Good Practice Guide Ch 4 Types of Fraud and Trends

CHAPTER 4 TYPES OF FRAUD & TRENDS

Table of contents.

Part one: Types of fraud 1.1 General 1.2 Smuggling 1.2.1 High-duty goods; 1.2.2 Goods subject to prohibitions, p rohibitions, restrictions restrictions or other measures 1.2.3 Endangered species; 1.2.4 Copyright. 1.3 Undervaluation 1.4 Overvaluation 1.5 Underdeclaration of quantity 1.6 Overdeclaration of quantity 1.7 Misdescription of tariff classification 1.8 False declaration of origin 1.9 False licences, permits and 1.10 Health certificates 1.11 False declaration of destination (or end-user) 1.12 Cap fraud Part two: Trends 2.1 Cigarettes 2.2 Alcohol 2.3 Stolen vehicles 2.4 Counterfeit 2.5 Endangered species 2.6 Weapons & military equipment 2.7 Heroine 2.8 Cocaine 2.9 Cannabis 2.10 Precursors

EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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CHAPTER 4 - TYPES OF FRAUD & TRENDS

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Part one TYPES OF FRAUD


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General

1.1

Because of the increased flow of goods in the ports, the transport companies looks for adapted and more rapid goods carriers. Container transport is a typical example of that. The checking of moves of goods accordingly becomes more complex. This development takes effect on fraud, especially in the field of smuggling of cigarettes and narcotics. Customs fraud is motivated by factors linked, to a large extent, to each country’s economic policy and structures. Consequently, the incidence of the different types of fraud encountered will vary from one country to another, in accordance with these factors. However, the types of fraud referred to below are those which a Customs officer may expect to encounter in the routine examination of goods carried by container.

• • • • • • • • • •

1.2

Smuggling Undervaluation Overvaluation Underdeclaration of quantity Overdeclaration of quantity Misdescription of tariff classification c lassification False declaration of origin False licences, permits and health hea lth certificates False declaration of destination (or end-user) CAP Fraud

Smuggling

Reason: Complete evasion of Customs control in relation to: 

high-duty goods (cigarettes, alcohol and stolen cars);



goods subject to prohibitions, restrictions restrictions or other measures (drugs, precursors, weapons, military equipment);



endangered species (cites);



copyright (counterfeit).


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1.2.1

High-duty goods

ALCOHOL

container FCSU 402168-0 1152 cartons poly chloroprene contact adhesive

24.537 KGs

FCL - FCL

ex m/v m/v KUALA LUMPUR EXPRESS (flag: Greece)

Surabaya

Antwerp

Container was checked on the basis of risk analysis of the cargo manifest. The container was loaded completely with cardboard cases. On every carton a yellow label with Spanish text was attached. Every carton contained a white plastic drum with a liquid, that smelled like alcohol. We brought some samples to the lab and the analysis showed that liquid was alcohol 96%.


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photo 1: external view of container FSCU 402168-0.

photo 2: view of the cargo loaded in container.


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photo 3: cardboard case opened showing a white plastic drum with alcohol.

photo 4: close up of the label that was attached on every cardboard case.


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CIGARETTES

container NOLU 463934-1 1005 cartons scooters 13.828 KGs FCL - FCL

ex m/v APL MALAYSIA(flag: MALAYSIA(flag : Liberian)

Hong Kong

Antwerp

Container was checked on base of risk analysis of the cargo manifest. The container was loaded completely with cartons. All the cartons were similar. The cartons on the first row were loaded with scooters. In all the other cartons cigarettes “Benson & Hedges were hidden inside. A total number of 8.350.000 cigarettes were seized.


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photo 1: external view of container NOLU 463934-1.

photo 2: view of the cargo loaded in container NOLU 463934-1.


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photo 3: close up of a carton.


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photo 4: view of the contents contents of a carton containing scooters.

photo 5: close up of a carton containing cigarettes “Benson & Hedges”.


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CIGARETTES

It is important to know that the doors of this container could be opened without breaking the seal of the container.

container TOLU 370232-1 524 cartons detergent powder

18.340 KGs

ex m/v CONTSHIP CHAMPION (flag: Germany)

Jebel Ali

Antwerp

Dublin

During the physical exam of the container we saw that the doors of the container could be opened without breaking the seal of the container. In the second row of the container we examined one of the large cartons said to contain detergent products. On the carton we noticed arrows indicating the top of the carton. When opening the carton we found under the detergent product (brand Laser) 16 x 20 packages of “REGAL” cigarettes. In the same carton, under these cigarettes, was found a complete carton of 10.000 cigarettes.


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photo 1: view of the seal on the container.

photo 2: view of the cargo loaded in container


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photo 3: close up of a large carton contained detergent powder, 16 x 20 packages cigarettes and a complete carton with 10.000 cigarettes.

photo 4: close up of a carton detergent powder.


