Skip links

ECJ – UK undervalued imports from China 2011 to 2017

€2.7 billion potential fine – ECJ finds UK “failed to fulfil its obligations”  failing to collect proper customs duties

The British government faces paying a hefty charge to the EU after the European court of justice ruled it had been negligent in allowing criminal gangs to flood EU markets via UK ports with cheap Chinese-made clothes and shoes.  When the UK was still part of the EU Customs Union , it was responsible for valuing and collecting the correct customs duties on behalf of the EU to be mostly remitted to central EU coffers. Import VAT was also due, but this was kept by the UK as part of it being a member of the EU VAT regime.

The UK may not appeal this ruling, but can claim a renegotiation of the fine since the ECJ was careful not to give it any legal basis. The ECJ stated it would not rule on the Commission’s estimate of €2.7 billion, stating it may have to be recalculated

The UK will have to pay 80% of the EU’s legal costs.

The failures by HMRC date from 2011 to 2017. The UK claimed that it was not obliged to follow the EU methodology to identify potential levels of fraud (see below). It was back by Belgium, Estonia, Greece, Latvia, Portugal and Slovakia.

UK ignored EU methodologies and warnings

The fine arises despite warnings to the UK between 2007 and 2015 from the European Anti-Fraud Office (OLAF).  It warned the UK and other member states of the risk of extreme undervaluation of imports of textiles and footwear from China by shell companies registered for the sole purpose of giving fraudulent transactions the appearance of legitimacy. OLAF asked to monitor their imports of such products, to carry out appropriate customs checks and to take adequate safeguard measures if there was any suspicion of artificially low invoiced prices.

According to OLAF, fraudulent imports were increasing significantly in the United Kingdom on account of the inadequate nature of the checks carried out by the United Kingdom customs authorities, encouraging the shift of fraudulent operations from other Member States to the United Kingdom. However, according to OLAF, the United Kingdom did not follow its recommendations, instead releasing the products concerned for free circulation in the internal market without conducting appropriate customs controls, with the result that a substantial proportion of the customs duties due were not collected or made available to the European Commission.

Consequently, taking the view that the United Kingdom had failed to enter in the accounts the correct amounts of customs duties and to make available to the Commission the correct amount of traditional own resources and own resources accruing from value added tax (‘VAT’) in respect of certain imports of textiles and footwear from China, the Commission brought an action for a declaration that the United Kingdom had failed to fulfil its obligations under EU legislation on control and supervision in relation to the recovery of own resources and under EU legislation on customs duty and on VAT.

 

 

Leave a comment

Newsletter

Get our latest news right in your mailbox