Special  Report Are preferential trade 
arrangements 
appropriately managed?EN 2014  NO 02
EUROPEAN
COURT
OF AUDITORS

EUROPEAN  COURT  OF AUDITORS  
12, rue Alcide  De Gasperi  
1615  Luxembourg  
LUXEMBOURG
Tel. +352  4398-1
E-mail:  eca-info@eca.europa.eu  
Internet:  http://eca.europa.eu
Twitter:  @EUAuditorsECA  
YouTube:  EUAuditorsECA
More  information  on the European  Union  is available  on the Internet  (http://europa.eu ).
Luxembourg:  Publications  Office  of the European  Union,  2014
ISBN  978-92-9241-842-7
doi: 10. 2865/63011
© European  Union,  2014
Reproduction  is authorised  provided  the source  is acknowledged.
Printed  in Luxembourg
EN 2014  N0 02
Special  Report Are preferential 
trade arrangements 
appropriately managed?
(pursuant to Article 287(4), second subparagraph, TFEU)
02
 Contents
Paragraph
 Abbreviations 
 Glossary
I–V Executive  summary
1–19 Introduction
1–6 Preferential trade arrangements
7–14 Assessment of the effects of PTAs by the Commission
15–19 Supervision and controls on PTAs
20–25 Audit  scope  and  approach
21–22 Assessment of the economic effects of PTAs
23–25 Supervision and controls on PTAs
26–106 Observations
26–53 Despite improvements over time the Commission has not appropriately assessed all the economic 
effects of PTAs
27–31  The Commission did not always carry out an assessment of all the economic effects of PTAs
32–53 The assessments carried out in most cases contained inaccuracies and were not fully useful or 
comprehensive, but there have been improvements
54–55 The interim evaluation of the GSP shows that the policy has not yet delivered all its intended 
benefits
56–80 Customs controls applied by the authorities of the selected Member States are weak
58–67 Weaknesses in control strategy and risk management
68–73 Weaknesses in the management of the administrative cooperation by the authorities of the selected 
Member States
03  
74–75 Member States’ risk management systems do not always include MA communications
76–80 Errors in recovery procedures in three of the selected Member States
81–99 There are weaknesses in the Commission’s supervision of Member States and beneficiary/partner 
countries in respect of PTAs 
82–86 The Commission has carried out few prior evaluations and no monitoring visits to countries benefiting 
from preferential treatment 
87–89 The Commission has taken steps to ensure the smooth working of the administrative cooperation 
arrangements, but problems remain
90–92  OLAF’s origin investigations are essential but there are weaknesses in their financial follow-up
93–99  Insufficient use of preventive and reactive measures to protect the financial interests of the EU
100–106  The legal provisions of the PTAs do not contain sufficient safeguards to protect the financial 
interests of the EU
100 –103 Complexity of cumulation rules
104 –105 Replacing certificates of origin and movement certificates with self-certification
106 Limited legal powers to counter fraud
107 – 120 Conclusions  and  recommendations
 Annex  I — Statistical data on PTAs in 2011
 Annex  II — Overview of Commission’s ex ante  evaluations on PTAs
 Annex  III — Overview of Commission’s interim and/or ex post  evaluations on PTAs
 Annex  IV — Audit approach in selected Member States
 Annex  V — Limitations of the CGE model
 Reply  of the Commission
04
 Abbreviations
ACP  African, Caribbean and Pacific Group of States
AC Administrative cooperation
AMA  Mutual assistance concerning agricultural or fishery products
CCC  Community Customs Code
CCIP  Customs Code Implementing Provisions
CGE  Computable General Equilibrium Model
CLWP  Commission’s legislative work programme
EPE  Ex post  evaluation
EPA  Economic partnership agreement
EU European Union
FAO  Food and Agriculture Organisation of the United Nations
FTA  Free trade agreement
GSP  Generalised system of preferences
GTAP  Global Trade Analysis Project
IA Impact assessment
ILO International Labour Organisation
MA Mutual assistance
OLAF  European Anti‑Fraud Office
PTAs  Preferential trade arrangements
SIA Sustainability impact assessment
TOR  Traditional own resources
TRIPS  Agreement on Trade‑Related Aspects of Intellectual Property Rights
05
 Glossary
Administrative cooperation (AC) : exchange of information between beneficiary/partner countries, the 
Commission and the Member States, whereby the former inform the Commission, which conveys this information 
to Member States, of the authorities competent to issue certificates of origin or movement certificates and the 
specimen of stamps used therein. Member States send requests to these authorities in order to confirm the validity 
and/or authenticity of proofs of preferential origin and movement certificates.
Cariforum : body that comprises Caribbean ACP states for the purpose of promoting and coordinating policy 
dialogue, cooperation and regional integration, mainly within the framework of the Cotonou Agreement between 
the ACP and the European Union and also the Cariforum–EU Economic Partnership Agreement (EPA).
Comext : the statistical database on trade of goods from and between European Union countries (intra and extra 
EU). These statistics cover the transactions of more than 11 000 goods classified in the Combined Nomenclature.
Computable General Equilibrium Model (CGE) : a quantitative economic model used to simulate how an economy 
reacts to changes in policy, in areas such as taxation, migration and trade policy. It assumes that markets in an 
economy tend toward equilibrium, if not disturbed by shocks, and in principle lead to an efficient allocation of 
resources. The first CGE model was constructed by Leif Johansen in 1960.
Cumulation : a system that allows products originating in country A to be further processed or added to products 
originating in country B, as if they had originated in country B. The resulting product would have the origin of 
country B. The working or processing carried out in each beneficiary/partner country on originating products does 
not have to be ‘sufficient working or processing’ as set out in the list rules.
Customs controls : specific acts performed by customs authorities in order to ensure the correct application 
of customs rules; such acts may include examining goods, verifying declaration data and the existence and 
authenticity of electronic or written documents, examining the accounts of undertakings and other records, 
inspecting means of transport, inspecting luggage and other similar acts.
Customs declaration : the act whereby a person indicates a wish to place goods under a given customs procedure.
06 Glossary
EU’s generalised system of preferences (GSP) : a unilateral trade arrangement by which the EU grants developing 
countries and territories preferential access to its market in the form of reduced tariffs for their goods upon entry in 
the EU market. The standard GSP provides preferences to developing countries and territories over more than 6 200 
tariff lines, whereas the special GSP in favour of sustainable development and good governance, known as GSP +, 
offers additional tariff reductions to assist vulnerable developing countries in their ratification and application of 
international agreements in these fields. The EBA ‘everything but arms’ scheme supplies quota free duty‑free for all 
products for the least developed countries.
Free trade areas and customs unions : preferential trade arrangements, which represent an exception to the most 
favoured nation (MFN) treatment rule of the GATT and the GATS by virtue of which trader partners grant reciprocally 
preferential access to their products and services in order to facilitate trade between them. While both lead to the 
reciprocal elimination of tariffs and quotas in the constituent territories and the discrimination of non‑members’ 
trade, the latter implies the establishment of a common customs tariff among them.
Global Trade Analysis Project (GTAP) : a global network of researchers and policy makers conducting quantitative 
analysis of international policy issues. GTAP is coordinated by the Center for Global Trade Analysis in Purdue 
University. A regional single country CGE model developed by the Australian Industry Commission provided the 
inspiration for the GTAP project in 1990–91. The centrepiece of the Global Trade Analysis Project is a global database 
describing bilateral trade patterns, production, consumption and intermediate use of commodities and services.
Impact assessment (IA) : an ex ante  evaluation prepared by the Commission in order to provide policymakers with 
evidence of the advantages and disadvantages of possible policy options by assessing their potential impact.
Local clearance procedure : a simplified procedure whereby a trader receives the goods directly at his/her 
premises (or the designated place) and usually the customs declaration is lodged and the goods are released by 
means of an entry in the trader’s own records.
Mutual assistance (MA) communication : transmission to Member States by the Commission of information 
concerning operations which constitute, or appear to constitute, breaches of customs or agricultural legislation that 
are of particular relevance at EU level.
Mode 4 : Supply of services in cross‑border trade delivered within the territory of a trade partner, with the EU 
supplier present as a natural person.
07 Glossary
REM–REC applications : claims for remission/repayment of the customs debt or for waiver of subsequent entry 
in the accounts thereof submitted by the Member States’ customs authorities to the Commission pursuant to 
Articles 871 and 905 of the CCIP .
Revenue foregone : the revenue that the EU forfeits due to the tariff preferences granted to beneficiary/partner 
countries of PTAs.
Revenue lost : customs duties due which can no longer be collected.
Risk management/risk analysis : the systematic identification of risk and implementation of all measures necessary 
to limit exposure to risk, preferably using automated data ‑processing techniques. This includes activities such as 
collecting data and information, analysing and assessing risk, prescribing and taking action and regular monitoring 
and review of the process and its outcomes, based on international, EU‑wide and national sources and strategies.
Risk profile : a combination of risk criteria and control areas (eg. type of goods, countries of origin) which indicates 
the existence of risk and leads to a proposal to carry out a control measure. When these criteria are developed at EU 
level following a common risk management framework they are known as EU risk profiles.
Simplified declaration procedure : a simplified procedure whereby a trader presents goods to customs and lodges 
either a simplified declaration form or a commercial document (e.g. an invoice) instead of a detailed standard 
declaration.
Sustainability impact assessment (SIA) : an independent study carried out by external consultants to provide 
negotiators with an evidence‑based analysis of the potential economic, environmental and social impacts that 
a trade agreement might have, both in the EU and in the partner countries. External consultants are bound by the 
guidelines and terms of reference contained in the Commission’s handbook on trade SIAs.
Time -barring of the customs debt : the fact that a customs debt can no longer be notified to the debtor because 
a period of 3 years has passed from the date on which the customs debt was incurred.
08
I
Preferential trade arrangements (PTAs) allow trading 
partners to grant preferential terms in the context of 
their trade with each other. They can be either recipro ‑
cal or unilateral. The former reduce tariff barriers with 
the objective of increasing trade, economic growth, 
employment and consumer benefits for both par ‑
ties. With the latter the EU grants preference without 
reciprocity with the objective of providing developing 
countries tariff‑free access to the EU market, thereby 
contributing to poverty eradication and to promoting 
sustainable development.
II
The objective of the Court’s audit was to evaluate 
whether the Commission has appropriately assessed 
the economic effects of PTAs and whether the controls 
thereon are effective in ensuring that imports cannot 
wrongly benefit from a preferential tariff, resulting in 
the loss of EU revenue.
III
The Court found that:
(a) the Commission has not appropriately assessed 
all the economic effects of PTAs; however, the 
use of the impact assessment tool has increased 
and there has been progress in the quality of the 
analysis conducted;
(b) the interim evaluation of the generalised system 
of preferences (GSP) shows that the policy has not 
yet fully delivered its intended benefits;
(c) there are weaknesses in customs controls applied 
by the authorities of the selected Member States;(d) there are weaknesses in the Commission’s super ‑
vision of Member States and beneficiary/partner 
countries in respect of PTAs; and
(e) the legal provisions of the PTAs do not contain suf ‑
ficient safeguards to protect the financial interests 
of the EU.
IV
In order to improve the assessment of the economic 
effects of PTAs the Commission should:
(a) unless duly justified, carry out an impact assess ‑
ment (IA) and a sustainability impact assessment 
(SIA) for each PTA, providing an in‑depth, compre ‑
hensive and quantified analysis of the expected 
economic effects, including an estimate of rev ‑
enue foregone;
(b) involve Eurostat routinely in the quality assess ‑
ment of the statistical data sources used in SIAs, 
and ensure the timeliness of the analysis carried 
out for negotiators;
(c) carry out interim and ex post  evaluations in order 
to assess the extent to which PTAs with a sig ‑
nificant impact meet their policy objectives and 
how their performance can be improved in key 
economic sectors and including an estimate of 
revenue foregone.Executive   
summary
09
 Executive summary 
V
In order to improve the protection of the EU’s financial 
interests the Commission should:
(a) create EU risk profiles on PTAs so that Member 
States have a common approach to risk analysis in 
order to reduce losses to the EU budget;
(b) verify that Member States improve the effective ‑
ness of their risk management systems and control 
strategy to reduce losses to the EU budget;
(c) encourage Member States to adopt appropriate 
precautionary measures upon receipt of a mutual 
assistance (MA) communication;
(d) evaluate and  carry out monitoring visits on a risk 
basis to countries benefiting from preferential 
treatment notably regarding the rules of origin 
and cumulation;
(e) require the Member States to improve the qual ‑
ity of the information they provide concerning 
administrative cooperation;
(f) improve the financial follow‑up of OLAF investiga ‑
tions in order to prevent losses to the EU budget 
due to time‑barring;
(g) reinforce the EU’s position in reciprocal PTAs and 
make more use of precautionary and safeguard 
measures including them in all future trade agree ‑
ments; and
(h) promote the replacement of origin and movement 
certificates with exporters’ self‑certification.
10
Introduction
Preferential trade 
arrangements
01 
Preferential trade arrangements (PTAs) 
allow trading partners to grant pref ‑
erential terms in the context of their 
trade with each other. They can be 
either reciprocal or unilateral. The 
former reduce tariff barriers with the 
objective of increasing trade, econom ‑
ic growth, employment and consumer 
benefits for both parties. With the 
latter the EU grants preference without 
reciprocity with the objective of pro ‑
viding developing countries tariff‑free 
access to the EU market, thereby con ‑
tributing to poverty eradication and to 
promoting sustainable development.
02 
At the end of 2013, 39 PTAs were in 
force covering trade between the EU 
and 180 countries and territories. In 
2011 the value of goods imported into 
the EU under PTAs amounted to more 
than 242  billion  euro, representing 
14 % of EU imports. Annex I  provides 
an overview of the data for the 10 
Member States which imported the 
most, and the 10 beneficiary/partner 
countries which exported the most, 
under PTAs that year.03 
According to the Treaty on the Func ‑
tioning of the EU1, common commer ‑
cial policy is the exclusive competence 
of the Union. The procedure for estab ‑
lishing PTAs is set out in its Articles 206 
and 207.
04 
The Commission is responsible for 
negotiating the PTAs, assessing and 
evaluating their economic, social and 
environmental impacts and supervis ‑
ing their implementation by Mem ‑
ber States and beneficiary/partner 
countries.
05 
The Member States’ customs author ‑
ities bear the main responsibility for 
overseeing the EU’s international 
trade. In particular, they implement 
measures to safeguard the financial in ‑
terests of the EU and to protect it from 
unfair or illegal trading practices, while 
encouraging legitimate trade.1 Article 3(1)(e) and Article 3(2) 
TFEU.
11 Introduction
06 
The authorities of the beneficiary/
partner countries are responsible for 
checking that the arrangements are 
adhered to and they therefore play an 
essential part in the initial determina ‑
tion of the ‘originating’ status of the 
products.
Assessment of the effects 
of PTAs by the 
Commission
07  
There are two types of ex ante  assess ‑
ments used to support decision‑  
making in trade matters: impact as ‑
sessments (IAs) and sustainability 
impact assessments (SIAs). IAs are 
a Commission‑wide tool used to sup ‑
port decision ‑making in the case of 
initiatives with expected significant 
impacts. SIAs are a trade‑specific 
instrument, providing a more detailed 
analysis of trade agreements under 
negotiation.
08  
In 20022 the Commission introduced 
IAs to help identify the main options 
for achieving the intended policy 
objectives and analyse their likely 
impacts in the economic, social and 
environmental fields. IAs also set 
out a framework for monitoring and 
evaluation. IAs are carried out by the 
Commission before the negotiation 
mandate is proposed for adoption by 
the Council.09  
Since 2003, the Commission has been 
required to carry out an ex ante  evalu ‑
ation or an IA to respect legal obliga ‑
tions3 or Commission rules4. This is 
because PTAs entail a reduction in 
revenue for the EU budget (revenue 
foregone) and are major policy pro ‑
posals having economic impacts both 
inside and outside the EU (see more 
details in Annex II ).
10 
In 1999 the Commission ‘ decided to 
integrate sustainable development into 
trade negotiations by developing a new 
assessment tool called trade SIA’5.
11 
After the trade negotiations have offi ‑
cially started but prior to the signature 
of PTAs, the Commission outsources 
SIAs, which are studies conducted by 
external consultants used as a policy 
tool for an ex ante  assessment of the 
economic, social and environmental 
implications of a trade negotiation.
12 
Interim and ex post  evaluations as ‑
sess the actual impacts of the PTAs 
as a result of their implementation. 
In the Court’s view they should be 
carried out in respect of all PTAs with 
significant economic, social and envir ‑
onmental impact ideally after  
3 years from their entry into force. 
These allow policymakers, stake ‑
holders and European taxpayers to 
assess whether PTAs are actually meet ‑
ing their policy objectives.2 COM(2002) 276 final of 
5 June 2002.
3 Pursuant to Article 21, under 
the heading ‘Principle of 
sound financial management’, 
of Commission Regulation 
(EC, Euratom) No 2342/2002 
of 23 December 2002 laying 
down detailed rules for the 
implementation of Council 
Regulation (EC, Euratom) 
No 1605/2002 on the Financial 
Regulation applicable to 
the general budget of the 
European Communities in 
force from 1.1.2003 (OJ L 357, 
31.12.2002, p. 1). However, 
since 22 August 2006 this 
article only requires ex ante  
evaluations in respect of 
‘programmes or activities 
occasioning budget 
expenditure’.