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TAMPERING WITH CONTAINER DOORS The bushing of the pivoting section turned out to have a screw thread. The bushing could be screwed into a matching threaded socket in the bolt hole of the door. Remove the bushing and the door could be opened without breaking the Customs seal.

photo 5: close up of the seal on the container.

photo 6: close up of the seal when the bushing was removed.


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photo 7: close up of the bushing.

photo 8: close up of the nuts on the inner side of the container container door. Notice the difference of nuts.


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STOLEN VEHICLE: DODGE RAM 1997

container TRLU 433305-4 4000 pieces plastic cups + 2 cars (1x 1987 Ford + 1x 1996 Dodge) 8.189 KGs FCL - FCL

ex m/v OOCL CANADA (flag: Hong Kong)

Montreal

Antwerp in transit to

Tema

Container was checked on base of risk analysis of the cargo manifest. During the physical exam of the container and the cars it was noticed that the mile-o-meter of the vehicle “DODGE” showed 59 km. Also the chassis-number mentioned on the manifest was different from the chassisnumber that we saw in the car. On base of the new chassis-number, the Customs in Canada informed us that the car was stolen. The car was seized in Antwerp. Afterwards the car was sent back to the owner in Canada.


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photo 1: external view on the container TRLU 433305-4.

photo 2: view of the plastic cups loaded in container TRLU 433305-4.


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photo 3: view of the vehicle “ FORD” loaded in the container under the plastic cups.

photo 4: close up of the “FORD”.


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photo 4: view of the rest of the load after the first vehicle was removed.

photo 4: close up of the stolen stolen vehicle “DODGE RAM”.


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1.2.2 Goods subject to to prohibition, restrictions restrictions or other Measures 3.405 KGS HERBAL CANNABIS

container TOLU 224235-0 799 bags of charcoal 7.990 KGs. FCL - FCL

ex m/v PATRICIA DELMAS (flag: Bahamas)

Monrovia

During the physical examination of the container we found out that in 90 % of all the bags there was a plastic bag amongst the charcoal. In all these plastic bags were five 1 kg blocks herbal cannabis. The total weight was 3.405 KGs. KGs.


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photo 1: external view of container TOLU 224235-0.

photo 2: view of the bags with charcoal after partial unloading.


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photo 3: close up of one bag of charcoal.

photo 4: view of some bags of charcoal and one plastic bag with herbal cannabis.


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photo 5: close up of one plastic bag.

photo 6: view of 5 packages herbal cannabis hidden in one plastic bag .


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5.016 Litres piperonyl methyl ketone (PMK) 1.770 Litres benzyl methyl ketone (BMK) (precursors cat. 1)

container TRLU 327537-5 900 cartons canned yellow peaches

19.000 KGs

FCL - FCL

ex m/v YUN HE (flag: Panama)

Lianyungang

During the physical examination of the container we found out that the first three rows of the container were loaded with cartons containing canned peaches. Behind them there were similar cartons and white polyester foam boxes all containing a clear or white plastic drum. 418 transparent drums contained PMK with a total of 5.016 litres; 177 white drums contained BMK with a total of 1770 litres.


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photo 1: view of the cartons and the polyurethane foam boxes loaded in the container.

photo 2: close up of one carton.


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photo 3: close up of one carton containing canned peaches.

photo 4: close up of one tin canned peaches.


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photo 5: view of a white drum with BMK.

photo 6: close up of a transparent drum with PMK.


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photo 7: view of a white drum with BMK in a polyurethane foam box.

photo 8: on the left a sample BMK, on the right a sample PMK.


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WEAPONS & MILITARY EQUIPMENT

Shippers-own container demonstration material FCL - FCL

ex vessel

Antwerp

SOUTH - AFRICA

The container was selected for examination from the risk analysis of the manifest. During the physical exam we saw tree-trunks on the first row, behind these trunks were crates which contained military-equipment (machineguns, communication equipment, infra-red night-glasses, binoculars, etc.). The equipment had been shipped to Burma where it was used to give a demonstration. Afterwards it was shipped back to SouthAfrica via Antwerp. No transit licences were submitted to the Customs. Because the goods were declared as demonstration-material all the military –equipment was seized in Antwerp.


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photo 1: view of a crate containing a machinegun.

photo 2: close up of a machinegun found in the shippers-own container.


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photo 3: close up of another machinegun.


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LICENCES

7 containers vehicles

29.850 KGs

FCL - FCL

ex m/v ZIM ANGLIA (flag: Malta)

Ashdod

Antwerp

Libreville

The container was selected for examination from risk analysis of the manifest, because it mentioned as consignee: Ministry of National Defence and immigration, att. Colonel Akendenguey, Libreville Gabon. During the physical exam of the containers we saw that the vehicles were manufactured according to military specification (colour, equipment, point of support for a machinegun on the roof). No transit-licences were submitted to the Customs.


