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The United Kingdom should have taken account of the risk profiles and the types of customs control recommended to it by OLAF and the Commission

The European Union has abolished all quotas on imports of textiles and clothing including from China since 1 January 2005.

In 2007, 2009 and 2015, the European Anti-Fraud Office (OLAF) sent mutual assistance messages to Member States, informing them in particular 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 all Member States 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.

To that end, OLAF developed a risk assessment tool based on EU-wide data. That tool, involving the calculation of an average derived from ‘cleaned average prices’, produces a ‘lowest acceptable price’ that is used as a risk profile or threshold enabling Member States’ customs authorities to detect values declared on importation that are particularly low, and thus imports presenting a significant risk of undervaluation.

In 2011 and 2014, the United Kingdom participated in monitoring operations conducted by the Commission and OLAF to counteract certain risks of undervaluation fraud, without however applying the lowest acceptable prices calculated in accordance with OLAF’s method or enforcing the additional payment demands issued by the United Kingdom authorities following such operations.

In several bilateral meetings, OLAF recommended that the competent United Kingdom authorities use EU-wide risk indicators, namely the lowest acceptable 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.