COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 09.06.1997 
COM(97) 259 final 
2nd REPORT 
ON 
THE RECOVERY OF TRADITIONAL OWN RESOURCES IN CASES OF 
FRAUD AND IRREGULARITIES 
(SAMPLE B 94) 
(presented by the Commission) 

-2 
INTRODUCTION 
1. SAMPLING METHODOLOGY AND CHARACTERIZATION OF CASES 
1.1 Method of selecting sample 
1.2 Information on the recovery situation 
1.3 Characterization of cases 
2. DESCRIPTION OF CASES SELECTED AND PROGRESS IN RECOVERY 
2.1 Fraud cases proper 
2.1.1 Cattle, sheep and meat from Eastern Europe 
2.1.2 Milk powder 
2.1.3 German/Dutch butter 
2.2 Cases of irregularities 
2.2.1 Seychelles tuna 
2.2.2 Faroese shrimps 
2.2.3 Colour television sets from Turkey 
3. SUMMARY OF THE RECOVERY SITUATION 
3.1 General picture 
3.2 List of shortcomings in recovery 
4. CONCLUSIONS 
-3-
INTRODUCTION 
This report outlines progress in recovering traditional own resources in six cases of fraud 
and irregularities deemed particularly important on the basis of selection criteria 
explained below. The own resources at stake in the six cases total some 
ECU 124 million. 
Responsibility for collecting traditional own resources (TOR) falls on the Member 
States. 1 In particular they have the task of establishing entitlements, recovering and 
verifying them and making them available. 2 They keep separate accounts of entitlements 
not yet recovered or in dispute and send the Commission a statement of these amounts 
every quarter. 
The Commission monitors the Member States' application of Community rules and the 
action they take to collect, recover and make available entitlements. It does so on the 
basis of information it receives from the Member States concerning the separate account 
of unrecovered entitlements, cases of fraud reported under the mutual assistance 
arrangements in accordance with Regulation No 1468/81 and write-offs mentioned in the 
Member States' annual reports on their recovery activities. ^ 
Given the very high number of cases reported on fraud and mutual assistance forms (over 
2 000 per year), the Commission has established a monitoring method based on samples. 
Two types of sample are taken, each consisting of a number of cases which are closely 
monitored until final clearance. Sample A is taken by selecting cases involving 
entitlements of over ECU 500 000 on the basis of fraud and irregularity forms. Sample 
B is formed on the basis of mutual assistance (AM) forms or other sources, by selecting 
cases involving more than ECU 1 million. The two samples differ in size and in purpose. 
• sample A is broader (around 100 cases) and lends itself to an essentially statistical 
analysis; 
• sample B is much smaller (6 cases) and is used to keep track of individual cases which 
are particularly important. 
Samples A and B account for around 70% and 30% of the amounts evaded in cases of 
fraud and irregularities reported to the Commission between the first half of 1989 and the 
first half of 1993. 
On 6 September 1995 the Commission presented a report to the budgetary authority on 
the first A-type sample - A94 (COM(95)398 final). 
This is the first report to cover a B-type sample (B94). It outlines the situation at 31 
December 1996 in respect of six cases selected on the basis of the criteria described at 
point 1.1. 
Under Article 8 of Council Decision 94/728/EC, Euratom. 
On the basis of Council Regulation (EEC), Euratom) No 1552/89 (Regulation No 1552/89), in particular Article 6(2)(b) thereof 
Provided for in Article 17(2) of Regulation No 1552/89 
-4 
Given the complexity of the cases in question, which typify the difficulties encountered in 
recovering TOR, the report inevitably shows that only a tiny proportion of the amounts 
at stake have been recovered. The Commission will continue to monitor these cases until 
final clearance and will give a further update on the sample at a later date. 
1. SAMPLING METHODOLOGY AND CHARACTERIZATION OF CASES 
1.1 Method of selecting sample B94 
Since 1994 the Commission (DG XIX) has drawn up an annual list of cases of fraud or 
irregularities which come to its attention either through notifications under the mutual 
assistance arrangements or otherwise. The list is constantly updated. 
Each year a number of cases are selected from the list to form a "B" sample for closer 
monitoring, on the basis of the following criteria. 
1. very high cost to the Community budget, i.e. over ECU I million; 
2. investigations launched by a Commission department (UCLAF, DGs VI, XIV, 
XIX, XX or XXI); 
3. responsibility for recovery shared between Member States; 
4. time-limit approaching for recovering amount due from debtor; 
5. interest shown by the budgetary control authorities in certain cases of fraud or 
irregularities. 
Cases are included in the sample if they meet the first two criteria and at least one of the 
other three. 
Of the 89 cases recorded between 1989 and 1993, six cases were chosen on the basis of 
the above criteria to be monitored until final clearance: 
Case No 1 : Fraudulent removal from the transit arrangements of cattle, sheep and 
meat originating in various eastern European countries; 
Case No 2: Fraudulent removal from the transit arrangements of milk powder 
originating in eastern European countries; 
Case No 3: Reimportation into the Federal Republic of Germany of Dutch butter 
exported with export refunds to the former GDR; 
Case No 4: Application of the preferential arrangements for canned tuna imported 
from the Seychelles on the basis of improperly issued EUR 1 certificates; 
Case No 5: Application of the preferential arrangements for shrimps imported from 
the Faroes on the basis of wrongly issued EUR 1 certificates; 
Case No 6: Application of the release for free circulation arrangements to television 
sets imported from Turkey on the basis of improperly issued ATR 
certificates. 
The reasons for selecting these cases are summarized in the following table: 
Table I 
Choice of cases in 1st sample 
1 
2 
3 
4 
5 
6 Cattle, sheep and 
meat from E. 
Europe 
Mik powder 
German/ Dutch 
butter 
Seychelles tuna 
Faroese shrimps 
Turkish TVs AM forms 
46-47/90 
54/91, 56/91 
7/92, 13/92 
38/92, 65/92 
19/93 
— 
10/92 
2/90 
33/88 Customs 
procedure in 
question 
Transit 
Transit 
Release for 
free circulation 
Release for 
free circulation 
Release for 
free circulation 
Release for 
free circulation Criteria 1 
Estimated 
amounts 
ECU 50 milon 
ECU 6.4 million 
ECU 7 milon 
ECU 1.5 million 
ECU 10 milon 
ECU 45 million Criteria 2 
Commission 
inspection 
X 
X 
X 
X 
X 
X Criteria 3 
Shared recovery 
B, D, F, I, NL 
B, E, F 
D, NL 
B, F, IRL, NL, UK 
B, DK, F, NL, UK 
All except IRL and L Criteria 4 
Time-imit 
approaching 
X 
X 
X 
X Critena 5 
Court of auditors 
(partly) 
Court of Auditors 
Court of Auditors 
Court of Auditors 
According to initial estimates based on the AM forms, before questions were put to the 
Member States, these six cases involved a total of around ECU 121 million in TOR. 
By comparison, once the Member States had been asked to report on progress in 
recovery, the total amount at stake turned out to be ECU 124 million. 
1.2 Information on the recovery situation 
Information on recovery by national authorities was obtained in reply to questions put by 
DG XIX to the relevant national departments. Except in the case of the German/Dutch 
butter, these questions were formulated on the basis of the disputed transit documents or 
certificates of preferential origin.^ 
This accurate data supplied by the national authorities replaced the Commission's 
previous figures for the cases under surveillance, which had been based on its own 
estimates or those of the national investigation departments. 
In the case concerning cattle, sheep and meat from Eastern Europe, the German authorities drew up a standard questionnaire and sent 
the Commission the answers it received from customs offices, covering more than 1300 T1 documents This first series of reports has 
already been updated by the German authorities 
6-
The estimates produced by comparing mutual assistance cases with a large number of 
fraud cases reported to the Commission under Regulation No 1552/89 were broken 
down into those concerning the A account (amounts already made available) and the B 
account (amounts awaiting recovery). When the figures became available, the amounts 
barred by lapse of time were indicated. The breakdown between A and B accounts is 
presented for each Member State in a table on each case in the sample. 
The Commission accepts the data supplied by the Member States as it stands until it finds 
proof to the contrary, notably as a result of inspections. 
