Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on computerising the movement and surveillance of excisable products

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Context

1.1 Council Directive 92/12/EEC of 25 February 1992, on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products [1], provides that products moving between Member States under excise-duty suspension arrangements must be accompanied by a document completed by the consignor whilst Commission Regulation (EEC) No 2719/92 of 11 September 1992, on the accompanying administrative document for the movement under duty-suspension arrangements of products subject to excise duty [2], lays down the form and content of the accompanying document.

[1] OJ L 76, 23.3.1992, p. 1; Directive as last amended by Directive 96/99/EC of 30 December 1996 (OJ L 8, 11.1.1997, p. 12).

[2] OJ L 276, 19.9.1992, p. 1.

1.2 In view of the amount of fraud connected with intra-Community movements of excisable alcohol and tobacco products, the Directors-General for Customs and Indirect Taxation set up a high-level group on fraud in these sectors on 26 March 1997. The group's remit was to identify the problems and propose solutions.

1.3 The group delivered its report in April 1998 and the Directors-General accepted it at their meeting of 24 April. Its conclusions include a recommendation for "the Commission and the Member States to develop and introduce a computerised intra-Community movement system" (point 3.4.4).

1.4 The Commission then sent a communication to the Council on the measures needed to combat fraud in connection with excise duty (O/98/131). This included the information that the Commission had commissioned "a feasibility study for improving the control of the movement of goods by the use of Information Technology ... financed within the framework of the Fiscalis Programme".

1.5 The ECOFIN Council of 19 May 1998 approved the report and underlined the importance of a computerised control system as a long-term goal, subject to the outcome of the feasibility study.

1.6 The report was sent to Parliament on 21 September that year.

2. Revenue from excise duty as a proportion of total Member State revenue

2.1 The figures currently available from Eurostat are for 1996. According to these, the total revenue from excise duty of all the Member States taken together is EUR 234 thousand million, or 8.1% of their combined total tax revenue of EUR 2 881 million.

2.2 For the same year, the loss to fraud in connection with excise duty on tobacco and alcohol (i.e. excluding mineral oils) in all Member States taken together was estimated at EUR 4 800 million, the figure quoted in the high-level group's report. It is calculated from estimates made by the Member States themselves.

3. Feasibility study on computerising the excise system

3.1 As a result of a tender published on 11 August 1998 in the S series of the Official Journal (XXI/98/CB-5003), followed by the usual selection procedure, a fourteen-month contract for carrying out a feasibility study was awarded to Alcatel TITN Answare and signed on 29 December.

3.2 The Commission approved the final report on the study on 17 March 2000. This shows that it would be technically possible to computerise the movement and surveillance of all products subject to excise duty. In other words, it would be entirely possible to take the accompanying administrative document - the piece of paper that currently accompanies all such products when they are moved between Member States under suspension arrangements - and replace it with a computer messaging system linking traders with each other and also routing their messages through their respective national administrations. Such a system would provide the Member States with real-time information on current movements and allow them to carry out whatever pre-movement, wayside and/or post-clearance checks they deem necessary. The traders consulted have also shown great interest in such a system since, on the whole, they accept that doing away with paper - as this system would - would simplify formalities, make trading more secure and release guarantees more quickly. This is because a consignor would immediately receive notification from the consignee of the arrival of the goods and this would have the same effect as the current copy 3 of the accompanying administrative document whose return triggers the release of the consignor's guarantee and discharges him of all further responsibility. Technical details of how such a system could be developed are given in the Annex to this proposal.

3.3 However, the study also shows how complicated it would be to establish such a system since it would have to connect up 80 000 traders to 15 national administrations - themselves linked up with each other - and would have to be available 24 hours a day, 365 days a year. Also, recovery times in the event of breakdown or maintenance would have to be very short. And, whilst some functions could be shared with the computerised transit system (NCTS/NSTI [3]; e.g. the list of competent offices in the Member States), the content of the messages themselves would differ from that of the NCTS since that links customs offices only [4].

[3] New Computerised Transit System/Nouveau Système de Transit Informatisé.

[4] Some traders may also be connected up to the NCTS if they are authorised to use simplified procedures.

3.4 What is more, the applicants for European Union membership would have to participate fully in all the steps involved in setting up the system since they would have to be connected up to it from the date of accession, by when the system would be in operation. This means they would also have to bear the costs and accept the constraints - factors which would make the system all the more complex and difficult to manage.

3.5 The study shows further that the setting-up phase, i.e. the period beginning on the date when work on developing the system actually starts, would be five years. This is relatively long but is impossible to reduce because of all the tasks that have to be completed before the procedures for tracking movements of excisable products can be computerised (e.g. management of code lists, excise offices, thesaurus of terms, harmonisation of excise registration numbers).

3.6 Finally, the study also shows that the costs of development and deployment, and the annual financial and administrative running costs would be high, for both the national administrations and the Commission (see point 4 below).

4. Respective obligations of the Commission, the Member States and traders

4.1 The Commission

Where financing the system is concerned, the original idea was to apply Article 4(2) of the Fiscalis programme decision (Decision No 888/98/EC of the European Parliament and of the Council of 30 March 1998 [5]) by which the Commission would finance those components of the projected system which would be the Community's responsibility, including the excise movement verification system (see Article 1(1) of the Commission implementing Decision No 98/532/EC of 8 July 1998 [6]). It should be remembered that the total budget allocated to Fiscalis - for the entire period and all tasks - is EUR 40 million.

[5] OJ L 126, 28.4.1998, p. 1.

[6] OJ L 247, 5.9.1998, p. 9.

By comparison, the budget which it is estimated that the Commission will have to fund - for accompanying measures, for both development and deployment of the electronic excise system and for the whole period from 2002 to 2006 - is estimated at EUR 35 million.

In other words, given the other tasks that also have to be completed as part of the programme, the Fiscalis budget is insufficient to finance the Community's share of the system. A specific budget allocation would therefore be needed to cover computerisation of the movement and surveillance system for excisable goods (see Article 10 of this proposal).

Also, once the system has been set up and is operational, managing it would require an annual operating allocation of EUR 4 million.

Where monitoring and managing the system is concerned, a committee would have to be set up to monitor the computerisation process and use of the budget. Following the Commission decision of 8 May 2001, six posts for seconded national experts have been allocated to the setting up stage of the project. However, DG TAXUD would remind all concerned that the estimate was for nine permanent staff posts.

4.2 The Member States

Only the project financing aspects need be considered here. Some of the Member States have calculated that, depending on the progress it has already made and the number of traders involved, each Member State would have to find EUR 5 to 12 million to cover all phases of setting up the system and some EUR 300 000 per year to cover running costs.

It was not possible to include in the feasibility study a calculation of the costs to be borne by each Member State since the infrastructure of one State's administration differs appreciably from that of the next, particularly that for training, information, support and development. Each Member State would therefore be required to estimate its own costs on the basis of the technical data provided in the feasibility study. In particular the Member States, too, would have to determine whether they have sufficient staff to implement the project or whether they have to outsource. This is a key factor in the end cost. Similarly, they would need to calculate their annual running costs on the basis of the parameters given in the feasibility study. The tasks to be completed by the Member States are as set out in Decision 98/532/EC (see Article 5 of this proposal).

4.3 It should be pointed out that, for both the Commission and the Member States, management, coordination, training, information and technical support would absorb just under 50% of all investment.

4.4 The Community's and the Member States' respective areas of responsibility

In this connection, some of the details of the split between the Community and non-Community components of the system as set out in Decision No 888/98/EEC should be reviewed (see Article 3 of the proposals). The Community's funding obligations - and particularly the Commission's - remain essentially unchanged from Decision 98/532/EC (see Article 4 of this proposal).

4.5 Traders

The cost to each trader connected up to the system (and all traders would have to be connected up) is estimated at a maximum EUR 140 000 per business for development and EUR 15 000 per business and year for running costs. This estimate is solely for big companies which decide to develop their own complete application comprising an interface with the projected Community computerised excise system and would therefore have to equip themselves with the necessary software. Typically such businesses would be cigarette manufacturers and oil companies. By contrast, the cost to a small trader such as an independent wine maker would be lower as the only equipment needed would be a computer and a modem. This is because each Member State would be required to develop a standard application and make it available free of charge to any trader requesting it.

4.6 Bases of comparison

Revenue: The figures obtained from certain Member States were compared with the amount of national revenue each obtained from excise duty in 1997. This showed that the investment each Member State would be required to make represents no more than 0.02 to 0.2% of that revenue.

Fraud: However, given the amount of fraud currently perpetrated, the investment and running costs of all parties would pay off in short order because, thanks to the on-line checks the projected system would enable national administrations to make, it would be possible to protect traders from such fraud. Assuming an initial investment of no more than 0.2% of total annual national revenue from excise duty, the total burden to be borne by the Commission and Member State budgets would be equivalent to only 5% of the total amount of revenue lost annually to evaded excise duty.

5. The will to implement

Computerisation of the excise system is also supported and advocated by all national administrations and traders because it would simplify documentation and mean faster discharge of operations. This chimes with a general trend in all procedures to eliminate paper documents and use automated data transmission methods.

Since the ECOFIN Council decision of 19 May 1998 it has emerged that there is the political will to develop a computerised excise system. Nevertheless, as this would be a huge, highly complex and costly project, the Member States and the Commission would each have to give a binding undertaking with regard to their legal and budgeting obligations (see Article 2 of this proposal), which is why this proposal for a European Parliament and Council Decision has been put forward.

