Opinion of the Economic and Social Committee on the 'Communication from the Commission to the European Parliament and the Council: action plan for transit in Europe - a new customs policy` (97/C 355/14)

On 1 October 1996 the Economic and Social Committee, acting under the third paragraph of Rule 23 of its Rules of Procedure, decided to draw up an opinion on the above-mentioned communication.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 16 July 1997. The rapporteur was Mr Giesecke.

At its 348th plenary session (meeting of 1 October 1997), the Economic and Social Committee adopted the following opinion by 81 votes with four absentions.

1. Introduction

1.1. Both this communication and the Communication from the Commission - the future of transit systems: interim report (COM(96) 477 final) are based on various proposals and communications that have recently been published on the subject of transit (ref. CES 767/97, point 1.1).

1.2. Trade within Europe and with countries outside Europe is considerably facilitated by the temporary suspension of import duties and other taxes. The relevant rules are contained in the Community transit procedures for the European Community, in the Common Transit Convention for trade with EFTA and the Visegrad countries, and in the TIR Convention for trade with its 59 signatory states.

1.3. Rapid growth in trade, particularly with the CCEEs, which is often conducted by road haulage, has in recent years made the risk of fraud with these systems more apparent. Increasing quantities of high-tax products, such as tobacco, tobacco products and alcohol in particular, have been illegally imported. Whereas the vast majority of transit operations are properly conducted, the European Court of Auditors reports that a relatively small proportion of fraudulent operations is responsible from some two thirds of total losses. This suggests that we are dealing here with organized crime on a large scale.

1.4. The revenue lost to the Community and national budgets has been estimated by the Committee of Inquiry of the European Parliament at ECU 3,5 billion per annum. On the basis of fraud cases reported by the Member States, the Commission estimates revenue lost at about ECU 1,27 billion over the last seven years. The uncontrolled entry of goods onto the Community market jeopardizes above all public health and safety and threatens the competitiveness of our firms and, therefore, jobs.

1.5. In the light of its own findings and those of the Court of Auditors, the Commission has taken various measures since March 1995 in cooperation with the Member States, including short-term measures to counter fraud. Given the seriousness of the problem, the European Parliament for the first time set up an ad hoc Committee of Inquiry, which after extensive investigations set out 38 recommendations in its detailed final report of 20 February 1997.

1.6. The ESC expects the Council, European Parliament, Commission and Court of Justice to fully use the powers given to them in the Amsterdam Treaty, with the aim of harmonizing the different national provisions as far as is necessary.

2. Commission Action Plan

2.1. The Commission presented its action plan for the transit system () at the end of April 1997 after discussion with all the parties concerned. The aim of this action plan is to tackle the acknowledged weaknesses of the current transit systems with a programme of detailed measures and a precise timetable for action.

2.2. The system is intended to be simple and coherent, and above all to improve considerably the transparency of goods movements. It is supposed to be easy for all operators to understand and apply, and to allow procedures to be concluded rapidly with all operators using IT and electronic data interchange. At the same time the system should be able to respond flexibly to new legal and economic data, and to the fast-changing needs of business. The aim is for it to incorporate coordinated fraud prevention and targeted protection of the interests of all operators.

2.3. It is important that the customs administrations in the 15 Member States as far as possible operate as if they were one, as provided for in the Commission communication 'Customs 2000` (). Reform of transit systems thus represents just one part of the overall plan to improve the way European customs function.

2.4. A single law enforcement policy in the Member States is also essential to facilitate the establishment of proof, have cases pursued in a coordinated fashion and impose effective and appropriate penalties on those responsible. This will require a considerable improvement in judicial cooperation within the Community and if possible also with EFTA and the Visegrad countries.

2.5. The cornerstone of the customs system in Europe is to be the modernization and substantial improvement of transit procedures.

2.5.1. To achieve this, the action plan first provides for a New Computerized Transit System (NCTS) to directly monitor the movement of goods. With the current paper-based procedures certain fraud checks could only be carried out after transit. NCTS works in real time and considerably accelerates the various procedures.

2.5.2. It is hoped that this system will promote a more active exchange of information within and between customs administrations, allowing goods and traders to be identified more precisely, and provide greater transparency with respect to the sums to be guaranteed, the mode of transport and difficulties with completing formalities.

2.5.3. The cooperation between customs administrations that this system provides for is designed to ensure proper and uniform application of the provisions at all Community customs offices. Better cooperation should also include coordinating risk management policy, evaluating information and taking joint measures to combat fraud.