1.3 Characterization of cases 
The six cases selected fall into two distinct categories. 
• The livestock and meat, milk powder and German/Dutch butter cases involve the 
deliberate infringement of existing legislation by importers whose good faith must be 
in doubt. 
These are cases of proven fraud or of exploitation of loopholes in customs legislation. 
• In the other three cases (Seychelles tuna, Faroese shrimps and Turkish TVs) 
importers asked for preferential treatment when presenting their goods for customs 
clearance, on the basis of certificates which Community inspections later revealed to 
have been wrongly issued by the authorities in the exporting countries. As a result the 
importers found themselves in an irregular situation, having incurred a customs debt 
for which they were liable retrospectively. 
The distinction between fraud proper and irregularities is relevant for two reasons: in 
relation to the period of limitation and from a procedural point of view. 
Firstly, in the case of irregularities, the normal period of limitation stipulated in the 
Customs Code is three years, while in fraud cases liable to prosecution the national 
limitation period applies. 
Secondly, the distinction is essential for determining the action to be taken by the 
national authorities to recover the traditional own resources at stake. 
- In the case of proven fraud, investigation departments normally seek to identify the 
perpetrators and determine their criminal and financial responsibility. 
However, evidence of the fraudulent activity is generally found on national territory or 
in other Member States. Any missions to exporting countries outside the Union are 
conducted mainly for the purposes of prevention. 
- In the case of irregularities, where certificates entitling goods to preferential 
treatment are subsequently found to be invalid, evidence of their invalidity can be 
obtained only by investigating the firms that produced the goods in the exporting 
countries. 
A Community mission of inquiry may be conducted in accordance with the mutual 
assistance Regulation. If the resulting report shows that the certificates are invalid, 
post-clearance recovery proceedings are instituted. 
-7 
In the three cases of irregularities in the present sample, missions of inquiry established 
that the certificates issued for the imports in question were invalid. 
2. DESCRIPTION OF CASES SELECTED AND PROGRESS IN RECOVERY 
2.1 Fraud cases proper (proven or assimilated fraud) 
2.1.1 Removal of cattle, sheep and meat originating in eastern Europe from the 
transit arrangements 
Background 
Between 1990 and 1993, cattle, sheep and meat were imported from various eastern 
European countries (Poland, Hungary, Czechoslovakia and Romania) into Germany, 
where they were placed under the external transit arrangements, supposedly destined 
for countries outside the Union (the Maghreb, Niger, etc.). 
The transit operations in question were either falsely discharged using fake stamps or 
not discharged at all. As a result tens of thousands of cattle and sheep were imported 
illegally into the Community customs territory. 
These unprecedented fraud networks, masterminded by criminal organizations, were 
uncovered by a number of national investigating departments. The traffic began in 
Germany, but also affected Belgium, France, the Netherlands and Italy, while some 
consignments even reached the United Kingdom. 
The Commission warned all the Member States by means of AM forms/ on the basis of 
which the relevant national investigating departments drew up reports, notified debtors 
of the customs debt (establishment within the meaning of Regulation No 1552/89) and, 
where possible, made seizures. A number of persons have been successfully prosecuted. 
Some investigations by national departments are still under way. 
While national prosecution services were taking these steps to put an end to the fraud, 
the Commission tightened up legislation on the transit arrangements, which had proved 
to be inadequate, by introducing the following changes: 
- allowing for a ban on the use of the comprehensive guarantee for high-risk goods; 
- allowing for a compulsory itinerary in cases where the comprehensive guarantee has 
been suspended, and a ban on changes to the office of destination; 
- fixing the amount of the comprehensive guarantee at 100% of duties and other 
charges payable, except in certain specific cases; 
- laying down stricter conditions governing entitlement to and use of the comprehensive 
guarantee; 
- excluding traders who commit serious infringements against the TIR arrangements; 
- establishing other special inspection measures regarding high-risk goods. 
AM forms 46-47/90, 54-56/91, 7-13-38-65/92 
-8-
Initial estimates of the economic and financial impact of these fraudulent imports, 
calculated on the basis of the transit documents covered by the AM forms which meet 
the monitoring criteria, put the cost to the Community budget as follows:^ 
Livestock 148 635 head ECU 20 million 
Meat 6 400 tonnes ECU 30 million 
ECU 50 million 
Outcome of recovery measures 
Progress in recovery depends on two conditions. 
• Investigations must be complete so that the debtor can be identified, the debt legally 
defined and the debtor notified of the debt. 
Many of the investigations in Germany had not been completed when the Member 
States replied to the Commission's questionnaire. In some cases the German 
authorities asked for assistance from the Dutch authorities, under Regulation 
No 1468/81, as the latter had evidence that the livestock or meat had been imported 
fraudulently into the Netherlands. The Dutch authorities have still not replied to these 
requests. 
• Where offenders are caught red-handed or there is enough evidence to prosecute, 
cases are brought before the courts, which then decide whether the defrauder is liable 
for the debt. Some Member States have taken precautionary measures (guarantees 
consisting of movable or immovable property) pending the end of the proceedings. 
Because of these conditions, many transit operations were still unresolved when the 
German authorities drew up notices using transit forms, which they sent to the 
Commission. 
Acting on the joint conclusions of the German and Dutch investigating departments, set 
out in a report by the FIOD (the Dutch investigating department), the German authorities 
wrote to the Dutch, Belgian and French authorities in October 1994, since the livestock 
and meat had been fraudulently imported into all three countries. 
The Belgian authorities questioned this unilateral attempt to attribute responsibility, 
while the Dutch authorities subsequently denied the conclusions of the report by their 
own department. Although three carriers involved in the transit operation were sentenced 
to fines or imprisonment in the Netherlands, the Commission was not informed of the 
consequences of these sentences for the recovery of TOR 
The monitoring of recovery does not cover all cases where there were similar AM forms during the period 1990-94 The total financial impact 
is in fact: 
Livestock 155 655 head ECU 25 million 
Meat 7 260 tonnes ECU 33.4 million 
ECU 58 4 million 
9-
Under the Customs Code, the principal is held generally liable - and his security 
retained - where a transit procedure is not discharged. However, the German authorities 
did not apply the relevant rules, as they only detected the first infringements (forged Tl 
copies or failure to send back Tl copies) after 14 months. 
The large firms which had presented the goods at customs and were liable to pay the 
debts subsequently filed for bankruptcy. 
Given the position of these Member States, the proportion of own resources actually 
recovered is still very low (see Tables Il-a and b below). 
In some cases established entitlements which have not yet been recovered or are in 
dispute were entered in the B account by different Member States for the same 
operations: first by the State where the principal named in the transit document was-
established and then by the State where the fraud was detected. 
In a number of undischarged operations none of the Member States has taken any action. 
In some cases the Member States concerned do not accept responsibility for recovery, so 
that the entitlements in question have not yet been entered in the accounts. In other 
cases, although the amounts have been entered in the B account, no practical steps have 
yet been taken to recover them. 
The biggest problem concerns entitlements which have not been established and have 
become time-barred. Even where the national period of limitation applies, the 
Commission takes the view that entitlements should be established as soon as possible. It 
will remind the Member States of their obligations - in the event of failure to identify the 
perpetrator of a fraud, amounts must be established for each individual document in 
accordance with Community rules. 
The Commission is now examining how Community legislation is applied by the Member 
States concerned. It will have to make a judgment on the degree of diligence shown by 
the national authorities in recovering own resources, in particular where there is no 
consultation. Similarly, where entitlements have not been established in accordance with 
legislation and have subsequently been time-barred, steps will have to be taken to ensure 
that the Member States assume their responsibilities. The Commission's accounting 
departments have already drawn up estimates of amounts owed by Belgium, Germany, 
France and the Netherlands. 