4 COM(2002) 276 final, 
applicable from 2003, 
and COM(2005) 12 final of 
26 January 2005, on the 
strategic objectives 2005–09.
5 Preface by Peter Mandelson, 
former European 
Commissioner for Trade, to the 
handbook on trade SIA.
12 Introduction
13 
In its communication on ‘Trade, 
growth and world affairs, trade policy 
as a core component of the EU’s 2020 
strategy’6, the Commission stated that 
ex post  evaluations would be carried 
out to monitor the impacts of existing 
PTAs on a more systematic basis (see 
more details in Annex III ).
14 
Revenue foregone is the revenue that 
the EU forfeits due to the tariff prefer ‑
ences granted to beneficiary/partner 
countries under PTAs. An ex ante  and 
ex post  evaluation of this revenue 
foregone allows the Commission to im ‑
prove the financial management of the 
EU budget by providing the budget ‑
ary authority with an accurate yearly 
forecast of customs duties collection 
and calculation of the budgetary costs 
associated with the PTAs.
Supervision and controls 
on PTAs
15 
The customs authorities of the Mem ‑
ber States, the authorities of the 
beneficiary/partner countries and the 
Commission should jointly manage 
PTAs and cooperate to ensure that the 
conditions required to benefit from 
the preferential treatment are met. 
The protection of the EU’s financial 
interests by preventing losses to the 
EU budget due to the import of goods 
under PTAs not entitled to preferential 
tariff treatment is the responsibility of 
those three groups of authorities.16  
Certifying and verifying the preferen ‑
tial status of products is crucial and re ‑
quires detailed checks on the origin of 
the goods and effective administrative 
cooperation with exporting countries.
17  
Rules of origin are used to ascertain 
that products originate in a particular 
country entitled to benefit from pref ‑
erences and thus meet the criteria for 
the trade preference7. These rules have 
three components :
(a) an origin8 component (which 
categorises products according to 
where they are produced) ;
(b) a consignment standard (which 
ensures that the products are not 
subjected to manipulation by 
requiring direct transport between 
the country of origin and the EU 
or by directly establishing the 
so‑called non‑manipulation prin ‑
ciple); and
(c) a documentary standard (adequate 
documentation needs to be 
provided as to the origin of the 
product).6 COM(2010) 612 final of 
9 November  2010.
7 Each agreement contains 
a list of working or processing 
procedures to be performed 
on non‑originating materials 
so that the manufactured 
product can obtain originating 
status.
8 EU rules of origin are based 
on process criteria: to have 
the preferential origin of 
a country, goods must be 
wholly obtained (e.g. grown, 
mined) there or, where this is 
not the case, have undergone 
sufficient processing there.
13 Introduction
18 
An example of the procedure for 
determining whether products are 
eligible for preferential treatment is 
shown in Chart 1 .19 
Administrative cooperation between 
the authorities of the Member States, 
beneficiary/partner countries and the 
Commission is used to confirm the 
authenticity of the proofs of origin and 
status of the products exported. The 
granting or refusal of the tariff prefer ‑
ence requested by the importer will 
depend in most cases upon the results 
of this procedure. Chart 2  shows the 
flowchart of controls on preferential 
trade.
Procedure to determine whether products are eligible for preferential tariff 
treatment under GSP
(1) Are the products suﬃciently worked
   (list of processes)? (2) Are the rules on cumulative origins   applicable?Are the pr oduc ts
wholly obtained?Complian t or F orm A
or
invoice declara tion
Yes
What is the rule on the list?
Does the pr oduc t comply with it?
No pr eferential tr eatmen tNo,
and the pr oduc t does not
comply Does the general t oleranc e
rule apply?
(non- origina ting ma terials
may ha ve been included)Yes,
and the pr oduc t complies
with itYesYesNo
NoNoChart 1
Source:  European Court of Auditors.
14 Introduction Chart 2Flowchart of controls on PTAs
Country of importation (Member State X)
Importer lodges
a customs import
declaration with
preferences codes
2XX, 3XX or 4XX
in box 36 of the SAD
Goods arrive to
either
importer’s or
his customer's
premisesImporter keeps
evidence and
records of the
preferential origin
during 3 years after
the end of the year
in which the import
takes place
Customs perform
random and risk-
based physical and
documentary checks
to verify whether
preferencial
conditions are metExporter applies for
a preferential origin
certiﬁcate or issues
an invoice declaration
Goods are
directly
transported to
MS XProof of PO is sent to importer
Export
 
---------------------------------------------- 
Customs carry out
random and risk-
based ex-post
checks and audits,
visiting trader’s
premises and reviewing
trader’s records. 
If needed,
Customs send AC
requests to the
beneﬁciary countryCompetent authorities
check that goods have
preferential origin and
issue the certiﬁcate,
where appropiate
Competent authorities
must reply the
request under AC
within 6 months of its
receipt or within
4 months of the receipt
of the reminder,
at the latestAdministrative cooperation (AC)
Goods are
released for
free circulationImportExporting beneﬁciary country (Non-EU)
Source:  European Court of Auditors.
15
20  
The objective of the Court’s audit was 
to evaluate whether the Commission 
has appropriately assessed the eco ‑
nomic effects of PTAs9 and whether 
the controls thereon ensure that 
imports cannot unduly benefit from 
a preferential tariff, resulting in the 
loss of EU revenue.
Assessment of the 
economic effects of PTAs
21  
The Court examined the ex ante  and ex 
post  evaluations carried out by, or on 
behalf of, the Commission of the eco ‑
nomic effects foreseen or realised. To 
this end the Court analysed the docu ‑
mentation available at the Commission 
in respect of a sample of 44 PTAs10, 
notably any IA reports, SIA studies, ex 
post  evaluations and the arrangements 
for future monitoring. An overview of 
these PTAs is provided in Annexes II  
and  III.
22  
The requirements defined by the IA 
and SIA guidelines, the reports of the 
Impact Assessment Board, the activity 
statements and annual activity reports 
of the Commission and its relevant 
communications on trade matters 
were taken into consideration to as ‑
sess the quality of such evaluations. Particular attention was paid to how 
the Commission ensured the robust ‑
ness of data sources used in these 
evaluations and also to the Commis ‑
sion’s follow‑up of previous findings 
and recommendations of the Court 
concerning IAs11 and of the European 
Economic and Social Committee con ‑
cerning SIAs12. The Court also verified 
whether ex post  evaluations show that 
the PTAs are delivering their intended 
benefits.
Supervision and controls 
on PTAs
23  
The Court examined the effectiveness 
of the supervision arrangements and 
of the controls performed on PTAs 
by the competent authorities in five 
Member States13, which represented 
two thirds of the total value of imports 
under PTAs benefiting from preferen ‑
tial tariff measures in 2011, carrying 
out the testing described in Annex IV . 
The audit covered the control strategy 
and risk management, the function ‑
ing of administrative cooperation 
arrangements and the procedures for 
the recovery of any traditional own 
resources (TOR) due.9 Due attention was paid to 
the analysis of the social 
and environmental impacts 
of unilateral PTAs and 
EPAs, which have a strong 
sustainable development 
content.
10 Of these, 39 represent all PTAs 
in force at the time of the audit 
work and five not yet in force 
at that time.
11 European Court of Auditors’ 
Special Report No 3/2010 
‘Impact assessments in the EU 
institutions: do they support 
decision‑making?’ ( http://eca.
europa.eu )
12 Opinions of the European 
Economic and Social 
Committee No 818/2011 on 
SIAs and EU trade policy and 
No 1612/2011 on the role of 
civil society in the free trade 
agreement between the EU 
and India ( http://www.eesc.
europa.eu ).
13 Germany, Spain, France, Italy 
and the United Kingdom, 
which were the five Member 
States that imported the most 
under PTAs in 2010.Audit  scope  and  
approach
16 Audit scope and approach 
24  
The Court assessed the Commission’s 
prior evaluation and ex post  monitor ‑
ing function in the beneficiary/partner 
countries, its role in the administra ‑
tive cooperation arrangements, its 
inspections of Member States’ cus ‑
toms authorities, the review of origin 
investigations carried out by OLAF and 
the waiver of duty collection applica ‑
tions, and the adequacy of the legis ‑
lative framework in force in order to 
ensure the completeness of revenue 
collection.
25  
The Commission’s supervisory and 
control activities on PTAs were as ‑
sessed against the legal provisions in 
force, the relevant mission statements, 
activity statements and the Commis ‑
sion’s communications on rules of 
origin and PTAs. Attention was paid to 
the Commission’s follow‑up of previ ‑
ous findings and recommendations of 
the Court concerning PTAs14.14 European Court of Auditors’ 
Annual Report concerning the 
financial year 2003, Chapter 3, 
paragraph 3(30) (OJ C 293, 
30.11.2004. p. 1).
17
 Observations
Despite improvements 
over time the Commission 
has not appropriately 
assessed all the economic 
effects of PTAs
26  
The economic effects of PTAs should 
be appropriately assessed by the Com ‑
mission both ex ante  and ex post (see 
paragraphs 7 to 14).
The Commission did 
not always carry out an 
assessment of all the 
economic effects of PTAs
Impact assessments or ex ante  
evaluations
27  
IAs or ex ante evaluations were not pre ‑
pared for seven of the 13 PTAs where 
there was either a legal requirement 
or a formal commitment to do so (see 
further details in Annex II ).
28  
In the six IAs reviewed by the Court, 
the impact of the different policy 
proposals on the revenue of the EU 
was only estimated15 in the case of the 
GSP16.Sustainability impact 
assessments
29  
SIAs were not prepared for five of the 
28 PTAs where there was a commit ‑
ment to do so (see further details in 
Annex II ). The revenue foregone has 
not been estimated in any of the SIAs 
reviewed by the Court.
Interim and/or  ex post  
evaluations
30  
Even though an interim and/or  ex post  
evaluation should have been carried 
out in respect of 27 PTAs in force, 
pursuant to the Commission’s commit ‑
ment in this regard and the principle 
of sound financial management and 
public accountability, this has not been 
done in 16 of them17 (see more details 
in Annex III ).
31  
Out of the 27 PTAs reviewed by the 
Court where it considers an ex post  
evaluation should have been con ‑
ducted, the revenue foregone was 
only estimated in respect of the GSP . 
The Commission’s statistical report 
on the GSP18 shows, over the period 
2006–09, the impact on the EU budget 
to be 8,6  billion  euro, representing 
nearly 14 % of the customs duties col ‑
lected in that period. The Commission 
did not explain how this amount was 
calculated.15 The IA (SEC(2011) 536 
final) concerning the GSP 
that entered into force on 
1 January  2014 estimates that, 
in the preferred option, when 
compared to the baseline 
scenario, the combined 
impact of exports from certain 
former beneficiaries becoming 
subject to higher duties, and 
the increased exports from 
third countries already subject 
to duties, imply that tariff 
revenue would increase in 
the short run in the order of 
2 billion euro (see Annex 6.4, 
Table 6 ‑4), which would add 
to current tariff revenues of 
around 19 billion euro.
16 Regulation (EU) No 978/2012 
of the European Parliament 
and of the Council of 
25 October 2012 applying 
a scheme of generalised tariff 
preferences and repealing 
Council Regulation (EC) 
No 732/2008 (OJ L 303, 
31.10.2012, p. 1).
17 PTAs with Turkey, the EEA, 
Switzerland, the former 
Yugoslav republic of 
Macedonia, Croatia, Albania, 
Montenegro, Bosnia and 
Herzegovina, Serbia, Lebanon, 
the occupied Palestinian 
territory), Syria, Cariforum 
(Caribbean countries), the 
Pacific states, overseas 
countries and territories and 
Moldova.
18 COM(2011) 272 final of 
17 May 2011.
18 Observations
The assessments carried 
out in most cases contained 
inaccuracies and were 
not fully useful or 
comprehensive, but there 
have been improvements
Impact assessments or ex ante  
evaluations
32  
According to the Commission’s IA 
guidelines19, the impacts should be 
quantified and monetised where pos ‑
sible and be based on robust methods 
and reliable data.
33  
In order to provide quality support for 
IAs, an Impact Assessment Board was 
set up in the Commission at the end 
of 2006. In addition, the internal audit 
capability of the Commission’s Direct ‑
orate ‑General for Trade conducted an 
audit of IAs and SIAs in 2007.
34  
The Court analysed the six IAs20 car‑
ried out in respect of PTAs among the 
13 for which the Court considers an 
IA was required (see further details 
in Annex II ) and found the following 
weaknesses.
Weaknesses concerning the 
robustness of the quantification 
of the impacts in the IAs
35  
Of the six IAs reviewed, only the 
one concerning the GSP Regulation 
No 978/2012, contained a comprehen ‑
sive analysis of the economic effects 
in the beneficiary countries based on 
robust data sources.36  
The economic impacts of the PTA with 
the Republic of Korea shown in its IA21 
are based on a study carried out by 
external consultants22. This study uses 
the Computable General Equilibrium 
(CGE) model and the Global Trade 
Analysis Project (GTAP) database as 
source data, whose inherent limita ‑
tions and weaknesses are set out in 
paragraphs 44 to 46 below.
37  
Of the six IAs examined, two IA reports 
concerning the GSP were produced 
after the Impact Assessment Board 
started operations in 2007; they were 
duly submitted to the board for quality 
review. Recommendations made by 
the latter to improve the quality of 
those draft reports were largely taken 
into account by the Commission and 
did not require a resubmission.19 European Commission impact 
assessment guidelines of 
15.1.2009 (SEC(2009) 92) and 
the earlier impact assessment 
guidelines of 15.6.2005 
(SEC(2005) 791).
20 IAs concerning central 
America, the Andean 
Community, the Republic 
of Korea, India, Council 
Regulation (EC) No 732/2008 
of 22 July 2008 applying 
a scheme of generalised 
tariff preferences for the 
period from 1 January 2009 
to 31 December 2011 and 
amending Regulations (EC) 
No 552/97, (EC) No 1933/2006 
and Commission Regulations 
(EC) No 1100/2006 and (EC) 
No 964/2007 (OJ L 211, 
6.8.2008, p. 1) and Regulation 
(EU) No 978/2012 of the 
European Parliament and of 
the Council of 25 October 2012 
applying a scheme of 
generalised tariff preferences 
and repealing Council 
Regulation (EC) No 732/2008 
(OJ L 303, 31.10.2012, p. 1).
21 Commission Staff Working 
Document, accompanying 
document to the 
recommendation for a Council 
decision authorising the 
Commission to negotiate 
a free trade agreement 
with the Republic of Korea 
on behalf of the EC and 
its Member States, impact 
assessment of 27.11.2006 
((SEC(2006) 1562).
22 Copenhagen Economics and 
Prof. J. F. Francois, ‘Economic 
impact of a potential FTA 
between the EU and South 
Korea’, March 2007.
19 Observations
Example of importance of ratifying and effectively implementing international  
conventions on human and labour rights, the environment and good governance
On 24 April 2013, an eight‑storey building in Bangladesh housing several garment factories (the Rana Plaza) 
collapsed and led to the death of 1 129 workers. This accident has increased public concern that EU trade with 
developing countries should not only ensure a cheap supply of clothing to EU firms and consumers but also 
that they are manufactured under labour conditions in accordance with international standards, such as Inter ‑
national Labour Organisation (ILO) core labour standards.  On 8 July 2013, the Commission, together with the 
Government of Bangladesh and the ILO, launched a joint initiative (‘Compact’) for improving labour, health 
and safety conditions for workers in Bangladeshi garment factories.Box  123 COM(2004) 461 final of 
7 July 2004. See also the 
roadmap ( http://ec.europa.
eu/governance/impact/
planned_ia/docs/88_trade_
gsp_regulation_en.pdf ) 
and SEC(2011) 536 final of 
10 May 2011 (this refers to the 
GSP regulation, Regulation  
(EU) No 978/2012).
24 SEC(2011) 536 final.
25 See Annex 6 of SEC(2011) 536 
final.
26 COM(2002) 276 final and IA 
guidelines.
27 IAs concerning central 
America, the Andean 
Community, the Republic of 
Korea and India.Weaknesses concerning the 
usefulness and completeness of 
the IAs
38  
The objectives of the GSP are to 
contribute to combating global pov ‑
erty, promote sustainable develop ‑
ment and ensure a better safeguard 
for the EU’s financial and economic 
interests23. However, the IA concern ‑
ing the scheme of GSP beginning on 
1 January  201424 has only covered the 
GSP general objective of promoting 
sustainable development and good 
governance in respect of 10 out of the 
85 potential beneficiary countries25. 
The need to ratify and effectively im ‑
plement international conventions on 
human and labour rights, the environ ‑
ment and good governance has only 
been considered for these 10 countries 
and not in respect of other beneficiary 
countries (see Box 1 ).39  
Identifying core monitoring indicators 
in order to prepare ex post  evaluations 
of what has been achieved is a key pro ‑
cedural step of the IA process26.
40  
Arrangements for monitoring were 
included in all six IAs examined by the 
Court. However, in four of them27 the 
Commission did not specify the tim ‑
ing, scope and indicators to assess the 
effectiveness of the preferred option 
and who would be responsible for car ‑
rying it out.
20 Observations
41 
The need for such monitoring actions 
has been highlighted by the European 
Economic and Social Committee in 
respect of the PTA between the EU 
and India. The European Economic and 
Social Committee28 recommended ‘ the 
immediate undertaking of new studies 
that expressly take into account the true 
impact of the FTA on the EU and Indian 
civil society (in particular Mode 4, SMEs, 
labour rights, women, consumer protec ‑
tion, the informal economy, agriculture 
poverty and the impact on the accessibil ‑
ity of basic products such as live‑saving 
medicines)’ .
42  
The IA concerning the scheme of GSP 
beginning on 1  January  2014 shows 
that one of the GSP objectives29 is 
to ensure a better safeguard for the 
EU’s financial and economic interests. 
Despite the fact that most of the fraud 
investigations carried out by OLAF in 
the field of PTAs concern GSP ben ‑
eficiary countries, the Commission 
indicators to monitor the effectiveness 
do not provide any link to fraud and 
customs duties evasion. Therefore, the 
stakeholders have no possibility to 
check the vulnerability of GSP to fraud 
and to measure any improvements in 
the fight against fraud and customs 
duties evasion.Sustainability impact 
assessments
43 
The Court analysed 10 SIAs30 and found 
the weaknesses described below.
Weaknesses concerning the 
robustness of the quantification 
of the impacts in SIAs
44 
In the SIAs external consultants apply 
the Computable General Equilibrium 
(CGE) model, based on the Global 
Trade Analysis Project (GTAP) database. 
This is a model widely used by inter ‑
national organisations. The model, 
however, suffers from some limitations 
(see  Annex V ).
45 
The Court found that the GTAP uses 
old data31 which are insufficiently 
verified for consistency and reliability. 
Its use may therefore lead to wrong 
conclusions in the SIAs. The Com ‑
mission has limited assurance on the 
consistency of the statistical frame ‑
work between the different regions 
and between EU Member States and 
beneficiary/partner countries.28 Opinion No 1612/2011 of the 
European Economic and Social 
Committee.
29 Pursuant to SEC(2011) 536 final.
30 SIAs concerning PTAs with 
Chile, six EPAs with ACP 
countries, Central America,  
Andean Community, 
Euro‑Mediterranean FTAs with 
nine countries, the Republic 
of Korea, Mercosur countries, 
India and Canada, and the 
DCFTA with Morocco.
31 For the purposes of the CGE 
model, social accounting 
matrices are compiled for each 
region but in the most recent 
versions of the GTAP the use 
of technical coefficients and 
structures of commodities for 
final and intermediate uses 
are based on supply and use 
tables at current prices for the 
reference year 2000, although 
Eurostat (the Commission’s 
statistics department) 
currently has data available for 
the years 2007, 2008 and 2009.
21 Observations
46 
Eurostat and the national statistical 
institutes are best placed to provide 
an opinion on the quality of the data 
for Member States but DG Trade has 
not requested the opinion of the 
former on the quality of the data used 
in the GTAP . The Court, in its Special 
Report No 3/201032, found that inter ‑
nal sources such as Eurostat are not 
actively used to determine the avail ‑
ability of Member State specific data 
and to provide such data (for example 
in cooperation with national statistics 
offices).
Weaknesses concerning the 
usefulness and completeness of 
the SIAs
47 
The timeliness of an SIA is very impor ‑
tant in order to ensure that it is useful 
for negotiators. However in one case, 
the PTA with Chile was already signed 
before the SIA had been finalised.
48 
IAs and SIAs analyse the impacts of 
PTAs in the agricultural sector. How ‑
ever, the impact of the common agri ‑
cultural policy on the local econ  omies 
of the partner countries has been 
assessed only in the regional trade SIA 
with the Caribbean countries, whereas 
negative impacts have been cited in 
international organisations’ reports 
(ILO33, FAO34), especially in respect of 
economic partnership agreements 
(EPAs)35.49 
Furthermore, the SIA concerning EPAs 
of 2007 does not address points dealt 
within other SIAs, such as the impact 
on public health of an intellectual 
property rights chapter because re ‑
strictions on access to generic medi ‑
cines may negatively affect govern ‑
ments’ ability to improve public health 
conditions. This puts into question 
the completeness of the analysis car ‑
ried out because the Commission has 
nevertheless introduced appropriate 
safeguards measures in that sense in 
the text of the agreement36.
Interim and/or ex post  
evaluation
50  
The Court analysed all the ex post  
evaluations carried out by the end of 
201237 concerning PTAs and found the 
following.
The quantification of impacts 
in some interim and/or ex post  
evaluations
51 
The Court found that comprehensive, 
quantitative and evidenced‑based 
analysis of the economic outcomes 
was carried out in the ex post  evalua ‑
tion of the PTA with Chile and in the 
mid‑term evaluation of the EU’s GSP . 
Both evaluations use, together with 
econometric estimates, CGE simula ‑
tions (see paragraphs 44 to 46 and 
Annex III ).32 See paragraph 70 of Special 
Report No 3/2010.
33 ILO, Trade and employment 
from myths to facts , 2011.
34 FAO, The agricultural dimension 
of the ACP–EU Economic 
Partnership Agreements , 2006.
35 PTAs creating an FTA between 
the EU and the ACP countries.
36 Pursuant to Article 139(2) 
of the EPA between the 
Cariforum states, of the 
one part, and the European 
Community and its Member 
States, of the other part, ‘The 
EC Party and the Signatory 
Cariforum States agree 
that the principles set out 
in Article 8 of the TRIPS 
Agreement apply to this 
Section. The Parties also agree 
that an adequate and effective 
enforcement of intellectual 
property rights should take 
account of the development 
needs of the Cariforum States, 
provide a balance of rights 
and obligations between 
rights holders and users and 
allow the EC Party and the 
Signatory Cariforum States 
to protect public health and 
nutrition. Nothing in this 
Agreement shall be construed 
as to impair the capacity of 
the Parties and the Signatory 
Cariforum States to promote 
access to medicines’.
37 The mid‑term evaluation of 
the EU’s GSP, the report on the 
economic integration in the 
Euro‑Mediterranean Area, the 
evaluation of the economic 
impact of the trade pillar 
of the EU–Chile association 
agreement and the ex post  
assessment of six EU FTAs.
22 Observations
Weaknesses concerning the 
completeness of the interim 
and/or ex post  evaluations
52  
The ex post  evaluation of six PTAs38 
limits the analysis of economic impacts 
to trade flows and places emphasis on 
their effects in the partner countries. 
The Commission has not conducted 
any sectoral analysis and the trade 
flows are not broken down further 
below the agricultural and industrial 
product level.
53 
The ex post  evaluation report for 
the Euro‑Mediterranean countries39 
contains a thorough analysis of the 
economic outcomes of trade liberalisa ‑
tion. However, the added value of the 
PTA to the baseline scenario in the EU 
was not set out. No cost‑benefit ana ‑
lysis has been made and no arrange ‑
ment for future ex post  evaluation is 
included.
The interim evaluation of 
the GSP shows that the 
policy has not yet 
delivered all its intended 
benefits
54 
Regarding the GSP objective to con ‑
tribute to combating global poverty 
and promote sustainable develop ‑
ment, the interim evaluation shows 
mixed results. On the one hand, it 
provides positive evidence that:
(a) the EU is offering improved pref ‑
erential access to those countries 
with a greater developmental 
need;(b) the econometric evidence sug ‑
gests that, in aggregate, prefer ‑
ences do impact positively on 
trade as well as on investment; and
(c) there is evidence that exporters 
in least developed countries do 
bene  fit from the preference mar ‑
gins and that the profit is not sim ‑
ply appropriated by the importers.
55 
On the other hand, the Commis ‑
sion considers that GSP should help 
developing economies increase their 
industrial exports40 and that provid ‑
ing preferences in industrial products 
would help boost such exports and 
contribute to diversification through 
the development of a broader in ‑
dustrial base. However, the interim 
evaluation of the GSP shows that it has 
not been effective in increasing diver ‑
sification41, and that there is no clear 
evidence of an increase in economic 
growth42 or sustainable development43 
in developing countries.38 South Africa, Mexico, Morocco, 
Tunisia, Chile and Jordan.
39 Lebanon, the occupied 
Palestinian territory and Syria 
were outside the scope of the 
evaluation.
40 SEC(2011) 536 final.
41 According to paragraph 7(1) of 
the mid‑term evaluation of the 
EU’s GSP, ‘There is no evidence 
that the GSP schemes have led 
to any export diversification 
and a move into new export 
products on the part of the 
beneficiary countries.’
42 Paragraph 7(1) of the mid‑term 
evaluation of the EU’s GSP 
states that ‘The evidence on 
the extent to which preference 
margins are associated with 
indicators of development are 
extremely mixed, and no clear 
picture emerges which would 
suggest that the preferences 
are particularly well targeted 
to those countries which are 
most in need/vulnerable … it 
is quite possible that the GSP 
regime has been an important 
factor for given countries in 
their development. The point 
is, however, that in aggregate, 
there is no strong evidence 
that this is the case. ’
43 Paragraph 7(1) of the mid‑term 
evaluation of the EU’s GSP 
introduces the following 
caveat: ‘While there is some 
evidence that the GSP+ 
scheme may have a positive 
impact on the ratification 
of given conventions, the 
evidence that there is actual 
active implementation of 
the relevant conventions 
(especially with regard to 
labour standards) is much 
weaker ’.
23 Observations
44 A monetary unit sample 
(MUS), based on the customs 
value of the goods. Materiality 
was set at 5 % and the 
confidence level at 95 %.
45 Pursuant to Article 221(3) of 
the Community Customs 
Code (CCC), communication to 
the debtor shall not take place 
after the expiry of a period 
of 3 years from the date on 
which the customs debt was 
incurred. Thus amounts due 
become time‑barred after this 
period has elapsed.Customs controls applied 
by the authorities of the 
selected Member States 
are weak
56 
The controls performed by the com ‑
petent authorities (Member States, 
beneficiary/partner countries and the 
Commission) as well as the manage ‑
ment of the administrative coopera ‑
tion should ensure the correct imple ‑
mentation of PTAs, thereby protecting 
legitimate economic and financial 
interests.
57 
The Court reviewed the overall control 
strategy applied to PTAs by customs 
authorities in five Member States (see 
paragraph 23). An appropriate control 
strategy is one based on effective risk 
analysis including a random element 
to introduce a degree of uncertainty.Weaknesses in control 
strategy and risk 
management
58  
The effectiveness of control arrange ‑
ments was tested using two random 
samples. A statistical44 sample of 60 
time‑barred45 imports of 2009 under 
PTAs was selected in each selected 
Member State. The purpose of this 
sample was twofold:
(a) to verify whether the imports 
complied with all the conditions 
required to benefit from preferen ‑
tial tariff measures, and whether 
customs controls were capable of 
detecting cases of non‑fulfilment 
of such conditions and recovering 
the customs debt incurred before 
the latter became time‑barred; and
(b) to extrapolate the amount of the 
definitive losses to the EU budget 
when the customs debt was not 
recovered in time to prevent 
time‑barring.
59 
The Court found weaknesses in the 
control strategy and risk management 
in Germany, France and the United 
Kingdom leading to potential losses to 
the EU budget.
24 Observations
60 
In Germany weaknesses were found 
concerning the risk management 
system for PTAs: manual interven ‑
tion is required in order to assess the 
results of the risk profiles and this is 
time‑consuming, complex and burden ‑
some; only one new local risk pro ‑
file46 was introduced in the system in 
2011 and 2012; and the selection of im ‑
porters for post‑clearance audits does 
not sufficiently take into account the 
specific risk of time‑barring in PTAs47.
61 
In France, preferential origin is taken 
into account in combination with other 
criteria. However, preferential origin is 
not a priority in the risk management 
system.
62 
In the United Kingdom, the customs 
authorities accept copies of the move ‑
ment and origin certificates when 
they perform documentary checks on 
imports under PTAs. Only originals can 
fully provide assurance of the authen ‑
ticity of these certificates. In addition 
the frequency of documentary checks 
on imports under the simplified 
declaration procedure48 and the local 
clearance procedure49 was very low50. 
Regarding post‑clearance audits PTAs 
have not been selected as an audit 
theme.63 
These weaknesses were confirmed 
by the amount of revenue potentially 
lost in these three Member States. By 
extrapolating the errors found in its 
sample of 2009, the Court has esti ‑
mated the amount of duties at stake 
in these Member States because of 
time‑barring to be 655 million euro51. 
This represents around 6 % of the 
gross amount of import duties collect ‑
ed in the five selected Member States 
that year.
64 
In the absence of the necessary sup ‑
porting evidence, the goods are not 
entitled to preferential tariff treatment. 
The errors found include the absence 
of the origin or movement certificates, 
the absence of the evidence of the 
direct transport, cases of certificates 
not signed or not stamped by the com ‑
petent authorities of the beneficiary/
partner country or showing a stamp 
that does not correspond to the au ‑
thentic stamp communicated to the 
Commission by the authorities of the 
latter, and certificates not matching 
with the supporting documents of the 
import. These errors occurred in 10 % 
of the cases in Germany, 11 % in France 
and 38 % in the United Kingdom.
65 
The second statistical sample of 30 im ‑
ports under PTAs of 2011 was checked 
by the Court in each of the five Mem ‑
ber States to determine:
(a) whether the imports were entitled 
to preferential tariff measures and 
if not,
(b) whether customs had started 
the post‑clearance verification of 
non‑compliant cases using admin ‑
istrative cooperation.46 A combination of risk criteria 
and control areas (e.g. type 
of goods, countries of origin) 
which indicates the existence 
of risk and leads to a proposal 
to carry out a control measure.
47 The period of up to 10 months 
that beneficiary/partner 
countries have to reply to the 
administrative cooperation 
requests should be taken 
into account in order to avoid 
time‑barring.
48 A simplified procedure 
whereby a trader presents 
goods to customs and lodges 
either a simplified declaration 
form or a commercial 
document (e.g. an invoice) 
instead of a detailed standard 
declaration.
49 A simplified procedure 
whereby a trader receives 
the goods directly at his/her 
premises (or the designated 
place) and usually the customs 
declaration is lodged and the 
goods are released by means 
of an entry in the trader’s own 
records.
50 No such declarations relating 
to imports under PTAs 
were selected by the risk 
management system for an 
ex post  documentary check 
in 2009 or 2010, whereas in 
2011 and 2012, the percentage 
of such declarations selected 
for a documentary check was, 
respectively, 0,0209 % and 
0,0289 %.
51 Made up of 167 million euro 
in respect of Germany, 
176 million euro in respect of 
France and 312 million euro 
in respect of the United 
Kingdom.
25 Observations
52 Provided that all the 
conditions set in the relevant 
provisions and case‑law, 
notably in the judgment of the 
Court of 9 March 2006 in Case 
C‑293/04 Beemsterboer [2006] 
ECR I ‑2284, are complied with.66 
The results of this sample showed 
control weaknesses in Germany, Spain 
and the United Kingdom. The errors 
found were similar to those found in 
the sample of 2009: the absence of the 
origin or movement certificates, cases 
of certificates showing a stamp or is ‑
sued by a customs office that do not 
correspond to those communicated 
to the Commission by the authorities 
of the beneficiary/partner countries, 
and certificates not matching with the 
supporting documents of the importa ‑
tion. These errors occurred in 7 % of 
the cases in Germany, 7 % in Spain and 
23 % in the United Kingdom.
67 
However, errors in the 2011 sample will 
not be time‑barred until 2014 and up 
to that time the customs authorities of 
Member States can send the movement 
and origin certificates to the benefi ‑
ciary/partner countries to be verified 
under administrative cooperation ar ‑
rangements. Any resulting debt can still 
be recovered, and therefore the Court 
did not extrapolate the errors found.
Weaknesses in the 
management of the 
administrative cooperation 
by the authorities of the 
selected Member States
68 
Administrative cooperation requests 
are sent by Member States’ author ‑
ities to beneficiary/partner countries 
in cases of reasonable doubt about the 
preferential treatment or on a random 
basis. In the first case, if there is no 
reply or satisfactory response within 
ten months, the preferential tariff treat ‑
ment should be refused and a recovery 
initiated52. In the case of random re ‑
quests, the preferential tariff treatment 
is maintained if no reply from benefi ‑
ciary/partner countries is received.69 
Administrative cooperation arrange ‑
ments were tested via an additional 
sample of 30 requests sent in 2011 by 
each selected Member State to bene ‑
ficiary/partner countries. Thus, the 
Court tested whether:
(a) once the initial deadline to reply 
(usually six months) had expired, 
a reminder was sent to the benefi ‑
ciary/partner country;
(b) if there had been no reply or no 
satisfactory response received 
within the further deadline of 
four months, a recovery action had 
been initiated.
70 
The Court found shortcomings in the 
management of administrative co ‑
operation in Spain, France and Italy.
71 
In Spain, 11 requests were sent by the 
Spanish customs to the Philippines and 
the letters were returned undelivered. 
No action either to find any other way 
of contacting the competent authori ‑
ties of the beneficary country or to 
start the post‑clearance recovery of 
the debt was taken by the Spanish 
customs.
