Apparel Sourcing Intelligence - Worldwide

EU and US arrest China trade “fraudsters” simultaneously

On Oct. 22 the U.S. and the European Union both near simultaneously announced actions against illegal Chinese imports.

US Customs and Border Protection (CBP) said it had seized, at Newark, three shipments of more than 2,500 cartons of clothing worth about $1 million which it said had been illegally transhipped to circumvent trade. It credited its “sophisticated targeting technologies” and its new international trade office for the seizure.

At the same time, the European Anti-Fraud Office (OLAF) disclosed that it had uncovered a scheme involving a band of Chinese, Hungarian and Austrian citizens who had smuggled large quantities of clothing and shoes from China into the EU by heavily undervaluing and falsifying invoices. The products included jeans, T-shirts and other clothes as well as various kinds of footwear, including sports shoes and casual shoes. OLAF claimed that small customs clearance agents performed the customs clearance so that goods were then cleared in the EU country of arrival without paying VAT and transported into another EU country. Most consignees were either non-existent or disappeared from the scene after a short period in operation. "The actual financial impact in customs duties and VAT in the present case cannot be accurately established yet, as the investigations are ongoing, but will run to millions of Euros,” said OLAF

Both sets of authorities made claims about the scale of the illegalities concerned. The CBP said that the number of factory visits in foreign countries doubled from fiscal year 2006 to FY 2007, the number of audits has increased by60% and penalties have increased by more than three times. In Europe, OLAF said that illegal trade through false origin and value declarations appears to occur throughout the continent and noted that several other investigations are ongoing. It estimated that the overall quantity of apparel and footwear affected by under-declaration frauds is around 600,000 tons and that the overall financial impact is more than 200 million euros in customs duties alone.

In fact, though, the two alleged schemes are quite different: the US case is an attempt to circumvent quotas, and there is no hint of underpaying tax: the EU case is an attempt to underpay tax – and, by implication, recover it later in the chain. and there is no evidence they are in any way connected