Examination of Witnesses (Questions 1-19)|
HM REVENUE AND
UK BORDER AGENCY
9 MARCH 2009
Q1 Chairman: Good afternoon. Welcome
to the Committee of Public Accounts where today we are considering
the Comptroller and Auditor General's Report on The Control and
Facilitation of Imports. We welcome back to our Committee Ms Leslie
Strathie who is the Chief Executive of HM Revenue and Customs.
I think it would be easier if you introduce your team.
Ms Strathie: Thank you, Chairman;
good afternoon. On my left I have Ms Melanie Dawes who is the
Director General for Business Tax; Mr Doug Tweddle who is the
Director for Customs and International; on my right is Brodie
Clark who is the Head of the UK Border Force.
Q2 Chairman: If we look at the summary
of our Report on controlling imports and we read paragraphs seven,
eight and nine on page five and paragraphs 12 and 13 on page six
these are a useful summary of how you do control importsthis
is imports of things of course rather than people; we were looking
at people last week, today we are looking at thingswhat
we see there is a rather fragmented regime. I am sure you would
agree with that. We have complex rules, errors in documentary
checks, fewer and fewer trader audits and you do not know how
many imports are checked centrally. Are these the hallmarks of
a well-run organisation, Ms Strathie?
Ms Strathie: No, I do not think
they are but I do not think that is quite how I would put it.
We have come a long way since the Report was written and much
has changed, including the transfer in day to day working of many
of our functions to the new UK Border Agency. The checks that
you refer to are a small element of the entire checking regime
that is carried out. Those are the checks identified by the CHIEF
system and in relation to physical checks at the border. They
do not include all the pre-checks and post-checks and all of the
audits that are carried on inland. Would you like me to expand
on those points?
Q3 Chairman: No, I think actually
we can go into detail one by one. I always assumed that goods
coming into the UK were much more rigorously checked then goods
going to the rest of the EU but if we look at paragraphs 2.16
and 2.18 that there is quite a low rate of examination. Apparently
we examine 2% to 3% of goods and the EU averages 9.1%. I find
this rather worrying, Ms Strathie. Are we seen in the UK as a
safe haven for imported guns or other prohibited goods?
Ms Strathie: First and foremost
we need to say that this is about control and facilitation of
imports coming from non-EU into the EU and the UK. That is the
first distinction. In addition to the physical examinations carried
out by the UKBA using shipping information, we have a large number
of documentary examinations carried out as well. The other thing
that is worth mentioning is that there is no direct comparison
between the Member States because we do not all carry out the
Q4 Chairman: We have the figure of
9.1% as the European average; is that right?
Ms Strathie: Right in terms of
numberswe accept thosebut in terms of comparing
apples and pears it is not right. Different functions are carried
out in different Member States by their equivalent organisations.
These checks here are simply the ones HMRC and now UKBA are responsible
Q5 Chairman: If we read paragraph
2.17 you have this CHIEF system; what does CHIEF stand for?
Mr Tweddle: Customs Handling of
Import and Export Freight.
Q6 Chairman: It is driven by some
sort of central IT system which seems to be more successful.
Mr Tweddle: CHIEF is a centralised
IT system which all imports into the UK from outside the EU are
electronically reported to.
Q7 Chairman: You do not use CHIEF
for everything and the rate of irregularities identified on imports
selected by detection officers is a lot less than for the CHIEF-based
examinations. Why do you not use CHIEF more often?
Mr Tweddle: CHIEF works on the
freight declarations where each of the 22 million freight declarations
has quite a lot of detailed information inputted into the computer
system and you are able to use the computer to identify things
which do not look right. That is why we get a high proportion
of irregularities. On the detection side we have officers working
at the ports and airports, working on much less refined information
and they are looking at things like manifests and they are getting
information from the shipping lines and they are not able to target
so precisely. Inevitably what they are looking at is going to
be less successful.
Q8 Chairman: There seem to be a large
number of errors. Looking at paragraph 2.6 on page 14 it says,
"In February 2008, a review of 430 cleared documents showed
that 18% of checks had an error". Does that mean that quite
a lot of stuff is getting into this country that we do not know
about, is there something wrong with it?
Ms Strathie: The errors referred
to are administrative errors.
Q9 Chairman: So that does not mean
that goods are coming into this country that we do not know about.
Ms Strathie: No.
Q10 Chairman: It then says, "and
did not meet the clearance standard" so it is not just administrative
errors, they did not meet the clearance standard apparently.
Mr Tweddle: We have looked at
this closely, Mr Leigh, and we can give an assurance that nothing
is being allowed into the country which should not have been because
of the errors which were subsequently detected.
Q11 Chairman: How can you be so confident
Mr Tweddle: We have done an analysis
of what the errors were and they were essentially recording things
after the goods declaration had been made. It was the way we process
the goods declaration rather than the nature of the goods declaration
itself. I think we can also give the Committee an assurance that
we have worked very hard to improve the quality levels which are
operating at our centralised clearance hub in Salford and we are
now very close to meeting the targets which the NAO suggested
we should be achieving.
Q12 Chairman: I was surprised to
read in paragraph 2.21 on page 18 that you have halved the number
of trader orders over the last three years. It says here: "The
number of audits conducted by the Large Business Service from
2005-06 to 2007-2008 has decreased by 51%". Is that a good
thing to do?