26 Observations
72 
In Italy, the customs authorities did 
not start a post‑clearance recovery by 
February 2013, even though the pref ‑
erential treatment had been denied 
by the beneficiary country in its reply 
in respect of four administrative co ‑
operation requests. In 10 other cases 
the post ‑clearance recovery proceed ‑
ings were delayed.
73 
The French customs authorities do not 
start post‑clearance recovery when 
the beneficiary/partner countries send 
late replies to random administrative 
cooperation requests. Even in cases 
where these late replies confirm that 
the movement certificates or certifi ‑
cates of origin are indeed either invalid 
or not authentic no recovery action is 
taken by the French customs author ‑
ities (see paragraph 68).
Member States’ risk 
management systems do 
not always include MA 
communications
74  
Whenever OLAF becomes aware of 
operations which constitute, or appear 
to constitute, breaches of PTA provi ‑
sions, it issues mutual assistance (MA) 
communications to Member States. 
In order to prevent losses to the EU 
budget, the latter should introduce 
this information into their risk manage ‑
ment systems.75 
The Court reviewed a sample of 30 
imports covered by MA communica ‑
tions issued by OLAF in each of the five 
selected Member States. It found that 
Germany, Spain and France did not 
introduce the relevant information into 
their risk management systems.
Errors in recovery procedures 
in three of the selected 
Member States
76 
The Court checked whether selected 
Member States reacted promptly to 
OLAF reports. These reports summar ‑
ise the results of the origin investiga ‑
tions and may lead Member States 
to identify imports that may not be 
entitled to preferential tariff treat ‑
ment and to proceed to the recovery 
of the customs debt. Member States’ 
customs authorities should start this 
recovery action within 3 months53. Any 
delay could lead to the customs debt 
becoming time‑barred.
77 
The Court found two cases, in Spain 
and the United Kingdom, amount ‑
ing to over 2 million euro, which had 
become time‑barred due to the late re ‑
action of the Member States’ customs 
authorities to OLAF reports. In another 
case, French customs authorities did 
not launch a recovery procedure after 
their Spanish counterparts notified 
them of the invalidity of a movement 
certificate.53 A period of 3 months from the 
sending of the letter by the 
Commission in order to notify 
the debtor of the import 
duties legally due has been 
quoted by the Court of Justice 
in its judgment of 1 July 2010 
in Case C ‑ 442/08, European 
Commission v Federal 
Republic of Germany, 
paragraphs 47, 59 and 81.
27 Observations
54 Request for remission/
repayment and waiver of ex 
post  recovery pursuant to 
Articles 871 and 905 of the 
Customs Code Implementing 
Provisions (CCIP).
55 Pursuant to paragraph 3(2) 
of COM(2005) 100 final of 
16 March 2005.78 
In order to ensure the uniform applica ‑
tion of EU law, customs law confers on 
the Commission the power of decision 
in regard to REM‑REC applications54. 
The judgment of the Court of Justice 
of 20 November 2008 in Case C ‑375/07, 
Heuschen and Schrouff, rules that ‘a 
national court, … ruling on an ap ‑
peal against a notice for recovery of 
import duties, must therefore, when 
it becomes aware in the course of the 
proceedings before it that the matter 
has been referred to the Commission 
… avoid giving decisions which would 
conflict with a decision contemplated 
by the Commission ... That means that 
the referring  court, which may not 
substitute its own determination for 
that of the Commission, can stay pro ‑
ceedings pending the Commission’s 
decision. ’
79  
Pursuant to this judgment, a national 
court should not rule on cases pending 
decision at the Commission. However, 
the Court found a case in Spain where 
a national court did not suspend 
proceedings even though this case 
had been submitted to the Commis ‑
sion for decision. The ensuing loss 
to the EU budget amounted to over 
600 000 euro.
80 
Thus, there is the risk that import ‑
ers refer the matter simultaneously 
to both layers and choose the most 
favourable, thereby undermining the 
usefulness and effectiveness of the 
REM‑REC system.There are weaknesses in 
the Commission’s 
supervision of Member 
States and beneficiary/
partner countries in 
respect of PTAs
81 
The Court reviewed the Commission’s 
monitoring and inspection activity 
intended to ensure the reliable and 
consistent implementation of PTAs in 
Member States and beneficiary/part ‑
ner countries and found the following 
weaknesses.
The Commission has carried 
out few prior evaluations 
and no monitoring visits to 
countries benefiting from 
preferential treatment
82 
The Commission should evaluate the 
continuing capacity of the country 
benefiting from preferential treatment 
(or group of countries) to administer 
the arrangement and the related rules 
and procedures on a risk basis55. The 
Court found that prior evaluation has 
taken place only in respect of a limited 
number of partner countries.
28 Observations
83 
According to the relevant Commission 
communication56 monitoring visits to 
the countries benefiting from pref ‑
erential treatment should take place. 
The Commission has not conducted 
any such monitoring visits to check the 
correct implementation of the scheme.
84 
This could lead to significant finan ‑
cial consequences as the absence of 
a monitoring visit can justify import ‑
ers’ claims for the repayment or remis ‑
sion of the customs debt recovered ex 
post  when it transpires that the goods 
were not eligible for preferential 
treatment57.
85 
In addition, the Commission communi ‑
cation provides for a periodical report ‑
ing system by beneficiary countries 
on their management and control of 
preferential origin. The Court verified 
whether such a system has been set 
up in GSP countries and found that this 
was not the case.
86 
The Court also reviewed the Commis ‑
sion’s inspection activity in the area 
of PTAs and found that it usually deals 
with preferential origin matters during 
its TOR inspections in Member States, 
including the control strategy thereon.
TOR inspections cannot be carried out 
in beneficiary/partner countries.The Commission has 
taken steps to ensure the 
smooth working of the 
administrative cooperation 
arrangements, but problems 
remain
87 
In the field of administrative coopera ‑
tion the Commission has strived to 
ensure that there is a seamless and 
streamlined communication of the 
necessary information under adminis ‑
trative cooperation between the Mem ‑
ber States, the beneficiary countries 
and itself.
88 
However, the Member States selected 
informed the Court that they encoun ‑
tered difficulties with countries such 
as the Philippines, India, Indonesia, 
Malaysia, Vietnam, the Dominican Re ‑
public and the United Arabs Emirates 
concerning late replies to administra ‑
tive cooperation requests and poor 
quality of the replies.
89 
The Commission regularly asks Mem ‑
ber States for statistics concerning the 
administrative cooperation requests 
sent to beneficiary/partner countries. 
This information is the starting point 
to plan the monitoring activity and to 
select the countries that need particu ‑
lar attention. However, the quality of 
the information provided by Mem ‑
ber States was poor because it was 
not possible to distinguish between 
requests sent on a random basis and 
those sent in case of reasonable doubt 
(see paragraph 68).56 See footnote 55.
57 In its judgment in Case 
C‑204/07P, the Court of 
Justice found that where, 
in a particular case, the 
Commission has not made 
full use of the supervising 
and monitoring rights and 
powers which it has under the 
association agreement with 
a view to ensuring the proper 
implementation thereof, its 
failure to fulfil obligations 
constitutes a special situation 
for the purposes of Article 239 
of the Community Customs 
Code, which justified the 
repayment or remittance 
of import duty levied on 
the basis of irregular or 
inauthentic certificates.
29 Observations
58 Concerning imports of surimi 
declared as originating in 
Thailand.
59 Spain and the United 
Kingdom, see paragraph 77.
60 The United Kingdom.OLAF’s origin investigations 
are essential but there are 
weaknesses in their financial 
follow -up
90 
In addition to issuing MA communica ‑
tions to Member States to alert them 
of suspicious imports related to the 
circumvention of the origin condition, 
OLAF carries out origin investiga ‑
tions in beneficiary/partner countries 
to ascertain, in cooperation with the 
competent authorities, whether goods 
imported into the EU were indeed 
eligible for preferential tariff measures. 
In order to verify the effectiveness of 
OLAF’s role in the protection of the 
financial interests of the EU concerning 
PTAs, the Court reviewed a sample of 
10 preferential origin investigations. It 
found that, except for one investiga ‑
tion58, OLAF was successful in dem ‑
onstrating that the imported goods 
were not eligible for preferential tariff 
measures.
91 
The performance indicators currently 
used by OLAF to assess the effective ‑
ness and the efficiency of its investi ‑
gations (e.g. number of cases opened 
triggering an investigation, number of 
investigations leading to a recommen ‑
dation) do not provide a link between 
the case, the amount of TOR at stake 
and the amount actually recovered.92 
The Court found cases of time‑barring 
in the financial follow‑up of OLAF 
investigations because of the lack of 
timely recovery by Member States59 or 
where the actual recovery rate of the 
amount of evaded duties estimated 
by OLAF in its report could not be 
established60.
Insufficient use of preventive 
and reactive measures to 
protect the financial interests 
of the EU
93 
The Court reviewed other Commis ‑
sion activities to protect the financial 
interests of the EU by preventing 
ineligible goods from being imported 
under preferential tariff measures, and 
recovering the TOR due if this is not 
the case.
94 
Member States have not always 
adopted appropriate measures upon 
receipt of an MA communication, such 
as the provision of a guarantee for the 
imports under investigation.
30 Observations
95 
The absence of such measures has led 
Member States to declare amounts as 
irrecoverable when the importer be ‑
comes insolvent and ceases economic 
activities (see Box 2 ).
96 
Precautionary and safeguard measures 
should be used in the event of insuf ‑
ficient control or the failure to provide 
cooperation, including assistance in 
investigations against fraud. These 
measures include notices to import ‑
ers61, suspension of preferences62 
where foreseen and possible financial 
responsibility of the country at fault63.
97 
Member States have to communicate 
to the Commission64 the amount of 
TOR repaid/remitted or post ‑clearance 
recoveries waived due to administra ‑
tive errors committed by beneficiary/
partner countries’ authorities. For the 
period 2007–12, the amount of TOR 
lost in this way was more than 5 mil ‑
lion euro. This represents a definitive 
loss to the EU budget.98 
In order to tackle this situation, the 
Commission has introduced the MAE 
clause in all PTAs that have been ne ‑
gotiated since 2006. This is a positive 
step in the protection of the financial 
interests of the EU.
99 
Other examples of insufficient use of 
preventive and reactive measures can 
be found in Box 3 .
The legal provisions of 
the PTAs do not contain 
sufficient safeguards to 
protect the financial 
interests of the EU
Complexity of cumulation 
rules
100  
Cumulation allows products origi ‑
nating in country A to be further 
processed or added to products 
originating in country B, as if they had 
originated in country B. The result ‑
ing product would have the origin of 
country B. The working or processing 
carried out in each beneficiary/partner 
country on originating products does 
not have to be ‘sufficient working or 
processing’ as set out in the standard 
origin rules65.61 Pursuant to Article 220(2) (b)
of the CCC in fine , importers 
cannot plead good faith in 
their applications for waiver 
of subsequent entry in the 
accounts if the Commission 
has published a notice in the 
Official Journal of the European 
Union  stating that there are 
grounds for doubt concerning 
the proper application of the 
preferential arrangements by 
the beneficiary country.
62 The so‑called anti‑fraud 
clause.
63 The so‑called management 
of administrative errors (MAE) 
clause. Typically, this reads 
as follows: ‘In case of error by 
the competent authorities 
in the proper management 
of the preferential system 
at export, and in particular 
in the application of the 
provisions of the protocol 
to the present agreement 
concerning the definition 
of originating products and 
methods of AC, where this 
error leads to consequences in 
terms of customs duties, the 
contracting party facing such 
consequences may request 
the (institutional body under 
the agreement) to examine 
the possibilities of adopting 
all appropriate measures 
with a view to resolving the 
situation’.
64 Pursuant to Articles 871 and 
905 of the CCIP (REM‑REC 
cases); Articles 870(1), and 
904a(1) of the CCIP (listing 
cases notified to DG Budget); 
and Articles 870(2) and 904a(2) 
of the CCIP (listing cases 
notified to DG Taxation and 
Customs Union).
65 Typically to add a certain 
percentage of the final value 
of the exported goods.
Example of customs duties not collected because of the absence of preventive and 
reactive measures adopted by Member States
In 2007, Polish customs proceeded to collect the customs duties owed for the importation of garlic from Tur ‑
key covered by false movement certificates. The recovery was unsuccessful because of the insolvency of the 
importer. An amount of 0,4 million euro was declared irrecoverable and lost to the EU budget in 2012.
This situation would have been prevented with the provision of a guarantee.Box  2
31 Observations
66 E. g: OLAF tuna investigations 
in Seychelles, Colombia, 
El Salvador, Ecuador and 
Thailand; investigation in 
Curaçao concerning imports 
of raw cane sugar declared as 
originating in the Netherlands 
Antilles; investigation in 
Cambodia concerning the 
export of bicycles to the EU 
under the GSP scheme.101  
Beneficiary/partner countries request 
the application of cumulation dur ‑
ing trade negotiations so that their 
exports can fully benefit from the PTA, 
especially when they lack adequate in ‑
dustrial infrastructure to carry out the 
processing required by the standard 
rules of origin.102  
Cumulation rules are very complex and 
require the authorities in the benefi ‑
ciary/partner countries to have a high 
degree of expertise and command of 
these complex rules. Indeed, several 
OLAF investigations66 have revealed 
the lack of administrative capacity 
of certain beneficiary countries to 
understand the complexity of the GSP 
cumulation rules.
The Court found insufficient use of preventive and reactive measures by the 
Commission to counter fraud and to protect the financial interests of the EU
(a) A notice to importers concerning imports of tuna from Thailand was published by DG Taxation and Cus ‑
toms Union two years after OLAF’s request to do so. In addition, according to OLAF ‘consideration may be 
given to propose suspension of the preferential regime applicable to processed tuna products ... declared as 
originating in Thailand ’. No such suspension was proposed by the Commission.
(b) The Commission did not publish in either Slovak or Hungarian a notice to importers concerning imports of 
sugar products from Croatia67. Had this notice been published in those languages, the importer would not 
have been able to invoke good faith68, one of the reasons for  the non‑recovery of 1 million euro69.
(c) The Commission has not taken any action following publication of the notice to importers concern ‑
ing imports of tuna from El Salvador70. This was despite a communication71 requiring it to follow up the 
post‑clearance verification of the origin of the imported tuna. As a result of this follow‑up, the Commission 
should decide whether to propose to withdraw the tariff preferences.
(d) The anti‑fraud clause has not been included in the PTA with the Republic of Korea . OLAF has issued several 
MA communications72 concerning misdescription of origin of imports from this country. 
67 Croatia joined the European Union on 1 July 2013.
68 Pursuant to the fifth paragraph of Article 220(2)(b) of the CCC.
69 Commission Decision of 21 October 2010 finding that it is justified to waive post‑clearance entry in the accounts of import duties in a particular 
case (REC 03/2010).
70 OJ C 132, 21.5.2010, p. 15.
71 OJ C 348, 5.12.2000, p. 4.
72 Inter alia MA 2007/002, MA 2007/022, MA 2007/047 and AMA 2010/027.Box 3
32 Observations
103  
Furthermore, cumulation should be 
between countries having identi ‑
cal rules of origin in order to prevent 
circumvention. However, in the current 
GSP the existing cumulation possibil ‑
ities between countries in the same 
regional group is maintained despite 
the differentiation in rules of origin in 
some cases between the least devel ‑
oped countries and other beneficiary 
countries.
Replacing certificates 
of origin and movement 
certificates with 
self -certification
104  
The Court stated in its Annual Report 
of 2003 that increased use of self‑  
certification by means of invoice dec ‑
laration to certify origin would present 
advantages from the own resources 
point of view. This is because under 
the current provisions the importers 
cannot claim the repayment/remis ‑
sion or the waiver of post clearance 
recovery due to administrative errors73 
on the part of beneficiary/partner 
countries’ authorities when an in ‑
voice declaration or another form of 
self‑certification is used. This would 
considerably reduce traders’ litigation 
concerning PTAs.105  
However, the use of certificates of ori ‑
gin and movement certificates is still 
widespread.
Limited legal powers to 
counter fraud
106  
The possibilities to counter fraud are 
limited in the case of reciprocal PTAs. 
In order to recover the duties related 
to OLAF’s findings, the authorities of 
the partner country in which the irreg ‑
ularities have been discovered must 
accept them and declare the invalidity 
of the unduly issued certificates (see 
Box 4 ).73 Pursuant to Articles 220(2)(b) 
and 236(1) of the CCC.
‘Mexican ’ garlic?
A consignment of garlic imported into Spain in March 2012 and declared as originating in Mexico was found 
to originate in China by the results of a laboratory test requested by OLAF on a sample of this consignment. 
Spanish customs could not proceed to the post‑clearance recovery of the evaded customs duties applicable to 
the imports of garlic from China because the Mexican authorities confirmed in August 2013 the validity of the 
certificates of origin in their reply to the administrative cooperation request sent by the Spanish customs.
Other cases of imports of garlic, declared as originating in Mexico but where there is evidence that they orig ‑
inate in China, are currently occurring in other Member States (e.g. the United Kingdom) but the Commission 
has asked Member States not to suspend or reject preferential treatment without requesting verification of 
the relevant proofs of origin from the Mexican authorities.Box 4
33
 Conclusions  and  
recommendations
107  
The Court has found that the Commis ‑
sion has not appropriately assessed all 
the economic effects of PTAs and that 
the completeness of revenue collec ‑
tion is not ensured. However, the use 
of the impact assessment tool has in ‑
creased and there has been progress in 
the quality of the analysis conducted.