10-
Tablell-la 
Livestock (cattle and sheep) from eastern Europe - Responsibility for recovery 
Reference 
AM forms 
Nos 56/91 & 
56/91(Sl)92 
(Qrcuit B-1) 
AM form No 
54/91 
(Qrcuit B-2) 
AM forms 
Nos 36792 & 
38/92(S1)92 
(Qrcuit B-3) 
AM form No 
13/92 
(Qrcuit B-4) 
AM forms 
Nos 46/90 & 
47/90 
(S1)92 
(Qrcuit B-5) 
TOTAL Numbe 
rof 
T1s 
153 
20 
131 
60 + 
71 
+ 8 
(TIR) 
8 
673 
985 + 
8(TIR) Issuing 
Office 
Frankfurt/ 
Oder 
Frankfurt/ 
Oder 
Waidhaus 
Various 
German 
border 
towns Member 
States 
concerned 
Germany 
Italy 
Germany 
Belgium1 
Germany 
Netherlands 
Belgium 
France' 
Netherlands 
Germany 
Belgium 
Germany 
Netherlands 
Belgium1 
France Responsi­
bility 
recognize 
d 
(Number 
ofT1s) 
152 
20 
(20) 
104 
26 
(2) 
8 
5 
3 
421 
739 Responsi­
bility 
attnbuted 
(Number 
ofT1s) 
3 
3 Responsi­
bility to be 
attnbuted 
(Number 
ofT1s) 
1T1 
503 T1 Amounts entered in the 
accounts (ECU) 
"A" a/c "B" a/c 
41500 
100 000 
340 000 
180 000 
183 500 
845 000 3 658 000 
672 650 
(582 300) 
1 970 000 
(115 700) 
271 780 
14 000 000 
(35 500) 
20 572 430 Evaluation 
of amounts 
to be 
attributed 
(ECU) 
16 303 000 
16 303 000 
Cases and amounts entered in the accounts twice. 
Table II - b 
Meat from eastern Europe - Responsibility for recovery 
AM 
Reference 
AM form 
No 7/92 
(Qrcuit V-
1) 
AM form 
No 65/92 
(Qrcuit V-
2) 
AM form 
No 65/92 
contd 
(Qrcuit V-
2A) 
TOTAL Number 
ofTIs 
involved 
20 
267 + 
3 TIR 
(84 H + 
87 S + 
78 R + 
21 C) 
11 T1 
289 + 3 Issuing 
Office 
Rotterdam Member 
States 
concerned 
Belgium 
Netherlands 
France 
(according to 
NL) 
Germany 
Belgium1 
Netherlands 
France1 
Germany 
Netherlands 
Belgium 
France 
Portugal Responsibility 
recognized 
(number of 
T1s) 
2 
75 
235 
(6T1) 
(4T1) 
322 Responsi­
bility 
attributed 
(number of 
T1s) 
18 
18 Responsi­
bility to be 
attributed 
18 T1 
2T1 
(20) Amounts 
entered in B 
account (ECU) 
3 200 
7169 214 
11600000 
(432 957) 
(369 162) 
18 772 414 Evaluation of 
amounts to be 
attnbuted 
(ECU) 
280 000 
280 000 
Cases and amounts entered in the accounts twice. 
-11 -
2.1.2 Removal of milk powder from transit arrangements 
Background 
Between June 1991 and October 1992 milk powder from Poland was placed under the 
external Community transit arrangements in Antwerp for carriage to Spain. 
In August 1992 four Tl documents (No 5 control copies drawn up for consignments of 
milk powder) arrived at Antwerp by post direct from Irun in Spain. As Tls discharged in 
Spain are normally sent via the designated central offices (Madrid or Barcelona), the 
Belgian authorities asked the Spanish authorities to carry out ex post checks on these 
documents under the mutual assistance Regulation (No 1468/81). In November 1992 the 
Spanish authorities replied that the four documents had neither been discharged nor sent 
by Irun customs office. 
Meanwhile the Belgian authorities had discovered other, similar Tl documents. 
Subsequent checks on all these documents by the Spanish authorities revealed that, in 
each case, discharge had been falsified. 
To date 229 consignments have been identified. The goods in question were transported 
by lorries registered in France and in Spain, except for five consignments where the 
carrier has not been identified. 
The French authorities launched an investigation in response to requests for 
assistance from the Belgian authorities and a request for information from the 
Commission. They were able to reconstitute 154 consignments transported by a French 
carrier to Spain, on the basis of documents seized from the carrier in question 
(consignment notes, invoices, drivers' records indicating the distance travelled). The 
confiscated documents showed that the goods were unloaded in Spain. The carrier in 
question has recently been notified of the infringements detected by the French 
authorities. 
The Belgian authorities found additional evidence that some consignments had been 
unloaded in Spain. On 16 August 1995 they again asked the Spanish authorities for 
assistance. Besides the 154 consignments transported by French vehicles and unloaded in 
Spain, it is suspected that another 74 consignments carried by Spanish lorries or by an 
unknown means of transport were also unloaded in Spain, although this cannot be 
proved for all the consignments in question. 
According to AM form No 19/93, issued by the Commission, the amount of duties 
evaded in these fraudulent transit operations, covering 190 consignments and around 
4000 t of milk powder, comes to ECU 6.4 million. In fraud form No 94/6-28, drawn up 
under Regulation No 1552/89, the Belgian authorities reported that a total of 5700 t of 
milk powder had been placed under the transit arrangements, for which the duties evaded 
came to ECU 8.9 million (229 consignments). 
The Commission has sent reminders to the national authorities concerned, and the 
Belgian and French investigation departments have produced evidence that some 
quantities of milk powder were unloaded in Spain Even so, the Spanish authorities were 
slow to launch investigations, which are still under way. 
12 
On the basis of the fraud notifications sent by French customs to Spanish customs, copies 
of which were received by the Commission, two Community teams visited Spain - the 
last on 25 January 1996 - to discuss with the authorities there what measures should be 
taken to handle the case effectively. 
Outcome of recovery measures 
The Belgian authorities warned the Commission on several occasions that the guarantee 
held as security from the principal, a customs agent, was insufficient to cover all of 
the TOR at stake. They considered it unfair to pursue recovery from the principal, as this 
would cause him to go bankrupt. As the Member State of departure, Belgium claimed 
that it need only recover and enter in the accounts entitlements in respect of 
consignments of which no trace could be found, since the evidence gathered by the 
investigating departments showed that most of the consignments had been unloaded 
fraudulently in Spain. 
Since the Member States concerned had failed to take appropriate action on the 
conclusions of the investigations and after four years no firm case had yet been brought 
against the French carrier and the Spanish consignees, the Commission asked the Spanish 
and French authorities - by letters dated 23 April 1996 and 20 March 1996 respectively -
to commence legal proceedings. By a decision of the Directorate-General of French 
Customs on 22 June 1996, a document initiating proceedings was lodged on 30 July 
1996 at the Tribunal de Grande Instance in Bayonne. 
On 23 December 1996 the Commission asked the French authorities for further 
information on the action brought against the carrier. On the same day it asked Spain to 
report on progress in the fraud investigations and in the prosecution of the defrauders. 
As regards the request from the Belgian authorities for the Belgian principal to be 
released from his responsibility for the consignments found to have been transported 
to France and unloaded in Spain, the Commission does not agree with Belgium's view or 
its interpretation of the rules applicable at that time, which have since been replaced by 
Article 379 of the provisions implementing the Customs Code. Under Articles 360 to 
369 and 379 of those provisions, the principal and his guarantor are liable for the non-
discharge of transit documents and the principal remains entirely responsible for paying 
the duties as long as a designated debtor, defrauder or carrier has not honoured the debt. 
This case shows that Community provisions are deficient in two respects: on the one 
hand they do not clearly define which authorities should accept the information specified 
in Article 378 paragraph 1 of the Implementing Provision nor do they define the criteria 
for acceptance of such information and on the other hand, with regard to the country 
where the transit offence took place they do not clearly define to what extent a Member 
State, other than the Member State of departure, is obliged to proceed with recovery. 
Table II-2 
Milk powder 
Member State 
Belgium 
Spain 
France A account 
Nil 
Nil 
Nil B account 
Nil 
Nil 
Nil Court proceedings 
X 
- 13 
2.1.3 German/Dutch butter 
Background 
On 15 August 1990 a cargo of 2000 t of butter was sent by sea from the Netherlands to 
the former GDR after some ECU 4 million had been paid in export refunds. 
