2nd Report on the recovery of traditional own resources in cases of fraud and irregularities (Sample B 94)
Date: 1997-06-09
Institutions: European Commission
Subjects: financing of the EU budget, fraud against the EU, own resources, report, statistical method

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 

INTRODUCTION 

- 3-

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 
total  some 
ECU  124 million. 

the  six  cases 

in 

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. 

2. 

3. 

4. 

5. 

very high cost to the Community budget, i.e. over ECU  I million; 

investigations  launched  by a  Commission  department  (UCLAF,  DGs  VI,  XIV, 
XIX, XX or XXI); 

responsibility for recovery shared between Member States; 

time-limit approaching for recovering amount due from  debtor; 

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 

AM forms 

1 

2 
3 

4 

5 

6 

Cattle, sheep and 
meat from E. 
Europe 

Mik powder 
German/ Dutch 
butter 
Seychelles tuna 

56/91 
13/92 

46-47/90 
54/91, 
7/92, 
38/92, 65/92 
19/93 
— 

10/92 

Faroese shrimps 

2/90 

Turkish TVs 

33/88 

Customs 
procedure 
question 

Transit 

in 

Criteria 1 
Estimated 
amounts 

Criteria 2 
Commission 
inspection 

Criteria 3 
Shared recovery 

Criteria 4 
Time-imit 
approaching 

Critena 5 

ECU 50 milon 

X 

B,  D,  F, I,  NL 

X 

Court of 
(partly) 

auditors 

Transit 
Release 
for 
free circulation 
Release 
for 
free circulation 
for 
Release 
free circulation 
Release 
for 
free circulation 

ECU 6.4 million 
ECU 7 milon 

ECU 1.5 million 

ECU 10 milon 

ECU 45 million 

X 
X 

X 

X 

X 

B,  E,  F 
D,  NL 

B,  F, IRL,  NL,  UK 

B,  DK,  F, NL,  UK 

All except IRL and L 

X 

X 

X 

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. 

Information  on the recovery situation 

1.2 
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 
Meat 

148 635 head 
6 400 tonnes 

ECU 20 million 
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 
Meat 

155 655 head 
7 260 tonnes 

ECU 25 million 
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. 

time-barred.  Even  where 

The  biggest  problem  concerns  entitlements  which  have  not  been  established  and  have 
the 
become 
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  national  period  of 

limitation  applies, 

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-

T a b l e l l - la 

Livestock (cattle and sheep) from eastern  Europe - Responsibility for recovery 

Reference 

Numbe 
rof 
T1s 

Issuing 
Office 

Member 
States 
concerned 

Responsi 
bility 
recognize 
d 

Responsi 
bility 
attnbuted 

Responsi 
bility to be 
attnbuted 

Amounts entered in the 
accounts (ECU) 

Evaluation 
of amounts 
to be 
attributed 
(ECU) 

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 

153 

20 

131 
60 + 
71 
+ 8 
(TIR) 
8 

673 

985  + 
8(TIR) 

(Number 
ofT1s) 

(Number 
ofT1s) 

(Number 
ofT1s) 

"A" a/c 

"B" a/c 

Frankfurt/ 
Oder 

Germany 

152 

Italy 

1T1 

41500 

3 658 000 

Frankfurt/ 
Oder 

Germany 
Belgium1 

Germany 
Netherlands 
Belgium 
France' 
Netherlands 
Germany 
Belgium 

Germany 
Netherlands 
Belgium1 
France 

Waidhaus 

Various 
German 
border 
towns 

20 
(20) 

104 
26 

(2) 
8 
5 
3 

421 

3 

100 000 
340 000 

180 000 
183 500 

503 T1 

672 650 
(582 300) 

1  970 000 

(115  700) 

271  780 

14 000 000 

(35 500) 

16 303 000 

739 

3 

845 000 

20 572 430 

16 303 000 

Cases and amounts entered in the accounts twice. 

Table II - b 

Meat from eastern Europe - Responsibility for recovery 

AM 
Reference 

Number 
ofTIs 
involved 

Issuing 
Office 

Member 
States 
concerned 

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 

20 

Rotterdam 

267 + 
3 TIR 
(84  H + 
87  S + 
78 R  + 
21  C) 
11  T1 

289 + 3 

Belgium 
Netherlands 
France 
(according to 
NL) 
Germany 
Belgium1 
Netherlands 
France1 

Germany 
Netherlands 
Belgium 
France 
Portugal 

Responsibility 
recognized 
(number of 
T1s) 

2 

Responsi 
bility 
attributed 
(number of 
T1s) 

18 

Responsi 
bility to be 
attributed 

Amounts 
entered in B 
account (ECU) 

Evaluation of 
amounts to be 
attnbuted 
(ECU) 

3 200 

280 000 

75 
235 
(6T1) 

(4T1) 

18 T1 

2T1 

7169 214 
11600000 
(432 957) 

(369  162) 

322 

18 

(20) 

18 772 414 

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 
the 
assistance  from  the  Belgian  authorities  and  a  request  for  information  from 
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 
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. 