Ms Dawes: That relates to the
Large Business Service and yes we have changed our approach to
audits of the largest customers and we are now doing fewer but
more in depth audits. We are still able to do a completely comprehensive
audit of all customs and international trade issues for those
biggest customers every three years and every single customer
has a named point of contact that they can speak to on a day by
day basis for checking detailed information and so on.
Q13 Chairman: Later on on this page
we read about the Department's performance in assessing and monitoring
risk. Surely if you are going to find out whether there is a new
and emerging threat you should have more random inspections, should
you not? It says on page 19, "The Department stopped random
inspections of imports in 2001 as resource constraints and rising
volumes of trade affected the statistical viability". What
is wrong with occasional random inspections?
Mr Tweddle: Perhaps I could answer
that, Mr Leigh. As you will see from this Report import procedures
are complex and the opportunities to find irregularities are wide.
Our experience of random testing was that it was not producing
worthwhile information which led to a more intelligent use of
our resources. If I could expand a little further, there are 34
different prohibition and restriction regimes; there are 30 different
customs regimes; there are 16,000 different tariff classifications.
Doing a random check to try to inform your overall risk would
just not be practical and you would have to actually check a very
high proportion of the goods which are coming into the country.
We think a process using structured risk targeting in particular
areas is a much more sensible way of deploying our operational
Q14 Chairman: I am glad you mentioned
the 16,000 different commodity codes; that is staggering. If you
are a trader it is very complex keeping up with it. Paragraph
3.4 on page 26 says, "There are many changes being made to
the importing process currently" so it seems that the traders
are having some difficulty keeping up. There is an interesting
figure which really sums up the problem. Figure 14 on page 21
reads: "Example of the complexity of identifying the correct
commodity code. A trader applied to the Department for a commodity
code for an Easter snow globe with a glass globe, a polyresin
base, containing a depiction of bunnies and spring, and playing
music. The Department considered that it could fall under the
following areas of the Tariff: Chapter 39 on polyresin ornaments;
Chapter 70 on glass; Chapter 95 on festive items; Chapter 92 on
music boxes. The Department sent it to the EU for a decision."
This is ridiculous; this is an Easter snow globe.
Mr Tweddle: If I could respond,
Mr Leigh, first of all I do not want to sound defensive but HMRC
does not establish the commodity codes. Most of them have come
from requests from business to have more precise identification
of the goods which are involved in international trade. I am not
quite old enough to remember, but if you go back to the customs
tariff of the 1930s I think the number of commodity codes was
not much more than a thousand but over the last 60 to 70 years,
because of demands of business and the demands to have more accurate
identification of particular commodities, you end up with this
example. I must say, our colleagues in the NAO have chosen a particular
difficult one of course over how you actually classify that. It
can be quite important. Let me give another example. We have mobile
phones which now have cameras on them and MP3s and global positioning
systems and classifying what it isis it a mobile phone,
is it a GPS system, et ceterais quite difficult and it
does affect the duty rates which have been decided, so the classification
can be very important. Also, when you come to things like preferential
trade agreements and origin you need that precise level of classification.
Q15 Chairman: Okay, you have convinced
me that you have the Easter snow globe right. My last question
relates to the general pressure on the UK Border Agency. We had
a hearing last week on asylum and they are obviously under huge
pressure with people, and I notice that the rate of examination
at seaports is significantly lower than at airports. With all
the problems of asylum and the rest of it, to what extent have
you taken your eye of the goods because you are worried about
people? By the way, I think it is very important to worry about
people and I am not blaming you for it.
Mr Clark: In terms of last week
and this week I think the changes to the UK Border Agency have
happened relatively recently in terms of customs and immigration
coming together. That should and will increase the flexibility
of the force at the border to deal more effectively with people
and goods and work through an effective prioritisation process
with good intelligence coming from both sides in terms of targeting
the resource. Instead of 4000-plus staff at the border looking
for goods, it will in effect mean 8000-plus staff there who will
have the ability, the skills and the powers to look for both people
Q16 Mr Williams: Ms Strathie, we
have one of the lowest rates of examinations in Europe so it would
not be unreasonable to assume that you focus on the areas of high
risk. That would be a logical conclusion but not an appropriate
conclusion because even then you only detect irregularities in
1% of this smallest number of examinations. How on earth do you
reconcile those two facts?
Mr Tweddle: Mr Williams, as the
person responsible for the customs procedures maybe I could begin
to answer that. First of all, if you look at some of the other
more advanced customs administrationI am not ashamed to
say that I think Britain does have an advanced customs administrationour
figures are not out of step with countries like the Netherlands,
Sweden or Denmark.
Q17 Mr Williams: You mean they only
identify 1% as well?
Mr Tweddle: We do not have the
Q18 Mr Williams: Then how can you
say they are not out of step?
Mr Tweddle: I am looking at the
physical examinations which they have conducted.
Q19 Mr Williams: That does not matter,
does it? It is outcomes that matter.
Mr Tweddle: If you actually look
at the result of the checking that we do on the cargo declarations,
we actually find a much higher proportion of irregularity. It
is not just dependent on physical examination.