The cargo was unloaded two days later and given customs clearance in Wismar in the 
former GDR, but the butter was immediately transferred to refrigerated warehouses in 
West Germany without any levy being collected. 
The Dutch investigation department was alerted to the case by its German counterparts. 
The Dutch authorities then intervened to demand repayment of the refunds unduly 
received by the exporter, since the butter had been reimported into the Community 
territory. This "export refund" aspect of the case has already been followed up through 
administrative action and in the courts. On 28 August 1996 the College van Beroep voor 
het bedrijfsleven rejected an appeal by the exporter against a decision by the Dutch dairy 
products board demanding repayment of the refund. Following this judgment, the Dutch 
authorities confiscated the bank guarantee of ECU 2.3 million and commenced a civil 
action to recover the balance. 
The recovery of export refunds is a matter of agricultural policy and, as mentioned 
above, is dealt with in accordance with agricultural legislation. By contrast, where 
butter previously exported with refunds is reimported into the Community without 
levies being paid, this constitutes an infringement giving rise to a customs debt. 
It is recovery of this debt which is the Commission's target. It has called into question 
the attitude of the German authorities, who claim that no customs debt has arisen 
because no administrative measures have been adopted to implement Community 
legislation vis-à-vis debtors. The amount of TOR at stake is ECU 6 856 665. 
Outcome of recovery measures 
The Commission rejected the German authorities' argument that there was no need for 
the importer to complete any customs formalities in importing into the Federal Republic 
butter which had previously been exported with refunds from the Netherlands to the 
GDR during the short-lived customs union between the two German states. 
On the contrary, the Federal Republic's representatives on the relevant agricultural 
committees gave an undertaking that measures would be adopted to implement 
Regulations (EEC) Nos 2252/90 and 2060/90, thus preventing butter which had received 
export refunds from being reimported into the Community on reunification. 
Accordingly the Commission asked the German authorities by letter dated 22 June 1994 
to make available the amount of levies at stake - ECU 6 856 665 (DM 12 684 000) - and 
on 16 August 1994 drew up a recovery order for that amount. 
- 14 
The Commission considered that the importer was able to import the butter into the 
Community without paying any levies because of negligence on the part of the 
German authorities 
The German authorities refused to act on the Commission's request. As the Commission 
was unable to accept the reasons they cited for this refusal in a letter dated 3 February 
1995, it sent a letter of formal notice on 13 September 1995, allowing two months for a 
reply. The reply did not arrive until 11 January 1996 and added nothing to the position 
already stated by the German authorities. The Commission sent Germany a reasoned 
opinion on 30 October 1996. 
Table 11-3 
German/Dutch butter 
Member 
State 
Germany A 
account 
nil B 
account 
nil Recovery order 
ECU 6 856 665, 
16.8.94 Stage in proceedings 
Letter of formal notice 
13.9.95 
Reasoned opinion, 
30.10.96 
2.2 Cases of irregularities (invalid preferential certificates) 
2.2.1 Seychelles tuna 
Background 
As part of its anti-fraud operations, the Commission conducted surveys at the end of 
1991 on imports of canned fish from various non-member countries (ACP and non-
ACP States), acting on suspicions expressed by the industry in the Community. 
A survey in the Seychelles found that the unloading of tuna by Community or ACP boats 
could not account for the volume of canned tuna exported from that country to the 
Community. As the Seychelles has a limited fishing capacity depending on the year (or 
indeed no capacity at all until two boats were put into service in 1991) and no 
Community boats are thought to fish in Seychelles waters, the local cannery could only 
have produced all of its consignments of canned tuna by buying fish from other 
countries. 
In order to clarify this apparent contravention of the rules of origin laid down in 
Protocol No 1 to the Lomé Convention, the Community organized a mission to the 
Seychelles from 7 to 19 December 1992, in cooperation with the Seychelles authorities. 
The Community representatives wanted to check whether certain preferential certificates 
were in order. However, since the Seychelles authorities were unable to present the 
registers which might have contained the relevant information, checks could be made 
only at the headquarters of the exporter. 
-15 
The inspection revealed that over the last few years large quantities offish (5368 tonnes) 
caught by boats from non-member countries (in particular Japan, Russia, Panama and 
Malta) had been used in part to manufacture canned tuna subsequently exported to 
the Community under cover of EUR 1 certificates (2000 t). 
The Community team inspected a total of 214 EUR 1 certificates issued by the 
Seychelles authorities between 9 January 1990 and 2 December 1992 and containing all 
the information needed to make an accurate decision on their validity Each certificate 
generally covered several containers (in some cases more than 20). 
The outcome of the inspection was as follows: 
• Of the 214 certificates, 54 concerned consignments of canned tuna which met all the 
criteria of the rules on origin under the Lomé Convention and were therefore entitled 
to preferential treatment on import into the Community. 
• 1 certificate covered only third-country products (not originating in the Seychelles) 
and was therefore invalid for the purposes of preferential treatment. 
• The other 159 certificates were issued for "mixed" consignments consisting of 
originating and non-originating products within the meaning of Protocol No 1 to the 
Lomé Convention. 
Using the available commercial documents, it was possible to identify for each container 
and each certificate the number of boxes containing cans of "originating" tuna and the 
number of "non-originating" boxes. From a legal point of view this distinction was vital if 
the procedure for recovering customs duties on third-country products was to be 
implemented. 
The list of certificates indicating in detail for each container and each certificate the 
number of boxes of originating and non-originating goods in accordance with the 
Lomé Convention criteria was sent to the Member States concerned (Belgium, France, 
Ireland, the Netherlands and the United Kingdom) on 19 July 1993 so that they could 
recover the duties evaded. 
As the consignments were "mixed", the customs debt was not based on the total amounts 
on the certificates, but on the quantity of non-originating goods identified separately for 
each certificate. The amounts to be recovered ex post were initially estimated at 
ECU 1.5 million by the investigating departments. 
Outcome of recovery measures 
The total amount of TOR at stake, as entered in the accounts by the Member States, is 
in fact ECU 1.84 million, compared with the initial estimate of ECU 1.5 million 
(AM form No 10/92). 
Although the Seychelles authorities initially accepted the conclusions of the Community 
mission, they subsequently tried to avoid the consequences of the invalidity of the EUR1 
certificates. Between November 1993 and March 1995 they contacted the Commission 
several times requesting that post-clearance recovery be abandoned 
- 16 
The Community importers who were the subject of recovery proceedings had invoked 
the safeguard clauses laid down in their business contracts and turned against the 
Seychelles exporters, a consortium of canneries, the main industry on the islands, 
suspending payments to Seychelles suppliers. 
In the United Kingdom in particular the importers managed to persuade the Seychelles 
consortium to pay in their place and the customs authorities granted the consortium 
deadlines for payment. However, at the end of August 1995, the consortium asked the 
British authorities for a moratorium on the amounts outstanding, which came to around a 
third of the debt in the United Kingdom, arguing (wrongly) that only the British 
importers could be obliged to pay duties. The British authorities passed on this request to 
the Commission. 
All these requests met the same response from the Members of the Commission, i.e. that 
the customs debt could not be cancelled without a legal basis 
On the basis of the Commission's replies, the UK authorities resumed recovery 
proceedings in the form of payment in instalments. The minimal debts which had arisen in 
the Netherlands and Ireland were recovered. 
The large debts incurred in France, which account for half of the total, are challenged by 
the importers. Although these cases were submitted to the ACP/EEC Council, which 
endorsed the position of the Customs Cooperation Committee that the calculation of the 
debts should be checked, the cases were nevertheless brought before an appeal body, the 
Commission de conciliation et d'expertise douanière (Committee for Conciliation and 
Customs Expertise), which in April 1996 (i.e. two years later) found that the imported 
tuna may have included Seychelles tuna. However, the rules on origin laid down in the 
Protocol to the Lomé Convention provide that products of different origin must be 
treated separately if products from the country in question are to receive preferential 
treatment. There was no such separate treatment in the Seychelles. The French 
authorities intend to take this matter to the courts. 
