8 Reduced levy on New Zealand dairy imports
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9384/98
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| Special Report No. 4/98 by the Court of Auditors on Importation of reduced rates of levy into the Community and disposal of New Zealand milk products.
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| Legal base | — |
| Department | HM Customs & Excise
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| Basis of consideration | Minister's letter of 18 July 2003
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| Previous Committee Report | HC 155-xxxiv (1997-98), paragraph 4 (15 July 1998), HC 34-xv (1998-99), paragraph 1 (30 March 1999) and HC 23-xxii (1999-2000), paragraph 1 (21 June 2000)
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| To be discussed in Council | Not applicable
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
8.1 Ever since the UK joined the European Community in 1973, specified
quantities of New Zealand butter have been entitled to enter the
Community at greatly reduced rates of levy, provided the butter
concerned is indeed of New Zealand origin, and meets certain other
conditions. In addition to the licence required by all imports
of dairy products, New Zealand butter requires a document providing
evidence that it meets the eligibility conditions and is within
the quota limit. New Zealand cheese also benefits, to a more
limited extent, from a similar concessionary arrangement.
8.2 These arrangements were reported upon in April
1998 by the Court of Auditors, which found major weaknesses in
the controls exercised by the UK authorities, and in the Commissions
oversight. As a result, the Court said that its audit had identified
under-payments of import levies amounting to some €410 million
and undue payments of export refunds amounting to €57,000.
Of these sums, only about €118 million was said to be recoverable
(because debts can be pursued only when they have been established
by a demand within three years of their arising). The implications
of this — not least in terms of the potential implications
for the Community budget and the UK Exchequer — were the
subject of lengthy Reports by our predecessors on 15 September
1998, 30 March 1999 and 21 June 2000. In particular, they noted
in the latter case that, due to the further legal action
already in train, it was likely to be some time yet before the
extent of any liability arising from the past irregularities could
be established, and they therefore decided to withhold clearance
until the position on this was clearer. They also noted that
a further report by the Court of Auditors on the subject was likely
to be published later that year.
Minister's letter of 18 July 2003
8.3 We have now received a letter of 18 July 2003
from the Paymaster General (Dawn Primarolo). She says that the
separate Report which the Court of Auditors had been expected
to produce had not materialized, but that the issue had been mentioned
in the Court's Annual Report for the 1999 financial year, in which
it had generally commended the action taken by Customs and Excise
to protect the Community's financial interest. She adds that
the Court has also acknowledged that a strategy had been adopted
to ensure that effective controls were in place and had been executed,
since when there had been no significant problems with imports
of New Zealand dairy products.
8.4 On the earlier difficulties identified by the
Court, the Minister says that the sums at stake have now been
resolved in principle, after protracted litigation (including
hearings in the House of Lords and VAT and Duties Tribunals) on
a number of technical issues, including technical disputes. In
the latter case, the Commission has granted remissions of major
parts of the debts, and, following recent scientific advice regarding
the reliability of butterfat content (and subsequent legal advice),
the final amount will be subject to further major reductions.
She says that it is not yet possible to put a precise figure on
the final sum, but that the early indications are that it will
be a small fraction of the estimated £290 million[16]
thought originally to be at stake. The Minister adds that the
result — which she anticipates will be reached by the end
of this year — is expected to be a full and final revision
of the debts, with the importers admitting liability, the outstanding
balance being paid in full, and all potential claims against Customs
and Excise and the Community being abandoned. Similarly, there
is not expected to be any actual loss to the Community budget.
Conclusion
8.5 We are grateful to the Minister for this further
information, in the light which we are now clearing this document.
16 This figure was later revised to £323 million. Back
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