COMMUNICATION FROM THE COMMISSION - THE FUTURE OF TRANSIT SYSTEMS: INTERIM REPORT
Date: 1996-10-09
Institutions: European Commission
Subjects: common commercial policy, customs fraud, customs transit, free movement of goods

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 09.10.1996 
COM(96) 477  final 

COMMUNICATION  FROM THE COMMISSION 

THE FUTURE OF TRANSIT SYSTEMS : INTERIM REPORT 

L 

The context  : a continuous action  of  the  Commission in  reinforcing  the efficacy  and 
security  of  transit  systems 

Customs transit allows the movement of goods inside the Community and between it and 
numerous  third  countries  without  charging  duty  and  tax  normally  due  at  import  or 
applying  any  supervision  measures  or  restrictions.  It  does  not  only  allow  the  simple 
passage through a given territory. Above all it is an instrument for bringing goods to their 
place  of  declaration  and,  where  appropriate,  moving  goods under  a customs  suspensive 
regime about the  Community. 
Since the origin of the Community the customs transit systems have been essential for the 
Customs  Union  and  for  trade  with  our  partner  third  countries  in  the  framework  of  a 
common trade policy. They are now suffering  the consequences of far  reaching political 
and  commercial  changes  in  respect  of  their  efficiency  and  security.  This  weakness  is 
being  exploited  and  abused  by  organised  crime  which  creates  a  considerable  threat  to 
public  budgets  and to  legal  commerce. 
The  Commission  has underlined  the  seriousness  of this  situation  and the  urgent  need  to 
counteract  it in its two Communications  on fraud  in transit dated  29 March  19951 and 3 
April  19962 . The Court  of Auditors  has underlined  in several  of  its reports  some of the 
malfunctions  of  the  system.  The  European  Parliament  found  the  consequences  for  the 
financial  interests  of  the  Union  so  worrying  that  it  set  up  a  temporary  Committee  of 
Inquiry  on  Transit  on  12  January  1996.  Taking  into  account  financial  and  economic 
implications  of this question,  the Commission  also informed  the ECOFIN  Council  on 8 
July  1996. This Communication  is completely  in line with these  initiatives. 
The  last  Commission  Communication  sets  out a number  of proposed  actions to  combat 
fraud  while  preserving  the  essential  economic  advantages  offered  by  transit.  Some  of 
these actions are being undertaken and the corresponding measures have been announced. 
Other  actions envisaged have to be the subject  of a more global analysis by the  services 
of the Commission in order to have a complete in depth picture of the situation in which 
transit finds itself. This will allow us to target the reform  of these systems in a balanced 
manner  and  with  full  knowledge  of what  is involved. 

A framework  for  work  and action  : the  interim  report  on transit 

H. 
Object  of  the  report 
The result  of  this global  analysis  is contained  in the  Interim  Report  on  Transit  which  is 
annexed  to this Communication.  It  is in the form  of a working document of  the services 
of the Commission which represents an essential stage of the reform process. It marks the 
intention of the Commission not to hide any difficulty  or any suggestion and to seek, via 
the  involvement  of all  the  actors  in transit  in the most  open  way, the best  definition  of 
the transit  systems  for  the  future. 
That  is  why  the  Interim  Report  undertakes,  from  a  technical  point  of  view,  a  critical 
analysis  of the difficulties  with  which transit  is confronted  and  of the  suggestions  from 
all  parties  for  improving  it,  which  translates  into  a  preliminary  identification  of  the 
possible  objectives  for  a future  reform  and the methods which could be used to  achieve 
this. 
Its interim status means it can be used as the factual and open framework  for a discussion 
with  all  the  parties  concerned  with  transit  to  which  it  is  given.  They  will  have  the 

1  COM  (95)  108 final, "Fraud  in the transit  procedure,  solutions  foreseen  and  perspectives  for  the 
future" 
""  SEC  (96) 290  final,  "Commmision  action  to  counter  transit  fraud" 

opportunity  to  debate  freely  on  this  basis  in  order  to  help  the  Commission  to  define, 
whilst exercising its right of initiative, the framework  which should in the end be adopted 
for  the reform  of transit. 
Contents  of the Report 
The  report,  which  has  six  explanatory  annexes,  is  in  a  framework  defined  by  three 
fundamentals  and  gives  a technical  synthesis  of  the  various  contributions  given  over  a 
period  of about  a year. 

A.  Fundamentals 

L 

Transit  at the  centre  of the  Customs Union  and trade policy 
Transit  regimes  are  essential  for  the  administration  and  the  protection  of  the  internal 
market,  for  the  special  trade  relationships  that the  European  Union  wishes to keep with 
the  EFTA  countries,  and  for  the  pre-accession  strategy  with  the  central  and  eastern 
European  countries.  In the  form  of  common transit  and  equally  TIR,  transit  contributes 
to  a new  economic  integration  on a continental  scale. Its  success with  trade  shows  it  is 
equally  a fundamental  element  for  their  commercial  strategy. 