Table H-4 
Seychelles tuna 
Country 
B 
F 
IRL 
NL 
UK 
Total EUR1 
recognized 
5 
75 
4 
5 
69 
165 Fraud forms 
BE/94/06/39 
BE/94/06/40 
FR/94/11 
FR/94/12 
IRL/93/12/05 
NL/93/12/107 
EN/93/12/176, 177, 178 
and 179; EN/94/06/40 
11 forms Amounts in 
A account 
(ECU)7 
18 092 
73148 
353 9168 
445 156 Amounts in 
B account 
(ECU) 
59 335 
1 075 530 
294 827 
1 429 692 Amounts time-
barred (ECU) 
3 723 
3 723 Court proceedings 
Yes 
Planned 
' Figures at 31 10.96. 
8 GBP 14 903.71 or ECU 18 048 in respect of imports for which the debt was less than ECU 10 000. 
- 17 
2.2.2 Faroese shrimps 
Background 
Following investigations in several Member States which led to AM form No 2/90, a 
Community mission to the Faroes established that nearly 600 EUR 1 certificates issued 
by the Faroese authorities for export to Belgium, Denmark, France, Netherlands and 
the United Kingdom were invalid. 
On the strength of these EUR 1 certificates, consignments of shrimps fished by Canadian 
boats or by Faroese boats that were not fitted out in accordance with the rules on 
preferential treatment as well as shrimps from non-member countries which were merely 
shelled in the Faroes benefited unduly from a reduction in customs duties intended for 
goods originating in the Faroes. The relevant rules on origin applicable to all fish 
products, which were adopted in 1974 and later incorporated into the trade agreement 
concluded with the Faroes, are standard rules based on economic considerations and 
should not be particularly difficult for international traders to apply. 
The Faroese authorities first acknowledged these facts, but then went back on this 
admission, claiming to have been unaware of certain rules on preferential origin, an 
assertion which is belied by the instructions issued to firms by the same authorities, the 
application of which they failed to monitor. The Faroese authorities also claimed that 
errors arose because a bilateral agreement with Denmark existed alongside the 
Community preferential arrangements. 
In fact these errors could easily have been avoided if adequate checks had been 
conducted, which would in any case have affected only a small number of traders. 
Under the relevant Community legislation, a reduction in duties could not be granted for 
the sole reason that documents presented, albeit in good faith, for the granting of 
preferential tariff treatment for goods entered for free circulation were later found to 
be false, forged or invalid. 
In this particular case, Member States should have based their recovery measures on the 
cancellation of the offending certificates by the Faroese authorities and the facts set out 
in the report on the Community mission of inquiry of 15 October 1991, in which some of 
their officials took part. 
The report was sent to all the Member States, in accordance with the rules adopted by 
the Council. 
The amounts to be recovered ex post were initially estimated at ECU 10 million, 
Outcome of recovery measures 
Although it was established that the EUR 1 certificates issued by the Faroese authorities 
were invalid, not all of the TOR at stake was recovered, for a variety of reasons. 
This was partly because of the bilateral arrangements in force between Denmark 
and the Faroes, which provided for an exemption on all imports of Faroese products 
into Denmark. This preferential scheme ended on 1 January 1992 with the signing of the 
trade agreement between the Community and the Faroes, enshrined in Article 20 of the 
National Customs Act. However, the Danish authorities considered that the Protocol on 
the Faroes annexed to Denmark's Act of Accession was still applicable, in the absence of 
any Council decision to the contrary. 
Thus, imported shrimps intended for consumption in Denmark or re-export to 
non-member countries, notably after shelling, but not entitled to preferential treatment on 
the basis of the disputed EUR 1 certificates, were exempt from duty under Article 20 of 
the Danish Customs Act. The amount of exempted duties came to around 
ECU 11 million, thereby reducing the recoveries to be made by the Danish authorities to 
around 1/10 of the amounts at stake, i.e. ECU 962 950 (see Table II-5). 
However, the shrimps imported into Denmark which benefited from this exemption were 
not in free circulation, and any re-export to other Member States would either have to be 
taxed or sent under the external transit arrangements (Tl). The fact that Denmark did 
not take any steps to monitor such re-exports, other than a notice issued to the importers 
concerned, raises a number of problems on which the Commission will adopt a position 
shortly. 
Another singular aspect of this case is that Denmark, Ireland and the United Kingdom 
applied preferential national tariffs on these imports until 1992. 
In Belgium a court found in favour of a Belgian debtor against whom an action had been 
brought by the customs authorities there. The authorities have appealed against the 
decision. As a result of this case, Belgian and British importers, who form the majority 
and for whom these imports constitute a well-established trade, have felt even more 
justified in opposing post-clearance recovery, sometimes through legal action. 
The UK High Court of Justice referred two cases to the European Court of Justice for a 
preliminary ruling on 14 April 1994 covering nearly all of the TOR established in the 
United Kingdom and entered in the B account there. The European Court gave a ruling 
on 14 May 1996 which has still to be interpreted by the British court. ^ 
By contrast, the Dutch authorities have made available a total of ECU 295 232 
Leaving aside amounts time-barred, a relatively long period elapsed between the time 
when Member States were notified of the results of the Community mission establishing 
the invalidity of the EUR 1 certificates and the time when national authorities took the 
necessary steps to protect the Community's financial interests. 
The Commission departments found that the Danish authorities had not sent out the 
recovery demands in good time, and as a result some of the amounts at stake were 
barred through lapse of time. 
Judgment of 14.5.1996 in Joined Cases 153-94 and 204-94 Faroe Seafood, [1996] ECR I-2465 
However, recovery of the amounts pending, confirmation of amounts already recovered 
and any action to be taken against Member States because of amounts time-barred all 
depend on how the national courts interpret the judgment of the Court of Justice 
The Commission will ask for information from the Member States on decisions by the 
national courts and their implications for the recovery of TOR. 
Table 11-5 
Faroese shrimps 
Country 
B 
DK 
F 
NL 
UK EUR1 
5 
266 
21 
12 
185 
Total 599 Fraud form 
BE 92/06/06 
FR 92/06/09 FR 
92/06/10 
10 fraud forms A account 
(ECU) 
962 950 
295 232 
1 258 182 B account 
(ECU) 
67 958 
29 883 
1 804 238 Amounts time-barred or 
exempt (ECU) 
11000 000 
29/4/89 1 018 646 
1902 079 12 018 646 Judgment 
Yes 
Yes 
Yes 
2.2.3 Colour television sets from Turkey 
Background 
In 1988 the Commission received information from various sources on low prices 
practised by Turkish exporters of TV sets which suggested that the Turkish authorities 
issued ATRs for products that were not entitled to preferential treatment. 
Components originating from non-member countries were used in Turkey to 
manufacture TV sets exported to the Community. Customs duties on the imported 
components were either suspended (with no compensatory levy being collected) or 
refunded under the drawback scheme. 
Since the TV sets manufactured from these components were not taxed in Turkey, they 
could not be re-exported to the Community in free circulation using ATR documents, 
unless a compensatory levy were collected on re-export. 
On the basis of this information, the Commission warned the Member States (AM form 
No 33/88) and launched an investigation into exports of this kind from Turkey. First they 
asked the Turkish authorities to check the situation on the ground - but without success. 
After two years' delay, the Turkish authorities finally agreed that a Community mission 
be sent from 18 October to 9 November 1993. 
The mission confirmed that the exports of TV sets and the corresponding certificates for 
release for free circulation did not meet the requirements of the EEC-Turkey agreement. 
In the light of the facts established during the mission, which were not challenged by 
either the exporters or the Turkish authorities, a list of invalid certificates was drawn up 
and sent to national authorities. The Commission considered that the amount of duties 
payable because of the invalidity of the ATR1 certificates should be calculated on the 
basis of the value of the TV sets for which exemption from duties had been requested 
under the Agreement. The rate applicable to such goods was 14%. 
20 
The financial impact of the invalid ATR1 certificates on TOR was initially estimated at 
ECU 45 million, including ECU 5 million in anti-dumping duties. 
Outcome of recovery measures 
The problems encountered by the Member States in recovering entitlements in this case 
have been extremely complex. 
First the Turkish authorities fostered doubts as to the true status of the exports to the 
Community for as long as possible. It was not until January 1995 that they announced 
measures intended to resolve the problem in future. However, these rather late measures 
affecting Turkish exporters could not apply to imports into the Community and could not 
allow the retrospective cancellation of debts in respect of imports already carried out 
which had not been affected by the limitation period of three years, or the resulting 
post-clearance recovery. 