Assessment of the economic 
effects of PTAs
108  
The Commission has not always car ‑
ried out ex ante  and ex post  evalu  ations 
to assess the economic effects of the 
PTAs. Policymakers, stakeholders and 
European taxpayers are therefore 
insufficiently informed of the main 
advantages and disadvantages of the 
different trade policy options and of 
whether the implemented policy de ‑
livered its intended results. Evalu  ation 
of the revenue foregone has only been 
carried out for the GSP . The Commis ‑
sion does not have information on 
the revenue foregone in each budget 
year as a result of the PTAs in force or 
a forecast of revenue that will be fore ‑
gone (see paragraphs 26 to 31).
109  
The Court found weaknesses concern ‑
ing the robustness of the quantifica ‑
tion of the impacts and its source data 
in both ex ante  and ex post  evaluations. 
Moreover, the usefulness and com ‑
pleteness of the analysis carried out 
in both IAs and SIAs has been limited. 
These shortcomings may affect the 
quality of the information available 
to negotiators and policymakers (see 
paragraphs 32 to 53).Attainment of objectives of GSP
110  
The interim evaluation of the GSP 
shows that the policy is not delivering 
all its intended benefits (see para ‑
graphs 54 and 55).
Recommendations 1 to 4
In order to improve the assessment of 
the economic effects of PTAs and the 
sound financial management of PTAs 
the Commission should:
(1) unless duly justified, carry out 
an IA and an SIA for each PTA, 
providing an in‑depth, compre ‑
hensive and quantified analysis of 
the expected economic effects, 
including an estimate of revenue 
foregone;
(2) involve Eurostat routinely in the 
quality assessment of the statis ‑
tical data sources used in SIAs, and 
ensure the timeliness of the ana ‑
lysis carried out for negotiators;
(3) carry out interim and ex post  evalu ‑
ations in order to assess the extent 
to which PTAs with a significant 
impact meet their policy objec ‑
tives and how their performance 
can be improved in key economic 
sectors , including an estimate of 
revenue foregone; and
(4) monitor the scheme of GSP begin ‑
ning on 1 January 2014 to make 
sure that it better meets its policy 
objectives to contribute to com ‑
bating global poverty and promot ‑
ing sustainable development.
34 Conclusions and recommendations
Customs controls applied by 
the authorities of the selected 
Member States
111 
Revenue collection is put at risk be ‑
cause there are weaknesses in cus ‑
toms controls of PTAs in the selected 
Member States, leading to potential 
losses to the EU budget estimated 
at 655 million euro in 2009. This 
represents around 6 % of the gross 
amount of import duties collected in 
the five selected Member States that 
year (see paragraphs 56 to 73, and 
paragraphs 76 to 77).
112  
Member States’ risk management sys ‑
tems do not always include MA com ‑
munications, which prevents Member 
States from ensuring an equivalent 
level of protection of the financial 
interests of the EU (see paragraphs 74 
and 75).
Commission’s supervision of 
Member States and beneficiary/
partner countries
113  
The REM‑REC system has weaknesses 
because national authorities and the 
Commission can take diverging deci ‑
sions on the same matter (see para ‑
graphs 78 to 80).114  
The capacity of the countries benefit ‑
ing from preferential treatment to ad ‑
minister the arrangements has rarely 
been evaluated by the Commission. 
In addition, no monitoring visits have 
been made. The Commission therefore 
has no assurance that these countries 
are able to ensure that only eligible 
goods are exported under PTAs (see 
paragraphs 81 to 86).
115  
The Commission has taken steps to 
ensure the smooth working of the ad ‑
ministrative cooperation arrangements 
in beneficiary/partner countries, but 
problems remain (see paragraphs 87 
to 89).
116  
In some cases the financial follow‑up 
of OLAF’s investigations has not been 
effective and has resulted in amounts 
due being lost because they became 
time‑barred (see paragraphs 90 to 92).
117  
There has been insufficient use of 
reactive measures to protect the fi ‑
nancial interests of the EU (see para ‑
graphs 93 to 99).
Legal provisions
118  
The complexity of cumulation rules 
hampers their implementation by 
beneficiary/partner countries (see 
paragraphs 100 to 103).
35 Conclusions and recommendations
119  
Although certificates of origin and 
movement certificates are prone to 
litigation, their use is still widespread, 
which makes the ex post  collection 
of customs duties cumbersome (see 
paragraphs 104 and 105).
120  
The EU’s position in reciprocal PTAs 
does not adequately protect its finan ‑
cial interests (see paragraph 106).
Recommendations 5 to 13
In order to improve protection of the 
EU’s financial interests the Commission 
should:
(5) create EU risk profiles on PTAs so 
that Member States have a com ‑
mon approach to risk analysis in 
order to reduce losses to the EU 
budget;
(6) verify that Member States improve 
the effectiveness of their risk 
management systems and control 
strategy to reduce losses to the EU 
budget ;
(7) encourage Member States to 
adopt appropriate precautionary 
measures upon receipt of an MA 
communication;
(8) evaluate and carry out monitoring 
visits on a risk basis to countries 
benefiting from preferential treat ‑
ment, notably regarding the rules 
of origin and cumulation;(9) require the Member States to 
improve the quality of the informa ‑
tion provided by them concerning 
administrative cooperation;
(10) follow up those countries benefit ‑
ing from preferential treatment 
where problems concerning ad ‑
ministrative cooperation exist;
(11) improve the financial follow‑up of 
the OLAF investigations in order 
to prevent losses to the EU budget 
due to time‑barring;
(12) reinforce the EU’s position in re ‑
ciprocal PTAs and make more use 
of precautionary and safeguard 
measures, including them in all 
future trade agreements; and
(13) promote the replacement of origin 
and movement certificates with 
exporters’ self‑certification.
36 Conclusions and recommendations
This Report was adopted by Chamber IV, headed by Mr Louis GALEA, Member of 
the Court of Auditors, in Luxembourg at its meeting of 18 March 2014.
For the Court  of Auditors
Vítor  Manuel  da SILVA  CALDEIRA
President

37
 Annexes
Statistical data on PTAs in 2011
List of Member States which imported the most under PTAs in 2011
Member StateValue of imports  
(billion euro)Percentage
Germany 55 23 %
France 30 12 %
Italy 29 12 %
United Kingdom 27 11 %
Netherlands 22 9 %
Spain 19 8 %
Belgium 12 5 %
Sweden 7 3 %
Austria 7 3 %
Poland 5 2 %
Others 30 12 %
Total 243 100  %
List of beneficiary/partner countries which exported the most under PTAs in 2011
Beneficiary/partnerValue of exports  
(billion euro)Percentage
Switzerland 38 16 %
Turkey 37 15 %
India 18 8 %
Norway 13 6 %
Bangladesh 8 3 %
Russia 7 3 %
Tunisia 7 3 %
South Africa 6 3 %
Morocco 6 3 %
Thailand 6 2 %
Others 97 38 %
Total 243 100  %
Source:  Comext.Annex  I
38 Annexes
Overview of the Commission’s ex ante evaluations on PTAs
Standards
Ex ante  evaluations : Pursuant to Article 21, under the heading ‘Principle of sound financial management’, of 
Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the 
implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the 
general budget of the European Communities, ‘all proposals for programmes or activities occasioning expend ‑
iture or a reduction in revenue for the budget shall be subject to an ex ante  evaluation’. This provision was in 
force from 1 January 2003 until 21 August 2006.
Impact assessments (IAs) : In 2003, the Commission introduced a requirement to conduct integrated IAs of all 
its most important policy initiatives: ‘IA will be applied to the major initiatives presented by the Commission in 
its Annual policy strategy or its work programme, be they either regulatory proposals or other proposals having 
an economic, social and environmental impact … such as negotiating guidelines for international agreements 
that have an economic, social or environmental impact1.’ Since 2005, ‘IA, including on competitiveness, before 
initiatives are launched and throughout the legislative process, must become second nature ’2.
‘IAs are necessary for the most important Commission initiatives and those which will have the most far‑  
reaching impacts. This will be the case for all legislative proposals of the Commission’s Legislative Work Pro ‑
gramme (CLWP) and for non‑CLWP legislative proposals which have clearly identifiable economic, social and 
environmental impacts and for non‑legislative initiatives which define future policies3’.
1 COM(2002) 276 final.
2 COM(2005) 12 final.
3 SEC(2009) 92 — IA guidelines.Annex II
39 Annexes
Cases in which an IA or ex ante  evaluation was required
PTAs with IA / Ex ante evaluation report Adequacy of this evaluation
Montenegro No ex ante  evaluation N/A
Bosnia and Herzegovina No ex ante  evaluation N/A
Serbia No ex ante  evaluation N/A
Central America IA X
Andean Community IA X
Republic of Korea IA X
India IA X
Canada No IA N/A
Morocco (deep and comprehensive free trade agreement) No IA N/A
GSP Regulation (EC) No 980/2005 No ex ante  evaluation N/A
GSP Regulation (EC) No 732/2008 IA X
GSP Regulation (EU) No 978/2012 IA √
Moldova No IA N/A
Legend:
N/A = Not applicable √ = Adequate X = Overall inadequate
In the following PTAs an IA or ex ante  evaluation was not required:
Andorra, Turkey, San Marino, Faeroe Islands, European Economic Area (Iceland, Liechtenstein and Norway), 
Switzerland, the former Yugoslav republic of Macedonia, Croatia, Albania, Algeria, Egypt, Israel, Jordan, Leba ‑
non, Morocco, the occupied Palestinian territory, Syria, Tunisia, Chile, Mexico, South Africa, Mercosur, Cariforum 
states, Ivory Coast, Cameroon, ESA (Comoros, Madagascar, Mauritius, Seychelles, Zambia and Zimbabwe), SADC 
(Botswana, Lesotho, Mozambique and Swaziland), Pacific states, market access regulation with ACP states, over ‑
seas countries and territories, Ceuta and Melilla.Annex  II
40 Annexes
Standard
Sustainability Impact Assessment (SIAs) : In 1999 the European Commission ‘decided to integrate sustainable 
development into trade negotiations by developing a new assessment tool called trade SIA4’.
Cases in which a SIA was required:
PTAs with SIA Adequacy of this evaluation
Croatia No SIA N/A
Albania No SIA N/A
Montenegro No SIA N/A
Bosnia and Herzegovina No SIA N/A
Serbia No SIA N/A
Algeria SIA5 X
Egypt SIA X
Israel SIA X
Jordan SIA X
Lebanon SIA X
Morocco SIA X
Occupied Palestinian territory SIA X
Syria SIA X
Tunisia SIA X
Central America SIA √
Legend:
N/A = Not applicable √ = Adequate X = Overall inadequate
4 Preface by Peter Mandelson, former European Commissioner for Trade, to the Commission’s handbook on trade sia.
5 The SIA on the Euro‑Mediterranean free trade area concerns PTAs with Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the occupied Palestinian 
territory, Syria and Tunisia.Annex II
41 Annexes
Cases in which a SIA was required:
PTAs with SIA Adequacy of this evaluation
Chile SIA X
Andean Community SIA X
Republic of Korea SIA √
India SIA X
Canada SIA √
Morocco DCFTA SIA X
Mercosur SIA X
Cariforum states SIA6 X
Ivory Coast SIA X
Cameroon SIA X
ESA  
Comoros, Madagascar, Mauritius, Seychelles, 
Zambia, ZimbabweSIA X
SADC  
Botswana, Lesotho, Mozambique, SwazilandSIA X
Pacific states  
Papua New Guinea, FijiSIA X
Legend:
N/A = Not applicable √ = Adequate X = Overall inadequate
In the following PTAs an SIA was not required:
Andorra, Turkey, San Marino, Faeroe Islands, European Economic Area (Iceland, Liechtenstein and Norway), Swit ‑
zerland, the former Yugoslav republic of Macedonia, Mexico, South Africa, market access regulation with ACP 
states, overseas countries and territories, GSP Regulation (EC) No 980/2005, GSP Regulation (EC) No 732/2008, 
GSP Regulation (EU) No 978/2012, unilateral PTA with Moldova and Ceuta and Melilla.
6 The SIA on the economic partnership agreements with ACP countries concerns EPAs with Cariforum states, Ivory Coast, Cameroon, ESA (Comoros, 
Madagascar, Mauritius, Seychelles, Zambia, Zimbabwe), SADC (Botswana, Lesotho, Mozambique, Swaziland) and Pacific states (Papua New Guinea, 
Fiji).Annex  II
42 Annexes
Overview of the Commission’s interim and/or ex post  evaluations on PTAs
Standard
In the Court’s view, interim and ex post  evaluations should be carried out in respect of all PTAs with significant 
economic, social and environmental impacts after 3 years from their entry into force. These would allow policy ‑
makers, stakeholders and European taxpayers to assess whether PTAs are actually meeting their policy objec ‑
tives in accordance with the principles of sound financial management and public accountability.
In its communication on ‘Trade, growth and world affairs, trade policy as a core component of the EU’s 2020 
strategy’1, the Commission stated that ex post  evaluations would be carried out to monitor the impacts of exist ‑
ing PTAs on a more systematic basis.
Cases in which an interim and/or ex post  evaluation (EPE) is required
PTAs with: Interim and/or  ex post   
evaluation Adequacy of this evaluation
Turkey No EPE N/A
European Economic Area  
(Iceland, Liechtenstein, 
Norway)No EPE N/A
Switzerland No EPE N/A
Former Yugoslav republic of 
MacedoniaNo EPE N/A
Croatia No EPE N/A
Albania No EPE N/A
1 COM(2010) 612.Annex III
43 Annexes
Cases in which an interim and/or ex post  evaluation (EPE) is required
PTAs with: Interim and/or  ex post   
evaluation Adequacy of this evaluation
Montenegro No EPE N/A
Bosnia and Herzegovina No EPE N/A
Serbia No EPE N/A
Algeria EPE2 X
Egypt EPE X
Israel EPE X
Jordan EPE X
Lebanon No EPE N/A
Morocco EPE X
Occupied Palestinian territory No EPE N/A
Syria No EPE N/A
Tunisia EPE X
Chile EPE √
Mexico EPE of six FTAs X
South Africa EPE of six FTAs X
Cariforum states No EPE N/A
Pacific states  
(Papua New Guinea, Fiji)No EPE N/A
Overseas countries and 
territoriesNo EPE N/A
GSP Regulation (EC)
No 980/2005Interim evaluation √
GSP Regulation(EC)  
No 732/2008Interim evaluation √
Moldova No EPE N/A
Legend:
N/A = Not applicable √ = Adequate X = Overall inadequate
In the following PTAs an ex post  evaluation was not required:
Andorra, San Marino, Faeroe Islands, central America, Andean Community, Republic of Korea, India, Canada, 
Morocco (deep and comprehensive free trade agreement), Mercosur, Ivory Coast, Cameroon, ESA (Comoros, 
Madagascar, Mauritius, Seychelles, Zambia and Zimbabwe), SADC (Botswana, Lesotho, Mozambique and Swazi ‑
land), market access regulation with ACP states, GSP Regulation (EU) No 978/2012 and Ceuta and Melilla.
2 The ex post  evaluation on the Euro‑Mediterranean free trade area concerns PTAs with Algeria, Egypt, Israel, Jordan, Morocco and Tunisia.Annex  III
44 Annexes
Audit approach in selected member states
The auditors reviewed national instructions and procedures, risk management and risk profiles, ex ante  and ex 
post  controls and administrative cooperation. The Court reviewed the overall control strategy applied to PTAs 
by customs authorities in five Member States. The value of their imports under PTAs represented more than two 
thirds of the total imports benefiting from preferential tariff measures.
Customs controls in the five selected Member States were evaluated by testing the following random samples.
(a) 60 imports under PTAs carried out in the time‑barred period of 2009, in order to check whether the goods 
were actually entitled to preferential tariff measures and also the preventive, deterrent and corrective meas ‑
ures adopted by the customs authorities to ensure this entitlement and to collect the duties due when this 
was not the case. An extrapolation of the underpayments detected in the sample was carried out in order to 
estimate the amount of TOR potentially lost to the EU budget.
(b) 30 imports under PTAs in 2011, in order to check whether the goods were actually entitled to preferential 
tariff measures and also the preventive, deterrent and corrective measures adopted by the customs author ‑
ities to ensure this entitlement and to collect the duties due when this was not the case.
(c) 30 imports in 2009 subject to an MA communication in order to check whether Member States had consist ‑
ently introduced automated risk profiles in their risk management systems.
(d) 30 requests sent in 2011 by Member States to beneficiary /partner countries under administrative coop ‑
eration in order to test the timely collection of the customs duties due in cases where the goods were not 
entitled to preferential tariff measures.Annex IV
45 Annexes
Limitations of the CGE model
1 
According to the European Economic and Social Committee1 ‘the results of modelling presented in SIAs are … 
without any real informative value for negotiators or stakeholders, since they do not indicate significant or suf ‑
ficiently targeted impacts. As a result of the absence or shortage of reliable statistics in the informal sector, the 
SIA does not take sufficient account of the possible impact on this sector’.