2001/0185 (COD)

Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on computerising the movement and surveillance of excisable products

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 95 thereof,

Having regard to the proposal from the Commission [7],

[7] OJ C

Having regard to the opinion of the Economic and Social Committee [8],

[8] OJ C

Acting in accordance with the procedure provided for in Article 251 of the Treaty [9],

[9] European Parliament opinion of ... (OJ C ...), Council Common Position of ... (OJ C ...) and European Parliament Decision of ... (OJ C ...). Council Decision of ... .

Whereas:

(1) Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products [10] provides that products moving between the territories of the Member States under excise-duty suspension arrangements must be accompanied by a document completed by the consignor.

[10] OJ L 76, 23.3.1992, p. 1; Directive as last amended by Directive 2000/47/EC (OJ L 197, 29.7.2000, p. 73).

(2) Commission Regulation (EEC) No 2719/92 of 11 September 1992 on the accompanying administrative document for the movement under duty-suspension arrangements of products subject to excise duty lays down the form and content of the accompanying document provided for in the Directive 92/12/EEC [11].

[11] OJ L 276, 19.9.1992, p. 1; Regulation as amended by Regulation (EEC) No 2225/93 (OJ L 198, 7.8.1993, p. 5).

(3) In view of the findings and recommendations set out in a report delivered on 24 April 1998 by a High Level Group on fraud in the alcohol and tobacco sectors, it is plainly necessary to replace the existing paper-based system with a computerised system for monitoring the movement of excisable goods, such as will allow Member States to obtain real-time information on those movements and to carry out the requisite checks, including checks during movement of products, within the meaning of Article 15 of Directive 92/12/EEC.

(4) The setting-up of a computer system should also allow the intra-Community movement of goods under suspension of excise duties to be simplified.

(5) For the purposes of implementing this Directive, the Commission should coordinate Member States' activities, so as to ensure the smooth operation of the internal market. It should also support the use of data to combat fraud, particularly by applying risk analysis at the Community level.

(6) Because of the size and complexity of such a computerised system, both the Community and the Member States will need large additional human and financial resources for the purpose. Accordingly, provision should be made whereby the Commission and the Member States make the necessary resources available for the development and deployment of the system.

(7) The division between the Community and non-Community components of the computerised system should also be defined, as should the respective duties of the Commission and the Member States with regard to the system's development and deployment. In that context, the Commission should fulfil a major role in coordinating, organising and managing the system.

(8) Arrangements should be made for evaluating the implementation of the computerised system for monitoring excisable goods.

(9) The funding of the system should be shared between the Community and the Member States, the Community's share being specifically entered as such in the General Budget of the European Union.

(10) This Decision establishes an overall financial amount covering the entire period needed for the development and the deployment of the system, and representing the budgetary authority's "special reference" within the meaning of Point 33 of the Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure [12].

[12] OJ C 172, 18.6.1999, p. 1.

(11) Since the measures necessary for the implementation of this Decision are management measures within the meaning of in Article 2 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [13], they should be adopted by use of the management procedure provided for in Article 4 of that Decision,

[13] OJ L 184, 17.7.1999, p. 23.

HAVE ADOPTED THIS DECISION:

Article 1

1. A computerised system for the movement and surveillance of excisable products of the kind referred to in Article 3(1) of Directive 92/12/EEC, hereinafter referred to as "the computerised system", is hereby established.

2. The computerised system shall:

(a) permit the electronic transmission of the accompanying administrative document provided for in Regulation No 2719/92/EEC, and the improvement of checks;

(b) combat fraud by enabling the Member States to monitor the flow of excisable products in real time and carry out the requisite checks where necessary;

(c) simplify the intra-Community movement of products under excise-duty suspension arrangements, in particular by facilitating and speeding up the discharge of such movements.

Article 2

The Member States shall establish the computerised system within five years of the entry into force of this Decision.

Work on developing the computerised system shall begin not later than nine months after the entry into force of this Decision.

The Commission and the Member States shall make available the human, budgetary and technical resources needed to establish and run the computerised system.

Article 3

The computerised system shall be made up of Community and non-Community components.

The Community components of the system shall be the common specifications, the technical products, the services of the CCN/CSI (Common Communications Network/Common Systems Interface) network, and the coordination services used by all the Member States, to the exclusion of any variant or special feature of any such services designed to meet national requirements.

The non-Community components of the system shall be the national specifications, the national databases forming part of the system, network connections between Community and non-Community components and any software or equipment which a Member State considers necessary to ensure full use of the system throughout its administration.

Article 4

1. The Commission shall coordinate the setting-up and running of the Community and non-Community components of the computerised system, and in particular:

(a) the infrastructure and tools needed to guarantee the system's internal links and overall interoperability;

(b) the exploitation of data to combat fraud, particularly by applying risk analysis at the Community level.

2. To achieve the aims of paragraph 1, the Commission shall conclude the requisite contracts and shall draw up, in cooperation with the Member States, management plans for setting up and running the system.

The management plans shall state which initial tasks and which routine tasks the Commission and the individual Member State, respectively, are responsible for completing, the completion date for each task and what evidence of completion may be required.

