ANNUAL REPORT concerning the financial year 1996 (96/C 348/01)

The report, together with the institutions' replies to the Court's observations, was transmitted to the authorities responsible for giving discharge and to the other institutions.

Bernhard FRIEDMANN (President)

John WIGGINS

Giorgio CLEMENTE

Barry DESMOND

Patrick EVERARD

Armindo de Jesus de SOUSA RIBEIRO

Antoni CASTELLS

Jan O. KARLSSON

Hubert WEBER

Aunus SALMI

Jørgen MOHR

Kalliopi NIKOLAOU

François COLLING

Maarten B. ENGWIRDA

Jean-François BERNICOT

VOLUME I REPORT ON ACTIVITIES FINANCED FROM THE GENERAL BUDGET AND ON THE ACTIVITIES OF THE SIXTH AND SEVENTH EUROPEAN DEVELOPMENT FUNDS

TABLE OF CONTENTS

Page

General introduction 6

Part I Own resources

Chapter 1 Own resources 12

Part II Common agricultural policy

Introduction 46

Chapter 2 Budgetary management 49

Chapter 3 Market organizations - Plant products 64

Chapter 4 Common organization of the market - Animal products - Beef and veal premium schemes and selected BSE related measures 99

Chapter 5 Certain procedural aspects of export refunds on beef and veal 125

Part III Structural measures

Introduction 138

Chapter 6 European Regional Development Fund 143

Chapter 7 European Social Fund 175

Chapter 8 European Agricultural Guidance and Guarantee Fund, Guidance Section (EAGGF-Guidance) 198

Chapter 9 Common policy on fisheries and the sea 220

Page

Part IV Internal policies

Introduction 238

Chapter 10 Research 239

Chapter 11 Industrial policies - MEDIA 255

Part V External measures

Introduction 269

Chapter 12 European Development Fund 271

Chapter 13 Cooperation with developing and third countries (except Central and Eastern Europe) 293

Chapter 14 Measures to benefit the countries of Central and Eastern Europe and the newly independent States (the former Soviet Union) and Mongolia 317

Part VI Administrative expenditure

Introduction 345

Chapter 15 The Commission 349

15.1 General subsidies 351

15.2 Office for Official Publications of the European Communities 353

15.3 Decentralized Community bodies 360

15.4 Joint Sickness Insurance Scheme 361

Chapter 16 Court of Auditors 383

Chapter 17 The Economic and Social Committee and the Committee of the Regions 385

Part VII Financial instruments and banking activities

Chapter 18 Financial instruments and banking activities 391

Annex I Reports and opinions adopted by the Court of Auditors during the last five years 409

NB: The diagrams are all in Annex II at the end of this report (Volume II).

THE INSTITUTIONS' REPLIES

Page

Part I Own resources

Chapter 1 Own resources 37

Part II Common agricultural policy

Introduction 48

Chapter 2 Budgetary management 59

Chapter 3 Market organizations - Plant products 91

Chapter 4 Common organization of the market - Animal products - Beef and veal premium schemes and selected BSE related measures 118

Chapter 5 Certain procedural aspects of export refunds on beef and veal 135

Part III Structural measures

Introduction 142

Chapter 6 European Regional Development Fund 164

Chapter 7 European Social Fund 189

Chapter 8 European Agricultural Guidance and Guarantee Fund, Guidance Section (EAGGF-Guidance) 214

Chapter 9 Common policy on fisheries and the sea 233

Part IV Internal policies

Chapter 10 Research 249

Chapter 11 Industrial policies - MEDIA 263

Part V External measures

Chapter 12 European Development Fund 287

Chapter 13 Cooperation with developing and third countries (except Central and Eastern Europe) 312

Chapter 14 Measures to benefit the countries of Central and Eastern Europe and the newly independent States (the former Soviet Union) and Mongolia 337

Page

Part VI Administrative expenditure

Chapter 15 The Commission 373

15.1 General subsidies 373

15.2 Office for Official Publications of the European Communities 374

15.3 Decentralized Community bodies 376

15.4 Joint Sickness Insurance Scheme 378

Chapter 16

Chapter 17 The Economic and Social Committee and the Committee of the Regions 388

Part VII Financial instruments and banking activities

Chapter 18 Financial instruments and banking activities 406

GENERAL INTRODUCTION

0.0. CONTENTS Paragraph reference

Structure of the Report 0.1

Budgetary management 0.2 - 0.6

Administration and control 0.7 - 0.27

Justification of expenditure 0.7

Principal observations 0.8 - 0.27

Community income 0.9 - 0.10

EAGGF-Guarantee 0.11 - 0.13

Structural measures 0.14 - 0.18

Programmes managed by the Commission 0.19 - 0.24

Other expenditure 0.25 - 0.27

Coordination 0.28

Evaluation 0.29

Statements of assurance (Volume II) 0.30 - 0.33

Remedial action by the Commission 0.34 - 0.36

The Financial Regulation 0.37

The significance of audit 0.38

STRUCTURE OF THE REPORT

0.1. This 1996 Annual Report has a different structure from that of previous years; its first volume reflects the structure of the financial perspectives and a second volume incorporates the statements of assurance and related chapters for both the general budget and the European Development Fund.

BUDGETARY MANAGEMENT

0.2. A generous allocation of budgetary appropriations may create pressure for expenditure or, at the very least, discourage rigorous financial management. Chapters 2, 3 and 4 draw attention to the way in which regulations that fail to take account of world market prices result in unnecessary expenditure on support for agriculture. Checks during clearance of advances to Member States detect and correct errors and irregularities, but do not prevent the creation or maintenance of excessive levels of aid which cannot be regarded as sound use of public funds. The amounts involved are considerable: Chapter 3 draws attention to 3 000 Mio ECU of overcompensation for cereals, Chapter 4 to more than 800 Mio ECU for beef and veal producers. Special Report No 4/97 showed that EAGGF compensation payments and export refunds relating to German unification measures also involved substantial overcompensation and unnecessary expenditure.

0.3. Advances to Member States for structural expenditure are treated as definitive expenditure at Community level, without adequate accounting and control arrangements and without an adequate clearance system. This system facilitates maximization of fund transfers to Member States without ensuring the timely and rigorous use of funds in ways which meet Community objectives. Chapter 6 draws attention to the considerable delays in completing investment programmes from the 1989 to 1993 financing period. Chapters 6, 7 and 8 illustrate the poor definition of programme objectives and content, lack of co-financing, and a continuing lack of information as to the progress of actions. Substantial funds remain for long periods in the hands of intermediary authorities instead of being transferred to final beneficiaries. Numerous errors and problems of legality and regularity have been discovered in programmes which have been officially closed.

0.4. For PHARE and TACIS also, appropriations exceeded the level of financing that could really be used. Chapter 14 analyses the continuing increase in outstanding commitments from 1990 to 1996 and the Commission's difficulties in implementing and arranging contracts for adopted programmes for which it has made budgetary commitments. Special Report No 3/97 on the PHARE decentralized implementation system indicated that the Commission's concentration on full commitment of annual budgets, combined with the low absorption capacities of the beneficiary countries and the excessively wide range of programmes, resulted in 497 Mio ECU (38%) of advance payments during the period 1990-95 remaining in beneficiary national administrations' bank accounts at the end of 1995. Special Report No 6/97 on TACIS subsidies to Ukraine also drew attention to slow use of appropriations and the unnecessary mobilization of funds.

0.5. In general, in a Community financial system making extensive use of advances, with central accounts which treat them as budgetary expenditure, the rate of use of funds at final beneficiary level is unclear. Such a system cannot be regarded as meeting the requirement of sound financial management and makes it difficult to determine the appropriateness of Community resources' transfers.

0.6. A lack of commitment appropriations also creates problems. For instance, Chapter 13 shows how, as a result of the ceiling in the relevant part of the financial perspectives, the Commission had to postpone the commitment of amounts required for projects for which financing decisions had already been taken (including projects under MEDA programmes and a large project in India). Postponing commitment in this way infringes a basic concept concerning multiannual actions. The Court's recent opinion on the Financial Regulation (see paragraph 0.37) refers to this issue.

ADMINISTRATION AND CONTROL

Justification of expenditure

0.7. Under the present systems of subsidy the normal burden of proof, by which the beneficiary has to fully justify use of public funds, is very often reversed. The Commission's difficulties in checking legality, regularity and sound financial management aspects of the Union's finances are such that it is unable to properly assume its central role in managing the budget. The problems are particularly evident in the Structural Funds and significant for the common agricultural policy. The Commission advances Community funds and can only recover or reallocate them if it can prove that they have been wrongly used. This would be perfectly acceptable if beneficiaries and all intermediary organizations had accounting and control systems which could fully justify expenditure with sufficient and relevant proof and were obliged to present or make available the evidence to the Commission for an adequate level of checking by its services. The decentralization of management of Community funds has, unfortunately, not been accompanied by the creation of appropriate management information and accounting systems to permit the Community authorities to exercise, in the general interest, their overall supervisory function. The identification of errors and irregularities is thereby severely handicapped and the proper use of Community funding is uncertain. The criticisms and recommendations that the Court makes naturally reflect this fundamental structural weakness in the management of Community finances.

Principal observations

0.8. Almost all chapters of this Report (and five special reports to be taken into consideration for the 1996 discharge) include observations on administration and control weaknesses which demonstrate how far the development of appropriate systems of accounting and financial management, in particular in the Member States, has failed to keep pace with the expansion of Community activities and with their diversified nature.