it  need  only  recover  and  enter 

in  the  accounts  entitlements 

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. 

further 
On  23  December  1996  the  Commission  asked 
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. 

the  French  authorities  for 

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 

Stage in proceedings 

ECU 6 856 665, 
16.8.94 

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). 

issued  by  the 
The  Community  team  inspected  a  total  of  214  EUR  1  certificates 
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 
initial  estimate  of  ECU  1.5  million 
in  fact  ECU  1.84  million,  compared  with 
(AM form  No  10/92). 

the 

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 

EUR1 
recognized 

Fraud forms 

B 

F 

IRL 
NL 
UK 

Total 

5 

75 

4 
5 
69 

165 

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 

Amounts in 
B account 
(ECU) 

59 335 

1  075 530 

294 827 

445  156 

1  429 692 

Amounts time-
barred (ECU) 

Court proceedings 

Yes 

Planned 

3  723 

3 723 

' 

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 
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). 

in  Denmark  or  re-export 

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 

EUR1 

Fraud form 

A account 
(ECU) 

B account 
(ECU) 

Amounts time-barred or 
exempt (ECU) 

Judgment 

B 
DK 
F 

NL 
UK 
Total 

5 
266 
21 

12 
185 
599 

BE 92/06/06 

FR 92/06/09 
92/06/10 

FR 

10 fraud forms 

962 950 

295  232 

1  258  182 

67 958 

29 883 

11000 000 

Yes 
Yes 

1  804  238 
1902 079 

29/4/89 1  018 646 
12 018 646 

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 
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. 

in  Turkey 

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 
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. 

to  Members  of 

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 

Number 
of 
ATRs 

Fraud 
forms 

Number of TVs 

Financial 
impact 

A account 

B account 

Estimate of 
amounts 
time-barred 

Date of 
limitation 
applied 

16 

5 

Declared 
28366 
938 

503 

302 
384 
216 
119 
53 
314 
1907 

12 

397 687 

17 

426.991 

Estimated 
31236 
738 
674 370 
4 974 
399 407 
368 936 
191  473 
223463 
79443 
584  121 
2.558.161 

845000 
12 500 
14 000 000 
84500 
8600000 
7850000 
4000000 
5580000 
1700 000 
13000000 
55.672.000 

(ECU) 

25 500 

558 OOOd) 

0 

10 500 000 

9 821  000 

3 093 000 
10 000 000O 

1 154 289 
3 886 2250) 
29.191.514 

1  567 400 

2 722 000 
14.110.400 

994 481 
7132 

1.027.113 

30.05.91 
0) 
1.1.92 

1.6.92 
1.1.91 

1.7.92 
1292 
18.10.91 

The amount was notified in order to interrupt the period of limitation but has not yet been recovered. 

Still to be determined. 

Under scrutiny. 

The Greek authorities have not taken any action. 

SUMMARY  OF THE RECOVERY  SITUATION 

B 
DK 
D 
aw 
E 
F 
1 
NL 
P 
UK 
Total 

(1) 

(2) 

(3) 

(4) 

3. 

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 
Overall recovery situation in respect of sample B94 

ECU million 
1 
Cases per 
Member State 

2 
Total per 
Member State 

3 
Entries in 
A account 
Payments 
made 

4 
Entries in B account 

5 
Limitation or 
exemption 

6 
Not entered 

(4a) Recovery 
pending 

(4b) Cases 
referred to the 
courts 

Amounts (6A) 

Infringement 
cases (6B) 

• 

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 

B 

DK 

D 

E 

F 

IRL 
NL 

P 
UK 

No1 
No2 
No 3 
No 4 
No5 
No 6 

No 5 
No6 
No1 
No2 
No 3 
No5 
No6 
No 2 
No6 
No1 
No2 
No4 
No 5 
No6 
No 4 
No1 

No 4 
No 5 
No6 
No 6 
No 4 
No 5 
No6 

22.55 

11.99 

45.18 

3.01 

11.58 

0.018 

18.493 

1.157 

10.04 

0.03 
0.32 

0018 
0 52 

0073 
0.3 
1 
0.007 
0.35 

TOTAL 

124.038 

2.618 

3.1.3  Comments 

Actual recoveries (column  1) 

11.00 

0.07 

0.96 

107 

6.9 

PC 
896 

PC 

PC 

PC 
16.60 

16 

37 

1 
27 
14.72 

25 56 

69 

| 

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 
(infringement 
proceedings/recoverable  entitlements not entered  in the accounts). 

the  Member  States 

in  dispute  with 

the  Commission 

is 

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 
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  presentation  of  an 

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. 

4.2. 

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. 

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 

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: 

- 2 9-

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. 

- 3 0-

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 

Infringement proceedings 

-31  -

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  £• 

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ISSN 0254-1475 

COM(97) 259 final 

DOCUMENTS 

EN 

09  01 

Catalogue number  :  CB-CO-97-247-EN-C 

ISBN 92-78-20604-0 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg