EU moves to sue UK over fraud in import from China

The European Union has begun a procedure to sue the United Kingdom for infringement in providing finances owed to the bloc over the import of Chinese products.

The EU’s budget chief Gunther Oettinger said on Monday that the European Commission, the executive arm of the EU, will send a ‘Reasoned Opinion’ to the UK as part of a formal procedure to protect the bloc’s finances from losses created by the UK’s fraudulent import of Chinese products.

The notice said that the fraud scheme resulted in losses to the EU budget amounting to €2.7 billion (plus interest and minus collection costs) during the period between November 2011 and October 2017.

EU officials say importers in Britain have managed to evade a large amount of customs duties related to the import of Chinese products into the bloc through the ports of Dover and Felixstowe over the past years.

OLAF, the EU’s anti-fraud body, said the China-led network used “fictitious and false invoices and incorrect value declarations at importation.”

“Despite having been informed of the risks of fraud relating to the imports of textiles and footwear originating from the People's Republic of China since 2007, and despite having been asked to take appropriate risk control measures, the United Kingdom failed to take effective action to prevent the fraud,” said OLAF, adding that the undervaluation fraud scheme discovered on the UK side was very large in scale.

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Britain’s HM Revenue and Customs denied the allegations, saying the country had in fact helped generate a huge amount of income for the EU that could have been lost if it was not for London’s proper supervision.

“HMRC has a very strong track record for tackling evasion and rule breaking of all kinds, generating a record £30.3 billion in 2017-18 alone in revenue that would otherwise have gone unpaid,” it said, adding “The UK does not accept liability for the alleged losses or recognize the estimate of alleged duty evaded.”

British authorities said, however, that they will continue to work with related EU officials over the issue.

The EU had prepared to announce the legal action against Britain last week but sending a warning was postponed to avoid interfering with discussions about Brexit during an EU summit in Austria.

Tough negotiations are underway on how Britain will leave the EU in March next year. Britain and the EU have repeatedly clashed over key terms of a withdrawal agreement and many speculate that a divorce without a deal is a possibility.

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