Article 5

1. The Member States shall ensure that they complete, by the date specified in the management plans mentioned in Article 4(2), the initial and routine tasks allocated to them.

They shall report to the Commission when each task has been completed and shall provide proof of the date of its completion.

2. No Member State shall take any action relating to the setting-up or running of the computerised system that might affect the system's internal links and overall interoperability or its functioning as a whole.

Any measure that a Member State might wish to take and that could affect either the computerised system's internal links and overall interoperability or its functioning as a whole shall only be taken with the prior agreement of the Commission.

3. Member States shall inform the Commission regularly of any measure they may have taken to enable their respective administrations to make full use of the computerised system.

Article 6

The Commission shall introduce any measures that are needed for the implementation of this Decision in accordance with the procedure set out in Article 7. These implementing measures shall not affect the Community provisions governing the raising and checking of indirect taxes or administrative cooperation and mutual assistance in matters of indirect taxation.

Article 7

1. The Commission shall be assisted by the Standing Committee on Administrative Cooperation in the field of Indirect Taxation established by Article 10 of Council Regulation (EEC) No 218/92 [14].

[14] OJ L 24, 1.2.1992, p. 1.

2. Where reference is made to this paragraph, the management procedure provided for in Article 4 of Decision 1999/468/EC shall apply, in compliance with Articles 7 and 8 thereof.

3. The period referred to in Article 4(3) of Decision 1999/468/EC shall be three months.

Article 8

1. The Commission shall take whatever other steps are necessary to verify that the measures financed from the Community budget are being carried out correctly and in compliance with the provisions of this Decision.

It shall regularly, in collaboration with the Member States, monitor the various development and deployment stages of the computerised system with a view to determining whether the objectives pursued have been achieved, and to issuing guidelines on how to raise the effectiveness of the activities involved in implementing the computerised system.

2. Thirty months after the entry into force of this Decision, the Commission shall submit to the Committee referred to in Article 7 an interim report on the monitoring operations. If appropriate, this report shall set out methods and criteria for use in the later evaluation of how the computerised system is functioning.

3. At the end of the five-year period referred to in the first paragraph of Article 2, the Commission shall present to Parliament and the Council a report on the implementation of the computerised system. The report shall set out, inter alia, the methods and criteria to be used in the later evaluation of how the system is functioning.

Article 9

The countries that have applied for membership of the European Union may be kept informed by the Commission of the development and deployment of the computerised system and may take part in the tests to be carried out.

Article 10

1. The costs of setting up the computerised system shall be split between the Community and the Member States in accordance with paragraphs 2 and 3.

2. The Community shall bear the costs of the design, acquisition, installation and maintenance of the Community components of the computerised system and the ongoing operating costs of those Community components installed in Commission premises, or in those of a designated subcontractor.

3. Member States shall bear the costs of setting up and running the non-Community components of the system and the ongoing operating costs of those non-Community components installed in their premises, or in those of a designated subcontractor.

Article 11

1. The overall reference amount for financing the computerised system for the period defined in the first paragraph of Article 2 shall be set at EUR 35 000 000 in so far as the Community budget is concerned.

The annual appropriations, including appropriations assigned to the use and operation of the system after the above implementation period, shall be approved by the budgetary authority subject to the financial perspective.

2. Member States shall estimate and make available the budgets and human resources needed to meet their obligations described in Article 5.

Article 12

This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities.

Article 13

This Decision is addressed to the Member States.

Done at Brussels,

For the European Parliament For the Council

The President The President

ANNEX

Technical Aspects

The data transmission system will use an architecture in which the Member States will be responsible for all telephone switchboards and electronic switching stations used by traders in the respective Member States, or by the Member States themselves, to receive or transmit data, and for all data exchanges with other Member States. No external intermediaries will be used to carry out these tasks.

If the system is to be used for commercial operations, very high standards of security and confidentiality have to be built into it. In particular it must be guaranteed to be tamper-proof, the data transmitted must enjoy absolute privacy and the system must be permanently available, 24 hours a day, 365 days a year. Similarly, recovery times after any breakdowns must be very short.

1. Architecture

Given the conclusions of the feasibility study and the data transmission system selected, the principles underlying the proposal are:

- All listed operators (authorised warehousekeepers and their bonded warehouses, registered traders and their tax representatives) must be connected up to the system.

- All data transmitted between traders connected up to the system must be transmitted via at least one Member State.

- Certain other traders, particularly non-registered traders (occasional consignees) will not have direct access to the system. In their case, certain data must be transmitted directly between traders.

- Where data are so transmitted, only one of the traders, generally the consignor, will be responsible for putting the data into the system.

- Listed operators will be responsible for providing all data on the movement of goods, particularly the data required for submitting and, where necessary, updating the movement information (the electronic AAD) [15], and for returning the "discharged" message.

[15] Accompanying administrative document.

- All administrative data other than movement data, will be transmitted directly between Member States. The data may never be transmitted via traders.