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photo 1: external view of container OCLU 073719-9 (one of the 7 containers).

photo 2: view of the contents of container OCLU 073719-9.


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photo 3: close up of a vehicle loaded in one of the 7 containers.


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LICENCES

91 container “car spare parts” + 40 trucks Mercedes Benz Unimog

ex truck and railway

+

Winschoten

Antwerp for export to

ERITREA

Asmara

A shipment of goods was presented to the Belgium Customs in the port of Antwerp for transport to Eritrea. The goods arrived in Antwerp partly by road, partly by train from the Netherlands. They were described as “car spare parts”. The shipment consisted of 91 containers and 40 Mercedes-Unimog vehicles. When the containers were checked, in co-operation with members of the Belgian army, the contents were recognised as old and new parts for T-55 combat tanks.(tracks, communication equipment, intercoms, T-55 dash-boards, infra-red lights, T-55-binoculars, firing-equipment, etc.) The trucks were in military military camouflage (brown-green) colours. After contact with the importer of UNIMOG in Belgium we find out that these vehicles were manufactured according to the military specification of the German Army (recognised from the chassis-numbers). We find out that the vehicles were still registered as military vehicles. No transit-licences were submitted to the Customs.


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photo 1: close up of one Mercedes-Unimog vehicle.

photo 2: view of the military vehicles.


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photo 3: view of the cargo loaded in one of the 91 containers.

photo 4: close up of a track from from a T-55 combat tank.


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photo 5: close up of military-equipment military-equipment found in one of the 91 containers.

photo 6: close up of two loaders for ammunition ammunition found in one of the 91 containers.


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LICENCES

containers ROXU 895084-0 – LIRU 432447-0 Equipment for aircraft 14.355 KGs FCL - FCL

ex m/v CITY OF HAIFA (flag: Antigua & Barbuda)

Haifa

Antwerp

Puerto Cabello

The container was selected for examination by risk analysis of the manifest. During the physical exam of the containers we saw that there was a helicopter on flatcontainer ROXU 895084-0. Container LIRU 432447-0 was loaded with accessories for the helicopter. On the basis of the colour, marks of identification and a copy of a design from the helicopter that was found in one of the crates we could say that the helicopter was destined for the air force of Venezuela. No transit-licences were submitted to the Customs.


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photo 1: view of flat-container ROXU 895084-0.

photo 2: close up up of the cabin of the helicopter.


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photo 3: external view view of container LIRU 432447-0.

photo 4: view of the cargo loaded in container LIRU 432447-0.


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photo 5: close up of a label on one of the cartons in container LIRU 432447-0.


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1.2.3 Endangered species

CITES Smuggling of Ivory

2 shippers-own containers beeswax FCL - FCL

ex vessel

Dar-Es-Salaam

Antwerp

The container was selected for examination by risk analysis of the manifest. During the physical exam we saw that the containers were fully loaded with elephants-tusks. A total number of 1600 tusks were seized.


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photo 1: view of the load in one of the containers.

photo 2: close up of the load in one of the containers.


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photo 3: close up of a elephant tusk.


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CITES Smuggling of giant shells and turtle shells

container HJCU 891301-4 stone ashtray 12.500 KG’s FCL - FCL

ex m/v HANJIN WILMINGTON (flag: Panama)

Manila

During the examination of the container turtle shells were found. The goods were declared as stone ashtrays.


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photo 1: view of container when doors open.

photo 2: detail of a giant shell.


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photo 3: detail of a turtle shell.

photo 4: view of the turtle shells.


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1.2.4 Copyright COUNTERFEIT

container HJCU 730280-7 416 cartons readymade garment 9.468 KGs FCL - FCL

ex m/v HANJIN KEELUNG (flag: Panama)

Bangkok

Singapore

Antwerp

The container was selected for examination from risk analysis of the manifest. During the physical examination of the container we noticed that the cartons contained branded shirts “Levi’s” and “Diesel”. In some cartons we also found labels “Levi’s” on banderoles. The brand-owners of both marks were informed about this shipment. Both confirmed that the goods were counterfeit. They introduced a complaint through the court of justice. The goods were seized and afterwards destroyed.


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photo 1: external view of container HJCU 730280-7.

photo 2: view of the cargo in the container.


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photo 3: close up of one shirt “Diesel”.

photo 4: close up of the shirts “Levi’s” and the labels on banderoles.


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COUNTERFEIT

container CBHU 142780-6 500 cartons men’s flannel yarn dye shirts and shoes 9.500 KGs FCL - FCL

ex m/v FEI HE (flag: China )

Shanghai

Antwerp

The container was selected for examination from risk analysis of the manifest. During the physical examination of the container we saw that the shirts were labelled with the mark “ Cristian Dioro” and that the shoes were labelled with the marks “Carterbilli” and “Jianni Versini”. The brand-owners of the marks “ Christian Dior “, “Caterpillar” and “Versace” were informed about this shipment. They confirmed that the goods were counterfeit. They introduced a complaint through the court of justice. The goods were seized and afterwards destroyed.


