4 Checks on export refund consignments
| (28943)
13268/07
—
| European Court of Auditors Special Report No. 4/2007 on physical and substitution checks on export refunds consignments
|
| Legal base | — |
| Deposited in Parliament | 28 September 2007
|
| Department | Environment, Food and Rural Affairs
|
| Basis of consideration | EM of 15 October 2007
|
| Previous Committee Report | None
|
| To be discussed in Council | In the near future
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
4.1 Export refunds are subsidies paid to exporters of agricultural
products to compensate them for the difference between EU internal
market prices and the lower world market price. Whilst the amount
of refunds paid has been decreasing in recent years (as a result
of reforms of the Common Agricultural Policy and development within
the World Trade Organisation), it is still significant, amounting
to some €2,500
million in 2006.
4.2 In order to ensure that refunds are paid only
for eligible goods and to deter false claims, checks have to be
made on export consignments, both at the point of departure from
the Member State where the goods originate, and at the point of
exit from the EU territory. These checks comprise a physical examination
of at least 5% of all export declarations at the point of departure,
and subsequent visual substitution checks at the EU frontier to
ensure that the goods declared and claimed for are indeed those
effectively exported.
The current document
4.3 The current document comprises a Report by the
European Court of Auditors on an examination it carried out from
2004 to 2006 of the system of checks conducted in 11 Member States
(including the UK) in which it sought to ascertain whether these
were carried out in the way required by the Community legislation.
The audit also examined whether the Commission had properly monitored
the implementation of these checks, and had taken appropriate
action where this was found to be deficient.
4.4 As regards the physical checks, the Court found
that, whilst the Member States had respected the requirement to
physically check 5% of the export declarations, there were weaknesses
in the methodologies applied which reduced, significantly in some
cases, the effectiveness of the checks carried out. In particular:
- the checks at the place of
loading (often the exporter's own premises) were systematically
carried out at the start of loading, and in a number of Member
States —
including the UK —
had become predictable to the extent that they no longer fulfilled
the requirement that there should be no tacit prior warning: this
reduced their effectiveness and increased the risk of refunds
being unduly paid;
- the method of selecting consignments for checking
used in the Member States resulted in a relatively high number
of low value and low risk exports being checked, and thus did
not make the most efficient and effective use of scarce and expensive
Customs resources. The Court also drew attention to the difficulties
created by the centralised management of the risk analysis system
used by the UK;
- the method used to check bulk shipments of goods,
which often carry a high value of refund and involve a number
of export declarations, did not ensure that the entire shipment
was verified to the extent required, with the attendant risk that
refunds were unduly paid.
4.5 The audit of the substitution checks found that:
- checks were in some cases not
detailed enough, and that the interpretation of the number of
checks to be made varied between Member States, with the practices
on the Community's eastern borders being more rigorous that those
in a number of other Member States, including the UK;
- although there is a presumption that such checks
need not be carried out on consignments which have been properly
sealed, it was not always possible to establish this, particularly
where exporters also apply their own seals;
- responsibility for confirming the exit of goods
from the EU was given by the UK to shipping agents and/or port
operators.
4.6 On the monitoring of the checks by the Commission
and its remedial action, the Court concluded that:
- the Commission monitors the
operation of the checks by audits in Member States and by reviewing
the reports Member States are required to submit in respect of
the export refund checks carried out: it takes assurance from
the physical and substitution checks as part of its overall assurance
that agricultural subsidies are paid in a legal and regular manner;
- the Court's own findings are largely mirrored
by those of the Commission's audit services, but that, despite
the Commission being aware of these weaknesses for some considerable
time, it has not reacted with legislative changes or timely financial
corrections.
4.7 In the light of these observations, the Court
has recommended that the Commission should:
- propose legislative changes
to strengthen the physical and substitution checks, and to ensure
their effective application;
- particularly review the validity of the checks
carried out prior to the loading of goods, in order to determine
whether these can be considered as meeting the minimum requirements
of Community legislation.
The Government's view
4.8 In his Explanatory Memorandum of 15 October 2007,
the Minister for Sustainable Food and Farming and Animal Welfare
at the Department for Environment, Food and Rural Affairs (Lord
Rooker) says that the Commission has accepted most of the Court's
comments and recommendations, and plans to proposed modifications
to the relevant Regulation. He also notes that the UK features
quite prominently in the Court's Report, and says that the issues
raised have been considered by the Rural Payments Agency and by
HM Revenue and Customs. In particular, he comments that the UK
has made considerable improvements in its risk analysis system
in order to improve the selection process; that guidance on the
times of attendance at exporters' premises has been amended to
avoid predictability; that improvements have been made in the
procedures for checking high value bulk consignments; and that
a programme of recorded checks on container seals has been introduced.
However, the UK does not accept the Court's view that responsibility
for confirming exit from the EU has been given to shipping agents
and/or port operators, though it agrees that the procedures in
question can be complex, and would therefore support any proposal
aimed at simplification and improving their clarity.
Conclusion
4.9 Although expenditure on export refunds is
continuing to decline, it remains significant, and it is thus
clearly important that adequate checks should be carried out to
ensure that it is incurred correctly. For that reason, and because
it contains a number of references to the practices within the
UK, we are, in clearing this Report by the Court of Auditors,
drawing it to the attention of the House.
|