2. 

Systems  in crisis against  a background  of profound  change 
The political events in Europe together with the globalisation of the  economy in a general 
context  of  lower  commercial  barriers  and  the  multiplication  of  preferential  agreements 
have permitted  a considerable expansion of trade. This has caused an unexpected  growth 
in  the  need  for  transit.  This  situation,  combined  with  a  reduction  of  staff  allocated  to 
transit, has overloaded the documentation procedures which are still based on the manual 
handling  of paper.  It has weakened  the security  of the systems and  favoured  their  abuse 
by criminal organisations and could lead to the loss of important amounts of import duties 
and  national  taxes.  This  financial  loss,  which  concerns  the  Community  budget,  with 
regard to the non-recovery  of traditional  own resources, but which also, for  a large part 
of the  amounts at stake, concerns national budgets, is accompanied by a commercial loss 
because  the  goods  lost  in  transit  go  onto  the  black  market  and  represent  a  unfair 
competition  for  the  legitimate  trade  and  a threat to  employment. 

3. 

The efficacy  of any transit reform  demands the setting up of a  framework 
favorable  for  management  and  co-operation 

The efficacy  and security of the transit systems rely not only upon procedures capable Of 
meeting the needs of trade. They also rely on the same unified  and loyal approach to their 
application and control, which in turn implies permanent co-operation between the various 
administrations involved, notably on the basis of a better knowledge of the reality of these 

systems. It should be obvious that a reform of transit legislation will not have a real  effect 
unless  it can depend  on : 
.  a set of rules, both in the Community  and internationally,  that is clear  and  accessible 

and which ensures the coherence  of the transit  systems as well; 

.  a policy  of  information  and training; 
. 
.  a  redefinition  of  the  relationship  between  the  customs  administrations  and  their 

the  allocation  of the necessary  resources; and  above all 

responsibilities  for  the proper  running  of the  Customs Union. 

At  least  for  the  Community,  some of these  preconditions  go beyond  the  strict  limits of 
the transit system, but it is clear that implementation of the "Customs 2000" programme, 
yet to be  adopted,  could partially  respond to this. 

B.  A synthesis  for  debate 

In  this  context,  the  interim  report  sets  out  an  inventory  of  the  problems  and  the 
corresponding suggestions advanced by all the players, contained in a synoptic table of 
five sections : 

- the monitoring and writing-off  of transit operations in order to have an effective  system, 
- the  surveillance  and  control  measures needed  to ensure the security  of movements, 
- the definition  of the roles of the players in relation  to the risks generated  by transit, 
-  the  quest to  obtain  an adequate  cover  for  these risks via financial  guarantees, 
- and a certain number of more general supporting measures essential for the  effectiveness 
of  the  reforms. 
Starting  from  this five  broad  categories  of objectives  to be  met emerge: 
.  an effective  management  of  secure regimes; 
.  a  close  co-operation  between  customs  administrations  and  between  them  and  the 

Commission; 

.  a permanent,  coherent  and constructive dialogue between the customs authorities and 

the trade; 

.  clear,  coherent  and  accessible  law and  instructions 
.  well  trained  customs officers  who are properly  led and  supported  and who are aware 
that they provide an essential contribution to the proper over-all working of the transit 
regimes. 

At the head of these priorities it must again be stressed that only a rapid and ambitious 
computerisation of procedures will really be able in itself to respond to most of the needs 
for effectiveness  and security. This will enable us to master the flow of international trade 
under  transit,  and  offers  us  an  instrument  for  real  time  analysis  of the  risk  inherent  in 
each  movement. 

A  tool to be used openly 

!1L 
The  Interim  Report,  in order  to achieve  its object,  which  is to fully  associate  the  actors 
in transit  in the  redefinition  of the  rules, will be  sent  to the customs  administrations  of 
the  Member  States  and  the  partner  countries  as  well  as  to  the  trade  organisations 
representing  the day to day users of the  system. 
It is by using the reactions to the Report from  all the players and their contributions that 
the Commission, knowing all the elements, will be able to rapidly define  a global action 
programme both at operational  and legislative level. It is only then that the Commission 
can  make  further  proposals.  The  Commission  also  feels  that  its  initiative  and  that  of 
Parliament,  in the  framework  of  its Temporary  Inquiry  on  Transit,  should  proceed  side 
by side and mutually support each other. This is in any case the approach the Commission 
will  continue  to  adopt towards  its reform  of the transit  systems. 

^ 

ISSN 0254-1475 

COM(96) 477  final 

DOCUMENTS 

EN 

02  09  11 

Catalogue number  : CB-C0-96-499-EN-C 

ISBN 92-78-09893-0 

Office for Official Publications of the European Communities 

L-2985 Luxembourg