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photo 1: close up of a shirt with the mark “Cristian Dioro”.

photo 2: close up of the mark “CD Cristian Dioro Dioro in the shirt.


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photo 3: close up of a shoe- box from the mark “Jianni Versini”.

photo 4: close up of a shoe with the mark “Jianni Versini”. Versini”.


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photo 5: close up of a shoe with the mark “Carterbilli”.

photo 6: close up of the mark “Carterbilly U.S.A.” inside inside one shoe.


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COUNTERFEIT

container GSTU 342528-3 280 cartons cotton knitted vest and and shorts set with prints. 3.500 KGs FCL - FCL

ex m/v IBN ZUHR (flag: Bahamas)

Singapore

Antwerp

The container was selected for examination from risk analysis of the manifest. During the physical examination of the goods we saw that a part of the cartons contained blank T-shirts. 140 cartons contained T-shirts with the the label “Atlanta Braves”. The brand-owner of the mark was informed about this shipment. He confirmed that the labelled T-shirts were counterfeit and introduced a complaint through the court of justice. The T-shirts with the label “Atlanta Braves" were seized and afterwards destroyed. The blank T-shirts were transported to their final destination.


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photo 1: external view of container GSTU 342528-3.

photo 2: view of the cartons loaded in container GSTU 342528-3.


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photo 3: close up of a T-shirt with the mark “Atlanta Braves”.


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COUNTERFEIT

container MSCU 890436-1 776 cartons electronic games 12.000 KGs FCL - FCL

ex m/v NORASIA SINGA (flag: Germany)

Shenzhen Antwerp

The container was selected for examination from risk analysis of the manifest. During the physical examination of the container we saw that the cartons contained different types of consoles. On the boxes were logos of games which are patented by Nintendo (Mario Bros, Donkey Kong…). The consoles were 8-bit consoles which looked from the outside like 16-bit consoles. The brand-owner of Nintendo was informed about this shipment. He confirmed that the goods were counterfeit and introduced a complaint through the court of justice. The goods were seized and afterwards destroyed.


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photo 1: external view of container MSCU 890436-1.

photo 2: close up of a console “STREET FIGHTER III”.


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photo 3: close up of a console “Mortal Kombat”.


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photo 4: close up of a box with patent logo’s “Mario Bros, Turtles etc.”

photo 5: close up of a console .


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photo 6: close up of a box “Super Games”. The logo’s are the same as these from Nintendo.

photo 7: close up of a console “Super Games”.


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COUNTERFEIT

Containers TEXU 304561-0 + MISU 113511-7 1920 cartons tea 26.496 KGs FCL - FCL

ex m/v LUDWIGSHAFEN EXPRESS (flag: Germany)

Shanghai

Antwerp

The container was selected for examination by risk analysis of the manifest. During the physical examination of the container we saw that the cartons contained packages of tea. On the packages was a patent logo of “Roodhooft” confectioner’s shop. The brand-owner of Roodhooft was informed about this shipment. He confirmed that his logo was being used without permission and introduced a complaint through the court of justice. The goods were seized and afterwards destroyed.


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photo 1: external view of one container loaded with cartons tea.

photo 2: close up of the packages tea.


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photo 3: close up of the logo’s: on the left side the patent logo of Roodhooft and on the right side the logo on the packages tea.


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1.3

Undervaluation

Reasons:  evasion of import duty;  increased volume of imports over that permitted by an ad valorem quota

licence; e xporting country.  evasion of exchange control in exporting

Methods: 

double invoicing;  part-payment in cash, not recorded on invoice;  offset accounting;  suppression of certain dutiable charges e.g. freight, insurance, commission, royalties, consulting fees, design costs, tooling costs, advertising costs, etc.

Example: An industry wide practice exists in undervaluation of cars and luxury pl easure yachts. Generally the fraud is effected through the non declaration of the initial deposits(on average 25% of the commissioned price) or on the non-declaration of the value of the options.

1.4

Overvaluation

Reasons: expo rtation;  evasion of exchange controls at importation or exportation;  evasion of import restrictions or anti-dumping duty on goods below a ce rtain value threshold.

Examples of methods: 

overstatement of values on invoices.

Note: Even duty-free goods may be undervalued to evade exchange control and, in this respect, works of art and rare artefacts are particularly sensitive to under/ overvaluation fraud.


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1.5

Underdeclaration of quantity

Reasons: 

evasion of import duty or levy on part of the total consignment;  evasion of quantitative quota restriction; expo rtation;  evasion of exchange controls at importation or exportation;  evasion of export levy on part of the total consignment. 1.6

Overdeclaration of quantity

Reasons: 

false entitlement to export refunds;  fraudulent remission of VAT liability on exports, or false entitlement to drawback. 1.7

Misdescription of tariff classification

Reasons: 

evasion of all/part of import duty;  evasion of import/export levies;  evasion of prohibitions;  evasion of quota or origin restrictions.