2 
Both the Commission and the external consultants have also highlighted the inherent limitations of the CGE 
model:
(a) the CGE model can only be used for simulation purposes and not for forecasting2 and its simulation of 
long‑run effects is tenuous3;
(b) its somewhat tautological construction, i.e. all results are implicitly linked to the assumptions and calibra ‑
tion made4;
(c) commodities are grouped within a broad category so that it is impossible to usefully determine the impact 
on specific products within a broad category, e.g. medium‑quality wheat in the context of the estimated 
impact on ‘wheat’5;
(d) diverse countries such as Russia, Norway, Switzerland and Turkey are combined into a single grouping, limit ‑
ing the useful interpretation that can be made from the CGE estimates for this group6;
(e) the formal modelling’s inability to account for the impact of investment liberalisation and measures that 
facilitate the movement of professionals7; and
(f) the CGE model results are not well suited for social impact assessments due to their lack of disaggregated 
information at the household level8.
1 Paragraph 2(6) of Opinion No 818/2011 of the European Economic and Social Committee.
2 Paragraph 11(5) of Annex 8 to Commission IA guidelines.
3  According to Commission services’ position paper on the SIA for the FTA between the EU and the Republic of India of March 2010, ‘ the long‑run 
effects are among the most tenuous parts of CGE modelling because the capital accumulation process inevitably relies on basic assumptions and ignores 
the dynamic effects of enhanced integration and competition’ .
4 Paragraph 11(5) of Annex 8 to Commission IA guidelines.
5 EU–Canada SIA final report briefing document, June 2011.
6 idem.
7 idem.
8 EU‑Andean trade sustainability impact assessment, final report, October 2009.Annex V
46
The Commission has used different modelling tech ‑
niques, mainly (but not exclusively) General Equi ‑
librium (CGE) modelling, and drawn on data from 
Global Trade Analysis Project (GTAP) database3. To 
date, these are the best available tools that allow 
us to quantify best the economic impact of trade 
policy changes.
III (b)
The General system of preferences (GSP) is a uni ‑
lateral scheme which seeks to address, through 
tariff reductions, long ‑standing economic, social 
and other structural needs in developing countries. 
While the Commission accepts the observation, the 
GSP is only one of the elements contributing to the 
full delivery of intended benefits.
The new GSP regulation, which entered into force 
on 1 January 2014, has made substantial reforms 
with a view to better targeting the countries most 
in need.
III (c)
The Court’s main findings relate to individual errors 
comprising missing documents or evidence which 
should have been retained by the importers.
III (d)
With regard to monitoring visits, the Commission 
is acting within the framework of the existing legal 
basis and in line with the respective provisions of 
the reciprocal trade arrangements, as approved by 
the Council and the Member States and, as appro ‑
priate, the European Parliament.
3 The use of the GTAP database in CGE modelling is widely accepted 
worldwide by virtually all similar international organisations such 
as the WTO, World Bank, OECD, UN, IMF and the US government.Executive summary
I
The economic gains associated with trade liberal ‑
isation are well known and thoroughly documented 
by the entire economic literature available. For 
instance, it has been shown that finalising all 
on going negotiations (Doha Round and bilateral 
agreements) would lead to an increase of EU GDP of 
more than 1 % than it would be otherwise. Consum ‑
ers are expected to benefit from access to a wider 
variety of goods and services. Finally, there are 
more than 36 million jobs in Europe that depend, 
directly or indirectly, on our ability to trade with the 
rest of the world1.
Moreover, the GSP scheme is effectively the EU’s 
development‑through‑trade arm; firstly, through 
the ‘everything but arms’ (EBA) scheme it provides 
duty‑free and quota‑free access to the EU market 
on all products (except weapons) to the 50 poor ‑
est countries in the world; secondly, through the 
additional benefits under the GSP+ sub‑scheme, it 
incentivises developing countries to pursue sustain ‑
able development objectives.
III (a)
Since 1999 all major multilateral and bilateral trade 
negotiations have been accompanied by a sustain ‑
ability impact assessment (SIA). In addition, since 
2010, with one exception2, all important trade 
negotiations have been also preceded by an impact 
assessment (IA).
All its trade arrangements have been able to draw 
on high ‑quality analysis of economic and other 
impacts. In doing this, the Commission has always 
strived to meet the applicable standards, which 
have evolved over time.
1 ‘Trade, growth and world affairs — Trade policy as a core 
component of the EU’s 2020 strategy ’.
2 In 2011 the Foreign Affairs Council and the European Council 
responded to the Arab Spring by calling for the launch of 
negotiations with Morocco, Tunisia, Egypt and Jordan. This 
political decision made conducting an IA redundant and would 
have introduced excessive delay in the launch of the negotiation 
process.Reply  of the  
Commission
Reply of the Commission 47
IV (a)
The Commission accepts the Court’s recommenda ‑
tion with regard to carrying out an IA and SIA for 
PTAs, and to duly justify situations where this may 
not be possible. It will do so, in accordance with the 
existing IA guidelines and SIA handbook and has 
estimated the revenue foregone in its most recent 
impact assessment for Japan and the United States.
The Commission already carries out IAs and SIAs in 
line with both commitments made and best prac ‑
tice. Since 1999 all major multilateral and bilateral 
trade negotiations have been accompanied by an 
SIA, and since 2010 (with one exception, see Com ‑
mission reply to paragraph III(a)), all important trade 
negotiations have also been preceded by an impact 
assessment.
IV (b)
With regards to the timeliness of analysis, the Com ‑
mission is committed to launch SIAs no later than 
6 months after the start of negotiations to ensure 
they can usefully feed into the negotiating and 
approval process.
Eurostat is now systematically invited to be a mem ‑
ber of the steering groups monitoring SIAs.
The Commission is seeking to intensify coopera ‑
tion on the quality of statistical data sources within 
an ongoing update of the service ‑level agreement 
between DG Trade and Eurostat.
IV (d)
The Commission accepts the Court’s recommenda ‑
tion for PTAs with significant economic, social and 
environmental impact.
It reflects the commitments already taken by the 
Commission to carry out ex post  evaluations on 
PTAs with significant economic, social and environ ‑
mental impact on a more systematic basis to help 
monitor the impacts of EU trade agreements5.
5 COM(2010) 612 ‘Trade, growth and world affairs’.While the legal basis for carrying out monitoring 
visits to beneficiary countries has been in place only 
since 1 January 2011, even before then the Com ‑
mission ensured a number of monitoring actions 
and provision of explanations vis‑a‑vis  beneficiary 
countries as a part of administrative cooperation, 
notably in the GSP context.
Nevertheless, a Commission action plan on moni ‑
toring of preferential rules of origin has been elabo ‑
rated, under which visits to a beneficiary country 
are one of the suggested activities. The action plan 
will cover both unilateral arrangements such as GSP 
and bilateral agreements with partner countries.
III (e)
The Commission takes note of the Court’s finding.
Since 2001 the Commission has proposed that all EU 
preferential trade regimes, whether autonomous or 
conventional, include the possibility of temporary 
withdrawal of preferences in the event of particular 
problems with the management of the preferences 
and/or other significant breaches of customs legis ‑
lation or non‑cooperation. The Commission consid ‑
ers that these safeguards have proved to be suffi ‑
cient and will continue to propose their inclusion in 
all future preferential trade arrangements.
The Commission notes that in just one PTA with 
South Korea, the safeguard provisions eventually 
agreed do not include the possibility of temporary 
withdrawal of preferences, even if those provisions 
contain an obligatory consultation mechanism. 
The Commission confirmed the exceptional nature 
of the compromise wording of the safeguard 
provisions agreed with South Korea at the time 
of the Council decision on the signature of the 
agreement4.
4 OJ L 127, 14.5.2011, p. 4.
Reply of the Commission 48
V (f)
The Commission notes that financial recovery is the 
responsibility of the Member States.
OLAF will continue to provide Member States’ com ‑
petent authorities with all necessary information to 
facilitate their recovery actions.
New provisions introduced in Regulation 883/2013 
on OLAF investigations6 require Member States 
to provide OLAF with information on actions they 
have taken following OLAF recommendations, inter 
alia on recovery of amounts due. This strength ‑
ens the monitoring of recovery action by Member 
States and further improves the financial follow‑up 
of OLAF investigations.
The Commission systematically follows up all 
identified cases of Member States’ financial liability 
resulting from delays in recovery procedures. It will 
continue to do so.
V (g)
Since 2001, the Commission has proposed that all 
EU preferential trade regimes, whether autono ‑
mous or conventional, include the possibility of 
temporary withdrawal of preferences in the event 
of particular problems with the management of 
the preferences and/or other significant breaches 
of customs legislation or non‑cooperation. The 
Commission considers that these safeguards have 
proved to be sufficient and will continue to pro ‑
pose their inclusion in all future preferential trade 
arrangements.
At the end of 2013, the possibility of temporary 
withdrawal of preferences was already included in 
four autonomous arrangements (including GSP) 
covering almost 200 countries and preferential 
agreements with more than 30 countries.
6 Regulation (EU, Euratom) No 883/2013 of the European 
Parliament and of the Council of 11  September  2013 concerning 
investigations conducted by the European Anti‑Fraud Office 
(OLAF) and repealing Regulation (EC) No 1073/1999 of the 
European Parliament and of the Council and Council Regulation 
(Euratom) No 1074/1999, OJ L 248, 18.9.2013.V (a)
The Commission will further evaluate in which par ‑
ticular cases such risk profiles are useful and how 
they should be implemented in the area of rules of 
origin under PTAs.
V (b)
In the course of its inspections in recent years, the 
Commission has placed a special focus on the effec ‑
tiveness of the Member States’ risk management 
systems and control strategies. It has produced 
thematic reports on its inspections of customs 
control strategy (2009), local clearance (2011) and 
transit (2012) and has presented these reports to the 
Member States in the Advisory Committee on Own 
Resources and in the Customs Policy Group. It will 
continue to verify that Member States improve the 
effectiveness of their risk management systems and 
control strategies.
V (c)
The Commission will continue to encourage Mem ‑
ber States to take all appropriate precautionary 
measures upon receipt of MA communications.
V (d)
The evaluation of the capacity of a beneficiary 
country is an integral part of the negotiation pro ‑
cess with each partner. It is not, however, reflected 
in a formal evaluation report. The Commission will 
include an assessment of this capacity in the formal 
scoping exercises that preceed new negotiations.
Generally, the negotiations provide the appropri ‑
ate framework for the Commission to assess the 
capacity of the authorities of the partner countries 
to administer properly the agreement.
V (e)
The Commission will raise this issue with Member 
States (during monitoring) with a view to improving 
the quality of the information the Member States 
provide concerning administrative cooperation. The 
reporting procedure will also be simplified.
Reply of the Commission 49
10
The commitment to conduct SIAs was made in 1999 
by the trade commissioner and became established 
practice for trade negotiations under subsequent 
trade commissioners.
12
The Commission agrees on the importance of evalu ‑
ations for all PTAs with significant impacts.
When evaluating a trade agreement, a sufficient 
amount of time needs to have passed to allow reli ‑
able conclusions to be drawn from the available 
data.
Trade agreements often foresee a gradual phasing 
in of reciprocal commitments over five to seven 
years7. The timing of an evaluation should take 
account of the period over which the impacts are 
felt. For this reason the Commission considers that 
an evaluation only 3 years after an agreement is in 
force, as suggested by the Court, is normally too 
early.
14
The Commission does not consider that an ex ante  
and an ex post  evaluation of revenue foregone 
would provide budgetary authorities with a suf ‑
ficiently accurate yearly forecast of custom duties 
collection to improve financial management of the 
EU budget.
PTAs form part of the legislative structure on the 
basis of which customs duties due are collected and 
made available to the EU budget. Therefore revenue 
cannot be considered foregone once a PTA is in 
place, nor are there budgetary costs. For its budget 
forecasts on TOR, the Commission needs to primar ‑
ily rely on macroeconomic methods. However, the 
method is currently under revision and the Commis ‑
sion will examine to what extent other elements, 
such as the impact of new PTAs, can be taken into 
account.
7 See also COM 2013 (686) ‘Strengthening the foundations of Smart 
regulation  — improving evaluation’.Currently the Commission is negotiating the inclu ‑
sion of provisions for the temporary withdrawal 
of preferences in PTAs with a number of partners, 
including Japan, Vietnam, Morocco, Thailand and 
Canada.
The Commission will continue to propose inclusion 
of the MAE clause in all future trade agreements 
where no self‑certification is agreed.
V (h)
The Commission will continue promoting the 
replacement of origin and movement certificates 
with exporters’ self‑certification.
Introduction
07
The Court is right to highlight IAs and SIAs. How ‑
ever, it does not give credit to tools such as feasi ‑
bility studies and other economic analysis, which 
in the past have also been an important element 
in decision‑making on some of the agreements 
included in the Court’s sample.
08
While the system of IAs was introduced in 2002, its 
scope has gradually evolved and PTAs with signifi ‑
cant impact were not included fully in its scope 
until 2009.
09
The Commission has a different interpretation 
concerning the legal obligation to carry out ex ante  
evaluations for PTAs between 2002 and 2006.
The requirement to conduct impact assessments 
has gradually been introduced since 2003.
Since 2005, IAs have been required for all initiatives 
set out in the CLWP and since 2009 for the most 
important Commission initiatives and those with 
the most far‑reaching impact.
Reply of the Commission 50
27
The Commission considers that IAs or ex ante  evalu ‑
ations need not have been prepared for the seven 
PTAs identified by the Court. In most of the cases 
an IA or ex ante  evaluation would have been of 
little added value and represented a disproportion ‑
ate use of resources, for example because political 
choices had already been made at the highest level 
to pursue an agreement or the measures envisaged 
had more limited effects or were transitional in 
nature.
28
The Commission has estimated the revenue fore ‑
gone in all IAs relating to trade agreements pro ‑
duced since 2010.
29
The Commission does not consider that there was 
a commitment to carry out SIAs for the five agree ‑
ments identified by the Court. The commitment 
to conduct SIAs during a trade negotiation was 
originally made in 1999 by the trade commissioner 
and related to those negotiations which are led by 
the commissioner for trade. The generalised use of 
SIAs for negotiations led by other commissioners on 
behalf of the Commission has never been subject 
to a College decision, which is the reason for the 
absence of an SIA in the five cases.
30
Since 2010, the Commission has been strengthening 
its system of evaluating legislation and policies and 
is committed to conduct evaluations on a more sys ‑
tematic basis. Priorities need to be set in pursuing 
a programme of evaluations, with first priority given 
to the ‘evaluate first’ principle, i.e. evaluating before 
an initiative is revised; to those initiatives with the 
most significant impact; and, finally, in terms of the 
scarce resources available.An estimate of revenue foregone has been included 
in IAs carried out since 2011. However, such an ex 
ante  calculation can only give an estimate of the 
likely reduction of own resources in the form of cus ‑
toms duties, based on the most likely scenarios aris ‑
ing from the final agreement. As to the economic 
effects, it should be noted that while PTAs lower 
duty rates they also entail benefits from increased 
trade flows that may even result in an increase in 
the amount of customs duties collected.
Audit scope and approach
21
The Court’s conclusion is based on the analysis 
of a period during which the Commission impact 
assessment system was progressively established 
and the systematic evaluation of policies still to 
be developed. Therefore, a number of agreements 
within the sample could not have been subject to 
either an IA or an SIA given the moment of their 
proposal and/or entry into force.
22
IA working methods were established progressively 
in the Commission with guidelines introduced in 
2005 and revised in 2009. Current more rigorous 
standards should not be used to assess earlier IAs, 
when the systems was evolving. In order to build 
on the experience of the first 5 years, SIA guidelines 
were introduced through the publication by the 
Commission services of the SIA handbook in 2006.
Observations
26
The Commission agrees with the importance of 
appropriately assessing both ex ante  and ex post  the 
economic and other effects of PTAs. It believes this 
to be the case since 1999.
Reply of the Commission 51
35
Of the six IAs reviewed by the Court, four were 
conducted in 2006/07, when the methodology to 
analyse the impact of trade agreements was still 
under development. All IAs conducted since 2010 
contain a comprehensive analysis of the economic 
effects in the beneficiary countries.
36
The Commission assesses economic impacts, by 
using state ‑of‑the ‑art economic modelling and 
datasets, keeping pace with most recent develop ‑
ments in the theoretical and empirical literature 
regarding the effects of free trade agreements.
38
The GSP scheme consists of a general arrange ‑
ment and two special arrangements. The general 
arrangement is granted to all those developing 
countries which share a developing need and are in 
a similar stage of economic development without 
the need to ratify or implement any international 
conventions.
The EU’s GSP+ sub‑scheme has been designed to 
include additional incentives for vulnerable coun ‑
tries willing to take extra steps towards sustainable 
development and good governance, leaving the 
choice to those countries of whether to seek the 
additional benefits or not. This approach, endorsed 
by Council and Parliament, represents a policy 
choice. The need to ratify and effectively imple ‑
ment international conventions on human and 
labour rights, the environment and good govern ‑
ance has, therefore, been considered for these 10 
countries and not in respect of other beneficiary 
countries of the general arrangement.In line with its commitment to carry out ex post  
evaluations on a more systematic basis, the Com ‑
mission carried out in 2012 an ex post  evaluation of 
the trade pillar of the EU–Chile association agree ‑
ment and launched in 2013 an ex post  evaluation 
of the implementation of the EU–Mexico free trade 
agreement and a comprehensive review of the Cari ‑
forum–EU EPA. Another two ex post  evaluations (of 
the autonomous trade preferences for Moldova and 
for western Balkan countries) are planned in 2014.
