Brussels, 21/09/2007 (Agence Europe) - In a special report published on Thursday 20 September, the European Court of Auditors criticises slackness in controls on goods which give rise to the payment of export refunds. The amount paid in refunds by the Community budget has fallen over the last few years, but remains considerable: €3 billion in 2005 (compared with €9.8 billion in 1988) and 2.5 billion in 2006.
Export refunds are subsidies paid to exporters of agricultural products to compensate them for the difference between EU internal market prices and the lower prices on the world market. In order to protect the Community's financial interests, a control system (both physical and substitution checks, and checks on payment requests) was put in place in 1990.
In terms of physical checks, the Court said that member states had met the requirement of submitting 5% of export consignments to physical checks, but it highlighted a number of failings in procedures. Physical checks at loading places (often on the exporter's premises) were “predictable” in several countries (Belgium, Denmark, Germany, France, Italy, the Netherlands and the United Kingdom). The Court said that it was common practice for agents to arrive before the loading of the merchandise begins, and the consequence of this was an increased risk of fraud (payment of improper refunds). The Community regulation clearly states that physical checks have to be unannounced and frequent. Customs authorities checked a relatively high number of low value exports, but carried out few checks on bulk shipments (mainly cereals and sugar) which can result in high value export refunds. Customs sealed containers, trailers and lorries without carrying out physical checks (a practice observed especially in Belgium, Germany, Spain, France and Italy).
The audit of substitution checks showed up various problems (interpretation of the number of checks to be carried out differing from one member state to another; agents having difficulty in determining the goods to be checked, etc).
The Court stated that the Commission monitored the proper functioning of the control system by carrying out audits in member states and analysing the data on export refund checks. After an investigation on the ground, the Commission imposed financial corrections because of unsatisfactory checks in several countries (Belgium, Denmark, the Netherlands, the United Kingdom, Germany and France). However, cases of failure to comply are still pending (substitution checks in Italy and the Netherlands, where audits were carried out in 2001-2002), the Court said, referring also to delays in audit procedures likely to result in financial corrections for Germany, Ireland, Spain, France, Italy, the Netherlands and the United Kingdom.
The Court recommended that the European Commission speed up procedures for recovering agricultural funds improperly spent and propose amendments to the regulation in order to enhance physical and substitution checks.
In its response, the Commission pointed out that it had begun procedures to remedy the weaknesses exposed. It noted that export refunds were one of the major pillars of the Common Agricultural Policy (CAP) until the 192 reform. They diminished in importance with the reforms (only €1.4 billion will be budgeted in 2007). Above all, the Commission had given the political commitment, as part of the WTO, to withdraw all export refunds by 2013. The export refund system, on its way to being ditched, “will be withdrawn”, the Commission said. (lc)