Methods: A blatant method is to give the goods the most beneficial description, e.g., to describe soap powder as butter at exportation in order to obtain an export refund. This is a crude method immediately identifiably upon examination. Usually, the misdescription is more subtle and therefore, less likely to be detected.

Example: “Other computer parts” under chapter 84.73, declared as US origin. It was suspected that the goods were actually DRAMS(Dynamic Random Access Memories) of Japanese origin attracting anti-dumping duty(ADD) of 60%. The entry was amended to pay on deposit pending a definite classification. classification. The importer was also trying to obtain documentation showing that the Japanese manufacturer was exempt from ADD(unseccessfully). The goods were described on the invoice as “16Mb Memory Expansion Sys” and had been entered to commodity codes 84733090090 and 84733000090. Samples taken for classifications showed them to be SIMMs(Single In-line Memory Modules) comprising of DRAMs mounted on a PCB, and according to the Classification Officer, proper to 84733010040 and therefore liable to ADD. EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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ANTI-DUMPING DUTIES. 570 cartons (569.900 pieces) non refillable lighters 5 cartons (480 pieces) canisters canisters with gas for lighters. lighters.

Container HDMU 219745-7 840 cartons Lighter 17.000 KGs FCL - FCL

ex m/v HYUNDAI FRONTIER (flag: Bahamas)

Hong Kong

Antwerp

The container was selected for examination by risk analysis of the manifest. The goods were declared as 840 cartons refillable lighters. During the physical exam of the container we find out that 2/3 of the container was loaded with cartons of non-refillable lighters and also with cartons containing canisters of gas for lighters. Because of the Chinese origin of the goods, an anti-dumping duty must be paid. After stock-taking we found out that the container was loaded with: - 299 cartons ( 299.000 pieces) of refillable lighters; - 570 cartons ( 569.900 pieces) of non-refillable lighters; 5 cartons ( 480 pieces) of canisters with gas for lighters. An attempt had been made to evade the following taxes: - import-duties 144 Euro - anti-dumping duties 35.530 Euro - VAT 7.961 Euro EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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photo 1: view of the cargo in the container

photo 2: close up of canister with gas and non refillable lighters.


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MISDESCRIPTION & LICENCES

container TPHU 473795-9 Articles of iron and steel 15.100 KGs

ex truck

Antwerp

The container was located and checked after receiving information from the German Customs. The goods were declared as “articles of iron and steel”. The container was to be loaded on a vessel with destination Singapore. During the physical examination we saw that the container was loaded with engines for tanks. No transit-licences were submitted to the Customs.


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photo 1: external view of container TPHU 473795-9.

photo 2: view of the cargo in container TPHU 473795-9.


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photo 3: close up of a engine for tanks.

photo 4: close close up of the identification plate on one of the engines. engines.


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1.8

False declaration of origin

Reasons: 

fraudulent entitlement to preferential rates of duty available for products from specified countries.  evasion of quota restriction or anti-dumping applied to products from specified countries.

method: Documents submitted with the Custom declaration indicate a different country of origin than the true country; All marks of origin on the goods themselves are removed prior to shipment and the goods are relabelled to show the false country of origin.

Example 1: 

textile products for a company already known for fiscal fraud;  declared origin: Bangladesh.  A check of the bill of lading and the tracking of the container showed the container was loaded in Shanghai.  Scrutiny of the Bangladesh certificate which was presented in Antwerp showed there was a false stamp from Bangladesh on it.

Example 2:           

16 containers siliciumsteel from China(anti dumping duties: 49%) declared origin: Vladivostok via Busan to Antwerp. bill of lading: Busan – Antwerp previous bill of lading: port of loading = China. inquiry concerning the routing of the container showed the goods were loaded in China. other imports traced: - 10. 142 tonnes imported in the same way (value 11.500.000 USD). the Antwerp agencies presented certificate of origin and contracts from an exporter in Moscow. the Antwerp agencies received their orders from a company in Austria working for a company in Switzerland. Enquiries in Russia showed that the exporters didn’t exist and that all documents, contracts and stamps were forged. Enquiries in Austria to interview company representatives who were aware of the fraud-system. fraud-system. for 55 shipments we found out that the goods were loaded in China. EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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

The Belgian administration called for a payment of 5.057.028 5 .057.028 Euro.  The European Commission stated that the proof in our possession was sufficient.  The proof is there that the goods came from China, nevertheless the origin of the product had not been proved.

Note: It should always be kept in mind that the country of despatch is not necessarily the country of origin.