- Information that is in the public domain may be made available for consultation at an information centre accessible to the public.

- Where use of the computerised system is concerned, a trader may communicate directly only with the Member State responsible for the place from which, or to which, the products are consigned, as appropriate.

It is recognised that the CCN/CSI infrastructure already in use to link the Member States would give the projected system a head start. It is proposed that the AFIS infrastructure should be used temporarily for movement verification, mutual assistance and any other related exchanges.

The resulting architecture is therefore as follows:

>REFERENCE TO A GRAPHIC>

Each Member State has one applications server (the computerised system for the movement and surveillance of excisable products) to process messages issued by its officials or by traders. Each server is linked up to the CCN/CSI [16] network by a CCN gateway. The officials' work stations (in the Member States) are connected up to the server for the computerised system by the internal AEM network. The various help centres and helpdesks are connected up to the system's server and/or the CCN gateway (not shown in the diagram).

[16] Common Communications Network/Common Systems Interface.

Traders (ECOP) are connected up to their respective Member States by a front-end communications channel (COM) which is duplicated so that, if one channel is down, the other ensures that the site remains available. Most traders use only one work station or one stand-alone PC but larger traders will have their own server and network.

The European Commission departments (the Directorate-General for Taxation and Customs Union (TAXUD) and the European Anti-Fraud Office (OLAF)) are directly linked to a CCN gateway. The AFIS [17] server is linked to the same gateway.

[17] Anti-Fraud Information System.

The applications centre (AC) is connected up to its own CCN gateway.

Each Member State is responsible for all the functions falling within its local domain.

2. Functions

To permit development and deployment to be staggered over the period, the system would be broken down into three groups of functions, as follows:

- Group I: The essential reference module for the AAD electronic routing system, chiefly comprising the basic data of the individual specifications in the Directive and the details of the mutual obligations on data exchange. Access to the VIES [18] system may be added to this group.

[18] VAT Information Exchange System.

- Group II: The AAD electronic routing system itself and all the data required for drawing up a movement document.

- Group III: The additional modules for which the electronic AAD (Group II) is the pre-requisite but which do not themselves have any effect on the AAD routing system.

The function modules which make up the different Groups are illustrated below in descending hierarchical order. Dark arrows indicate that the return module cannot function if the reference module is not operational. Dotted arrows show that the reference modules can be left out temporarily although it would be advisable to develop them. Modules shaded in grey are those which the Member States and traders regard as priorities.

For easier reading, not all transmission links have been shown.

>REFERENCE TO A GRAPHIC>

The following paragraphs summarise the subsystems in each Group.

Group I: Pre-requisite functions (development period - two and half years from start-up of activities)

This group includes all the functions needed to activate the system as a whole, i.e:

- drawing up reference lists (lists of codes, lists of excise offices handling the system, structure of the excisable products, thesaurus of terms;

- management and consultation of listed traders;

- management of and consultation on guarantees;

- management of and consultation on excise rates;

- consultation of VAT data;

- related reports.

It should be pointed out that, where possible, some of the reference lists such as the list of codes and list of Member States' offices will be shared with the New Computerised Transit System (NCTS).

Group II: Electronic AAD routing system (development period - four years commencing one year after start-up of activities)

This group comprises the functions needed for managing the electronic AAD, i.e:

- management of guarantee certificates;

- submitting and registering the AAD;

- updating and splitting the AAD whilst a movement is under way;

- acceptance or rejection of the AAD;

- link to the customs arrangements for exporting goods;

- claims for losses;

- consultation and recovery of movement data;

- automatic reminders;

- related reports.

Group III: Downstream functions (development period - two years commencing three years after start-up of activities)

This group includes:

- registration of reports on wayside checks;

- risk evaluation;

- management of warnings;

- automatic reminders;

- statistics;

- movement verification and mutual assistance;

- free text messages.

Applications

Apart from the application functions listed above, other aspects also have to be developed in order to be able to:

- allocate user names;

- change passwords;

- check links;

- consolidate statistics;

- allow support personnel to consult data;

- allow support personnel to make corrections and connect up equipment.

3. Tasks

Work will be shared out between the European Commission and the Member States as follows:

- The Commission will coordinate all work done by the partners, as also the joint programme. It will check the overall systems specification and supervise the development of the common applications. It will provide an applications centre for the partners so that they can check operations and evaluate the various components.

- Each Member State will set up a network of terminals, develop its own application and open it up to traders. Each party involved will do that part of the work on the common programme that relates to itself.

3.1 The European Commission

In view of European Union policy, the system for the movement and surveillance of excisable products should be computerised in three stages, as in the classic V-shaped development approach. The main components identified as being the European Commission's responsibility are:

A central project office, which will also coordinate the support programme and supervise deployment, will be responsible for:

- the common specifications;

- technical products;

- the services of the CCN/CSI network;

- the coordination services for all the Member States.

These Community components do not include any variant or special feature designed to meet purely national needs.

