European Union anti-fraud investigators suspect Greece and Hungary may have become the main EU centres of a large-scale scam that exploits the infrastructure of China’s “Belt and Road Initiative”.

The scheme, involving alleged under-declaration of the value of imported Chinese clothing and footwear resulting in lower duties and sales taxes, was first uncovered in Britain and had been under way for years. As a result, the European Commission this year demanded that London pay 2.7 billion (US$3.1 billion) worth of lost customs duties to the EU budget.

Officials at the European Anti-Fraud Office (OLAF) said they now suspected the scam could have shifted to Hungary and to the port of Piraeus in Athens, which has been majority-owned by China’s state-owned Cosco Shipping since 2016.

Hungarian and Greek customs data show a surge of undervalued clothing and footwear imports from China over the past two years, OLAF officials said. They stressed that this trend had coincided with a drop in undervalued Chinese imports into Britain.

Customs duties in EU countries are a direct revenue for the bloc’s budget. They are collected by national authorities before being sent to Brussels.

OLAF officials said the trend was “worrying” and that monitoring of import flows would be improved. In April, Reuters reported that Italian authorities were investigating suspected import fraud by Chinese criminal gangs at Piraeus port, the largest in Greece. Asked about the suspected fraud in April, Cosco Shipping said: “The company has in its global operations consistently and strictly followed local and international laws, and persevered to operate legally and compliantly.”

How China’s Belt and Road Initiative can extend its reach to the edge of the European Union

China wants to transform the Greek port into a “gateway to Europe” as part of the US$126 billion belt and road programme, which envisions a new “Silk Road” of land and sea routes linking its trading partners. The plan would include a fast rail and land route to connect Athens to the Hungarian capital, Budapest, across the Balkans. However, investigators said they suspect the same route could have been used by traffickers to move underpriced and undeclared Chinese goods to Hungary.

In the British scam, Chinese criminal organisations allegedly used the German port of Hanover as Europe’s first arrival point for undervalued clothing and footwear cargos. But goods passed customs controls only after having been shipped to Britain’s ports, under EU rules that spare checks on items in transit between the bloc’s member states, investigators said.

EU presents (nearly) united front against China’s ‘unfair’ Belt and Road Initiative 

The British ports of Dover and Felixstowe were still the EU’s main hubs for undervalued Chinese imports in 2017, OLAF data showed, but that flow had nearly stopped this year because of stricter checks by British customs, EU officials said.

They added that Britain’s decision to leave the EU’s customs union might have also persuaded the criminal groups that oversaw this business to find new routes to bring Chinese goods into Europe. OLAF defines undervalued goods as those which fall far below the average price declared in all EU customs.

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