Community income

0.9. Chapter 1 draws attention to the risks for own resources in the operation of customs-free zones and inward processing arrangements. It also mentions the frequent use of false certificates of origin to obtain preferential tariffs and the way in which, because of the length of investigations, legal time limits lead to loss to the Community. To avoid delays in making available own resources and to ensure their correct and harmonized collection, the Commission should establish a precise framework for resolving cases where it reserves its position with regard to the calculation of VAT and GNP resources.

0.10. Special Report No 5/97 on the management of cereals trade found that continuing difficulties were being experienced in recovering refunds paid, although exporters had accepted buyers' claims for shortfalls in quantities delivered.

EAGGF-Guarantee

0.11. The EAGGF-Guarantee chapters describe prob-lems with the implementation of the 1992 reform of the common agricultural policy with regard to cereals and beef. The integrated administrative and control systems, which are essential for adequate financial management, have still not been fully implemented. For cereals, the stabilizer system is hampered by imprecise regulations and Member State documentation fails to provide the necessary audit trail. Some Member States failed to comply with regulatory requirements concerning risk analysis, area and crop inspections and reporting. For beef, delays in adapting national mechanisms occurred and further improvements are needed to the cattle register, the administrative document and databases.

0.12. A specific aid programme for imports of beef into the Canary Islands was insufficiently controlled and necessary national legislation had not been enacted. Customs and veterinary checks on reimportation of beef exports rejected by Egyptian veterinary authorities were also inadequate.

0.13. In the wine market, the recent introduction of penalties for the provision of incorrect and incomplete information by beneficiaries for the Community's management information system has yet to be proved effective and vineyard registers are still not properly established. It is also regrettable, given the complexity of the aid system for tobacco, that the Member State control agencies foreseen in the 1993 reform have not been established.

Structural measures

0.14. The chapters concerning structural measures all contain, as in previous years, severe criticism of Member State statements of expenditure, which are often unreliable or inaccurate. Accounting and information systems must be improved so that there is an adequate audit trail from the Commission's payments to final beneficiaries' expenditure via the multiple levels of collection and certification of data.

0.15. Chapter 6 reports numerous problems of legality and regularity in actions from that part of the 1989-93 programmes which had been officially completed and closed. The Commission and Member States need systems to ensure that the Community budget does not finance ineligible expenditure.

0.16. Chapter 7 points out that Member States need a risk-based audit of final beneficiaries and the Commission should give greater attention to examination of final declarations, in order to ensure that the conditions for granting ESF funding, including the presence of national co-financing, are met.

0.17. Chapter 8 refers to cases where expenditure declared cannot be traced in accounting records or where individual amounts paid differ from those declared. National authorities have approved aid to firms processing agricultural products without reasonable market prospects or viability; incorrect expenditure declarations were also accepted.

0.18. The decentralized management of the Financial Instrument for Fisheries Guidance (Chapter 9) requires more thorough scrutiny by the Commission, particularly on-the-spot checks of the legality, regularity and reality of the expenditure declared. Follow-up of the Court's Special Report No 3/93 on restructuring of the Community's fishing fleet confirms that management information systems envisaged for effective monitoring and control are still not adequate for the efficient allocation of aid.

Programmes managed by the Commission

0.19. The Commission's handling of expenditure which it manages directly is also revealed to be unsatisfactory in many areas.

0.20. With regard to the participation of small and medium-sized enterprises in research, technological development and demonstration programmes, Chapter 10 concludes that weaknesses in SMEs' accounting systems and the complexity of the rules result in incorrect cost statements; more audits by the Commission are needed to establish the basis for recovery of overpayments and to deter irregular claims for aid. In general, the Community has to improve and simplify its procedures and develop specific measures to cope with the needs of SMEs.

0.21. The MEDIA I programme of assistance for industrial aspects of Community audiovisual policy (Chapter 11) was adversely affected by unclear contract arrangements for support agencies, inadequate audit of the agencies, and lack of instructions for the administration of venture capital and the recovery of outstanding loans.

0.22. Tendering during the period 1988-93 for EDF-financed works contracts (Chapter 12) shows many weaknesses in regulations and their application, affecting both the preparation and approval of calls for tender and the procedures for determination of compliance and for tender clarification.

0.23. Chapter 13 comments on the management, by a regional public financial institution, of a revolving fund for loans to export-oriented firms in Central America. The fund was set up in 1991, at a moment when the Court had just informed the Commission of important failures by the same regional financial institution in the management of another large project. Although the Commission included tighter conditions in the financing agreement for the revolving fund project, the financial institution failed to observe many of them and the Commission did not take effective action to ensure compliance.

0.24. For support to agricultural reform in the PHARE and TACIS countries, Chapter 14 refers to the Commission's failure, when considering programme proposals, to take sufficient account of the administrative organization of beneficiary countries or their institutional and legislative framework.

Other expenditure

0.25. Chapter 15 reveals the need to improve the definition of the use of grants to organizations advancing the idea of Europe and to delimit the type of expenditure and activity eligible for Community financing. It also draws attention to problems of budgetary presentation, accounting systems and internal control of the decentralized Community bodies. They should, while preserving their autonomy, cooperate with the Commission to improve their financial management.

0.26. Chapter 17 describes inadequacies in the system of reimbursement of travel expenses and allowances to members and alternates of the Economic and Social Committee and, to a much lesser extent, of the Committee of the Regions.

0.27. Chapter 18 - 'Financial instruments and banking activities` - concludes that any future operations similar to the loans with interest subsidies granted to Italy after the 1980 earthquake should be monitored by the Commission so as to ensure that the managing organization takes corrective action when borrowers do not respect their commitments.

COORDINATION

0.28. Administration and control is often adversely affected by lack of coordination. Chapters 6, 7, 10, 11 and 14 refer to noteworthy cases, as does the special report on humanitarian aid (No 2/97). Chapters 3 and 4 reveal that the development of the integrated administration and control system for agriculture has been handicapped by delays in the development of appropriate computer systems. Within the Commission's own services, five years after deciding to allocate substantial resources to the development of a management information system for development cooperation, the audit revealed that this major project had been badly handled.

EVALUATION

0.29. Evaluation is a key factor in ensuring proper use of public money. Weaknesses in the evaluation of the results of Community financing are described in Chapters 6 (particularly aid for SMEs) and 14, and in the special reports on humanitarian aid, on PHARE and on TACIS. In the absence of clear objectives and performance indicators, evaluation of the efficiency and effectiveness of structural expenditure is very severely hindered. The Court's assessment of the impact of aid for agricultural reform in Central and Eastern Europe (Chapter 14) was that its effects were at best limited. Special Report No 2/97 concluded that humanitarian aid seemed to have reached the intended beneficiaries, although sometimes with some delay. Every legislative proposal or financing decision that involves major expenditure needs to incorporate appropriate arrangements for determining success or failure in terms of precise objectives and in relation to firm baseline data. Only thus can the taxpayer's interest be protected against wastage. Finally, as Special Report No 2/97 recalls, the independence of the evaluation function from the operational departments of the Commission is necessary both for the effective use of resources and to encourage objectivity.

STATEMENTS OF ASSURANCE (VOLUME II)

0.30. Chapters 19, 20 and 21 concern the statement of assurance relating to the general budget and supporting information. For the general budget, the Court concludes that overall, with the exceptions mentioned in its statement, the 1996 accounts reliably reflect the Union's revenue and expenditure for the year and financial situation at the end of the year.

0.31. Because of the extent of the problems revealed by its audit of transactions underlying payments from the general budget, the Court declines to provide positive global assurance as to the legality and regularity of these transactions for the year 1996.

0.32. For EAGGF-Guarantee expenditure, improvements in a posteriori audit must be accompanied by completion of the installation of effective management controls in agricultural markets. For the Structural Funds, the high levels of substantive and formal errors again confirm the need for considerable improvement in accounting and control arrangements.

0.33. Chapter 22, which concerns the statement of assurance for the EDF, concludes that overall, with the exceptions mentioned in its statement, the accounts reflect reliably the revenue and expenditure for the year and financial situation at the end of the year and that the underlying transactions are legal and regular.

REMEDIAL ACTION BY THE COMMISSION

0.34. The Commission, in its replies to the Court's reports, has reacted positively to many of the Court's findings, often recognizing the need for action and, in some cases, indicating quite precisely its intentions with regard to remedial measures. It is, moreover, seeking to resolve many of the problems and weaknesses on which the Court reports by the implementation of its SEM 2000 financial management improvement initiative, both within its own services and in collaboration with the national authorities which handle and account for Community funds.

0.35. Success in strengthening the administrative and information systems which are the key to better financial management will be reflected in a fall in the rate of errors and irregularities detected by auditors. This Annual Report and special reports provide only very limited evidence of progress. A high rate of error and irregularity was still evident in 1996, particularly with regard to operations managed in the Member States other than agricultural guarantees. For agricultural guarantees there are, however, indications that the new financial clearance of accounts arrangements are having some beneficial impact.

0.36. There have been some other encouraging developments. Definition of eligibility criteria for Structural Fund assistance has been considerably clarified (although Chapter 7 draws attention to some remaining difficulties of interpretation with regard to Social Fund actions). Clearer definitions should reduce future errors and irregularities, but need to be accompanied by significant improvements in accounting and management information and in audits of operations (see Chapter 7). The decentralized financial management and the extent to which any programme can be modified by replacing an original component by a new one during programme implementation mean that there are no effective sanctions for incorrect declarations of expenditure by national administrations. As already discussed in other institutions, some real sanction, in the form of a net financial correction by the Commission, would be appropriate in serious cases of incorrect declaration.