As regards amounts outstanding from the past, the Turkish authorities undertook to 
introduce a compensatory levy to be collected in the next three years which was intended 
to give the wrongly issued ATR certificates retrospective validity. There is no provision 
for this in either the Customs Code or the EEC-Turkey association agreement. 
These arguments were taken up by importers and by the national authorities in the 
Member States, who on several occasions appealed direct to Members of the 
Commission, asking for exemption from post-clearance recovery. Delegates representing 
most of the Member States concerned made similar requests in customs legislation 
committees, based on the same arguments. 
The Dutch and French delegations have sent the Commission requests for amendments 
to the Customs Code on the protection of importers' good faith, aimed either at 
obtaining an exemption from the recovery of debts incurred in the past on imports of 
Turkish TV sets or at exempting importers in future from the financial consequences of 
preferential certificates unduly issued by non-member countries and subsequently found 
to be invalid. 
The aim behind these requests was to make the Community budget meet the cost of any 
failure to recover debts. The Commission has not acted on these requests, as they 
undermine existing legislation and the very basis of the system of preferences governing 
all trade with non-member countries. 
In 1994 the Commission asked national authorities on several occasions to recover the 
TOR at stake or obtain security, while allowing debtors payment facilities that were 
compatible with the provisions of the Customs Code. ^ 
10 Letters from DG XIX No 1720, dated 2.3.1994, No 3141, dated 21.4 1994 and No 8957, dated 25 11 94 to the Permanent Representatives of 
(he Member States concerned and letter from DG XIX No 15885 dated 6 10 94 to the heads of customs depaitments. 
21 
The Commission maintains this position, even though the Member States have failed 
to take appropriate action. It considers that Member States should have taken all 
necessary steps to protect the TOR, while respecting the rights of debtors, at least after 
1 April 1994, when relations with Turkey were clarified. To date only Denmark has 
recovered the entitlements in respect of the (very few) imports of Turkish colour TVs to 
that country. 
Of the other Member States concerned, only the United Kingdom has produced a 
detailed statement of the debts for which it is responsible, some of which have been 
entered in the B account and others time-barred. The Netherlands has made available the 
amounts which have not been time-barred, having set July 1992 as the point of limitation. 
Some Member States (Belgium, France, Germany, Spain and Portugal) have entered 
amounts due in the B account and notified the Commission, but not in sufficient detail. 
The other Member States (Greece and Italy) failed to reply to the Commission's request 
for information. 
In some cases no real recovery measures have been taken to follow up the entry of 
entitlements in the B account. The Member States concerned appear to be waiting for 
a Commission decision on requests for reimbursement before taking any action. The 
requests, which cover around ECU 5 million, were submitted by German debtors under 
the legislation in force at that time, which is now incorporated in Articles 235 to 242 of 
the Customs Code. 
Recently there have been fresh developments in the case. By Decision of 28 May 1996, 
the Council asked the Commission to conduct a study with a view to finding a solution 
to the problems of post-clearance recovery of customs duties in relation to documentary 
evidence of preferential status, particularly in the context of the protection of good faith 
and the avoidance of discrimination between Community traders. 1 * The Court of Justice 
shed some light on this matter in its Faroe Seafood judgment (see footnote 9, 
Section 2.2.2) which might also have implications for the monitoring of recovery in this 
case. The Commission is preparing a communication on the subject which will be sent to 
the Council shortly. 
11 OJ C 170,14 June 1996 
22 
Table II-6 
Turkish colour television sets 
MS 
B 
DK 
D 
aw 
E 
F 
1 
NL 
P 
UK 
Total Number 
of 
ATRs 
16 
503 
302 
384 
216 
119 
53 
314 
1907 Fraud 
forms 
5 
12 
17 Number of TVs 
Declared 
28366 
938 
397 687 
426.991 Estimated 
31236 
738 
674 370 
4 974 
399 407 
368 936 
191 473 
223463 
79443 
584 121 
2.558.161 Financial 
impact A account B account 
(ECU) 
845000 
12 500 
14 000 000 
84500 
8600000 
7850000 
4000000 
5580000 
1700 000 
13000000 
55.672.000 25 500 
994 481 
7132 
1.027.113 558 OOOd) 
10 500 000 
3 093 000 
10 000 000O 
1 154 289 
3 886 2250) 
29.191.514 Estimate of 
amounts 
time-barred 
0 
9 821 000 
1 567 400 
2 722 000 
14.110.400 Date of 
limitation 
applied 
30.05.91 
0) 
1.1.92 
1.6.92 
1.1.91 
1.7.92 
1292 
18.10.91 
(1) The amount was notified in order to interrupt the period of limitation but has not yet been recovered. 
(2) Still to be determined. 
(3) Under scrutiny. 
(4) The Greek authorities have not taken any action. 
3. SUMMARY OF THE RECOVERY SITUATION 
3.1 General picture 
3.1.1 Monitoring 
Thanks to the cooperation of the Member States, the Commission has a fairly complete 
picture of how they exercise their recovery responsibilities, sometimes in difficult 
circumstances, for example in the case of the present sample. 
The cases covered in this report show that the systematic monitoring of recovery by 
national authorities is warranted. The Commission is aware of the additional workload 
caused by its action in this field. However, its aim is to safeguard the Union's financial 
interests and its action is often prompted by shortcomings and weaknesses detected in 
the recovery process. 
3.1.2 Overall recovery situation for sample B/94 (Table II- 7) 
Table II-7 presents the recovery situation for each Member State and each case in the 
sample at 31 October 1996, broken down as follows: 
• Amounts paid entered in the A account; 
• Amounts awaiting recovery entered in the B account; 
• Amounts to be recovered in cases where the Commission has challenged the action 
taken by Member States. 
The sample covers TOR totalling ECU 124 million, representing 27% of the balance of 
B accounts at 31 December 1993. It includes examples of the most serious difficulties 
encountered by national authorities - invalid preferential certificates and removal from 
the Community transit arrangements. 
23 
Table II-7 
ECU million Overall recovery situation in respect of sample B94 
1 
Cases per 
Member State 
B No1 
No2 
No 3 
No 4 
No5 
No 6 
DK No 5 
No6 
D No1 
No2 
No 3 
No5 
No6 
E No 2 
No6 
F No1 
No2 
No4 
No 5 
No6 
IRL No 4 
NL No1 
No 4 
No 5 
No6 
P No 6 
UK No 4 
No 5 
No6 
TOTAL 2 
Total per 
Member State 
22.55 
11.99 
45.18 
3.01 
11.58 
0.018 
18.493 
1.157 
10.04 
124.038 3 
Entries in 
A account 
Payments 
made 
0.03 
0.32 
0018 
0 52 
0073 
0.3 
1 
0.007 
0.35 
2.618 4 
Entries in B account 
(4a) Recovery 
pending 
129 
0.06 
0.56 
27.46 
10.50 
3.01 
0.48 
0.03 
10.00 
1.15 
0.29 
0.2 
39 
7054 (4b) Cases 
referred to the 
courts 
0.07 
0.96 
107 
16 
37 5 
Limitation or 
exemption 
11.00 
1 
27 
14.72 6 
Not entered 
Amounts (6A) 
PC 
896 
PC 
PC 
PC 
16.60 
25 56 Infringement 
cases (6B) 
• 
6.9 
69 | 
3.1.3 Comments 
Actual recoveries (column 1) 
Practically all recoveries that have taken place have been in cases of irregularities in 
preferential trade. Recovery proceedings in cases of fraud concern mainly the external 
transit arrangements, where nearly all of the amounts at stake are the subject of 
administrative or court appeals following demands for payment. The proportion of cases 
finally cleared is therefore still very low (less than 0.5%). 
B account: Recoveries pending (column 4a) 
This column indicates amounts not yet recovered. One might expect the lion's share of 
entitlements to be included in this category. However, the amount entered in the 
B account is actually much lower for two main reasons. 