It should be noted that the experience of the Member States is required as input into the systems specification. The Commission will therefore request the participation and contributions of the Member States in establishing this specification.

The Commission, with the collaboration of the Member States, will also regularly evaluate the various development stages of the system.

3.2 The Member States

Each Member State must develop and implement its own application of the system whilst complying with the operating and technical specifications supplied by the Commission.

Member States are free to select tools, the technical environment, equipment and the like to suit their internal requirements. Each Member State may develop its application on an existing platform. However, the resulting system must comply fully with the specifications jointly agreed by the Commission and the Member States. In particular, the intra-EU interfaces must be strictly compatible in form and semantics with the systems developed by other Member States.

To help Member States check the compatibility of their applications and prepare for validation (type-approval) of their systems, the European Commission will provide the Member States with validation tools.

The following components are the responsibility of the Member States:

- drawing up of national specifications;

- participation in the drawing up of the common operating specifications and interfaces;

- establishing a national project office;

- quality management;

- security and management policy;

- developing Group I applications;

- acceptance of Group I applications;

- developing Group II applications;

- acceptance of Group II applications;

- developing Group III applications;

- acceptance of Group III applications;

- the information programme;

- the training programme;

- the support programme;

- deployment.

The Commission will encourage any joint initiatives to develop products that are of interest to some or all the Member States where one national administration acts as team leader.

FINANCIAL STATEMENT

1. TITLE OF OPERATION

Computerisation of excise operations. Setting up of a European system to computerise the movement and surveillance of excisable products (system for computerising the movement and surveillance of excisable products).

2. BUDGET HEADING [19]

[19] This indication concerns only the implementation of the system. It is not possible, at this stage, to define the budget heading that will allow to finance the running of the system.

B5-306

3. LEGAL BASIS

Article 95 of the Treaty establishing the European Community

4. DESCRIPTION OF OPERATION

4.1 General objective

To combat fraud by implementing the main recommendation of the report of the High Level Group on fraud in tobacco and alcohol products approved by the Directors-General for Customs and Indirect Taxation on 24 April 1998 and the ECOFIN Council on 19 May 1998.

To ensure the smooth operation of the internal market by simplifying the intra-Community movement of excisable products under excise-duty suspension arrangements and making such movements more secure, as provided for in Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products.

To do so, the accompanying administrative document, the paper which currently accompanies all excisable products moving between the Member States under a suspension arrangement, must be replaced by an electronic message linking traders to each other via their respective national administrations.

Such a system would provide Member States with real-time information on current movements and allow them to carry out whatever pre-movement, wayside and/or post-clearance checks they deem necessary.

Traders who were consulted have shown great interest in the system since, on the whole, they recognise that doing away with paper - as this system would - would simplify formalities, make trade more secure and release guarantees more quickly. This is because a consignor would immediately receive notice of the arrival of his goods at their destination, a notice which would have the same effect as the current copy 3 of the accompanying administrative document whose return means that the consignor's guarantee is released and he is also discharged of all further responsibility.

Alcatel TITN Answare carried out a feasibility study in 1999 and concluded that such a system was technically possible. The study provided all the details required for developing and deploying such a system. This study was officially approved by the Commission departments on 17 March 2000.

4.2 Period covered and arrangements for renewal or extension

Multiannual project, 2002-2006, i.e. five full years from start-up.

5. CLASSIFICATION OF EXPENDITURE OR REVENUE

5.1 Compulsory/non-compulsory expenditure

Non-compulsory expenditure

5.2 Differentiated/non-differentiated appropriations

Differentiated appropriations

5.3 Type of revenue involved

None

6. TYPE OF EXPENDITURE

- Subsidy to be combined with funding from other public or private sector sources

The Community will finance that part of the system which links the national administrations with each other. The Member States will finance the part which links their respective administrations with their traders.

The operating expenditure to be borne by the Community will include mainly:

- legal and procedural measures;

- management tasks (organisation, planning, issuing calls for tender, selecting consultants, monitoring contracts, budget and administrative matters);

- quality control of the products developed and installed;

- coordination (particularly with the Member States and professional associations and between the various development and deployment contracts; the costs for this item will include meetings and missions relating to coordination);

- the equipment covered by the definition of the Community components of the system set out in Article 3(1) of the draft decision;

- the operating and technical specifications for the system (definition of all the features of the system in terms of operating and technical modules);

- the precise definition and configuration of the interfaces;

- the development of the common central system;

- the deployment and monitoring of, and support services for, the common system;

- the definition of a common information policy;

- the setting up of a common training programme;

- operations to test the common system;

- the contingency plan (backup for the system);

Should the operation prove an economic success, is there provision for all or part of the Community contribution to be reimbursed- No.

Will the proposed operation cause any change in the level of revenue- If so what sort of change and what type of revenue is involved- No.

7. FINANCIAL INCIDENCE

7.1 Method of calculating total costs of operation (definition of unit costs)

The costs of meetings and missions relating to coordination tasks will be calculated on the basis of the cost of travel and accommodation.