THE FINANCIAL REGULATION

0.37. Opinion No 4/97 of the Court on a proposal to amend the Financial Regulation applicable to the general budget of the Communities concludes that it is time for the Commission to embark on a general overhaul of the Communities' financial regulations, first clearly redefining the fundamental principles on which they must be based. Numerous vague expressions and legal 'grey areas` need to be clarified and terminology scrupulously standardized. Many discretionary arrangements which run counter to a disciplined approach and hugely complicate accounting and financial management are not indispensable; some are irregular. The opinion lists principles and provisions that a new Financial Regulation should contain in respect of the budget, of the drawing-up of financial statements, and of the exercise of the internal control function in the institution. The Annex to the Court's opinion sets out in greater detail its general recommandations for a reformed set of financial regulations. The Court welcomes recent indications that the Commission intends to propose a general revision of the Financial Regulation and that the Court's opinion will be taken into account.

THE SIGNIFICANCE OF AUDIT

0.38. In the present state of accounting and financial management arrangements, the financial significance of audit is very high in terms of identification of expenditure which should not have been incurred, of amounts potentially recoverable and of possible future savings. This Report mentions considerable expenditure which was unnecessary, though not irregular (mainly overcompensation of agricultural producers), and numerous examples of potential savings which cannot be readily quantified. There is, in addition, the unquanti-fiable but significant deterrent effect of audit activity. The audit of Community finances whether by the Commission, by Member State auditors or by the Court is more than ever necessary to protect the interests of the European citizen.

PART I Own resources

CHAPTER 1(1*) Own resources

1.0. CONTENTS Paragraph reference

General introduction 1.1

Implementation of the budget 1.2

Traditional own resources 1.3 - 1.119

Financial management 1.3 - 1.17

Follow-up by the Commission in response to the Court's observations 1.3 - 1.8

Financial management in the Member States 1.9 - 1.17

Free zones 1.18 - 1.43

Introduction 1.18 - 1.20

Designation and enclosure of free zones 1.21 - 1.24

Control of flow of goods and approval for free zone activities 1.25 - 1.33

Placing goods in free zones 1.34 - 1.35

Use of information note 1.36 - 1.37

Customs duties on goods unaccounted for in free zones 1.38 - 1.40

Customs checks 1.41 - 1.42

Conclusion 1.43

Inward processing regime 1.44 - 1.64

Introduction 1.44 - 1.46

Economic conditions on the grant of an authorization 1.47 - 1.53

Presentation of returns, establishment and making available 1.54 - 1.58

Rates of yield 1.59 - 1.61

Equivalent compensation and prior exportation 1.62 - 1.63

Conclusion 1.64

Establishment and ex post facto recovery of traditional own resources 1.65 - 1.119

Introduction 1.65 - 1.67

General observations concerning the regulatory framework, the procedures and the systems 1.68 - 1.88

Observations concerning the implementation of provisions in force 1.89 - 1.116

Conclusion 1.117 - 1.119

Own resources deriving from value added tax (VAT) and the gross national product (GNP) 1.120 - 1.156

Introduction 1.120 - 1.121

Adjustments to the VAT and GNP assessment bases 1.122 - 1.152

Control by the Commission and the entry of reservations 1.122 - 1.126

Situation as regards reservations and their financial impact 1.127 - 1.129

The entry of reservations in the accounts and their accounting follow-up 1.130 - 1.136

The monitoring of debts relating to reservations for the purpose of their recovery 1.137 - 1.149

The failure to charge arrears interest when own resources have been made available late 1.150 - 1.152

Conclusion 1.153 - 1.156

GENERAL INTRODUCTION

1.1. In the field of traditional own resources the Court's examination concentrated on the financial management by the Commission and the Member States as regards the establishment and recovery of Community entitlements, on the implementation of Community customs regulations in the field of free zones, on the financial management of the inward processing customs procedure (suspension system) and on the ex post facto establishment and recovery of traditional own resources in cases of fraud or irregularity. The Court also examined the monitoring of reservations entered by the Commission concerning the management of resources deriving from the application of a uniform VAT assessment base and a rate fixed in the framework of the budgetary procedure to the sum of the GNPs of all the Member States.

IMPLEMENTATION OF THE BUDGET

1.2. Table 1.1 summarizes Community revenue for 1996 and Diagram 1.1 shows that:

(a) actual revenue in 1996 was 81 275,1 Mio ECU, or 99% of the revenue provided for in the final budget, an increase of 8,3% on the 1995 figure (75 077,1 Mio ECU);

(b) net traditional own resources, less collection costs (1 509,3 Mio ECU), amounted to 13 583,6 Mio ECU, which is 16,7% of total actual revenue; these resources, which were 6% less than in 1995, comprised:

- customs duties of 13 069,1 Mio ECU gross, or 86,6% of gross traditional own resources (15 092,9 Mio ECU)(2);

- agricultural duties of 810,2 Mio ECU gross, or 5,4% of gross traditional own resources;

- sugar and isoglucose levies of 1 213,7 Mio ECU gross, or 8% of gross traditional own resources;

(c) the own resource based on value added tax (VAT) (taking account of balances and adjustments: 858,2 Mio ECU) amounted to 36 535 Mio ECU(3), or 45% of actual revenue; actual revenue was (39 127,34 Mio ECU) was 6,6% less than in 1995;

(d) the GNP resource (allowing for balances and adjustments: P27 Mio ECU) amounted to 21 058 Mio ECU(4) (including reserves of 237,9 Mio ECU), i.e. 26% of actual revenue; this resource was 48,6% higher than during the previous financial year (14 172,6 Mio ECU);

(e) the surplus from the previous financial year (9 215,19 Mio ECU) and miscellaneous revenue (915,93 Mio ECU) represent 12,5% of actual revenue, an increase of 40,4% on 1995.

TRADITIONAL OWN RESOURCES

Financial management

Follow-up by the Commission in response to the Court's observations

1.3. In its annual report concerning the financial year 1991(5), the Court of Auditors identified, on the one hand, traditional own resources which had not been made available to the Commission amounting to 2 Mio ECU and, on the other, entitlements made available late and amounting to over 2 000 Mio ECU on which the late payment interest due was estimated by the Court to be 25,72 Mio ECU. After audits in the Member States the Commission established that 6,5 Mio ECU of duties were still to be recovered, along with 25,0 Mio ECU of arrears interest. On 1 May 1997 only the sum of 0,1 Mio ECU of interest was still outstanding.

1.4. The Commission has recovered the 37 253 ECU relating to the specific cases mentioned in the Court's annual reports concerning the financial years 1992(6) and 1993(7). The Court's observations concerning the financial years 1994(8) and 1995(9) made it possible to recover 3,1 Mio ECU and issue recovery orders for an additional 2,5 Mio ECU.

1.5. As a result of these audits by the Court of Auditors followed up by the Commission, 169 recovery procedures were initiated. On 1 March 1997, 143 of these were still open; in 117 cases the actual amount of the debt had not yet been assessed. In the case of 21 recovery orders issued by the Commission, for a total of 25 Mio ECU, the final date for payment had passed by 1 March 1997. In 12 of these cases the final date for payment entered on the recovery order had passed more than a year previously.

1.6. In July 1995 the Court of Auditors established that the German authorities had neglected to make available to the Commission traditional own resources for the months of December 1993 and December 1994 amounting to 19,4 Mio ECU. The Commission was informed of this in August 1995. On its own initiative, the Member State concerned made the principal amount available to the Commission but did not pay interest in respect of late payment. On 29 November 1996, almost 15 months later, the authorizing officer issued a recovery order for the interest due.

1.7. In May 1995 Denmark informed the Commission that anti-dumping duties totalling 0,8 Mio ECU would be made available with a significant delay. Part of this amount (0,5 Mio ECU) had been established before 1991. In October 1995 the Commission asked for Article 11 of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 concerning interest on late payments to be applied to the whole period of arrears. A month later Denmark cited Article 7(2) of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989, in anticipation of its amendment by Council Regulation (Euratom, EC) No 1355/96 of 8 July 1996, which was in the course of being adopted at the time, for the amounts concerning financial years prior to 1991. The invoked amendment introduced a time-bar of three years in respect of claims by the Commission on Member States where the latter had not previously been informed of the said claims. As of 31 January 1997 the recovery of the amount owed by Denmark was still pending.

Conclusion

1.8. The Commission encounters difficulties in timely recovering of amounts found to be owing following Community audits, notably interest on late payments. Furthermore, the amendment to Regulation (EEC, Euratom) No 1552/89 means that numerous recovery operations to be carried out in response to observations made by the Court risk falling victim to the three-year time-bar if they are not communicated to the Member States within the prescribed periods.

Financial management in the Member States

1.9. The Court has, during missions focusing on audit work related to the Statement of Assurance and on the audit of the topics reported hereafter, examined the establishment of Community entitlements, the accounting procedures and specific aspects of the collection procedures in all Member States.