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GOODS EX ISRAEL – Marked “MADE IN BELGIUM”

container TPHU 420318-8 200 cartons air conditioning systems 10.260 KGs FCL - FCL

ex m/v SEXTUM (flag: Panama)

Haifa

Antwerp

Beir

The origin of the goods was Israel. During the physical exam of the container we saw on the cartons a description: “made in Belgium”. This is an offence of the law from 29 July 1994 for the benefit of the trade traffic of goods with an non-member state origin.


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photo 1: external view of container TPHU 420318-8.

photo 2: view of the cargo loaded in the container.


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photo 3: close up of the cartons with description “made in Belgium”.


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1.9

False licences, permits and Health certificates

Reasons: 

evasion of quota restrictions;  evasion of prohibitions;  evasion of health requirements.

Examples of methods: 

unauthorized completion of genuine, blank certificates;  forgery of certificates;  fraudulent amendment of details on genuine certificates (e.g. increased quantities)

1.10 False declaration of destination (or end-user)

Reasons: 

evasion of restrictions on exportation to specific destinations;  diversion to home use of goods travelling under cover of a transit document.

Example of method: In order to evade restrictions on export, a collaborator is shown as the addressee and end-user in a transit country. The consignment is subsequently shipped onward to the intended (but unauthorized) destination.

1.11 Cap fraud

Common Agricultural Policy Rome Convention 25th of march 1957. 

a decent income for the farmers;  improvement of production through a technical progress;  stability of prices for the consumer and for the delivery of the goods;  to create an independent strategy in order to satisfy the needs for foodproducts. Based upon 3 basic elements: • • •

a market policy and common prices; a common policy to the third countries; a common structural policy. EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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To realise all this, the Commission has installed a European legislation.

Fraud in the Agricultural sector:     

false declaration of tariff code (import/ export); false declaration of origin (false certificates, transport-documents etc…); transit fraud (imports without declaration); d eclaration); fraud in the field of quota; underevaluation.

Example: Garlic from China. To evade the installed quota: - forged transportdocuments such as bill of lading and ships manifest. - forged certificates of origin for 6.700 tons (origin mentioned on certificates = Jordan) consequences: disruption of the European market.


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Part 2 TRENDS


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Officers should always keep in mind that trends are changing regularly and although potential places of concealment have been identified, they are not exhaustive. Therefore officers should use their own imagination, show initiative and apply common sense in order to develop the necessary skills. They should consult Intelligence Bulletins, Marinfo messages and Circulars with special reference to freight.

2.1 Cigarettes The smuggling of foreign manufactured tobacco products is not merely a fiscal problem but also, and above all, a social problem which poses a serious challenge to public order. It continues to be a major threat, bearing in mind the very close subjective and objective links with drug trafficking; the same gangs use identical profiles and methods for both types of illicit traffic.

Cigarette smuggling is conducted in the following ways: • ships are being moored off the coasts of Italy and Spain and are being used as floating warehouses. Sea-going yachts and speed-boats are being used for smuggling, they take on the contraband from these mother vessels. • Sea-going yachts and speed-boats take on cigarettes in small tourist ports in the Adriatic Sea (Bar-Montenegro or ports in the bay of Duress-Albania). • Cigarette smuggling by use of containers and lorries.

There is a growing problem with cigarette smuggling by use of containers and lorries. All the transactions and links between the companies involved at various levels are designed to make it virtually impossible to find out the real destination of the contraband or to identify the persons benefiting financially.


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Source countries 

About 80% of all cigarettes smuggled in the European Union originates from China. Nearly all these cigarettes are counterfeit goods.



Eastern Europe is also a source area. The cigarettes are coming from Lithuania, Estonia, Latvia and Russia. Sea transport has been used but the overland system (Carnet Tir) present also a big part of the threat.



Another source area is the Black Sea; containers with cigarettes hidden in or behind cover loads get shipped to Europe from Turkey or Ukraine.



Other seizures are already made on cigarettes coming from The U.S.A., Panama, Egypt, South and West Africa.

Transit

The ports of Dubai (U.A.E), Singapore (Singapore) and Port Kelang (Malaysia) are major transit points for smuggling of (counterfeit) cigarettes originates from China. The role of transit ports such as La Valetta (Malta), Limassol (Cyprus), Piraeus (Greece) and Gioia Tauro (Italy) is increasing.

New trends

Currently a new method for smuggling counterfeit cigarettes has been discovered. Cigarettes were shipped and declared under the right tariff code, but a control of the goods in the container showed that the complete load was counterfeit cigarettes. Another new trend is that containers with counterfeit cigarettes hidden in boilers were shipped first from China to Los Angeles (West-coast U.S.A.). From Los Angeles the containers were sent to Houston (Gulf of Mexico) where the containers were loaded on board of vessels with destination Europe. It is important to be aware that with the extensive movement of containers loaded with cigarettes, all consignments regardless of port of origin shown, should be considered. Seizure records show that 40’ high cube containers are favoured by smugglers, because more cigarettes can be packed inside.