31
The evaluation of the impact on the EU budget in 
the GSP statistical report for 2006–09 followed the 
Commission’s standard approach8.
As the calculation was done ex post , the loss of reve ‑
nue was calculated on the basis of the real statistics, 
i.e. GSP preferential trade in the period 2006–09.
34
Considerable effort has gone into producing high ‑ 
quality impact assessments using the best available 
modelling. Moreover, the Commission notes that 
the Court’s analysis is based on IAs done several 
years ago, at a time when impact assessment 
methodologies were still under development. Only 
one of the five IAs in support of a trade agreement 
analysed by the Court was carried out under the lat ‑
est IA guidelines. As a consequence, the Court fails 
to acknowledge the substantial evolution in IAs in 
support of PTAs since 2010.
8 The revenue foregone expresses the difference between the MFN 
duties that would be payable for all GSP trade in the absence of 
the GSP scheme AND the duties actually paid, i.e. (total of most 
favoured nation duty calculated on GSP preferential trade) – (total 
of preferential duty calculated on GSP preferential trade).
Reply of the Commission 52
42
The IA did not identify fraud or customs evasion as 
a salient shortcoming of the previously applied GSP 
scheme. Therefore, there was no major adaptation 
of the anti‑fraud provisions in the reformed scheme.
On the other hand, the IA highlighted that the safe ‑
guard mechanisms within the GSP scheme (where 
imports may cause or threaten to cause serious 
difficulty to EU producers) were not operational and 
could allow preferential imports to harm the finan ‑
cial and economic interests of EU industry. Options 
were identified to remedy them and, as a result, the 
new GSP , in force since 1 January 2014, strength ‑
ened them.
By November 2017, the Commission must submit 
a report to the European Parliament and to the 
Council on the application of the GSP regulation. 
For the purpose of the report, the Commission 
will assess fraud and customs duty evasion issues 
and, where appropriate, will consider measures to 
address them.
44
The Commission agrees that, as in any modelling, 
there are limitations but considers that CGE is the 
best instrument available. All modelling frame ‑
works have shortcomings, but CGE models are best 
equipped to quantify the economic impact of PTAs. 
The objectives are to quantify the impact of trade 
policy changes, ceteris paribus , based on the most 
robust and relevant methodological approaches 
available in the economics profession for trade pol ‑
icy analysis. Such economic analyses are not based 
on ‘the’ CGE model but on different CGE models 
that are adapted to best suit the policy question at 
hand in each IA and SIA.Box 1  
Bangladesh is a good example of where GSP ben ‑
efits have significantly contributed to the develop ‑
ment of the country, a least developed country 
(LDC), leading to growth, poverty reduction and 
increased employment opportunities, in particular 
for women. The availability of GSP benefits creates 
the political space for the EU to influence develop ‑
ments in human and labour rights as shown by the 
Rana Plaza event. In addition, the Commission has 
closely followed the International Labour Organisa ‑
tion (ILO) work in the country aimed at improving 
working conditions. It is doubtful if Bangladesh 
would have accepted the conditions imposed by 
the compact had it not been a GSP beneficiary.
40
The Commission acknowledges that in the light of 
experience it has tightened the requirement for 
monitoring and evaluation to be more effectively 
addressed in IAs. This has reflected the gradual 
evolution of the IA system.
In all the IAs carried out since 2010 in the area of 
trade, clear and quantifiable indicators have been 
identified complying with the 2009 IA guidelines. 
The IAB positive opinions on these IAs confirm this.
41
An in‑depth study of the nature outlined in the 
EESC recommendations in the Indian context would 
be unlikely to produce reliable findings, as a major ‑
ity of the vulnerable sectors of society are in the 
informal economy where quantitative data is not 
easily available.
However, the results of the SIA for the India FTA are 
relevant in the context of the EESC recommenda ‑
tions. The SIA concluded that an FTA with India (in 
all scenarios analysed) should lead to significant 
increases in real wages of both skilled and unskilled 
workers as well as to moderate pro‑poor effects. 
In addition, negotiators have regular consultations 
with civil society, allowing the issues mentioned in 
the EESC recommendations to be discussed.
Reply of the Commission 53
48
IAs and SIAs analyse the likely impact of the trade 
agreement itself on the relevant sectors, taking into 
account the existence of all the relevant EU policies. 
In doing so, they may (as for the Caribbean coun ‑
tries) or may not explicitly mention the common 
agricultural policy (CAP).
49
The Commission recognises that the SIA concerning 
the EPAs does not have the same level of coverage 
and depth as more recent SIAs. In part this reflected 
the very broad geographical and thematic cover ‑
age of this specific SIA — more than 75 countries. 
No SIA could have given full coverage of all possible 
issues for all potential signatories.
52
The study was an econometric assessment of the 
impact of six PTAs on trade. Its stated objective was 
to analyse if the agreements have had a measurable 
and statistically significant impact on EU exports 
and imports. It was not intended to have a broader 
scope or to be a fully fledged ex post  evaluation. 
The Commission has subsequently conducted full 
ex post  evaluations for two of the countries con ‑
cerned (Mexico and Chile).
53
Whilst the ex post  evaluation report for the Euromed 
countries did not contain any arrangements for 
future evaluation, the Commission can confirm that 
such an ex post  evaluation is likely to be carried out 
once ongoing negotiations are out of the way and 
agreements fully implemented.
55
Following the interim evaluation of the GSP , sub ‑
stantive changes were made to the scheme, which 
entered into force on 1 January 2014, to address the 
shortcomings identified in the interim evaluation of 
the scheme.45
The GTAP database is built on the most reliable 
international data sources (including Eurostat 
data for EU countries), and it undergoes constant 
scrutiny by the different stakeholders (World 
Bank, OECD, IMF, WTO, United Nations, FAO). Most 
economic data used in the GTAP database (such 
as trade flows, protection patters, GDP , final con ‑
sumption) are updated to the latest year available. 
In this case, outdated data refers only to technical 
coefficients of the EU supply and use tables (SUTs). 
The Eurostat raw data shows that the change in the 
technical coefficients in EU SUT tables is minimal for 
the period 2000–09.
The Commission, as part of the GTAP consortium, 
will seek to ensure that GTAP uses updated EU use 
and supply and input–output tables when avail ‑
able and that in the metadata of GTAP it is stated, 
country by country, what the sources are and which 
year of data is used.
As shown by the January 2014 report by the Joint 
Research Centre (JRC) of the European Commis ‑
sion, updating EU technical coefficients to the most 
recent year available only marginally changed the 
simulated impact of the EU–South Korea FTA.
46
As the source of most EU data in the GTAP database 
is Eurostat or national statistical offices in the first 
place, the involvement of Eurostat in a second ‑
ary quality assessment of the GTAP data might be 
superfluous.
47
The Commission agrees that the timeliness of an SIA 
is very important in order to ensure that it is useful 
for negotiators. The Commission services are com ‑
mitted to launch SIAs no later than 6 months after 
the start of the negotiation to ensure reports feed 
into the negotiations. Out of the 18 SIAs conducted 
since 1999, the Chile SIA was the only SIA where the 
final report was only delivered after the initialling of 
the association agreement.
Reply of the Commission 54
The Commission further notes that the non‑  
extrapolated potential loss reported by the Court to 
the three Member States in relation to the individ ‑
ual errors detected, amounted to 1 million euro, of 
which 91 % concerns one Member State.
64
Some of the missing documents or evidence may 
yet be supplied as a result of the Commission’s 
follow‑up of the ECA’s findings. Therefore the end 
result may well show substantially lower rates. In 
addition, the Commission inspections of simpli ‑
fied procedures in 21 Member States did not show 
high error rates in the sample of origin declarations 
checked and the financial impact of the errors was 
low.
The results of the examination of originals of origin 
documents carried out by the Commission in its 
inspections in the UK are not in line with the find ‑
ings of the Court.
66
The errors found by the Court mainly comprise 
missing supporting documents or evidence. Where 
the origin certificates show a stamp or are issued 
by an office not communicated to the Commis ‑
sion by the authorities of the beneficiary/partner 
countries they may be sent for verification to those 
authorities.
Also in relation to paragraph 64 above, the Commis ‑
sion points out that nowadays almost all the sup ‑
porting documents are held by the importers and 
should be kept by them at the customs authorities’ 
disposal in accordance with Article 77 of the EU Cus ‑
toms Code. There cannot be a 100% check of docu ‑
ments and the checks need to be carried out on the 
basis of risk analysis as stipulated in Article  13 of the 
EU Customs Code.For example, the number of GSP beneficiaries was 
substantially reduced so as to focus benefits to the 
countries most in need (from over 170 to around 
90 countries). Moreover, export opportunities for 
poorer countries have been increased through the 
elimination of benefits for very competitive sectors 
from certain countries, such as textiles from China 
and India.
61
The Commission considers that the inclusion of ori ‑
gin in combination with other risk elements is even 
more effective because it is more closely targeted.
62
The errors found by the Court in import declara ‑
tions in which preference was claimed under 
simplified procedures were low (three). The UK has 
undertaken to review its control strategy for pref ‑
erential origin. However, while PTAs has not been 
selected as an audit theme in the UK, this does not 
mean that origin controls have not been carried out 
in the context of other post‑clearance audits. The 
issues raised by the Court will be followed up by the 
Commission.
63
The Court’s extrapolation is made on the basis of 
individual errors that comprise missing documents 
or evidence that should have been retained by the 
importers at the time of the Court’s audit. However, 
these errors do not automatically substantiate that 
the imported goods were not of the preferential 
origin declared at the time of importation. In its 
follow‑up of the individual errors detected by the 
Court, the Commission will give the Member States 
in question the possibility to prove that the docu ‑
ments and evidence of origin were available at the 
time of clearance and that they can still be supplied. 
Only where evidence is not supplied is there likely 
to be amounts of TOR due from the Member States 
if they result from their administrative errors.
Reply of the Commission 55
75
In all the cases mentioned the information has 
been analysed and taken into account by the 
Member States in their risk assessments. It is for the 
Member State to decide, following analysis of its 
trade pattern, whether to enter information from 
mutual assistance communications in the form of 
risk profiles into its risk management systems but 
it is not obliged to do so. France has explained 
that the creation of a risk profile in the case of the 
mutual assistance communication notice in ques ‑
tion would be ineffective because the information 
had no impact in France. In the case of Spain, the 
sample related to operators that were excluded 
from ‘pre‑release ’ control circuits. The Commission 
had already requested the Spanish authorities to 
correct this practice. The Commission considers that 
a risk profile based on the information contained in 
a mutual assistance communication request need 
only be established if the information has an impact 
for the Member State.
77
All these recovery cases are being followed up by 
the Commission with the Member States’ author ‑
ities, and where amounts of TOR are due as a result 
of administrative error they will be asked to make 
available these amounts with interest, if applicable.
The UK has been requested to make available the 
amount of traditional own resources relating to 
the MA communications concerned which it has 
acknowledged has become time‑barred because of 
ineffective internal controls. France has contested 
this finding and the Commission has requested 
additional information.
78
The Commission underlines that in this case the 
Member State concerned has already taken appro ‑
priate measures to avoid a similar situation occur ‑
ring in the future.
See the Commission’s reply to paragraph 79.67
The errors identified by the Court will be followed 
up by the Commission and where amounts of 
traditional own resources are found to be due, the 
Member States will be requested to take measures 
to recover these amounts and pay any interest 
applicable.
71
The 11 requests sent by Spain to the Philippines and 
returned undelivered have subsequently been sent 
again to the Philippines to the correct addresses.
72
The Commission is following up these post‑  
clearance cases with the Italian authorities. Interest 
will be charged where applicable.
73
The Commission will follow up with the French 
authorities the cases where post‑clearance recovery 
has not been started following confirmation that 
the certificates are invalid or not authentic and will 
request recovery of any amounts of TOR due and 
the payment of interest, if applicable.
74
The Commission considers that the Member States 
should take account of the information in its overall 
customs risk and control strategy and, to the extent 
that the information from the mutual assistance 
communication impacts the Member State, to take 
measures to recover amounts of TOR due and pre ‑
vent future losses.
Reply of the Commission 56
84
In the Court of Justice judgment mentioned by the 
Court of Auditors, the fact that the Commission did 
not make full use of the rights and powers con ‑
ferred upon it by the association agreement with 
Turkey refers just to a specific case and therefore 
cannot lead to a general conclusion.
Articles 220(2)(b) and 239 of the Community Cus ‑
toms Code provide for exceptions to the general 
principle of recovery of import duties. In those 
cases, despite the existence of a customs debt and 
the fact that the conditions for preferential treat ‑
ment of the goods had not been fulfilled, the appli ‑
cant (supported by its national authorities when the 
file is submitted to the Commission for decision) 
asks for an exception to the principle of recovery or 
non‑remission/repayment of import duties.
The provisions governing these exceptions must be 
interpreted restrictively and are assessed on a case 
by case basis.
The exceptions to the principle of recovery require 
either (a) the existence of an error on the part of 
the customs authority which could not reasonably 
have been detected by the person liable acting in 
good faith and complying with the provisions of the 
customs declaration or (b) the existence of a special 
situation in which no negligence or deception can 
be attributed to the debtor.
85
The Commission will carefully consider such 
a periodical reporting system within its new and 
enhanced monitoring actions.
89
The Commission will look at this issue within the 
framework of its newly planned monitoring actions, 
so as to improve the quality of information pro ‑
vided by Member States and to ensure, inter alia, 
that reporting by Member States more efficiently 
focuses on anomalies calling for remedial action.79
The Commission has already been informed by 
the Member State concerned that their customs 
authorities had high ‑level exchanges with the 
national judicial authorities and that they are in the 
process of amending the national tax law to prevent 
a similar situation occurring in future.
The Commission will follow up this issue with the 
Spanish authorities.
80
See Commission reply to paragraph 78.
82
The evaluation of the capacity of a beneficiary 
country is an integral part of the negotiation 
process with each partner, including the scoping 
exercise. It is not, however, reflected in a formal 
evaluation report.
Generally, the negotiations provide the appropri ‑
ate framework for the Commission to assess the 
capacity of the authorities of the partner countries 
to administer properly the agreement taking into 
account, for instance, experiences with existing cus ‑
toms cooperation agreements and other coopera ‑
tion mechanisms. More detailed prior evaluations 
have taken place with regard to the SAAs with the 
Balkan countries.
83
A Commission action plan on monitoring of pref ‑
erential rules of origin has been elaborated, under 
which visits in a country benefiting from preferen ‑
tial treatment are one of the suggested activities. 
The action plan will cover both, unilateral arrange ‑
ments such as GSP and bilateral agreements with 
partner countries.
Reply of the Commission 57
94
The primary function of MA communication is to 
alert the Member States to identified fraud risks 
and obtain their cooperation in dealing with them 
efficiently and effectively. OLAF fully applies the 
requirements of the existing Regulation 515/9710 
(as amended by Regulation 766/200811). It is the 
responsibility of the Member States to analyse the 
risk pertaining to their territory based on the infor ‑
mation provided and take all necessary measures 
in accordance with the provisions of EU customs 
legislation.
95
The amounts declared irrecoverable by Member 
States do not necessarily constitute final losses to 
the EU budget as the Commission examines the 
diligence of the Member States in recovering these 
amounts under Article 17.2 of Regulation 1150/2000 
and holds them responsible where diligence in 
recovery procedures is not shown.
Box 2  
In accordance with the procedure in Article 17 of 
Council Regulation 1150/2000, the Commission had 
already examined this case in 2013.
Poland was subsequently requested to make avail ‑
able these amounts because precautionary meas ‑
ures, as requested by OLAF in its MA communica ‑
tion, had not been taken at the time of import.
10 Council Regulation (EC) No 515/97 of 13 March 1997 on mutual 
assistance between the administrative authorities of the Member 
States and cooperation between the latter and the Commission 
to ensure the correct application of the law on customs and 
agricultural matters (OJ L 82, 22.3.1997, p. 1).
11 Regulation (EC) No 766/2008 of the European Parliament and 
of the Council of 9 July 2008 amending Council Regulation (EC) 
No 515/97 on mutual assistance between the administrative 
authorities of the Member States and cooperation between the 
latter and the Commission to ensure the correct application of 
the law on customs and agricultural matters (OJ L 218, 13.8.2008, 
p. 48).90
The Commission welcomes the Court’s finding that 
OLAF was successful in demonstrating that the 
imported goods were not eligible for preferential 
tariff measures, except for one investigation.
91
The recovery action following OLAF investigations 
in customs cases is the task of national authorities 
and it is outside OLAF’s control.
Thus the amount actually recovered reflects Mem ‑
ber States’ and not OLAF’s performance and it is not 
appropriate to use this amount as a performance 
indicator for OLAF.
OLAF provides Member States’ competent author ‑
ities with all necessary information to facilitate their 
recovery actions.