2.5.4. The Commission would like a partnership based on a climate of trust to be developed between customs administrations and traders; it suggests that a telephone hotline be set up, that responsibilities be more clearly defined in Memoranda of Understanding, that training measures be improved and that problems be periodically discussed. A trader's reliability should determine whether or not simplified transit procedures may be used.

3. General comments

3.1. The ESC welcomes the action plan for transit in Europe, because it provides for a long overdue comprehensive modernization of the transit system with clear goals and deadlines. The three transit systems have served the economy well since 1968, contributing substantially to growth in European trade and the internal market. This anticipated modernization should certainly make the systems more beneficial for business.

3.2. The ESC expects the proposed changes - as indicated by the European Parliament - to overcome the main shortcoming of the present systems, which is perceived to be the fact that both the management and staff of customs administrations have always thought in terms of national frontiers rather than a real European internal market. The proposed administrative changes must support the operations of customs offices.

3.2.1. At the same time the ESC expects these modernized customs administrations increasingly to develop their role as service providers - to manage business-promoting measures - in addition to their surveillance role. This would enable businesses whose operations are above board to develop a partnership based on trust with them, which would make it easier for customs to perform their supervisory task, while providing businesses with the best possible transit conditions.

Such a development would also enhance Europe's status as a business location.

3.2.2. Customs administrations in the Member States have cut their payrolls to varying degrees. Rapid growth in trade has created more work for them, fraud has increased and big improvements in training have, one would hope, been achieved; these factors and the effects of using the latest technology will make it necessary to review and adjust staff numbers again.

3.3. The ESC welcomes the fact that there are at long last plans to provide customs offices with better, up-to-date equipment so that procedures can be carried out more quickly, making them cheaper for the user. For most businesses this will close a technical gap, allowing them to work more closely and more rapidly with customs offices.

3.4. The proposed partnership is in users' interests and could further simplify procedures, provided that smaller businesses also benefit from these improvements.

3.5. The aim of the fight against fraud, which has been stepped up during the past years, is also to benefit honest businesses which use the procedures. But a relatively small number of offenders have caused a crisis in the current, simplified system of collecting duties and taxes. The anti-fraud measures employed to date, in particular the much tighter guarantee requirements, have already considerably reduced the financial advantages of transit procedures.

3.6. The ESC expects the proposed anti-fraud measures to be appropriate and to work by increasing efficiency rather than by placing extra charges and burdens on businesses whose operations are above board.

3.7. Until this closer degree of cooperation has been achieved, administrations should accept forms of proof other than the receipt that transit formalities have been completed. For instance, copies of the customs certificate could be sent by fax (by the receiving customs office), or proof of import customs clearance or similar documents could be presented. Allowing such alternatives could currently save businesses a lot of money.

3.8. The ESC particularly welcomes the current political determination to give European customs administrations new status. This also means providing them with the authority they now need. As well as having better equipment, customs officials could in future have a greater sense of representing a European customs system.

4. Specific comments on the action plan

4.1. Managing transit by means of an active information policy

4.1.1. The ESC agrees with the Commission that an efficient administration of the transit system can be achieved only if the officials in charge of procedures have a thorough working knowledge of the system and if information is effectively transmitted within administrations.

4.1.2. The ESC's opinion on the 'Customs 2000` action programme already mentioned the need for information sent from Community bodies to the Member States to be transmitted using standard procedures from the national ministries concerned to their subordinate services. Only a Europe-wide computer-based customs communication system will allow information to be transmitted promptly.

4.1.3. The ESC considers the network of national transit coordinators provided for in the action plan to be an important first step towards removing national barriers, particularly in this area of cooperation.

4.2. Ensuring that provisions are properly and uniformly applied

4.2.1. It is essential that customs provisions be properly applied by the customs authorities so that procedures work smoothly. The mistakes or violations noted by the Commission and Parliament in their inquiries, especially with respect to returning copy 5 of the transit document, are now putting considerable financial pressure on traders. The Commission therefore proposes setting up joint control operations with spot checks to ensure proper application of customs provisions. The ESC supports this proposal subject to the proviso that it should not place any extra burden on traders.

4.2.2. However, in this connection the ESC believes that control operations financed through the Community budget would be sufficient if used to their full potential. Under current law it is the Member States which administer the transit system. Since more than 61 % of fraud affects national taxes (), the Member States have every interest in taking appropriate measures to deal with the problem.

4.2.3. Given that the implications are not purely financial, we welcome the Commission's intention to present to the Council before the end of the year a proposal for a regulation that would define breaches of customs law and appropriate penalties or Community administrative measures. Penalties should be regulated in the framework of EC law, since both law enforcement and prosecution of offences are at present governed by national law alone.