Late establishment of own resources

1.10. In all Member States, the Court examined the extent to which national procedures ensure that, in accordance with Community legislation(10), customs debts are entered in the accounts at the appropriate time. The Court found that for:

(a) customs duties asseassed on operators after post-clearance examination (11) in other cases of irregularity where there are criminal proceedings: in the United Kingdom, customs debts are not established as soon as the conditions of Article 2 of Council Regulation (EEC, EURATOM) No 1552/89 are fulfilled. In many cases, such debts are established prior to initiation of criminal proceedings. Nevertheless, completion of the criminal proceedings and successful prosecution takes precedence over arrears collection;

(b) customs duties assessed on operators after post-clearance examination in cases of irregularities: in Spain the procedures applied created delays in establishment, bringing to account and making available of own resources, and to this extent did not comply with the Community legislation. Further, in Germany and Italy, the customs duties assessed from post-clearance examination were established up to 24 months late. In Belgium and to some extent in Germany lateness was systematic; and

(c) customs duties payable on incomplete declarations: in seven Member States(12) customs duties assessed on more than 10% of incomplete declarations were not properly entered into the accounts at the end of the period provided for in Community legislation(13) to allow operators to submit the particulars missing from their declarations. The customs duties outstanding or established late on a sample of incomplete declarations in Belgium, Spain and Ireland amounted to some 0,5 Mio ECU.

1.11. In the United Kingdom, the accounting system for managing cash deposits taken to secure potential tax debts does not allow separate identification of the deposits relating to Community own resources. In 1992, the British authorities acknowledged this to be a problem (14). In 1996 they stated that their accounting system was still not able to identify deposits either by revenue type or by reason for deposit and that further investigation would be needed to ascertain if there was a cost-effective solution to this problem(15).

1.12. In Germany, customs duties arising from period entry declarations(16) were in numerous cases brought to account three to four months late.

Separate accounts or B-accounts

1.13. Customs debts must be entered by the Member States in Community accounts. However, customs debts which have been communicated to the debtor but which remain uncollected and unsecured or, although secured have been challenged, should be entered in a separate Community account(17). In Italy, such amounts, in various offices, are not brought to account until the moment of recovery while Community legislation requires them to be accounted for at the moment of communication to the debtor. This procedure does not comply with Community legislation.

Write-off of established entitlements

1.14. In Germany, 0,2 Mio ECU were not made available to the Commission in application of Article 17(2) of Regulation (EEC, Euratom) No 1552/89 which allows Member States to be released from the obligation of making available own resources if in specific cases it appears that the recovery is impossible but the reason cannot be attributed to the Member State(18). However, in this case the non-collection was due to an error by the national authorities and the amount due should have been made available in June 1993.

Tariff classification

1.15. In the United Kingdom an error in the tariff had persisted for 17 years. The British authorities established and made available (in March 1995) the underpaid duties (3,36 Mio ECU) for a period up to three years prior to the date of discovery of the error (December 1991). Duties forgone during the period of enquiry necessary to establish and correct the error were not made available (0,3 Mio ECU). Late payment interest should apply to the underpayment made available more than three years late.

Duties payable on passengers' baggage

1.16. In some Member States, customs duties, excise and VAT are assessed on passengers' baggage at a flat rate. The receipts from passengers are subsequently, under national procedures, apportioned between the duty and tax categories. In the United Kingdom an incorrect percentage was used for three years in the apportionment of own resource revenue from passengers' baggage. This led to an underpayment of 3,9 Mio ECU of traditional own resources for the years 1993 to 1995. In March 1996, this amount was made available to the Commission. In Belgium, there is no periodic review of the national procedures for the apportionment percentage applied. This percentage, which has remained unchanged for 17 years, needs to be modified to take account of tariff or traffic changes.

Conclusion

1.17. Member States have the responsibility for the proper establishment of traditional own resources, for entering them to account, and for making them available to the Commission. They should ensure that Community legislation is properly applied. Moreover, they are entitled to retain 10% from the own resources made available to cover their collection costs. The Commission should monitor the way the Member States discharge this responsibility when carrying out controls and on-the-spot verifications. From a sample of approximately 3 000 declarations examined by the Court, at least 3 Mio ECU of own resources need to be recovered.

Free zones

Introduction

1.18. Free zones and free warehouses are defined in Community legislation(19) as parts of the customs territory of the Community but separated from the rest of it in which:

(a) non-Community goods are considered, for the purpose of import duties and commercial policy measures, as not being on Community customs territory, provided they are not released for free circulation or placed under another customs procedure or used or consumed under conditions other than those provided for in customs regulations;

(b) Community goods for which such provision is made under Community legislation governing specific fields qualify, by virtue of being placed in a free zone or free warehouse, for measures normally attaching to the export of goods.

1.19. Community regulations(20) currently list, as designated and operational, 33 free zones in 10 Member States. In Germany, Greece and Italy free zones are located in major national ports. Although reliable statistics are not available for the volume of goods passing through Community ports with free zones, it is estimated that such volumes do not exceed 10% of total goods movements for all Community ports. The Court's enquiry was conducted in six Member States(21) and included visits to 16 designated free zones.

1.20. The main principle underpinning the free zone concept is that the integrity of the customs territory be preserved by a combination of secure perimeters, entry and exit points, such as to facilitate supervision by the customs authorities outside the free zone and prevent any goods being irregularly removed. Rigorous recording in approved stock records is required for all goods brought into the free zone by authorized operators.

Designation and enclosure of free zones

1.21. Security arrangements for free zones in the Member States visited vary from nearly non-existent in the case of Ireland to very strong in Germany.

1.22. Ireland has two designated free zones, Shannon and Ringaskiddy. In one of these (Ringaskiddy), formally designated as a free zone in 1989, no free zone activity has taken place. While the two free zones are clearly defined, neither has secure perimeters or entry or exit points that facilitate customs supervision. The perimeters have not been designed to prevent goods from being irregularly removed from the zones. The Irish authorities place almost total reliance for the control of goods in free zones on documentary controls related to customs entry documents, on stock records maintained by free zone operators and on standard control procedures exercised over traders.

1.23. Tilbury Freeport free zone (United Kingdom) occupies the whole of the Port of Tilbury and, while adequately defined, fenced and secured, is simultaneously used as a free zone and as a normal port. The port is under customs supervision, but the free zone is a more abstract concept. Goods are 'placed` in the free zone as if it were a customs regime - up to 45 days after unloading in the case of goods arriving by sea - but are not segregated from other goods in the port under customs control or in free circulation. The 'virtual` free zone concept presents risks to Community own resources as free zone goods have been removed for free circulation from the zone, without payment of the appropriate customs duties. When discovered, the free zone goods have been replaced by similar goods from outside the free zone system. The regulations do not provide for the replacement of goods removed for free circulation by equivalent goods. Therefore, customs duties should have been collected on the goods removed pursuant to Article 201 of the Code.

1.24. In Italy, a listed free zone (Venice) has not functioned as a free zone since April 1993. A newly designated location, which does not have any authorized operators, has not been listed in the Official Journal of the European Communities as required by Community legislation(22).

Control of flow of goods and approval for free zone activities

1.25. Before an operator can carry out an activity in a free zone, he must first get the approval of the customs authorities for the stock records(23), in which he must enter all particulars of the goods brought by him into the free zone such as will enable the customs authorities to check the proper application of customs legislation.

1.26. The customs authorities responsible for supervision of free zones may, either at random or where they have reasonable doubts concerning compliance with the applicable legislation, check goods entering, leaving or remaining in a free zone(24).

1.27. Eight of the operational free zones visited by the Court have direct access to the sea(25). All of these, with the exception of Cadiz, comprise the major goods-handling facilities in each port. Consequently, the bulk of goods (including goods in containers) which are unloaded in these zones are for onward transportation inside the Community customs territory.

1.28. In the free zones of Germany and Italy, these goods, since they are not destined for the free zones concerned, are neither recorded in free zone stock records nor in temporary storage records as provided for by the Code(26). This is the case even though these goods sometimes remain within the free zone area for many weeks, circumventing customs supervision provisions.

1.29. The regulations make no distinction between goods being placed in free zones and goods entering free zones for onward transportation to other Community destinations. This fact, and the provision of the Code(27) that short-term storage in conjunction with transshipment shall be considered to be part of transshipment, mean that goods for onward transportation to other Community destinations can be described as transshipment goods and benefit from the free zone system without being subject to its rules.

1.30. In Germany (Bremen and Bremerhaven), the port authority which provides goods-handling and storage facilities is neither formally authorized as a free zone operator nor does it keep details of goods entering, leaving or remaining in the free zone in customs-approved stock records.

1.31. In Greece, when goods are conveyed in containers, the customs-approved stock records of the free zones' operators (the respective port authorities)only record container identification marks and brief descriptions of the goods. The requirement in the regulations that the stock records should enable the customs authorities to identify the goods and their movements(28) is not observed.

1.32. In the free zones of Trieste (Italy), the customs authorities do not generally enforce the requirement that operators maintain stock records nor do they, contrary to Community regulations(29), ensure that operators who engage in warehousing activities only seek their authority to conduct business within the zones by the presentation of applications for approval of stock records.

1.33. In the free zone of Barcelona, all the operators carrying out warehousing activities maintain their stock records on a system provided by the free-zone authority, a consortium of public bodies. None of the enterprises has sought the consent of the customs authorities to carry out activities in the free zone by making application for approval of stock records as required. In such circumstances, the consortium is the only entity against which the customs authorities can pursue customs debts arising under Article 205 of the Code.

Placing goods in free zones

1.34. The regulations(30) permit the placing of goods in a free zone without the need to present them to or lodge a customs declaration with the customs authorities. However, only operators carrying out activities in free zones with direct sea access can avail themselves of this right. In the other Community free zones, non-Community goods must first pass through another part of the customs territory, and therefore need to be covered by an appropriate transit arrangement. Transit arrangements invariably terminate on presentation of the goods and/or documents to customs.