All other costs relating to activities described in the Table below will be calculated on the basis of experience gained from similar projects.

The tables mentioned below at points 7.2 and 7.3 concern the development and deployment phases of the system, as set out in article 2, 1st sub-paragraph of the proposal for decision.

However, the proposal for decision also covers operating costs and use of the system, after its implementation, which are provisionally estimated to be 4M EUR.

7.2 Breakdown by elements of the action in the development and deployment phase (5 years)

million EUR (current prices)

>TABLE POSITION>

7.3 Indicative table of the commitments and payments during the development and deployment phase.

EC in Millions of EUR (current prices)

>TABLE POSITION>

8. FRAUD PREVENTION MEASURES

The Commission will pay travel expenses and costs relating to the holding of Community-level information and consultation seminars directly to Member State officials, officials of other countries (particularly those from applicant countries) and representatives of external bodies. Anti-fraud clauses will be added to all contracts concerned.

The Commission will check all subsidies paid, all services provided and all studies delivered before making any payments and will do so in the light of contractual requirements and the principles of thrift and good financial and/or general management. Fraud prevention provisions (e.g. checks, requirements to deliver reports) will be included in all agreements and contracts between the Commission and those receiving payments.

9. ELEMENTS OF COST-EFFECTIVE ANALYSIS

9.1 Specific and quantified objectives, target population

- Specific objectives

With a view to achieving the general objective of preventing fraud and simplifying the intra-Community system for moving goods under excise-suspension arrangements, the computerising of the movement and surveillance of such products has its own specific objectives:

First, the purpose of the system is so to link traders with each other and via their respective Member State administrations as to permit automatic checking of the data on an authorised warehouse keeper and his consignee before any excisable goods are consigned under the excise-suspension arrangements. The system will discharge movements by the same route and automatically track losses from or shortfalls in consignments. Each Member State's SEED [20] database (containing the registration details for authorised warehousekeepers, registered operators and warehouses) will be stored in the computerised system so that it will no longer be necessary to exchange data between Member States by diskette as at present.

[20] System for the Exchange of Excise Data.

Secondly, computerisation would make it possible to establish a surveillance system that enables Member States' administrations to exchange information on movements. This could be used:

- to store all data on a given movement that are required for surveillance purposes;

- as an early warning system;

- to allow checks, including wayside checks, to be carried out or planned in real time;

- to carry out automatic risk analyses based on risk indicators agreed at Community and national level;

- for exchanging data between Member States.

- Target population:

Officials of the competent administrations of the Member States and applicant countries, members of professional circles involved in excise products, consumers.

9.2 Grounds for the operation

- Need for a Community budget allocation, particularly in the light of the principle of subsidiarity

A contribution from the Community budget will be needed since the Member States will not be able, on their own, to establish the kind of data system involved which must be capable of fully harmonised, consistent and simultaneous operation in all Member States. To guarantee full compliance with this essential condition, the Community must therefore finance all that part of the project which involves setting up the data link between the Member States themselves.

The system could also use the Common Communications Network/Common Systems Interface (CCN/CSI) whose purpose is to provide a common platform which allows voluminous amounts of data to be transferred quickly and economically between the Member States' customs and tax administrations and between Member States and the Commission whilst guaranteeing maximum security. Using this system would reduce costs and prevent delays in putting into operation new systems such as the one for computerising the movement and surveillance of excisable products. It should be noted that the CCN/CSI platform is itself financed under the Customs 2002 and Fiscalis programmes.

- Ways and means to be used

* analysis of any similar projects carried out at Community or national level

A similar project is currently under way to computerise external Community transit (NCTS/NSTI). [21] This project aims to computerise the transmission of customs transit documents between Community customs offices. The Community is funding the data link established between the Member States whilst the latter are funding their national applications. It should also be pointed out that some basic tools would be shared by the NCTS/NSTI and the computerised system for the movement and surveillance of excisable products. With a little adaptation, it would be possible to use the list of customs offices, the thesaurus of terms and the list of codes, which would mean a substantial saving.

[21] New Computerised Transit System/Nouveau Système de Transit Informatisé.

* spin-off and multiplier effects expected

The computerised excise system would help stem a large proportion of the fraud committed under the present system based on the paper version of the accompanying administrative document. It would do so by eliminating the kinds of fraud in which forged seals are used or consignments are re-routed to a trader other than the one entered on the document - and often established in the same Member State as the consigning trader.

It would also considerably simplify the formalities to be completed by traders by ensuring the rapid and risk-free release of their guarantees because the message giving notice of the arrival of their goods at destination would be transmitted electronically.

- Main uncertainties which could affect the specific outcomes of the project

The main uncertainty factor is the human and financial resources the Member States must marshal to carry out that share of the development and deployment of the project which falls to them. However, the specific purpose of the proposal for a Council Decision to which this financial statement is to be attached is to require the Member States to give a formal undertaking in this regard.