4.3. Integrating the European customs systems: a new convention to facilitate European customs procedures

4.3.1. The Commission is responding to the European Parliament's call to create a Europe-wide customs system, alongside national customs administrations for transit procedures. This would simplify trade throughout Europe by introducing common rules and procedures. The ESC sees this setting up of a single legal framework as a crucial contribution to strengthening the internal market. It should therefore also be adopted as it stands by those non-Community countries that use the transit system, allowing the Community transit and common transit systems to be merged.

4.3.2. The inclusion of a derogation clause enabling any party to temporarily suspend application of the single legal framework wholly or in part can be endorsed by the ESC only if situations in which this would be allowed are clearly defined. Otherwise this would lead in extreme cases to national peculiarities.

4.4. Ensuring that international transit systems are compatible

The Commission action plan mainly describes measures that would affect the Community and common transit systems. There is no doubt that the TIR Convention needs to be revised. Setting up a new, decentralized TIR guarantee system and introducing computerized procedures are complex issues that must be agreed between the 59 TIR signatory states. The ESC reserves the right to issue a separate opinion on this matter.

4.5. NCTS - the new computerized transit procedure

4.5.1. The ESC stresses the need to introduce a computerized transit procedure. We support the European Parliament's call for the NCTS to be introduced quickly and for it to be used to best effect both for management and security and for fraud prevention.

4.5.2. To exploit the full potential of a computerized transit system, each workplace will have to be properly equipped and customs officials will require special training. Accompanying political measures are essential to ensure that the necessary budget resources are made available.

The ESC feels it would be desirable for systems to be extended as far as possible concurrently in all the countries using the transit system, since disparities would mean that special checks were maintained.

4.5.3. The introduction of computerized procedures should therefore be prepared, but also financially supported, in those countries that plan to join the transit system in the near future.

4.5.4. On no account should introducing the electronic transit system result in small and medium-sized businesses being excluded because they do not have the right IT equipment. The system must be open to everyone. To ensure that procedures are consistent, customs administrations will have to transfer paper transit declarations to the NCTS if necessary. Businesses should not be required to have special customs status in order to use the system.

4.5.5. The NCTS must meet the needs of customs administrations with respect to safe management of transit procedures, but it must also take sufficient account of business concerns. The ESC perceives a number of information problems here, but it believes that the desired results will be achieved if all those involved exchange information in good time. However, this requires that they should not ask for too much information, e.g. the value of goods or code numbers.

4.5.6. The Commission is planning to set up the NCTS by the year 2000, but the ESC still feels that interim solutions are called for. The Member States must provide the necessary budgetary resources and make technical arrangements so that in the short term transit formalities can be completed by e-mail or, if appropriate, fax. This would make things much easier for businesses.

4.6. Controlling operators' use of the procedure according to their reliability and the degree of risk

4.6.1. A balance must be struck between the need for safe processing and honest traders' requests for simplifications. Administrations need technical and financial information about individuals and/or companies in order to produce a risk profile, and it is much easier to process this information using the NCTS.

4.6.2. The ESC considers that operators should be involved in drawing up the risk profile which is available to every customs office. Operators should also be able at any time to improve their risk factor through internal measures. The criteria for determining the risk factor must therefore be clearly defined.

4.6.3. Any economic operator deemed reliable must be allowed to benefit from the simplifications. There must no blanket exclusion criteria. It is important in this respect to distinguish between procedural irregularities and fraud.

4.7. Dialogue between administrations and business

4.7.1. The ESC welcomes the Commission's intention to establish a new climate of trust between customs authorities and operators. To achieve this, customs administrations must take economic factors into account and operators must accept the need for surveillance. Terms of reference must be clearly defined and responsibility must be accepted for mistakes.

4.7.2. This calls for a high level of training on both sides. In its opinion on the 'Customs 2000` action programme, the ESC already mentioned the possibility of joint training measures ().

4.7.3. We welcome the fact that the partnership between administrations and business is to be enshrined at local level also in a Memorandum of Understanding (MoU). Since the principal bears liability through the guarantee provided, the ESC does not think it necessary to set out special criteria for use, such as the appointment of a transit agent.

4.8. Reviewing transit procedures for certain modes of transport

4.8.1. The Commission action plan concerns above all measures that affect road transport. In the ESC's view, an analysis of the potential for fraud with sea, rail, air and pipeline transport is certainly also indispensable. Business is interested in the suspension of duties and taxes equally for all forms of transport, but different levels of guarantee are required because different forms of transport vary in their susceptibility to fraud.