1.35. In Ireland, non-Community goods are 'placed` in the Shannon free zone by means of a customs entry to the free zone as a 'customs regime` on their arrival on national territory. These entries are carried out without cover of a guarantee, which would normally be required for transit movements through the customs territory. A transit procedure is not used.

Use of information note

1.36. Community regulations make provision for an 'information note` which may be used by captains to facilitate the identification of vessels likely to be carrying Community goods(31). The same regulation, however, makes conflicting provisions(32) for the compulsory use of the information note where vessels are carrying non-Community goods to other Community ports and, in place of external Community transit procedures, where non-Community goods are carried by sea to free zones in Community ports. The information note, which records the vessel's name, its port and date of departure, port of destination and probable ports of call, does not record details of goods transported, nor does it distinguish between its compulsory and optional uses. It is only issued in a single copy, is neither numbered nor registered and, unlike full transit procedures, need not be discharged on arrival at the stated destination. The lack of coherence and clarity in its use has resulted in four of the Member States visited (Spain, Germany, Italy and Greece) requiring proof-of-status documents for goods arriving from any Community port of loading.

1.37. Consequently, when an information note is used in place of the Community transit procedures for the 'transport (of non-Community goods) to a free zone situated in a port`, there is a risk that it could be presented at another Community port or the non-free zone part of a named port and be accepted as proof of Community status for the (non-Community) goods being conveyed, on the basis that it had been authenticated to indicate that the vessel had set off with its initial load from a Community port.

Customs duties on goods unaccounted for in free zones

1.38. Article 205 of the Community Customs Code provides that a customs debt shall be incurred through the consumption or use in a free zone of goods liable to import duties under conditions other than those laid down in the legislation in force. Where goods disappear from a free zone and their disappearance cannot be explained satisfactorily to the customs authorities, the authorities may regard the goods as having been consumed or used in the free zone.

1.39. In the German free zones visited, customs debts on goods missing from the premises of free zone operators due to theft are waived. In Italy (Trieste), goods liable to customs duties which cannot be accounted for to the customs authorities are considered to have been re-exported from the customs territory and no customs debts are deemed to have been incurred.

1.40. In Greece (Piraeus) the sole free zone operator (the port authority) had contested customs debts which had arisen through the disappearance of goods liable to import duties from within the free zone area.

Customs checks

1.41. Generally, the optional customs checks provided for in the regulations(33) are carried out by the customs authorities of the Member States visited. In some instances, however, the management and effectiveness of these checks or audits were found to be unsatisfactory.

1.42. In Ireland (Shannon) no reports were produced of audits carried out nor was there evidence of the results or of follow-up action being taken in response to these audits. In Italy (Trieste), the customs authorities indicated that the checks carried out by them had been carried out without reference to stock records or other documentation. Checks on the stock records of operators in the Hamburg free zone were carried out by German customs without attempting to verify the completeness of the records by reference to the transport documents into and out of the zone. Major discrepancies came to light in the stock records of one free zone operator in the Bremen free zone, but were only detected by the national authorities after a change of ownership in the company.

Conclusion

1.43. The Court's findings suggest that each free zone operates in an almost unique fashion. The Commission should ensure that:

(a) information on the status and definition of free zones is up to date, accurate and clear and is disseminated to the customs authorities responsible for controlling the movement of goods between Community ports (see paragraphs 1.22 to 1.24);

(b) the regulations include a mandatory requirement that regular and systematic risk-based checks are carried out on free-zone goods and on the stock records and documents supporting their movement within free zones (see paragraphs 1.41 and 1.42);

(c) the risks posed for Community own resources by the non-application in the free zones of important aspects of the Community rules are eliminated; (see paragraphs 1.32 and 1.42);

(d) clear rules, which protect the financial interests of the Community, are prescribed for all non-Community goods which enter free zones (see paragraphs 1.28 to 1.30 and 1.35);

(e) appropriate duties are collected where dutiable goods disappear from within or are misused in free zones (see paragraphs 1.39 and 1.40);

(f) the regulations governing the customs treatment of goods transported by sea, and in particular non-Community goods transported from normal Community ports to ports with free zones(34) are amended to protect the financial interests of the Community but remain broadly compatible with the single market (see paragraphs 1.36 and 1.37).

Inward processing regime

Introduction

1.44. Inward processing is a customs procedure which allows the importation of non-Community goods, hereafter referred to as import goods, without payment of duty for the purpose of processing and export of the finished goods (compensating products) from the Community market. It can occur under two forms:

(a) the suspension system: in this case the duties due on the import goods, which are intended to be re-exported in the form of compensating products, are suspended at importation. However, if some finished products or import goods are placed on the Community market the duties become payable;

(b) the drawback system: the duties applicable to the import goods are paid at importation and are refunded if the finished products or import goods are later re-exported from the Community market.

To operate under inward processing a trader must first obtain an authorization issued by the appropriate national authorities.

1.45. In 1995 the Court audited a specific aspect of the scheme, focusing on compensatory interest to be paid on goods released for free circulation after having been placed under the suspension system(35). In 1996, the Court examined the implementation of the inward processing suspension system in eight Member States(36). The audit considered the potential impact on own resources of the way in which the suspension system is operated.

1.46. In the eight Member States visited authorizations delivered to operators in 1994 accounted for approximately 26 296,9 Mio ECU of goods imported(37). In the same year authorizations issued in the 12 Member States amounted in value terms to 36 997,8 Mio ECU. Some 1 200 authorizations were operational during the period 1995-96 in the 24 offices visited, of which a sample of 207 has been audited. Anomalies were found in 94 of those 207 authorizations. The Court established losses of own resources estimated at 0,5 Mio ECU from 25 of the 207 authorizations.

Economic conditions on the grant of an authorization

1.47. Prior to the issue of an authorization to participate in inward processing, an operator must satisfy the administration concerned that he complies with the economic conditions laid down in the Community legislation(38). The objective of these conditions is to protect the interests of Community producers who might be adversely affected by the importation of the import goods.

1.48. The economic conditions are regarded as fulfilled if the value of each type of goods imported by operator per calendar year is within a certain defined threshold(39). Where the value of the goods exceeds this threshold and where the nature of the operation is other than a simple handling operation the applicant must supply proof that he satisfies the economic conditions.

1.49. Where the economic condition claimed is that the use of Community goods is unsuitable because of their price, their quality, etc., then the particulars of the authorization concerned must be advised by the Member States to the Commission on a monthly basis so that it can inform the other Member States. In the case of milk and milk products and live animals the Commission must be informed in all cases(40).

1.50. In the Member States visited no instance was noted where an application had been refused on the basis of failure to fulfil the economic condition. If an economic condition claimed was not applicable then another economic condition was substituted. Furthermore, no instance was noted where an economic condition had been refused retrospectively as a result of a complaint by another Member State following notification through the Commission.

1.51. In Ireland, when an operator lodges an application for inward processing and claims an economic condition other than the value threshold (see paragraph 1.48), the Irish authorities apply the threshold if the value of the goods satisfies it. However, in such cases the authorization does not show that the threshold economic condition was granted. Thus, the relevant customs supervision office is not able to monitor its implementation.

1.52. In Portugal, the local customs office examines the economic condition under which it is claimed that the use of Community goods would be unprofitable. In the case of serious doubts the matter is referred to central level for decision. The examination should always be made at central level where adequate knowledge of overall market conditions and prices is available.

1.53. When the period of validity of an authorization exceeds two years the economic conditions must be reviewed at intervals not exceeding 24 months(41). In Germany national instructions do not comply with Community legislation as they require that this review should occur only every three years.

Presentation of returns, establishment and making available

1.54. When an operator is authorized to use inward processing, he is given a period within which the finished product (compensating product) must be re-exported(42). Within 30 days of the re-exportation period, the operator must supply the customs with a return (bill of discharge) showing the goods imported and discharge of the liability by export of the finished products, or assignment to a customs-approved treatment or use(43). If goods are placed on the Community market then the duties applicable to the import goods must be paid(44) together with compensatory interest.

1.55. The audit of 207 authorizations in the eight Member States visited leads to the conclusion that in some 20 cases about 14 Mio ECU were made available to the Commission up to seven months late, except in Spain where late payments may run from one year up to seven years late and in Germany from three months up to 27 months.

1.56. A pattern of late presentation of returns was found in the case of four operators in three Member States (Germany, Ireland, Italy), and in one large customs district in the Netherlands late presentation of returns was systematic. The Dutch customs authorities allowed the operators a period of 90 days for presentation of the bill of discharge and payment of duty, i.e. 60 days later than provided for by Community legislation. In Germany, an aggregation period of six months was granted to one operator instead of the monthly or quarterly aggregation period(45) provided for in Community legislation. The use of a six-month aggregation period has resulted in a delay of three months in the establishment and making available of own resources.

1.57. In Germany, for one large operator secondary compensating products and waste were not included in the bills of discharge and duty was not paid on their diversion to the Community market. The same exports were used to discharge several returns. In the case of another large operator a formal control was not carried out for a period in excess of three years.

1.58. In Belgium and Germany re-exportation periods were regularly and repeatedly extended without the operator justifying the need for extension. In some instances, the extended re-exportation period was not respected. Duties were not collected on import goods not re-exported within the period authorized for re-exportation.

Rates of yield

1.59. The rate of yield, which is defined as the quantity or percentage of compensating products obtained from the processing of a given quantity of import goods, should be subject to retrospective verification by the customs authorities(46).