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2.2

Alcohol

Ethyl Alcohol: 90% of world alcohol production is subsidised and a number of the countries producing subsidised alcohol do so on very large scale, such as the USA – more than 4 times total EU production, Brazil – approximately 10 times EU production, and South Africa. Such subsidised alcohol, if allow to disrupt fair trade on the European Alcohol market, could destroy European production. This large subsided production explains that the USA, Brazil or South Africa or satellite countries (in South- and Middle America, the Caribbean countries and countries near South Africa) try and circumvent legitimate duties and flood the market with subsidised alcohol. The current trend of import flows towards the EU demonstrates that countries with subsidised alcohol production are now seeking means to import alcohol into the EU by circumventing the applicable custom tariff duties. - Tariff circumvention through change of origin. Zero tariff agreements under the European Generalised System of Preferences and under a number of bilateral agreements aiming to encourage the economy in lesser developed countries have been or are being used by third countries as means of penetrating the EU market and circumventing legitimate duties. Subsidised alcohol from the USA has already been re-routed through certain countries in order to change origin and benefit from zero tariff agreements. - Blends Another manner of avoiding tariffs has been to sell blends of ethyl alcohol with other chemical products and obtain a reclassification of this alcohol blend under a tariff heading other than the denatured ethyl alcohol, such as tariff classifications under chapter 38, which provides for very low or minimal duties. Such imports of blends are arriving from the USA, Former Soviet Union and South Africa.

Spirits drinks: A common method of smuggling spirits drinks is that they are loaded amongst other goods in containers (e.g. foodstuff). Only the other goods were de clared. There have been seizures of spirits drinks hidden in containers amongst other goods from Turkey (Raki), Lebanon (Arak) and West Afrika (Brandy, Gin, Rum or Bitter). Since 1994, imports from India into the EU have increased. India has an enormous capacity for fermentation ethanol which is at present only partly realised. Recent there have been seizures of alcohol 96% shipped from Malaysia into Europe. EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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2.3

Stolen vehicles

Cars stolen in the Members states or stolen cars originates from the U.S and Canada are frequently shipped in containers to West Africa, the former Soviet Union and the Middle East. Most of the containers are declared as “Personal effects” or “Second hand goods”. Sometimes brand new cars are hidden behind b ehind of amongst other cargo. These cars were leased or rent. the Milo-o meter of these cars showed only a few hundred kilometres. When the vessel has left the port of loading, the cars were reported as stolen. The chassis numbers of the cars are original. This system has changed and it is more common for the chassis numbers to be changed. Sometimes it is very difficult to discover the original number.

Often the declaration shows “Cars”, but on the bill of lading and/or manifest the wrong chassis numbers are shown.

Sometimes the vehicles are dismantled and the parts p arts shipped out to prevent detection.


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2.4 Counterfeit The practice of producing counterfeit goods has harmful repercussions. Firstly, there is the economic impact of job losses and reduced earnings (especially exports earnings) in the country where the manufacturer of the genuine product is located. Secondly, there is the aspect of product safety; counterfeit goods are not made in accordance with statutory consumer safety requirements. The danger of by counterfeit co unterfeit medicines, toys and machineparts (aircraft/motorvehicle (aircraft/motorvehicle components for example) are only too real. Thirdly, there are potential revenue losses in that counterfeit goods are often sold off record as the genuine article, meeting consumer demand which would normally have been satisfied by purchase of the genuine product through legitimate commercial channels, with sales tax/excise duty being charged and paid over to the Revenue departments

Source countries for counterfeit goods      

China :  for all kind of products, especially cigarettes; Hong Kong:  all kind of products; Taiwan:  electronic products; India & Pakistan:  leather wares; Turkey:  textiles products; Former Russia;  CD-ROMs and textiles products.

Transit

Singapore and Dubai are the major transit points for counterfeit goods coming from the Far East (China, Hong Kong and Taiwan).


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2.5

Endangered species

The Convention of Washington (CITES) was set up out of concerns regarding endangered species as to prevent the total exhaustion of some wildlife. The Convention has set up rules for the international trade in endangered species in a way that it makes a distinction between different categories. Each category has its own regulations. The aim of CITES is to protect endangered species by, depending of the kind and nature of the species, either forbidding the international trade, or either to limit the trade to ensure the further existence of the species. Third world countries YESTERDAY: Specified wild, like the Leopard was taboo and killed rarely. Only the chief was allowed to wear this kind of skins. The chase on such kind of wild was restricted by tradition en superstition. The wild fauna & flora was protected.

Transport TODAY: The cat-likes and other endangered species are persecuted and captured,

Industrial countries - or to be sold on tourists; - or to be sold on smugglers.

Countries who plunder their one fauna & flora exchanging exchangin g these endangered species for foreign currencies, mostly lesser than the real value of the goods.

Tourism


Endangered species are sold (dead or alive) to people in rich countries.