1. in some cases because the period of limitation expired before the demand for 
payment was presented to the debtor (column 3), 
2. in other cases where amounts are not yet time-barred (period of limitation for fraud), 
some Member States have still to take the necessary steps to enter entitlements in 
the B account. 
24-
Cases referred to the courts (column 4b) 
This category covers post-clearance recovery cases where the debtor has appealed 
against the demand for payment. It includes cases where certificates were invalid but the 
importers argue that they acted in good faith and are therefore refusing to pay duties 
ex post. 
Recoverable entitlements not entered in the accounts/established by Member States 
(column 6) 
A relatively large amount of recoverable TOR, representing around one quarter of the 
sample, has not been entered in the accounts, either temporarily or definitively. 
In the case of imports of German/Dutch butter, the German authorities have refused 
outright to accept the Commission's remarks on the existence of a debt which should 
have been recovered. Given the importance of this dispute in determining the scope of 
Germany's obligations, infringement proceedings have been commenced. 
3.1.4 Final clearance of cases in the sample 
The Commission is concerned at the very low proportion of cases in the sample which 
have so far been cleared. 
Actual recoveries have been minimal and the amounts involved in cases referred to the 
courts, a step which in some ways marks the end of administrative proceedings, are also 
relatively small. 
By contrast, nearly all of the cases in the sample are still open and in more than half of 
these the Commission is in dispute with the Member States (infringement 
proceedings/recoverable entitlements not entered in the accounts). 
To some extent this makes life easier for the perpetrators of fraud and irregularities. 
3.2 List of shortcomings 
Monitoring of sample B94 confirms a number of shortcomings in the recovery of TOR at 
national level. 
3.2.1 Delays in investigations by the Member States 
In criminal cases (livestock, milk powder), investigations by the national authorities 
generally take a very long time, mainly because of their complexity and the excessive 
workload on investigating departments. They are prolonged even further by difficulties in 
obtaining assistance from other Member States, which may be necessary to complete 
national investigations (see above). 
Moreover, once investigations are completed, action by financial departments and 
administrative decisions on the debtor's position do not always follow immediately. 
25 
If a case is referred to the courts, a fresh investigation has to be conducted, leading to 
even longer delays. By the time the relevant departments finally have operational 
recovery orders, the perpetrators of the fraud are often out of reach. 
3.2.2 Delays caused by various legal remedies in the Member States 
Various national procedures exist for challenging recovery orders, including both 
administrative remedies and appeals, the main etTect of which is to suspend recovery until 
after the time-limits for payment provided for by the Customs Code. For example: 
- British debtors may contest the validity of a recovery order directly with the 
authorities, without going through any particular formalities. This negotiation 
procedure has not always been accompanied by the proper establishment of 
entitlements and calls into question the original establishment without making it clear 
whether a new entitlement has been established within the meaning of Article 2 of 
Regulation No 1552/89 or whether part of the debt has been remitted. 
- When German debtors challenge a recovery order, the authorities may then decide to 
suspend execution for an indefinite period. 
- In France disputes over the origin, value or nature of goods declared are referred to a 
special Customs Conciliation and Expertise Committee, which does not deliver its 
opinions immediately, but in its own time. As a result recovery is suspended 
indefinitely. The Commission intends to scrutinize this generous appeals procedure 
which does not seem to be in accordance with the provisions on the right of redress 
laid down in Title VII of the Community Customs Code and which, although largely 
ineffective, has the effect of calling into question the decisions taken. 
In the case of the Seychelles tuna, the Community mission of inquiry established beyond 
doubt that the tuna could not possibly have originated in the Seychelles, a finding which 
was recorded in the report sent to the French authorities. The ACP-EEC Council of 
Ministers also adopted a decision on the case on 18 and 19 May 1994. 
3.2.3 Delays and weaknesses in applying the rules on post-clearance recovery in 
undischarged transit operations 
It was found that the rules on the post-clearance recovery of customs debts arising from 
the failure to discharge transit operations were not properly applied. On-the-spot 
inspections by the Commission in 1994 and 1995 revealed systematic delays in all the 
Member States, illustrated by the transit cases in the present sample. 
In most cases the time-limits laid down in legislation for apprehending those responsible 
were exceeded, because the authorities concerned failed to act or acted too late. 
As a result own resources have been irretrievably lost, as the firms threatened with 
recovery proceedings (the principals) were declared bankrupt or were released from their 
legal obligations because the time-limit for seizure had passed. 
26 
3.2.4 Delays and weaknesses in applying the rules on post-clearance recovery in the 
case of invalid preferential certificates 
The Commission has found that in the cases where entitlements should have been recovered 
ex post because of invalid preferential certificates, the national authorities made insufficient 
or no use at all of the results of the Community mission to the non-member countries 
concerned. 
As a result the period of limitation has expired in a number of cases of irregularities, raising 
the question of whether the reluctance of some Member States to take appropriate recovery 
action is not partly motivated by a concern to protect Community importers threatened with 
bankruptcy, while they apparently fail to take into account the position of Community 
producers of goods equivalent to those imported (e.g. bankruptcy of TV producers in the 
Turkish TV case). 
For their part, Member States have stressed that, although the mutual assistance Regulation 
provides for a report on the Community mission of inquiry, this report does not have 
evidential value under existing legislation. Accordingly, some national authorities argue that 
it is impossible to present the report in court as evidence that certificates are invalid or to 
take the date on which it is sent by the Commission as giving rise to a legal obligation to 
establish an entitlement under Article 78 of the Code. However, the situation has already 
improved in the wake of the Court of Justice's decision in Faroe Seafood, in which it 
highlighted the importance of the conclusions of a Community mission of inquiry and the 
consequences which may arise therefrom. This question will be definitely solved by applying 
the regulation concerning on-the-spot checks and inspections carried out by the Commission 
in order to protect the European Communities' financial interests against fraud and other 
irregularities. (*) 
In any event, it is clear that Member States have not always satisfactorily applied the 
provisions of the Customs Code as regards entry in the accounts or Regulation No 1552/89 
as regards establishment. They have failed to send recovery notices or establish the TOR at 
stake, even though they knew the debtor and the amount of the debt. 
3.2.5 Weaknesses in cooperation between Member States under the mutual assistance 
arrangements 
• In certain cases of proven fraud, Member States have unsuccessfully asked for assistance 
from other Member States (e.g. Germany requested help from the Netherlands in a 
number of cases involving cattle and Belgium met with no response from Spain in the 
milk powder case). It is worth remembering that the mutual assistance Regulation 
(Regulation No 1468/81) does not place Member States under any legal obligation. In 
other cases, assistance was provided, but only after a long delay. 
Paragraph 1 of the grounds of Court decision "Seafood" and article 8 (5) of Council Regulation No 2185/96 of 11 November 
1996-OJL 292 of 15.11.96 
27-
• With the disappearance of the Union's internal borders and the resulting freedom of 
movement, it is vital that closer relations be forged between national authorities. 
In some cases in the present sample, responsibility for recovery should have been 
attributed to specific Member States, which could then have received assistance with 
recovery under Directive 76/308/EEC. However, in most instances, it seems that the 
Member States concerned failed to take any initiative. 
3.2.6 Use and abuse of the argument of the importer's good faith 
In a number of cases where goods were imported with invalid preferential certificates, in 
particular the Turkish TV sets, the importers argued that they acted in good faith and 
should therefore be exempt from post-clearance payment of duties and charges. Some 
national authorities have - at least temporarily - accepted these arguments and presented 
them to Community bodies. 
Yet the Court of Justice has consistently held, up to now, that good faith cannot in any 
circumstances excuse the presentation of an invalid certificate. Furthermore, 
Article 904(c) of the provisions implementing the Code, which rules out the remission or 
repayment of import duties solely on the grounds of the good faith of an importer, 
remains a central part of the law on preferential agreements. 
The Commission is at present drawing up a communication on the application of the 
concept of good faith in the context of preferential arrangements, which will also cover 
the implications of the recent Faroe Seafood judgment. 
3.2.7 Leniency shown by national authorities 
The Community Customs Code lays down detailed, binding provisions on the deadlines 
to be imposed on debtors for the payment of TOR. However, in practice, recovery 
arrangements may differ from one Member State to another for the same cases of fraud 
and irregularities. 