4.8.2. The compulsory introduction of a guarantee for sea transport sought by the Commission will automatically increase the cost of sea transport. Since sea transport - unlike land transport - involves only a small number of carriers, who are generally known to customs administrations, the ESC considers that the guarantees should be set at a lower level.

4.8.3. Transport procedures in the transit system are highly regulated. The ESC therefore considers that the modes of transport for which guarantee waivers systematically apply should not all have to be covered by a flat rate transit guarantee in future.

4.9. Responsibility of economic operators and secure movement of goods in transit

4.9.1. The responsibilities of all those involved in the transit system must be clearly defined. However, the ESC considers that until the NCTS system is fully operational, traders' wish for alternative ways of proving that they have completed the transit operation should not result in them having to bear the full burden of proof. To shift the risk in this way seems unjustified given that administrations often now need much more time in which to send the confirmation of receipt.

4.9.2. The ESC is sceptical about the proposal of the Commission and the European Parliament to affix a 'T` plate to vehicles. Such a system is used for vehicles registered for TIR transit operations, but in practice the plates are not crossed out or removed when vehicles are used for operations outside the scope of the TIR convention. Given the large number of transit systems, there is always a risk that after a time almost all lorries would carry these plates, which would defeat the whole point of having them.

It could be worth considering whether the GPS (Global Positioning System), which is frequently used for logistical reasons, might be employed to increase surveillance capability of customs administrations.

4.9.3. With 18 million transits per annum, compared with 1 million TIR transits, the Community/common transit is a large-scale system, and no more pressure should be put on the modes of transport used. The task of issuing certificates of approval and inspecting vehicles every year is costly and time-consuming for customs offices. It is the responsibility of the office that initiates the procedure to assess whether a vehicle is safely sealed and if necessary to report any reservations.

4.10. Targeted monitoring of operations

4.10.1. The ESC thinks that physical monitoring measures should be kept to a minimum. These hamper the circulation of goods, even when they are carried out as intelligent samples. With the help of the improved possibilities of risk analysis through the NCTS system, sampling can be carried out even more intelligently than before.

4.10.2. The effectiveness of sampling also depends considerably on the most modern technical tools being used.

4.10.3. The ESC suggests a general shortening of the periods for the implementation of transit procedures, bearing in mind the individual carrying distance proposed.

4.11. Fraud detection and elimination

4.11.1. The ESC particularly welcomes the Commission's intention to co-ordinate national authorities' fraud monitoring and elimination measures at European level. In its opinion on the 'Customs 2000` action programme the ESC has already discussed the creation of a co-ordinated European institution along the lines of Europol to take the place of UCLAF, which so far has not been given adequate powers.

4.11.2. Action against irregularities and crimes is a matter for national laws on such matters. So, at EU level the thing to do is to lay down a legal and extra-legal obligation to take action against all cases of fraud and define a uniform approach. It is desirable that such framework provisions should not cover just the EU but should also apply to EFTA and the Visegrad group.

4.12. Harmonization of powers

4.12.1. The ESC welcomes the Commission's plan to harmonise customs officers' powers of control to the extent necessary. This is the only way to ensure a standard level of security and guarantee equivalent treatment for all operators throughout the EU customs area. It is also a good thing that this measure should apply not only to the internal territory but also to customs posts at the EU's external frontiers. As the customs authorities' powers of control are regulated by national laws supplementing European customs law, any guidelines from the Commission must guarantee that national provisions correspond to each other.

4.12.2. In its opinion on the 'Customs 2000` action programme the ESC already called for the training of customs officials to be based on uniform criteria, so that the fifteen customs authorities would operate as one. This requirement was also emphasised by the EP's committee of inquiry. An exchange of officials is desirable even during training, so as to give training a European dimension and thereby ensure that customs officials acquire a European vision of their duties. In this connection the ESC supports the proposal to set up a European customs academy.

In the light of recent developments, the ESC also feels that a review of the funds available for the Matthäus programme is advisable.

4.13. Smooth financial management of transit/guarantee

4.13.1. The ESC thinks that the form and amount of the guarantee must primarily depend on the specific risk linked to the goods.

4.13.2. In the simplified procedure the firm must always have the possibility of providing an overall guarantee reduced to 30 % - except when sensitive goods are involved. Since facilities are only granted to firms considered as irreproachable on the customs legislation front, this classification must also be taken into consideration when calculating the amount of the guarantee.

4.13.3. The ESC also welcomes the study planned by the Commission to determine to what extent a guarantee from a third party could be replaced by an alternative system for insuring levies. The ESC again expects the future implementing provisions for the Customs Code to contain a clear indication that the guarantee can be waived completely in certain cases.