New provisions introduced in Regulation 883/2013 
on OLAF investigations9 require Member States 
to provide OLAF with information on actions they 
have taken following OLAF recommendations, inter 
alia, on recovery of amounts due. This strength ‑
ens the monitoring of recovery action by Member 
States and further improves the financial follow‑up 
of OLAF investigations.
92
The Commission systematically follows up all 
identified cases of Member States’ financial liabil ‑
ity resulting from delays in recovery procedures. It 
will follow up the findings of the Court and request 
the recovery of traditional own resources and the 
payment of interest where applicable. The amount 
of duties shown in the OLAF report is the amount 
recommended for recovery and the actual amount 
that can be recovered can only be definitively 
determined when followed up.
9 Regulation (EU, Euratom) No 883/2013 of the European 
Parliament and of the Council of 11  September  2013 concerning 
investigations conducted by the European Anti‑Fraud Office 
(OLAF) and repealing Regulation (EC) No 1073/1999 of the 
European Parliament and of the Council and Council Regulation 
(Euratom) No 1074/1999, OJ L 248, 18.9.2013.
Reply of the Commission 58
Box 3 (c)
Concerning the follow‑up to the notice to importers 
about imports of tuna from El Salvador, the Com ‑
mission has meanwhile reacted to the Court’s audit 
finding and sent out a letter with detailed questions 
to El Salvador.
Box 3 (d)
See reply to paragraph III (e).
102
The OLAF investigations referred to by the Court 
demonstrating that beneficiary/partner countries 
lack the expertise to apply these rules relate to the 
period before the GSP rules of origin reform. Under 
the reform, GSP regional cumulation rules have 
been simplified, making them easier for partner 
countries to manage.
103
The Court identifies a particular cumulation chal ‑
lenge, where different rules apply for countries in 
the same region. The flexibility introduced in the 
GSP rules was destined to facilitate cumulation 
of origin between developing countries even in 
cases where different rules of origin apply. This is 
particularly important for least developed coun ‑
tries, which are subject to different rules as com ‑
pared with other GSP beneficiary countries. There 
are mechanisms in the GSP regulation to prevent 
circumvention.
Box 4  
EU–Mexico preferential trade relations are gov ‑
erned by an agreement‑based preferential system 
under which requesting subsequent verification of 
preferential origin by the country of export is man ‑
datory before considering any denial of preference. 
The Commission is considering the further action 
that may need to be taken in these cases.96
Since 2001, the Commission has proposed that all 
EU preferential trade regimes, whether autono ‑
mous or conventional, include the possibility of 
temporary withdrawal of preferences in the event 
of particular problems with the management of the 
preferences and/or other significant breaches of 
customs legislation or non‑cooperation. They also 
include a possibility to issue notices to importers. 
The Commission will continue to propose the inclu ‑
sion of these safeguards in all future preferential 
trade arrangements.
The Commission proposes the inclusion of the 
MAE clause in all trade agreements where no self‑  
certification is agreed and will continue to do so in 
all future trade agreements and in those which are 
renegotiated.
97
See reply under paragraph 84. The cases notified to 
the Commission refer to exceptions to the general 
principle of recovery of import or export duties 
and require that the errors of the customs authority 
could not be detectable by a debtor acting in good 
faith and complying with the provisions applicable 
or the existence of a special situation provided that 
the debtor was not negligent. It is for the decision ‑
making customs authority to assess whether these 
conditions are met.
98
The Commission will continue to propose inclusion 
of the MAE clause in all trade agreements where no 
self‑certification is agreed.
Box 3 (b)
The non‑publication was related to translation dif ‑
ficulties in the run‑up to accession.
Reply of the Commission 59
Recommendations 1 to 4
(1) The Commission accepts the Court’s recommen ‑
dation with regard to carrying out an IA and an 
SIA for PTAs, and to duly justify situations where 
this may not be possible. It will do so, in accord ‑
ance with the existing IA guidelines and SIA 
handbook, and has estimated the revenue fore ‑
gone in its most recent impact assessment for 
Japan and the United States.
(2) With regards to the timeliness of analysis, the 
Commission is committed to launching SIAs no 
later than 6 months after the start of negotia ‑
tions to ensure they can usefully feed into the 
negotiating and approval process.
Eurostat is now systematically invited to be 
a member of the steering groups monitoring 
SIAs.
The Commission is seeking to intensify 
co operation on the quality of statistical data 
sources within an ongoing update of the 
service ‑level agreement between DG Trade and 
Eurostat.
(3) The Commission accepts the Court’s recommen ‑
dation for PTAs with significant economic, social 
and environmental impact.
It reflects the commitments already taken by 
the Commission to carry out ex post  evalua ‑
tions of PTAs with significant economic, social 
and environmental impact on a more systematic 
basis to help monitor the impacts of EU trade 
agreements12.
12 COM(2010) 612, ‘Trade, growth and world affairs’.Conclusions and recommendations
108
While the Commission’s ex ante  and ex post  evalu ‑
ations to assess the economic and other effects 
of PTAs have evolved over time, the Commission 
considers that the policymakers, stakeholders and 
European taxpayers are today fully informed of the 
main advantages and disadvantages of the different 
trade policy options.
Since 1999, all major multilateral and bilateral trade 
negotiations have been accompanied by an SIA 
which analysed in detail the expected economic 
(but also social and environmental) impact of the 
PTA. Since 2010 (with one exception, see Commis ‑
sion reply to paragraph III(a)), all important trade 
negotiations have been preceded, before their 
launch, by an IA assessing the likely economic 
effects of the PTA, including an evaluation of the 
revenue likely to be foregone.
109
Although the Commission acknowledges that there 
is room for improvement, it does not fully share the 
Court’s assessment. Considerable effort will con ‑
tinue to go into producing high ‑quality IAs and SIAs 
in the future. The Commission notes the Court’s 
choice of a sample which included only one IA con ‑
ducted under the new IA guidelines issued in 2009. 
As a consequence, the Court’s analysis does not 
sufficiently acknowledge the substantial progress in 
IAs in support of PTAs since 2010.
As far as the ex post  evaluations are concerned, 
relatively few have been completed, reflecting the 
long periods for PTAs to be fully in force. However, 
the Commission is now moving up a gear in this 
respect.
110
A scheme like the GSP is only one tool in address ‑
ing developing countries’ needs and one should 
not overestimate its capacity to resolve develop ‑
ing countries’ issues. The scheme has — within the 
framework of WTO law — just been reformed draw ‑
ing on the interim analysis findings.
Reply of the Commission 60
112
The information from MA communications does not 
always lead to the creation of a risk profile as the 
information may not impact the Member State.
In all the cases mentioned the information has been 
analysed and taken into account by the Member 
States in their risk assessments.
113
The Court bases its conclusion on the weaknesses of 
the REM ‑REC system on one specific case in Spain. 
The Commission has already been informed by the 
Member State concerned that its customs author ‑
ities had high ‑level exchanges with the national 
judicial authorities and that it is in the process of 
amending the national tax law to prevent a similar 
situation occurring in future.
The Commission will follow up this issue with the 
Spanish authorities.
114
There are means other than formal evaluation 
reports to be satisfied about the capacity of the 
third country to administer properly the PTA. Evalu ‑
ation takes place during the negotiating process of 
bilateral agreements.
As regards monitoring, the Commission uses dif ‑
ferent tools such as notices to importers, providing 
advice to beneficiary countries, etc., notably in the 
context of the GSP . A Commission action plan on 
monitoring of preferential rules of origin has been 
elaborated, under which visits to a beneficiary 
country are one of the suggested activities. The 
action plan will cover both unilateral arrangements 
such as GSP and bilateral agreements with partner 
countries.
Furthermore, the Commission also refers to its 
replies under paragraphs 81 to 86.
115
The Commission will follow up cases identified by 
the Court and address problems in cooperation 
with Member States and the countries benefiting 
from preferences both in the context of unilateral 
arrangements and bilateral agreements.(4) The Commission accepts the Court’s 
recommendation.
See reply to paragraph 55 above. Following 
the interim evaluation of the GSP , substantive 
changes were made to the scheme to address 
these shortcomings. As the tariff preferences 
under the new GSP regulation (Regulation 
978/2012) only apply as from 1 January 2014, 
the Commission will be reviewing the scheme 
and reporting to the European Parliament and 
Member States by 2016 on the effects of the 
scheme and by 2017 on the overall operation of 
the new regulation.
111
The Court’s extrapolation is made on the basis of 
individual errors that comprise missing documents 
or evidence that should have been retained by the 
importers at the time of the Court’s audit. However, 
these errors do not automatically substantiate that 
the imported goods were not of the preferential 
origin declared at the time of importation. In its 
follow‑up of the individual errors detected by the 
Court, the Commission will give the Member States 
in question the possibility to prove that the docu ‑
ments and evidence of origin were available at the 
time of clearance and that they can still be supplied. 
Only where evidence is not supplied is there likely 
to be amounts of TOR due from the Member States 
if they result from their administrative errors.
The Commission points out that nowadays almost 
all the supporting documents are held by the 
importers and should be kept by them at the 
customs authorities’ disposal in accordance with 
Article 77 of the EU Customs Code. There cannot be 
a 100 % check of documents and the checks need 
to be carried out on the basis of risk analysis as 
stipulated in Article 13 of the EU Customs Code.
The Commission further notes that the non‑  
extrapolated potential loss reported by the Court to 
the three Member States in relation to the individ ‑
ual errors detected, amounted to 1 million euro, of 
which 91 % concerns one Member State.
Reply of the Commission 61
(7) The Commission will continue to encour ‑
age Member States to take all appropriate 
precautionary measures upon receipt of MA 
communications.
(8) The evaluation of capacity of a country benefit ‑
ing from preferential treatment is an integral part 
of the negotiation process with each partner. It is 
not, however, reflected in a formal evaluation re ‑
port. The Commission will include an assessment 
of this capacity in the formal scoping exercises 
that preceed new negotiations.
Generally, the negotiations provide the 
appropriate framework for the Commission 
to assess the capacity of the authorities of the 
partner countries to administer properly the 
agreement.
(9) The Commission will raise this issue with Mem ‑
ber States (during monitoring) with a view to 
improving the quality of the information the 
Member States provide concerning administra ‑
tive cooperation. The reporting procedure will 
also be simplified.
(10)  The Commission will follow up countries ben ‑
efiting from preferential treatment in which the 
audit by the Court revealed that problems con ‑
cerning administrative cooperation exist. A Com ‑
mission action plan on monitoring of preferential 
rules of origin has been elaborated, which sug ‑
gests different remedial activities.
(11) The Commission notes that financial recovery is 
the responsibility of the Member States.
OLAF will continue to provide Member States’ 
competent authorities with all necessary infor ‑
mation to facilitate their recovery actions.116
Although the Commission accepts that time‑barring 
poses difficulties for recovery, it recalls that it is 
the duty of Member States to take the appropriate 
measures to ensure the timely recovery of import 
duties to the maximum extent possible.
The Commission systematically follows up all 
identified cases of Member States’ financial liability 
resulting from delays in recovery procedures. It will 
follow up the findings of the Court and will request 
the payment of traditional own resources and of 
interest where the amounts due are the result of 
administrative errors.
117
See replies to paragraphs 96 and 99.
The Commission will continue to propose inclusion 
of the MAE clause in all trade agreements where no 
self‑certification is agreed.
120
See replies to paragraphs III  (d) and (e), V (d) 
and (g), 82, 83, 96, 99 (d), 106 and 114, and to 
recommendation 12.
Recommendations 5 to 13
(5) The Commission will further evaluate in which 
particular cases such risk profiles are useful and 
how they should be implemented in the area of 
rules of origin under PTAs.
(6) In the course of its inspections in recent years, 
the Commission has placed a special focus on 
the effectiveness of the Member States’ risk man ‑
agement systems and control strategies. It has 
produced thematic reports on its inspections of 
customs control strategy (2009), local clearance 
(2011) and transit (2012) and has presented these 
reports to the Member States in the Advisory 
Committee on Own Resources, and in the Cus ‑
toms Policy Group. It will continue to verify that 
Member States improve the effectiveness of their 
risk management systems and control strategies.
Reply of the Commission 62
(13)  The Commission will continue promoting the re ‑
placement of origin and movement certificates 
with exporters’ self‑certification.
Reply to Annex V
1
CGE models are state ‑of‑the‑art tools and, as 
opposed to other available models, they are best 
suited to measure the economy‑wide impact of 
trade policy changes producing results on a wide 
range of sectoral socioeconomic indicators (tar ‑
iff revenues, imports, exports, production prices, 
wages, CO2 emissions, etc.). This is of critical impor ‑
tance to negotiators and stakeholders. SIAs com ‑
plement CGE results with qualitative and sectoral 
analyses, including on the informal sector, when 
data allows. So far, data on the informal sector were 
not sufficiently reliable to be used.
2
(a) The long‑run effects of trade policy changes have 
been assessed by numerous academics and inter ‑
national organisations and the results are widely 
used and accepted by governments.
(b) CGE models are used for simulation purposes, 
not for forecasts. They are built on strong theor ‑
etical foundations while at the same time being 
based on real economic data which replicate 
agents’ economic behaviour.
(c) The aggregation of commodities and countries 
into broader categories is decided based on the 
specificities of the economies under considera ‑
tion. If considered useful, CGE results are comple ‑
mented with partial equilibrium analyses which 
can differentiate between, for example, different 
categories of wheat.New provisions introduced in Regulation 
883/2013 on OLAF investigations13 require 
Member States to provide OLAF with informa ‑
tion on actions they have taken following OLAF 
recommendations, inter alia, on recovery of 
amounts due. This strengthens the monitoring 
of recovery action by Member States and fur ‑
ther improves the financial follow‑up of OLAF 
investigations.
The Commission systematically follows up all 
identified cases of Member States’ financial 
liability resulting from delays in recovery pro ‑
cedures. It will continue to do so.
(12)  Since 2001, the Commission has proposed that all 
EU preferential trade regimes, whether autono ‑
mous or conventional, include the possibility of 
temporary withdrawal of preferences in the event 
of particular problems with the management of 
the preferences and/or other significant breach ‑
es of customs legislation or non‑  cooperation. 
The Commission considers that these safeguards 
have proved to be sufficient and will continue to 
propose their inclusion in all future preferential 
trade arrangements.
At the end of 2013, the possibility of tempo ‑
rary withdrawal of preferences was already 
included in four autonomous arrangements 
(including GSP) covering almost 200 countries, 
and preferential agreements with more than 30 
countries.
Currently the Commission is negotiating the 
inclusion of provisions for the temporary with ‑
drawal of preferences in PTAs with a number of 
partners, including Japan, Vietnam, Morocco, 
Thailand and Canada.
The Commission will continue to propose inclu ‑
sion of the MAE clause in all future trade agree ‑
ments where no self‑certification is agreed.
13 Regulation (EU, Euratom) No 883/2013 of the European 
Parliament and of the Council of 11  September  2013 concerning 
investigations conducted by the European Anti‑Fraud Office 
(OLAF) and repealing Regulation (EC) No 1073/1999 of the 
European Parliament and of the Council and Council Regulation 
(Euratom) No 1074/1999, OJ L 248, 18.9.2013.
Reply of the Commission 63
(d) As in the case of commodity aggregation, the 
aggregation of regions is adapted to the specific 
situation of each IA/SIA at hand and is done with 
the objective of focusing on what is considered 
to be of main interest.
(e) In recent years, significant progress has been 
made in these areas. The Commission financed 
the construction of a global foreign direct invest ‑
ment database, now used in CGE modelling, and 
as a GTAP board member supports a new global 
migration database.
(f) CGE modelling is also complemented by addi ‑
tional quantitative modelling (in particular of 
social and environmental effects) and more de ‑
tailed sectoral analyses.

HOW  TO OBTAIN  EU PUBLICATIONS
Free  publications:
•  one  copy:  
via EU Bookshop  (http://bookshop.europa.eu );
•  more  than  one  copy  or posters/maps:  
from  the European  Union’s  representations  (http://ec.europa.eu/represent_en.htm );  
from  the delegations  in non‑EU  countries  (http://eeas.europa.eu/delegations/index_en.htm );  
by contacting  the Europe  Direct  service  (http://europa.eu/europedirect/index_en.htm ) or 
calling  00 800 6 7 8 9 10 11 (freephone  number  from  anywhere  in the EU) (*).
(*) The information  given  is free,  as are most  calls  (though  some  operators,  phone  boxes  or hotels  may  charge  you).
Priced  publications:
• via EU Bookshop  (http://bookshop.europa.eu ).
Priced  subscriptions:
•  via one  of the sales  agents  of the Publications  Office  of the European  Union  
(http://publications.europa.eu/others/agents/index_en.htm).nts/index_en.htm ).
QJ‑AB‑14‑002‑EN‑C ISSN  1831 ‑0834
Preferential trade arrangements (PTAs) are an 
essential instrument of EU trade policy. Trade 
brings economic benefits to both the EU and its 
partner countries and promotes sustainable 
development and poverty eradication in 
developing countries. This report evaluates 
whether PTAs are appropriately managed by 
both the Commission and Member States. It 
found that the Commission has not 
appropriately assessed all the economic effects 
of PTAs and that the completeness of revenue 
collection is not ensured because customs 
controls applied by Member States are weak and 
there are also deficiencies in the Commission’s 
supervision.
EUROPEAN
COURTOF AUDITORS