Goods are undervalued in order to reduce the duty payable. To provide protection against these threats without unduly interfering with legitimate trade requires well-designed, innovative procedures. All too often, cumbersome procedures built on outdated methods continue to be used in many countries, managing both to jeopardise revenue and to impose significant burdens on the honest trader.
In order to counter the ever-increasing threat of undervaluation, the National customs agency set out on a project that had to both detect undervaluation indicators and provide reasonable doubt during the customs clearance of the goods – in order to legally and justifiably reject the declared low value. That project came to be the Bulgarian counter-undervaluation methodology i.e. ‘Methodology for detection of undervaluation indicators and for provision of reasonable doubt during the customs clearance of undervalued goods.’
The approach for detecting indicators of undervalued goods is based on: Title II, Art. 29 in accordance with Art. 32 & 33 of the Community Customs Code (CCC): in determining the customs value under Art. 29, there shall be added to the price actually paid or payable for the imported goods (...) the value, of the materials incorporated in the imported goods.
Our first task was to find an irrefutable raw materials price source in order to formulate an operational solution based on the above CCC articles. The IMF official webpage was used as such a source - where monthly reports and analysis of the prices of raw materials traded on the stock exchanges are published (Commodity Market Monthly). In order to refine the approach, and with the help and support of the Bulgarian industrial association, all major national guilds/ organisations of textile, clothing and shoe producers were approached. On their part, the specialised producers provided us with data on the share of raw materials in the prime cost of the intermediate product and based on that in the prime cost of the final product. The latter provided solution for devising lower threshold values (not based on statistics).
Utilising the above approach and data from the CIS resulted in detection of over 70 economic operators - consignees of goods cleared for free circulation with greatly under-declared values. In order to counter similar cases of undervaluation, national risk profiles were set up to include the detected economic operators but also certain tariff codes. The most immediate result of all of the above was the massive decrease of ‘suspected’ operators - from over 70 to just 5.
A further boost to the approach was given by the fact that the European anti-fraud office (OLAF) has evaluated our methodology and disseminated it to all 27 MS as a ‘good practice and innovation in the fight against undervaluation’. It is worth mentioning that the Bulgarian approach does not include statistics (which are very difficult to defend during judicial appeal) but rather builds upon the foundation that it is not possible for a complete good to cost lower than a kilogram of its raw source material.
|Award category:||new solutions to complex challenges - european or national level|
|Sector:||Taxation, customs, finances|
|Type of activity:|
|Keywords:||Methodology, counter-undervaluation, customs value, risk indicators, customs clearance|
|Short English description:||Goods are undervalued in order to reduce the duty payable. To provide protection against these threats without unduly interfering with legitimate trade requires well-designed, innovative procedures. All too often, cumbersome procedures built on outdated methods continue to be used in many countries, managing both to jeopardise revenue and to impose significant burdens on the honest trader|
|Organisation:||Bulgarian National Customs Agency|
|Level of government:||national level|
|Size of organisation:||>100|
|Number of people involved:||>15|
|EU membership:||EU member|