1.60. In Belgium, France and Portugal the rates were not retrospectively verified by the customs authorities.

1.61. In Germany, one large operator presented bills of discharge which were completed on the basis of outdated rates of yield without a posteriori updating with the true rates. The differences between the outdated rates and the actual rates ranged from 10 to 150%. Re-export of import goods incorporated in compensating products had been overstated in 1995 resulting in a loss of own resources still to be estimated by the national authorities.

Equivalent compensation and prior exportation

1.62. An operator may be approved to use goods obtained on the Community market, instead of import goods, to produce compensating products (known as equivalent compensation). He may also be approved to export from the Community compensating products obtained from equivalent goods before importation of the substitute import goods. This is known as prior exportation. The authorization must allow for the use of equivalent compensation and prior exportation(47) and in the case of prior exportation, should specify the period allowed for importation of the substitute import goods(48).

1.63. In Spain, equivalent compensation had in one case been accepted in the bill of discharge without prior authorization. In the Netherlands, equivalent compensation was not applied in the manner provided for in Community legislation(49). In Germany and Spain, unauthorized prior exportation had occurred. In all of these cases own resources should have been collected.

Conclusion

1.64. The Commission should:

(a) assess the effectiveness of the implementation of economic conditions, take measures to limit the number of economic conditions applicable to those which are necessary to protect the interests of Community producers and ensure that these are effectively monitored; (see paragraphs 1.50 to 1.54);

(b) ensure that Community legislation is correctly applied by introducing a system for actively monitoring the implementation of the inward processing suspension system in particular as regards the control of the timely presentation of bills of discharge and making available own resources (see paragraphs 1.55 to 1.58), the retrospective checking of rates of yield (see paragraphs 1.60 and 1.61), the granting of equivalent compensation and prior exportation only on the basis of authorization (see paragraph 1.63);

(c) apply Article 11 of Council Regulation (EEC, Euratom) No 1552/89 on the payment of interest in the case of delays in making own resources available, where the customs debt arises as a result of inadequate monitoring by national administrations (see paragraphs 1.55 to 1.58).

Establishment and ex post facto recovery of traditional own resources

Introduction

1.65. In 1996 the Court examined, in eight Member States(50), the establishment and ex post facto recovery procedures for traditional own resources, concentrating on cases of fraud or irregularity dealt with by the Member States, in cooperation with the Commission, in the framework of mutual assistance (MA)(51). Most of the investigations carried out within this framework were intended to verify the regularity of certificates of origin issued in third countries which benefit from preferential tariff arrangements. The financial advantage arising from preferential arrangements granted to non-Member States is substantial. More than half of all Community imports benefit from preferential arrangements and much more than half of all cases of fraud and irregularity are committed under preferential arrangements. The Court's audit in the Member States was intended to complement the results of the audit conducted earlier on the same subject at the Commission(52).

1.66. From the point of view of protecting the Community's own resources, the rules on time-barring are the weak point in the procedures for the ex post facto establishment and crediting of traditional ownresources. This is because customs investigations are often complex and may extend over several years, particularly where they are intended to establish the regularity of certificates of origin. In such cases, except cases of fraud where national statutes of limitations apply, the time-bar comes into operation after only three years(53).

1.67. The Court has set out below the most common fundamental factors which regularly cause traditional own resources to be lost as a result of the time-bar. In the 23 cases in the sample examined by the Court, losses of this kind may be estimated to amount to 80 Mio ECU. In January 1996, the total number of cases appraised since 1988 and still being looked at in connection with fraud or customs irregularities was about 700 and the amount of duty evaded in those cases was estimated by the Court to be equal to 1 000 Mio ECU.

General observations concerning the regulatory framework, the procedures and the systems

Provisions concerning the protection of the financial interests of the European Union

Absence of legal basis for the provisional notification of entitlements and for the ex post facto requirement of a guarantee

1.68. In its annual report concerning the financial year 1994(54), the Court recommended in particular the incorporation into the Community Customs Code of provisions authorizing the taking of a security after goods have been discharged, as well as provisions permitting the period of time-barring to be interrupted from the moment an investigation commences, and permitting an estimate of the duties to be entered in the accounts. The cases established by the Court, in which own resources were already affected by the time-bar at the time the investigations were definitively terminated, confirmed that these recommendations were well-founded (see paragraph 1.67).

1.69. As regards the possibility of suspending the period of time-barring by a provisional communication, the Commission shared the view of the Court and submitted to the Council a proposal(55) intended to complement Article 220 of the Community Customs Code with a view to permitting an estimate of the amount of duty to be communicated. Allowing the customs authorities the option of requiring ex post facto security was also the subject of discussions at the Customs Code Committee, following which the idea was abandoned(56).

1.70. In May 1996 the Council requested the Commission to submit a proposal, the substance of which was to allow duties not to be recovered when, within the framework of preferential systems, the irregularities established originate in acts by the authorities of non-member States which the Community operators may not reasonably be expected to uncover(57).

Limited possibility of suspending the application of agreements in the case of insufficient cooperation on the part of the non-member States to which preferences have been granted

1.71. The successful outcome of investigations into the irregular or fraudulent application of preferential systems presupposes the cooperation of the authorities in the non-member States which issued the certificates of origin. It has only recently become possible for the Commission to institute proceedings to withdraw the preferences granted in cases involving fraud where no administrative cooperation is forthcoming, and in only one of the systems, the generalized system of preferences (GSP)(58).

1.72. In the case of orange juice from Israel, which was subject to conventional preferential arrangements, the Commission had to cope with the refusal of the local authorities to cooperate in getting to the bottom of the affair(59). The Israeli authorities agreed to check the authenticity of the stamps and the signatures which appeared on the certificates of origin but, faithful to their national legislation, refused to extend their checks to the actual origin of the juice, despite the fact that the Commission had observed as long ago as 1993 that the quantities of Israeli orange juice imported into the European Union were equal to approximately three times Irael's orange production capacity.

1.73. The unnecessary protraction of procedures and delays in replying may also be regarded as one of the administrative impediments to the recovery of evaded duties.

1.74. For example, a Community mission carried out at the end of 1991 to the Ivory Coast concluded that the tuna exported by the country in question to the Community since 1988 was of a non-original nature. The duties payable in this case amounted to about 17 Mio ECU. The Ivory Coast authorities, whilst not questioning the mission's conclusion, insisted that the Member States which had imported the tuna should submit, in accordance with the provisions of the Lomé Convention, individual requests for ex post facto checks on the relevant certificates of origin before they would institute recovery measures.

1.75. The Member States concerned then requested the authorities of the Ivory Coast, in the course of 1992, formally to declare void the certificates that had been inspected during the mission. Replies were provided to the Member States only in September 1995(60), and then they contradicted the findings of the Community mission. In France, the main Member State which had imported the tuna, the case had still not been settled in June 1996, although the customs authorities had, since 1991, taken down statements concerning duties totalling 8,7 Mio ECU (see paragraphs 1.107 et seq.). The opinion given in the framework of an administrative action brought by the importers concerned concluded that only about a third of the certificates covered by the official reports were irregular.

1.76. Finally, in certain cases the information forwarded by third countries is scarcely sufficient to remove doubts as to the regularity of the certificates of origin.

1.77. Textile products certified as originating in Jamaica were thus imported into France with exemption from duties (approximately 1,5 Mio ECU) from February 1989 to October 1991 under cover of 241 certificates of origin which were presumed to be false. A check on the stamps carried out by the French customs authorities showed that all the stamps on the certificates were different to the specimen stamps provided officially by the Jamaican authorities(61); one stamp even contained a misspelling of the name of the capital of Jamaica. The Jamaican authorities nevertheless confirmed to the French customs authorities in November 1994 that all the stamps in question were valid.

Inappropriate provisions which facilitate the circumventing of anti-dumping duties

1.78. Certain Community regulations instituting anti-dumping duties impose a variable duty based on a free-at-frontier minimum price; the difference between this minimum price and the price invoiced, if the latter is the lower, is collected in the form of an anti-dumping duty. Nevertheless, Community regulations(62) provide, in the case of successive sales of a product within the customs territory of the Community before it has been placed in free circulation, for the price at last sale to be accepted for customs valuation purposes. These provisions allow operators to circumvent the application of anti-dumping duties by presenting for customs valuation purposes invoices containing prices which are scarcely higher than the floor price.

1.79. The Court examined the case of Community imports from China of cheap shoes known in French as espadrilles, which were subject to anti-dumping duties instituted in December 1990(63).

1.80. In October 1993, the customs authorities drew up an official report relating to the sum of 0,2 Mio ECU payable by a Community importer who had cleared his goods on the basis of invoices drawn up by a Community intermediary established in another Member State(64). These invoices quoted a price that was almost three times that invoiced by the Chinese exporter. The free-at-frontier price which was declared was in the end only 0,0065 ECU higher per pair of shoes than the minimum price required for the non-imposition of provisional anti-dumping duties as instituted between the date of the order and the date they were placed in free circulation.

1.81. The customs investigations demonstrated that the Community intermediary had issued to the importer credit notes for a total amount which came to approximately 90% of the difference between his own invoice and the invoice of the Chinese exporter. As the customs investigations had been unable to establish any link between these credit notes and the sale of the shoes, the duties established were declared void in September 1994.

Non-uniform application of guarantee measures

1.82. When the customs authorities consider, during customs clearance, that the checks they have conducted could result in an amount of duty being payable which is greater than results from the information contained in the declaration, they require a sufficient guarantee to be provided to ensure that the duty to which the goods may ultimately prove to be subject can be recovered(65). This principle has been systematically transposed to the various agreements instituting preferential tariff measures and to the generalized system of preferences. If a measure of this kind is not to produce an unjustified change in trade flows, it must be applied uniformly in all the importing Member States.