Some debtors have refused to pay customs debts to their national authorities, arguing 
that other Member States did not demand post-clearance recovery in similar cases. In 
fact recovery proceedings had been initiated in these other Member States, but were 
subject to administrative and court appeals, giving firms elsewhere the impression that 
recovery had not been demanded. 
4. CONCLUSIONS 
4.1. This report describes in detail the follow-up to six cases of fraud and 
irregularities selected by the Commission on the basis of objective criteria. 
While bearing in mind that these cases are particularly complex, the kind of 
problems involved are representative of most cases of TOR recovery. 
28 
The various recovery measures taken by the Member States have been 
undermined by slow-moving administrative and court appeals procedures and 
practical problems encountered by national government departments in actually 
collecting debts from the debtor once an administrative or court decision has 
been taken. Cross-border operations entail additional problems. 
These difficulties of substance are compounded by shortcomings in applying 
customs legislation, particularly as regards the definition of customs debt and 
the establishment and entry in the accounts of TOR. 
4.2. The increase in the number of cases of fraud and irregularities, particularly since 
the early 1990s, has highlighted the limits on the inspection capabilities of 
Member States' customs authorities. These are due mainly to the growing 
volume of transactions, the ever-increasing sophistication of products, the 
complexity of the rules to be applied and the number of customs procedures and 
preferential agreements open to traders. Increasingly, these authorities are 
confronted with fraud schemes organized by international criminal networks, 
often based in non-member countries and either operating under cover of 
dummy companies or using reputable firms which are unaware of the true 
nature of their business partners. In view of this situation, both the Council and 
Parliament have insisted that it is absolutely essential that Member States afford 
adequate protection to Community revenue as part of a general campaign 
against the waste and diversion of Community funds. ^ 
Given the scale of these problems, we can hardly expect miracle solutions, and 
Member States must concentrate their efforts first and foremost on areas where 
progress is most likely, i.e. in the strict application of Community provisions, 
particularly as regards the incurring of customs debts, guarantees and the 
establishment and entry in the accounts of TOR. As well as stepping up 
measures to pursue defrauders, each Member State should consider introducing 
changes to court procedures so that cases can be dealt with more quickly. 
On a more general note, it is worth considering whether a number of 
irregularities might be caused by complex Community and international rules, 
which sometimes strive to attain different goals at the same time. Application of 
certain international agreements may give rise to irregularities, usually as a 
result of a misinterpretation of Community rules or a failure to observe these 
rules by one link in the chain, as the (financial) consequences are then borne by 
others. 
A striking example is in the preferential arrangements, which clearly need to be 
examined very carefully. It should be possible to cut the number of cases of 
irregularities by introducing more transparent legislation that is easy to apply in 
practice both for our international partners and individual traders. 
19 
c Most recently in the report by Mr Bardong, rapporteur for Parliament's Committee on Budgetary Control, and the Conclusions of the Madrid 
European Council of 27 November 1995 
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4.3 The Commission committed itself to take a number of specific steps to rectify the factors 
which could be liable to impede the recovery of entitlements by the Member States: 
Recovery procedures 
With regard to the resources available to Member States to pursue (enforced) recovery, at 
the end of 1994 the Commission launched a comparative study of relevant national 
provisions by means of questionnaires addressed to the Member States and of seminars. 
The results highlighted certain shortcomings, such as differences in treatment under 
national law, and in particular different treatment of time limitations, the calling-in of 
guarantees and the possibilities of appeal. Consequently, in accordance with the 
conclusions of the ECOFIN Council of 27 November 1995, the Commission, in co­
operation with the representatives of the Member States in the framework of ACOR, is 
pursuing a review of options for the strengthening of recovery procedures for defrauded 
amounts. 
External Community Transit 
In relation to Transit, the Commission, on the basis of an interim report presented in 
October 1996, and in close co-operation with the Member States and the trade, is in the 
process of devising a strategy for the reform of transit arrangements and is drawing up 
measures designed to ensure the security of the different arrangements. The main 
emphasis in this review will focus on controlling access to the Common and Community 
arrangements, the protection of financial interests, the establishment of a system for the 
collection and exchange of statistics and information, and ensuring coherence and 
consistency between transit systems. 
Also in relation to Transit, the Commission undertook a series of controls during the years 
1994 and 1995 pursuant to Articles 18 paragraphs 2 and 3 of Regulation 1552/89. In 
almost all Member States, delays, sometimes of long duration, in the taking of recovery 
action were observed and the Member States were requested to rectify the situation for all 
Transit operations remaining undischarged after the legal time limit. The Commission is 
monitoring the actions taken in response to these requests. 
Preferential tariff arrangements 
The problems highlighted in regard to the recovery of debts incurred in the context of 
preferential tariffs gave rise to a number of control missions to the Member States by the 
Commission (on the basis of Article 18 paragraphs 2 or 3 of Regulation 1552/89). These 
missions confirmed that preference arrangements are not operating satisfactorily, 
particularly in relation to the issuing of preference certificates and the measures in place 
for ex-post control. 
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These observations led the Commission to strengthen the legislation on administrative co­
operation between the beneficiary countries of Generalised System of Preferences (GSP) 
and of autonomous Community arrangements on the one hand and the Community as 
grantor of preferences13 on the other. The new provisions, which entered into force on 1 
January 1997, clarify the arrangements for Commission participation in investigations 
undertaken by the competent authorities of the beneficiary countries aimed at verifying the 
true origin of products exported under certificates of origin. 
At a practical level, the Commission has established a computer system for the 
transmission of stamp impressions used to authenticate certificates of origin to the 
customs authorities of the Member States. This electronic transmission, allowing for 
greater speed in the circulation of information and for more legible models of stamps, is an 
important factor in the improvement of the effectiveness of controls on certificates of 
origin and on the circulation of goods. 
Based on the findings of the control activities and on the analyses outlined above, and in 
accordance with a request of the Council contained in its decision of 28 May 199614, the 
Commission is currently preparing a communication on the subject of preferential 
arrangements. This will identify certain steps to be taken immediately and in the longer 
term with a view to the rectification of the problems arising from the implementation of 
these arrangements. 
Improvement in the quality of information on recovery 
The amendment of Council Regulation (EEC, EURATOM) n° 1552/8915 included, for the 
first time in relation to the Community's own resources, the requirement for Member 
States to continuously update the Commission on the situation regarding recovery in cases 
of fraud and irregularities. To facilitate the transmission of data, a computer programme 
(OWNRES) has been developed. This will be operational before summer 1997. 
In future, the Commission will have up-to-date information on the recovery situation for 
evaded resources in all such cases and will be in a position to propose appropriate 
measures, which it may consider necessary to mitigate any deficiencies in the actions taken 
at national level. In addition, the Commission will be proposing certain amendments to 
Council Regulation (EEC, EURATOM) n° 1552/89 aimed at clarifying the provisions 
concerning the responsibilities of the Member States in the case of non-recovery of 
entitlements. 
13 Commission Regulation (EC) n° 12/97 of 18 December 1996 (OJ L n° 9 of 13.1.1997), amending 
Commission Regulation (EEC) n° 2454/93 (Implementing Provisions), and in particular Articles 93, 
93a and 94. 
14 Decision n° 96/C/170/01, published in OJ C 170 of 14.6.1996, p. 1. 
15 Council Regulation n° 1355/96 of 8.7.1996 (OJ L 175 of 13.7.1996, p. 3 
-31 -
Infringement proceedings 
In one case ("German/Dutch butter"), the failings displayed by the national authorities in 
the protection of the financial interests of the Community, together with the refusal of 
those authorities to rectify the situation in relation to irregular imports from third 
countries, has led the Commission to deliver a reasoned opinion pursuant to Article 169 of 
the Treaty. 
4.4 The results of the monitoring by the Commission of recovery in the present sample will be 
the subject of a communication dealing with the recovery of TOR in cases of fraud and 
irregularities. 

.3 £• -
ISSN 0254-1475 
COM(97) 259 final 
DOCUMENTS 
EN 09 01 
Catalogue number : CB-CO-97-247-EN-C 
ISBN 92-78-20604-0 
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