Smuggling – Black market

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2.6

Weapons & Military Equipment

Smuggling of forbidden weapons by misdescription of goods. In a lot of cases the goods were declared as “spare parts”.

Mostly military equipment is declared under the right tariff code but no import, export or transit licences are submitted to the Customs.

Weapons and military equipment are regularly shipped from various Member States. The U.S.A., the states of the former Soviet Union, Israel, India, Pakistan, Brazil, Argentina are main exporters of weapons and military equipment. They are sending the goods to different unstable countries via ports in Europe.

On the manifest and bill of loading the consignee is sometimes mentioned as: Ministry of National Defence Attention of General/ General/ Colonel ……..


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2.7

Heroin

Source countries

About 80% of all heroin seized in the European Union originates from Afghanistan and Pakistan in South West Asia. Afghanistan is one of the worlds’ leading opium-producing countries. The Golden Triangle of Myanmar, Laos and Thailand is another opium producing area. Till now there are no indicators that heroin from the Golden Triangle is smuggled to Europe in containers, although forensic investigations is nearly impossible.

Opium production in Colombia is some 66 tons, resulting in 6 tons of heroin. Colombian heroin has already been seized in France, Germany and Portugal (Air transport). However 70% of the Colombian heroin is destined for the market in the USA. Up until now there are no seizures in Europe of Colombian heroin in containers.

Transit

Morphine base is transported from Afghanistan via Iran to Turkey for processing into heroin, which is than smuggled to the Member States. Sea transport (containers) has been used but the overland system, along the various Balkan routes, crossing Central and Eastern Europe into Germany, Italy and Greece, presents the most consistent threat. Increasingly, the “traditional” Balkan route through the former Yugoslavia is once again being used, putting a high emphasis on Austria as country of entry into the European Union. In Several Central and Eastern European countries, heroin depots have been set up to store the drugs, awaiting further transportation on the European Union in small Quantities, using private cars, buses, minibuses and vans.


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2.8

Cocaine

According to United States authorities the area under coca cultivation in the Andean region is 194.100 hectares with a potential production of 650 tons of cocaine. In contrast with the early nineties, Colombia is now the main producer of coca leaves, followed by Peru and Bolivia. Some processing of cocaine takes place in Peru and Bolivia. Colombia, however, remains the main producer of cocaine. Until now, national plans to significantly reduce the coca cultivation have not been very successful and it is unclear whether this will change in the future, despite new initiatives. Colombia is the main producer of cocaine destined for the Member States. Trafficking predominantly takes place by sea freight (container- and banana vessels), making use of commercial infrastructures and geographical characteristics.

Transit

Most countries in South and Central America are major transit countries. Also there is secondary distribution from the Caribbean to the United States and the European Union.


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2.9

Cannabis

Cannabis, both resin (hashish) and herbal (marihuana) is the prevalent illicit drug of abuse in the European Union. Source countries

Morocco is a major supplier of cannabis resin to the Member States. Some 60.000 hectares in the Rif Mountains are under cultivation. Pakistan is another source country. Large amounts of Pakistani cannabis resin were seized in Belgium, Germany, the Netherlands and the th e United Kingdom. In most cases the drugs were shipped in containers. Colombia, Jamaica, South Africa, Nigeria, Cambodia and Thailand are suppliers of herbal cannabis to the European Union. Trafficking mostly takes place in containers. Transit countries

East Africa (Kenya, Tanzania and Mozambique are transit regions for cannabis resin from Pakistan destined for Europe. Also Central and Eastern Europe is a transit region for cannabis destined for the Member States. To a certain extent this is due to the use of the Balkan routes for cannabis trafficking from Turkey. However, increasingly there is diversion to this region of cannabis shipments from Pakistan, Thailand and Colombia, either directly or via ports in the Member States. Subsequently the drugs are being smuggled to the Member States.

Cannabis cultivation

Cultivation of cannabis, for personal use or o r distribution, nowadays takes place in almost all Member States. In the Netherlands and Belgium, organised crime is involved in the cultivation of, and trafficking in “Nederweed”. EUROPEAN COMMISSION GOOD PRACTICE GUIDE

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2.10 Precursors Several million people in the Member States are believed to take synthetic drugs. Consumption has become a serious problem of epidemic proportions. The European Union is a major producer of amphetamine and ecstasy-type stimulants. Large-scale production is controlled by criminal groups. Intra-EU trafficking predominantly takes place overland in cars, lorries and trains.

Manufacture of synthetic drugs can be done with different chemical methods. For these methods precursors and other chemicals are need. Precursors are classified in three different categories. Some of these precursors, like Piperonyl methyl ketone (PMK) and Benzyl methyl ketone (BMK), are liquids with a typical aroma from category 1. Regulations are very strict(licences) by national laws and EU-regulations. Seizures of PMK and BMK were already made in containers shipped from China.

EUROPE

CHINA


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Good Practice Guide Ch 4 Types of Fraud and Trends

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