1.83. The Court has established that even where there are serious doubts as to the validity of the certificates of origin submitted, and in spite of requests by the Commission, certain Member States do not insist on a guarantee for the imports at the time of customs clearance.

1.84. In August 1995 the Commission asked the Member States concerned to require guarantees in respect of the duties and levies payable on imports of concentrated orange juice covered by Israeli certificates of origin (see paragraph 1.73) and systematically to send the said certificates to Israel for ex post facto checks(66). The measures requested were applied immediately in Belgium, Greece and Italy and only from January 1996 in Germany and Spain. At the time of the enquiry the Danish, French and British authorities had no plans to institute guarantee arrangements because they felt that the evidence was insufficient to justify such a step. The Community rules do not allow the Commission to decide on the measures needed to ensure that guarantee arrangements are applied in a uniform manner.

1.85. According to Community statistics(67), the total value of orange juice imports from Israel into the Community increased by 52% between February and June 1996. During the same period, imports into the five Member States which had instituted guarantee arrangements remained stable, which suggests that imports shifted to other Member States.

Problem arising from the confidential nature of evidence gathered

1.86. The provisions of Article 15 of the Community Customs Code stipulate that 'all information which is by nature confidential or which is provided on a confidential basis shall be covered by the obligation of professional secrecy. It shall not be disclosed by the customs authorities without the express permission of the person or authority providing it; the communication of information shall be permitted where the customs authorities may be obliged or authorized to do so pursuant to the provisions in force, particularly (...) in connection with legal proceedings`.

1.87. Article 19 of Regulation (EEC) No 1468/81 concerning mutual assistance(68) also stipulates that information exchanged should be confidential. Paragraph 2 of this Article also stipulates that information obtained in the course of legal actions or legal proceedings subseqently instituted on account of failure to respect customs or agricultural regulations may be used. The strict application of the provisions concerning the confidential nature of certain information may cause attempts at ex post facto recovery to fail.

1.88. In Germany, the customs authorities notified an importer of video cassettes from Macao (see paragraph 1.91) that customs duties amounting to 0,1 Mio ECU, and anti-dumping duties amounting to 0,6 Mio ECU were payable. When an action was brought by the operator the German authorities submitted to the Court all the evidence available. However, national legal procedures stipulate that a court may only take into account those items of evidence which are available to both parties to the action. The court therefore requested authorization from the Commission to make the evidence available to the other party. The Commission said no, referring to Article 15 of the Community Customs Code concerning the confidentiality of information (see paragraph 1.86). The court then returned the items of evidence to the customs authorities and informed them that under those circumstances the recovery order for the anti-dumping duties could not be upheld.

Observations concerning the implementation of provisions in force

Delays in the legal evaluation of certain cases by the Commission

1.89. The Commission sometimes has to give an opinion on the legal aspects of a case before recovery measures may be instituted. If the examination takes a very long time it may result in a loss of own resources.

1.90. Delays of this nature occurred in dealing with the case of video cassettes from Macao. In order to circumvent anti-dumping duties(69), the principal producer of the video cassettes affected by the investigation had transferred his operations a number of times, first from Hong Kong to the People's Republic of China and then to Macao.

1.91. The Customs Code Committee (Origins Section) was asked on 31 July 1992 to decide whether, in accordance with Article 25 of the Code, which is applicable in the event of the rules concerning the origin of goods being circumvented, the video cassettes of the producer in question, which had been imported prior to April 1991 and declared as originating in China, and those imported after the said date and declared as originating in Macao, were subject to anti-dumping duties. When, in February 1994, the Committee completed its examination of the problem of anti-dumping duties by concluding that the imports from Macao were subject to the said duties, it was no longer important whether or not those from China were subject to them because of the time-bar.

1.92. If the Customs Code Committee had, within the appropriate time limits, adopted a decision to the effect that the video cassettes declared as originating in China were subject to anti-dumping duties, own resources estimated by the Court as amounting to more than 4 Mio ECU could have been preserved.

1.93. A second decision taken by the Committee in May 1994 also stipulated that the cassettes declared as originating in Macao could not benefit from the GSP.

Delays in making available to the Member States the results of joint investigations

1.94. Information from non-member States involved in investigations is usually communicated to the Member States via the Commission, which in some instances was late in forwarding to the Member States documents which were indispensable for starting recovery measures.

1.95. For example, with regard to the import into the Community of fish from Norway, the Commission did not forward to the Member States certain lists of non-valid certificates of origin communicated by the Norwegian authorities until more than two months after receipt.

Shortcomings in the implementation of results of investigations by the Member States

Non-uniform application of ex post facto establishment measures

1.96. In the investigation into car radios from Indonesia, the Community on-the-spot mission found that car radios imported into the Community under cover of certificates of origin did not meet the GSP criteria and, moreover, that the car radios from certain manufacturers should be deemed to have originated in South Korea and therefore be subject to anti-dumping duties. In March 1994 the Indonesian authorities confirmed the invalidity of the certificates they had issued.

1.97. For the most part the Member States visited by the Court have decided to establish the customs debt ex post facto and to notify importers of both customs duties and anti-dumping duties. However, some Member States considered that the evidence collected by the Commission was insufficient from a legal point of view to allow the recovery of the anti-dumping duties.

1.98. In the United Kingdom anti-dumping duties amounting to 1,5 Mio ECU were communicated to the principal importer in June 1994. In June 1996 the British authorities were informed that these duties had not been recovered in all Member States. In August 1996 they declared void the duties communicated to the principal British importer and in May 1997 they informed the Court that they planned to repay the anti-dumping duties already paid by three other importers.

1.99. In Germany, only customs duties were communicated; no ex post facto recovery measures had been instituted in respect of the anti-dumping duties because the evidence available was not judged sufficient by the German authorities. The amount of own resources involved was estimated by the Court to be 2,5 Mio ECU.

1.100. In Spain the competent authorities stated that they had not been aware until March 1996 of the confirmation from Indonesia of March 1994. Between April 1993 and March 1996 they had not instituted any ex post facto recovery measures, because they considered that the mission report and the lists of invalid certificates were insufficient for this purpose. In March 1996, however, all the import declarations pertaining to the 36 certificates referred to in the list of November 1993 became time-barred. The customs duties and the anti-dumping duties thus barred are estimated by the Court to be over 0,6 Mio ECU.

Other examples of delays and shortcomings in the implementation by the Member States of decisions taken at Community level

1.101. In some cases recovery measures were not taken or were subject to delays which resulted in a loss of own resources.

1.102. Table 1.2 shows for three Member States the estimated amount of duties time-barred in the case concerning video cassettes declared as originating in Macao. In the case concerning fish from Norway the amount of duties which lapsed because time-barred is estimated by the Court to be 0,6 Mio ECU in respect of three Member States, and in the case of car radios from Indonesia to be 1,1 Mio ECU in respect of four Member States(70).

1.103. The Court carried out thorough substantive tests in one Member State on the basis of a sample of 285 import declarations relating to video cassettes declared as originating in Macao and accompanied by certificates of origin issued by the Macao authorities. In the case of 15 of these declarations, the competent local offices had not carried out any ex post facto notification, and in 11 other cases notification took place after the cases had become time-barred. In six other cases the investigation instituted in good time by a regional office was not taken up at central customs level.

Inadequacy of accounting follow-up of establishments and recoveries

1.104. In Germany and in Greece the central authorities do not carry out out any systematic checks on the application at local level of the recovery orders they issue. In Germany, customs clearance operations continue to be insufficiently automated and still do not provide any guarantee that all import declarations which may be the subject of an ex post facto establishment will be identified. In Italy the central administration said that it was currently monitoring the progress of the enquiries but was unable, during the Court's on-the-spot visit, to supply any summary of the establishments and recoveries carried out by the local offices.

Suspension of payment not in accordance with the Customs Code

1.105. In application of the Community Customs Code, the amount of the customs debt must be communicated to the debtor as soon as it has been entered in the accounts (Article 221), and all amounts communicated must be paid within the time limit set, which is normally 10 days (Article 222).

1.106. Where the amount of duty has not been paid within the prescribed period, the customs authorities may avail themselves of all options open to them under the legislation in force, including enforcement (Article 232). The lodging of an appeal does not cause implementation of the disputed decision to be suspended; except in exceptional circumstances, suspension of payment may be granted only if a security is lodged (Article 244).

1.107. In Belgium and in France the taking of a statement is deemed equivalent to the communication of the amount of the customs debt and extends the period before time-barring takes effect.

1.108. In France, the official statements taken down by the customs authorities indicate the debtor and the amount of the debt. So long as the customs debt has not been recognized by the debtor or upheld by the courts no recovery measures are undertaken.

1.109. The result is that the French customs authorities in effect suspend implementation of the recovery procedure without the conditions for such suspension, as laid down in Article 244 of the Code, being met. At the time of the investigation an amount of approximately 21 Mio ECU, in respect of a sample of 26 official reports examined by the Court, was subject to such suspension. The French authorities told the Court that instructions would be given to the departments concerned to ensure that the request to pay the debt within 10 days was entered in the minutes.

1.110. In Belgium too there is sometimes a considerable delay between when the official reports are drawn up and the requests for payment are issued. The sample of 15 official reports selected by the Court related to a total amount of about 1 Mio ECU; the parties to whom these official reports were addressed had benefited from deferments of up to four years and some were still benefiting from them at the time of the Court's visit.