The second factor is the purely technical aspect. To provide the expected advantages, the system must be fully available round the clock and 365 days a year and, in the event of breakdown, recovery time must be very short if trade is not to be hindered. The Member States therefore have to make every effort to comply with this requirement in respect of the part of the project for which they are responsible. The feasibility study carried out in 1999 gives the specifications with which Member States must comply.

9.3 Monitoring and evaluation of the operation

- Monitoring indicators

* for measuring completed activities:

(a) number of contracts concluded with computer companies with a view to developing and deploying the system;

(b) number of meetings held with the Member States and applicant countries;

(c) number of information and consultation seminars held, particularly with European traders' federations;

(d) number of leaflets, manuals and other tools created to help implement the information and training policy;

(e) number of documents translated.

* development and deployment objectives to be achieved:

(a) Group I activities: pre-requisites:

- reference lists drawn up;

- list of listed traders updated and incorporated;

- methods for the management and consultation of guarantees established;

- methods for the management and consultation of excise duty rates established.

(b) Group II activities: AAD electronic routing system:

- operating system specification: description of how the system is to operate in terms of function and interface modules;

- technical system specification: description of how the system is to operate in terms of technical modules and their interfaces;

- development of technical acceptance scenarios: description of the configuration of the data bases, related day-to-day handling and the expected results;

- development of validation tools: software which will allow validation of all interfaces created on the basis of the technical systems specification;

- technical acceptance of the system: using validation tools to validate the operational acceptance of the application in the Member States;

- operational acceptance of the system: using the application modules validated earlier and the acceptance scenarios to validate the results of the technical acceptance of the system;

- adoption of a new legal text applying the details of the data circuit and the content of the messages to be exchanged.

(c) Group III activities: downstream functions:

- design "wayside checks" function;

- design application for automatic risk evaluation;

- design "warnings management" function;

- design "automatic reminder" function;

- design "statistics" function;

- design "movement verification and mutual assistance" function;

- design "free-text messages" function.

- Details and frequency of planned evaluations

The computerisation project will be monitored constantly - by the Excise Committee as regards the legal aspects, by the Computerisation Subcommittee as regards the technical aspects and by the SCAC as regards the budget side.

Upon completion of the Group I activities described in the Annex to the proposal for a Decision to which this Financial Statement is attached and in the previous paragraph, i.e. two and a half years after start-up of development work, there will also be an interim report on the monitoring of the development and deployment activities. If possible, this report should already include the kind of information that would be helpful in determining the methods and criteria to be used in evaluating the functioning of the system itself.

As required by Article 8(2) of the proposal for a Decision to which this Financial Statement is attached, the final evaluation report will be presented to Parliament and the Council once work on developing and deploying the system has been completed. This report must include the method to be used for evaluating the functioning of the system.

10. ADMINISTRATIVE EXPENDITURE (SECTION III PART A OF THE GENERAL BUDGET)

10.1 Human resources

The necessary administrative resources will actually be mobilised in the light of the Commission's annual decision on allocating resources and, in particular, in the light of any additional staff and funds granted by the budget authority.

10.2 Incidence on the number of posts

(a) during the start-up stage: 2002

>TABLE POSITION>

(b) during the operational stage: 2003 - 2006

>TABLE POSITION>

Description of posts required for the operational stage

Title // Job description

Head of project // Grade A. Will have responsibility for managing the work of the team and in particular for coordinating organisation, planning, contractual and budget matters, the technical verification of applications and all support activities. Must be familiar with internal Commission procedures, particularly those for tenders and the budget. Must be a computer scientist.

Deputy Head of project // Grade A. Must be able to deputise for the Head of Project. As above.

Excise expert // Grade A. Will have responsibility for coordinating all matters relating to excise duties that arise in connection with the setting up and development of the computerised system, and particularly for all legal matters relating to its development and deployment. Must be an Excise specialist.

Technical expert // Grade B. Will be involved in the functional analysis tasks and will assist the national administrations with their practical application of the system.

Technical expert // Grade B. Will be involved in defining interfaces and will assist the administrations with their national applications thereof.

Technical expert // Grade B. Will assist in the development of the common technical products.

Technical expert // Grade B. Will have responsibility for coordination with national administrations.

Technical expert // Grade B. Will have responsibility for coordination with national administrations.

Secretary // Grade C. Will organise meetings with national administrations and prepare the requisite documents.

10.3 Overall financial incidence of the additional staff

(a) during the start-up stage: 2002

(EUR)

>TABLE POSITION>

These amounts reflect the total costs of the extra posts for 2002.

(b) during the operational stage: 2003 - 2006

(EUR)

>TABLE POSITION>

These amounts reflect the total costs of the extra posts for the period 2003-2006.

10.4 Increase in any other operating expenditure arising out of the project, in particular costs of committee and expert group meetings

(EUR)

>TABLE POSITION>

These amounts represent the total expenditure on the project for the period 2002-2006.