Judgment of the Court Grand Chamber of 8 March 2022, Commission v United Kingdom Lutte contre la fraude à la sous-évaluation, C-213/19

• Date: 08 March 2022
• Year: 2022

29

IX. FINANCIAL PROVISIONS: COMBATTING FRAUD

Judgment of the Court (Grand Chamber) of 8 March 2022, Commission v United Kingdom

(Lutte contre la fraude à la sous-évaluation), C-213/19

Link to the complete text of the judgment

Failure of a Member State to fulfil obligations – Article 4(3) TEU – Article 310(6) and Article 325 TFEU – Own

resources – Customs duties – Value added tax (VAT) – Protection of the financial interests of the European

Union – Combating fraud – Principle of effectiveness – Obligation for Member States to make own

resources available to the European Commission – Financial liability of Member States in the event of

losses of own resources – Imports of textiles and footwear from China – Large-scale and systematic

fraud – Organised crime – Missing importers – Customs value – Undervaluation – Taxable amount for VAT

purposes – Lack of systematic customs controls based on risk analysis and carried out prior to the release

of the goods concerned – No systematic provision of security – Method used to e stimate the amount of

traditional own resources losses in respect of imports presenting a significant risk of undervaluation –

Statistical method based on the average price determined at EU level – Whether permissible

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.