APPENDIX 11
Further memorandum submitted by HM Customs
and Excise
When we gave oral evidence to the Committee
on 24 March, we undertook to provide additional information on
a number of issues. I am sorry for the delay in providing this,
but we decided that we should consult the Laboratory of the Government
Chemist on the point raised regarding testing for laundered fuel,
and to ask them to carry out some trials on our behalf.
I enclose a Supplementary Memorandum.
SUPPLEMENTARY MEMORANDUM BY HM CUSTOMS AND
EXCISE
METHODS OF
LAUNDERING FUEL
AND MEANS
OF DETECTION
(MR MCWALTER)
Customs and Excise know of several main washing
or laundering processes:
* * *
We should be grateful if the Committee could
treat this information as confidential.
DEVELOPMENTS IN
FISCAL MARKING
The Committee may wish to note that the European
Commission is currently progressing the introduction of a "Euromarker",
a marking system for rebated fuels that would be compulsory in
all Member States. This is likely to be based on azobenzene. It
is unlikely that this will provide any greater protection against
laundering.
In the longer term, however, biomarkers are
being developed that should prove resistant to laundering.
THE REPUBLIC
OF IRELAND
The Republic requires gas oil to be chemically
marked with azobenzene and dyed with CI Solvent Blue 79; the combined
markers give the gas oil a green colour.
The Republic also requires kerosene to be chemically
marked with azobenzene and two dyes, CI Solvent Yellow 174 and
CI Solvent Red 19; the combined markers give the kerosene an orange
colour.
Customs are able to test for azobenzene and
use in the UK of rebated fuel from the Republic of Ireland in
a road vehicle is an offence.
QUANTIFICATION OF
THE AMOUNT
OF WASHING
OR LAUNDERING
IN NORTHERN
IRELAND AND
THE UNITED
KINGDOM AS
A WHOLE
(MR HUNTER)
As we said on 24 March, it is always difficult
to estimate or quantify the extent of any illegal activity.
There has been only 1 major prosecution for
laundering in the past few years, in Great Britain. However, there
are currently five ongoing investigations in Northern Ireland.
WHETHER THERE
WOULD BE
ANY ADVANTAGES
IN A
LICENSING SYSTEM
FOR OIL
DISTRIBUTORS, OR
IN MOVING
THE DUTY
POINT TO
THE DEPOT
RATHER THAN
THE REFINERY,
AND WHETHER
THERE WOULD
BE EXCESSIVE
COMPLIANCE COSTS
(MR HESFORD)
We understand that the thinking behind this
is that it would give Customs much more information about distribution
patterns within Northern Ireland and enable us to target our resources
more efficiently. For example we would be able to identify unusually
large sales of rebated gas oil which might indicate that laundering
was being carried out.
This is something to which Customs has already
given some thought. In 1997 26 additional staff were allocated
to Customs and Excise as part of the "Spend to Save"
initiative, to target misuse of rebated gas oil. Their function
is to examine the business records of oils distributors and haulage
companies etc in order to discern trends, obtain intelligence
and identify suspected illegal use of oil. There are two staff
in Belfast carrying out this role. We believe this meets the same
point. Under the Revenue Traders (Accounts and Records) Regulations
1992 oils distributors are obliged to produce their records to
us if we so require, and a licensing system would not give us
any greater access.
The same effect would be achieved by moving
the duty point to the depot rather than the refinery. However,
we are concerned that this would open up new opportunities for
fraud because oil products would have to move in duty suspension
between Great Britain and Northern Ireland, creating a new incentive
to divert the product to use without payment of duty. Up until
1985 oil in duty suspension could be moved between refineries
and warehouses, with a greatly increased number of traders for
Customs to control, and there were significant cases of fraud.
This is no longer allowed, and we have had no recurrences of this
type of fraud.
In addition, moving the duty point back to the
refinery freed a large number of traders from the responsibility
of duty payment. Traders who pay duty have to hold bankers' guarantees,
which can be expensive. This is because they are allowed to defer
payment of duty for 14 days after the end of their monthly accounting
periods, and we require a guarantee to help cover their liability
in case of a default.
MOVEMENT OF
GOODS ACROSS
THE LAND
BOUNDARY (SUPPLEMENTARY
INFORMATION)
There are two systems for the movement of goods
from the Republic to Northern Ireland.
(i) Oil in duty suspension
Oil products on which duty has not been paid
can be moved between approved warehouses in different Member States.
There are two approved import warehouses in Northern Ireland.
The goods must travel with an administrative accompanying document
(AAD) which is in four parts. Copy 1 is kept by the dispatching
warehouse and copies 2, 3 and 4 must accompany the goods. The
receiving warehouse endorses copy 3 and returns it to the dispatching
warehouse. If copy 3 is not received, the Member State of departure
can call for the duty.
No traders currently use this sytem.
(ii) Duty paid oil
Duty paid oil can be received by either an Occasional
Importer or a Registered Excise Dealer and Shipper (REDS). In
both cases the goods must be accompanied by a simplified administrative
accompanying document (SAAD).
Occasional Importers must pay the UK duty before
the goods are dispatched and send evidence of this which should
also travel with the goods to the consignor. Because REDS are
under official control the arrangements are slightly different.
They are required to notify UK Customs 48 hours before the goods
are dispatched and provide a guarantee for the UK duty. Evidence
of this must be sent to the consignor. The duty is paid on the
REDS' next periodic return to Customs and Excise.
If the consignor wishes to recover Irish duty
they will be required to provide evidence that UK duty has been
paid.
Any oil not being transported under one of these
two systems, other than that in the standard running tanks of
vehicles, is being moved illegally. If a driver is not able to
produce an AAD or an SAAD, we would regard it prima facie,
as smuggled, unless of course there was incontrovertible evidence
that it was a duty paid movement within Northern Ireland.
27 May 1999
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