2011/12/international-transport-climate-change-and-trade.pdf

[57]       Given the fact that trade is global the underlying assumption
is that there are no companies in the relevant sector that do not trade with
the US. In any case there would be no impact on the economic operators who
decide to submit the CSM by means of global dump.

[58]      Currently a prolongation for one year is in
preparation.

[59]       Assuming that the recommendation was implemented by creating
a new national legislation obliging the shipping companies entering the EU
Member State to provide the Commission with the CSM.

[60]       Operated by DG TAXUD. For more
details see footnote n.52.

[61]       ATIS arrangement is considered as a
temporary solution until the Commission will be able to propose a legal base
for this arrangement, as requested by the Member States.

[62]       There are two possible methods of the
provision of CSMs: i.e. "global dump" and "selective
reporting". In case of a global dump, the economic operator 'dumps' all
available data to the Commission, and the Commission selects what is relevant.
In case of selective reporting, the economic operator would first select the
required message and provide only part of the information. For further details
see Annex 5.

[63]       Estimate based on the experience of reporting to the US
authorities.

[64]       OLAF Report 2011, page 18.

[65]       Transit declarations would be copied
from the New Computerized Transit System ("NCTS"); import
declarations from the Surveillance II; and export declarations from the Export
Control System ("ECS"). Direct export could be sourced via Customs
Communication Network gateways.

[66]       Commission Follow-up Report 2010 to European Parliament
Resolution P6 TA (2007 0432) of 11. 2007; http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2007-0432+0+DOC+XML+V0//EN#def_1_6

[67]       See chapter on Problem description, page 11.

[68]       Importantly, a study by the World Bank suggests that a
reduction in customs clearance times by one day can bring the equivalent of
around 0,5% to 0,8% of cargo value in increased income; halving the standard
deviation of customs clearance times is the equivalent of a 0,2% increase. This
reduction in costs would increase the external competitiveness of the EU
business.

[69]       Assuming that TAXUD's systems ("Surveilance
III" and "ECS") will be the automated data source for
the new databases, in the same way that "NCTS" is the
automated data source for ATIS.

[70]       New Computerised Transit System which is a European wide system, based upon electronic declarations
and processing.

[71]       Common communication network is a private secure network
operated by DG TAXUD which is used by customs authorities of the Member States.

[72]       EDIFACT is the international EDI
(Electronic Data Interchange) standard developed under the UN.

[73]       It is assumed that the costs for the development and
operation of a centralised database would be equal to the cost of a national
database developed by one Member State. This extrapolation is based on the
assumption that while some aspects would allow Member States to save the
resources (e.g. smaller size of the database), the Commission would also save
on a variety of different communication channels needed (e.g. translations,
harmonized rules and interface).

[74]       There is a budget covering AFIS related development and
maintenance. The estimated amounts for suggested modifications should be
accommodated within the current financial perspective. Hence, these costs will
not require additional budget increase.

[75]       Costs of provision of data on
national transit by Member States. The costs are estimated on the basis of the
current costs incurred by 4 Member States who are currently voluntarily
providing transit data on national movements that the cost will be negligible.

[76]       Action Programme for Reducing Administrative Burdens in the
EU, COM(2007), 23 final.

[77]       Generally, diverse systems will be put in place and can
possibly create advantages for certain companies depending on which country
they are operating.

[78]       As opposed to option 2 where there would be an overall
(central) coordination assured by the Commission.

[79]       Even if the shipping companies were submitting the data
directly to the national database, whey would need to establish communication
channels with all of them. In the consultation process between the Commission
and the World Shipping Council, the latter expressed a clear wish to use one
(central) communication channel.

[80]       Although maximum possible
effectiveness is assumed, in the perceived risks associated with the options
are taken into account in the scoring and affect the expected overall
effectiveness;

[81]       See Annex 8.

[82]       Views expressed by WSC during the EU
High Level Seminar on Strengthening the Security of the Supply Chain (Customs
Risk Management in the EU), 26 March 2013.

[83]       From long term perspective (10 years), the maintenance costs
for the option 3 for 10 would be 54 million EUR (27 MS x 10 years x
200 000 EUR (100 000+ 100 000), while maintenance costs for the option 3 would
only be 2 million (200 000 EUR x 10 years).

[84]       Calculation method used: one quarter of 558.000 EUR (the
amount discovered by the Court of Auditors).

[85]       The 2 months is the expected duration for obtaining documents
in case the Commission is in charge.

[86]       Communication from the Commission to the European Parliament,
the Council and the European Economic and Social Committee on Customs Risk
Management and Security of the Supply Chain COM(2012) 793 final.

[87]       Action Programme for Reducing Administrative Burdens in the
EU, COM(2007), 23 final.

[88]     or make electronically available

[89]       These events take place when a
container enters or exits a port, container yard, or other facility. Generally,
these CSMs are referred to as “gate-in” and “gate-out” messages.

[90]       This includes vessel, feeder vessel,
barge, rail and truck movements. Generally, these CSMs are referred to as
“loaded on” and “unloaded from” messages.

[91]       Indicated as backward-reporting (A) in Fig 1.

[92]       http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_filing/
and http://cfr.regstoday.com/19cfr4.aspx

[93]       http://www.cbp.gov/linkhandler/cgov/trade/cargo_security/carriers/security_filing/ra.ctt/ra.pdf . Section 4-29 presents an estimation of the costs
associated with CSMs.  From the US example, it seems that "global
dump" is by far the cheapest solution and similar ‘low costs’ can be
estimated by an EU "global dump" solution. As regards the
"selective reporting" the EU relevant costs might differ from US
cost-estimations, because the EU "reporting rules" are more
complex than the ones used by US.

[94]       'Global data dump' is an approach whereby the companies would
put at the disposal of the Commission all their CSM data and the Commission
would select the ones that are required for analyses.

[95]       See Annex 8.

[96]       AFIS: Anti-Fraud Information System – see Annex 1, Glossary.