4.14. Identification of debtors that ensures adequate protection for financial interests

4.14.1. Like the Commission, the ESC feels that it should be possible to cover rapidly and efficiently debts due to an irregular transit operation. It is pleasing to note here that the customs authorities turn first of all to the persons responsible for the origin of the debt before falling back on the guarantee paid by the principal.

4.14.2. However, the ESC cannot agree with the Commission when it says that if any difficulties occur when recovering sums from debtors, the amounts may be automatically demanded from the principal and his bond. Administrative problems, including those involved in debt recovery, cannot be settled at the operator's expense! For economic reasons, therefore, debts should be recovered from the debtor whenever the latter can be identified beyond any doubt. The hierarchy of claims is laid down clearly by law, and must be observed by all Member States, so as to rule out any differences in treatment among them.

Claims on the guarantee only appears to be an acceptable solution in cases where no debtor can be identified.

4.14.3. The ESC considers it justified for the Commission to ask that, in the event of an irregular bringing-in of goods following a transit operation, when the principal has been freed from his obligations, his guarantee should no longer cover debts that then arise. The clear demarcation of powers during a transit operation has already been dealt with elsewhere.

4.15. Transit manual

4.15.1. Because there are so many regulations currently in force, it would be useful to provide customs officials with a manual describing all the stages in a transit operation - preferably, because of their topicality, in the form of a loose-leaf collection or on the Internet. In addition to the partnership between the administration and operators, the manual should clearly describe the powers of the two sides. The ESC, unlike the Commission, thinks that such a manual should also be made available in its entirety to operators. Obviously, this does not apply to internal administrative instructions.

4.15.2. Some passages in this manual should be the fruit of close collaboration between the Commission's departments, national administrations and firms. In this way it could also include indications relating to internal problems within firms when applying existing regulations. As the new transit system is to be transparent, the ESC sees no reason to prevent the point of view of the customs authorities being expressed clearly to operators. It would be helpful if transport personnel could be provided with the parts that are relevant to them.

4.15.3. A comparable publication has existed for several decades as part of the ATA Carnet system. The World Customs Organisation (WCO) describes in this manual not only the ATA Convention but also the decisions of the bureau of the International Chamber of Commerce in Paris, which co-ordinates the international chain of bonds ().

4.16. Informing all those involved in transit

4.16.1. The ESC thinks that operators should be informed in an appropriate manner of the advantages of the transit system. It particularly approves of the plan to set up, as part of the Matthäus and 'Customs 2000` programmes, a customs-transit operators contact group in which administrations and operators from the 23 countries concerned by the Community transit system would be represented. The success of the Eurotransit 1997 conference proves how useful this sort of initiative is.

The proposal for a common further training cycle between administrations and business is also welcomed.

4.16.2. As the transit system is a dynamic system it must adapt to a constantly changing economic situation. So, monitoring by the Council, Commission, EP and European Court of Auditors is necessary. Political accompanying measures, also in the Member States, are essential in order to guarantee uniform implementation in all the countries concerned - including EFTA and the Visegrad group.

5. Conclusions

5.1. The ESC feels that the present action plan generally seems to be a suitable tool for making the transit system part of a modern and future-oriented European customs legislation system. The ESC would like its remarks to be taken into account when implementing the action plan and wishes to be involved in future developments.

5.2. The close collaboration between the Council, the Commission and the EP on the one hand and the debate with operators on the other have proved over the last twelve months that it is possible to set up a new transit system resulting from a wide-ranging consensus between all the parties concerned. Such a partnership must be continued in the future.

Brussels, 1 October 1997.

The President of the Economic and Social Committee

Tom JENKINS

() Communication from the Commission to the European Parliament and the Council - Action plan for transit in Europe - a new customs policy (COM (97) 188 final).

() Commission proposal for a decision of the European Parliament and the Council adopting an action programme for customs in the Community (Customs 2000) [COM (95) 119 final - 95/0087 (COD)]; opinion of the Economic and Social Committee - OJ C 301, 13. 11. 1995, p. 5.

() The Commission calculates revenue lost due to fraud as ECU 1,27 billion for the years 1990 to 1996. Of this, ECU 485 million (38,2 %) was lost to own resources and ECU 784 million (61,8 %) to national taxes.

() Cf. OJ C 301, 13. 11. 1995, p. 7, point 3.3, 'Gearing training to the needs of a modern European customs administration`.

() ATA Handbook, Customs Convention on the ATA Carnet for the Temporary Admission of Goods, Customs Co-operation Council, World Customs Organisation, first edition 1973.