1.111. In the United Kingdom recovery orders refer systematically to a time limit for payment of 10 days. Nonetheless, the Court has established that the British authorities usually suspend implementation of enforcement measures without requiring the lodging of security for such time as the case is pending with the customs authorities(71).

Disputes between Member States regarding the application of the provisions governing failure to discharge an external Community transit document

1.112. The Court audited the progress made in the mutual assistance investigation into discharges at Irun in Spain, using false stamps, of 229 T1 transit documents issued between June 1991 and October 1992 by the customs office in Antwerp for consignments of milk powder originating in Eastern Europe and destined for Spain. The total amount of agricultural duties evaded is estimated to be over 9 Mio ECU.

1.113. Under the provisions of Article 215(1) of the Community Customs Code and Articles 378 and 379 of the implementing provisions, recovery action must be instituted by the competent customs authorities of the place where the customs debt is incurred. Where a transit document is not discharged the debt is deemed to have been incurred at the place where the goods were withdrawn from customs supervision; if this place is not known, the goods are deemed to have been so withdrawn in the Member State of departure.

1.114. The Belgian authorities, who informed the guarantor in March 1993 and drew up an official report in January 1994 against the three principals concerned, nevertheless failed to issue a single request for payment. They base their case on the conclusions of investigations conducted since 1993 in Belgium and in France, which state that the goods were withdrawn from customs supervision on Spanish territory.

1.115. At the time of the Court's examination the Spanish authorities had not instituted recovery procedures against those presumed to have committed the fraud in Spain either, because under national law administrative recovery procedures may only be instituted after a court judgment has established that the parties in question are guilty. The Spanish authorities also consider that they have no power to institute recovery measures against the Belgian principals either, because they believe there is insufficient evidence to show that the goods were withdrawn from customs supervision in Spain.

1.116. The Commission shares the conclusions of the Belgian and French authorities(72). At the time of the Court's examination, however, it had taken no steps to put an end to the dispute between the Member States or to ensure that the administrative recovery procedures provided for by the Community customs regulations follow their normal course, without prejudice to the pursuance of criminal proceedings at Member State level.

Conclusion

1.117. With regard to non-member States which benefit from preferential trade agreements, the protection of the financial interests of the Community requires that measures be taken to suspend the benefits granted in all cases where the Community budget has suffered from the failure by the other party to the agreement to respect obligations. The possibility of suspending such benefits should be extended to all preferential agreements (see paragraphs 1.71 to 1.77).

1.118. Within the customs union, the Commission and the Member States should work to ensure that the aims of the Community regulations on traditional own resources are respected (see paragraphs 1.86 to 1.88 and 1.111) and are applied rapidly and uniformly (see paragraphs 1.89 to 1.95). The Commission should:

(a) persuade the Member States, if necessary by proposing that its own prerogatives be reinforced, to adopt identical practices as regards preventive guarantees (see paragraphs 1.82 to 1.85), establishment (see paragraphs 1.96 to 1.103) and recovery (see paragraphs 1.105 to 1.111);

(b) ensure that regulations instituting special protection measures, notably anti-dumping duties, cannot easily be circumvented by operators, to the detriment of the Community budget (see paragraphs 1.78 to 1.81);

(c) institute rapid and efficient conciliation procedures, in order to resolve cases where the competences of Member States conflict and so prevent the recovery of own resources (see paragraphs 1.112 to 1.116);

(d) propose appropriate measures with a view to harmonizing the time-barring periods for recoveries (see paragraphs 1.68 to 1.70) provided for in the Community Customs Code with the longer periods concerning Community administrative sanctions as laid down in Article 3(1) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities' financial interests(73);

(e) propose a suitable regulatory framework so as to guarantee the uniform application of the security system in all Member States (see 1.82 to 1.85).

1.119. The Commission must make the best possible use of the accounting follow-up of investigations into cases of fraud and irregularities (see paragraph 1.104). Where necessary, it is incumbent on the Commission to institute infringement proceedings where there is found to have been negligence in ex post facto establishments and recoveries for which the Member States are responsible.

OWN RESOURCES DERIVING FROM VALUE ADDED TAX (VAT) AND THE GROSS NATIONAL PRODUCT (GNP)

Introduction

1.120. The method for calculating assessment bases for VAT and GNP own resources, which globally represent approximately 80% of own resources, are laid down in specific Community regulations(74). Statistical data play a decisive role. Moreover, with regard to the VAT resource, the many exceptions that arise within the joint VAT system in the Member States mean that subsequent corrections and compensation are required so that the theoretical assessment base that would result from harmonized application by the Member States of VAT-related legislation may be reconstructed.

1.121. The Community regulations concerning the making available to the European Union of own resources(75) prescribe that arrears interest should be paid by the Member State concerned where entries in the accounts are made late. The same applies when the Commission decides to call for additional funds from Member States(76).

Adjustments to the VAT and GNP assessment bases

Control by the Commission and the entry of reservations

1.122. For a given financial year, the Member States forward to the Commission the data concerning the assessment bases for the VAT and GNP own resources in the second half of the year following the financial year of reference. These data are checked by the Commission, which is responsible for ensuring that the Member States comply in a uniform manner with the applicable provisions regarding the calculation of tax bases.

1.123. Whenever the Commission believes that one of the factors used to calculate the assessment base is incorrect, it enters a reservation, which initiates the right, where appropriate, to make the necessary adjustments for the financial year under way, as well as for preceding financial years. Moreover, the Member States are also entitled to enter a reservation.

1.124. In general, reservations originate with problems relating to the statistical data used to calculate the assessment bases, or even with instances of violation of the regulations, particularly as regards application of the Sixth Directive concerning the joint VAT system(77). Amongst the matters currently outstanding for all Member States is that of the exhaustiveness of the GNP, i.e. the problem of taking the black economy into account.

1.125. The Court of Auditors has already had to deal with the handling of reservations in the past(78), and the European Parliament has expressed its opinion on this matter in the context of several discharge procedures(79). This year the Court decided to examine more particularly entry in the accounts, the monitoring of debts connected with reservations, and the charging of arrears interest when own resources are made available late.

1.126. What is at stake as far as these procedures are concerned is, on the one hand, the Commission's right fully to exercise its prerogatives as regards determining and making available the principal own resources of the Union and, on the other, the fact that Member States are required to respect their obligations in this field.

Situation as regards reservations and their financial impact

1.127. On 31 December 1996 115 reservations had been entered in connection with the VAT resource (including nine involving ongoing violation proceedings) and 115 concerning GNP. Half of these reservations, entered primarily by the Commission, had been notified between 1985 and 1992.

1.128. There is no information available as to the sums at stake in the cases currently pending. According to the Commission, any valid indication in this area actually depends on the Member States, so that the precise financial impact of any reservation can only be known with certainty when it is cleared.

1.129. The effect, both positive and negative, of the clearance of reservations on the VAT resource base resulted overall in additional payments of about 14 Mio ECU in 1996. The largest amounts related to three reservations in respect of which adjustments amounted, respectively, to 16,4 Mio ECU, 3,1 Mio ECU and 1,7 Mio ECU. It should, moreover, be noted that the raising of a GNP reservation on the VAT base (capped at 55% of the GNP) resulted, for one Member State, in the payment of 39 Mio ECU more by way of VAT resources.

The entry of reservations in the accounts and their accounting follow-up

1.130. For the purpose of ensuring exhaustive and efficient follow-up, the Financial Regulation stipulates that a debt estimate must be entered in the accounts, after the Financial Controller's approval has been given, for any measure or situation likely to give rise to or modify a debt, and thus any reservation. This constitutes a preliminary stage where the debt is not yet 'established, liquid and due` and it is therefore necessary to take effective measures with a view to determining the factors that will enable recovery, where appropriate.

1.131. The Court's audits have revealed that the reservations entered and the entry in the accounts of debt estimates do not always correspond. Hence, some reservations might not be entered in the accounts, and the primary objective of avoiding any oversights by making entries in the accounts is thus defeated.

1.132. The financial statements do not give a true picture of outstanding reservations, because the accounts do not systematically include token entries showing the impact which reservations may have on the current financial year. Moreover, in several cases the entry in the accounts did not take full account of all the previous financial years concerned either.

1.133. In breach of the detailed rules concerning the implementation of the Financial Regulation, the accounts do not mention in any detail what has been done to effect recovery. It is possible to establish the true circumstances surrounding each reservation only by systematically consulting the files of the unit of the Commission responsible for the audits.

1.134. The accounts system is designed in such a way that when reservations are entered and the Member State concerned remits the own resources, the recovery order is drawn up in a global manner and thus includes any other corrections. This being the case, in order to establish the amount remitted by the Member State in respect of each of the cancelled reservations, considerable research has to be carried out, which hinders the Community's monitoring and control procedures.

1.135. In these circumstances, entering reservations in the accounts constitutes little more than a formal application of the Regulation. As a result of its lack of reliability, the current system cannot guarantee at any one time the accuracy of the accounting entries relating to reservations nor that all of the European Union's entitlements and obligations in this field are accounted for.

1.136. Each department concerned, including the Financial Controller, has therefore set up its own monitoring system. These systems, which are not coordinated and in part serve different purposes, cannot take the place of a centralized accounts system organized in such a way as to ensure that all details are entered. In order to draw up a full account of existing reservations it is in fact necessary manually to cross-check the lists from the various Commission departments against the base files.

The monitoring of debts relating to reservations for the purpose of their recovery

1.137. The regulation applicable to the VAT resource(80) provides that where a Member State disagrees with a correction that is to be made to the assessment base, the Commission m