Monday, November 29

UK negligent in failing to stop customs fraud, says senior EU lawyer | European Union

A senior EU lawyer has concluded that the British government was negligent in failing to tackle customs fraud that allowed criminal gangs to flood European markets with cheap clothes and shoes made in China.

The non-binding opinion of a legal expert from the European court of law does not recommend any sanction, but reinforces the position of the Brussels authorities who have demanded that the United Kingdom pay € 2 billion (£ 1.71 billion) in compensation to the EU budget.

In a 139-page legal opinion published Thursday, Attorney General Priit Pikamäe came out largely in favor of the European Commission; it found that the UK “failed to meet its obligations” under EU law to collect the correct amount of customs duties and VAT on imported Chinese products. The Estonian legal expert also said that the British authorities had not shown “sincere cooperation”, a key principle of EU law. In particular, he criticized the UK for withholding a legal opinion that is believed to be the justification for HMRC canceling 24 payment demands from suspicious importers.

“The measures taken by the United Kingdom were manifestly ineffective, given the characteristics of the fraud in question and the knowledge that the authorities of the United Kingdom may have had during the period of infringement,” wrote Pikamäe.

While the opinions of the attorneys general are not binding on the ECJ judges, the court often follows their advice.

His opinion is likely to heighten tensions between London and Brussels, amid a smoldering dispute over the renegotiation of Northern Ireland’s Brexit protocol. Under the Brexit withdrawal agreement, the UK remains subject to the jurisdiction of the ECJ for any breach of EU law during its membership. The alleged HMRC rulings date from 2011 to 2017.

The European Commission launched legal action in 2018 after the bloc’s anti-fraud office (Olaf) accused British authorities of failing to combat customs fraud that had allowed criminal gangs to evade EU customs tariffs, making false claims about clothes and shoes imported from China. . Olaf said the British authorities had been repeatedly warned about the fraud and recommended a fine of 1.98 billion euros.

According to fraud investigators, in 2016 more than 50% of all textiles and footwear imported into the UK from China were below “the lowest acceptable prices”, a calculation based on production costs.

The case came after a 2005 decision championed by then-EU Trade Commissioner Peter Mandelson to abolish textile and apparel quotas for all World Trade Organization countries, including China. In the years that followed, EU fraud officials were concerned that importers would use false invoices that undervalued Chinese-made clothing and shoes. Raising the alarm in 2014, the EU anti-fraud office launched Operation Snake to verify import declarations. This included a method to calculate undervalued assets.

British customs officials refused to use the EU method, arguing that it was counterproductive and disproportionate. In court, the UK defense team said customs officials had done everything necessary to combat fraud, arguing that EU law did not mandate any method of calculating undervalued goods. The government had the support of six member states: Belgium, Estonia, Greece, Latvia, Portugal and Slovakia.

The Advocate General rejected their arguments and recommended that the UK and six supporting countries pay their own costs. It also wants the UK to pay four fifths of the European Commission’s legal bill.

Other member states, notably France, have accused the UK of failing to help fight fraud. The case affects all EU member states, as 80% of customs duties collected at the EU’s external borders go to the common budget.

The Guardian has contacted the British government for comment. When the allegations first surfaced in 2017, HMRC said it had an “excellent track record in fighting fraud and rule-breaking of all kinds.”

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