EU Auditors Highlight Weaknesses in E-Commerce Customs Duty Collections

The EU's customs exemptions for low-value shipments may encourage undervaluation, the European Court of Auditors said in a report on the EU's collection of customs duties for e-commerce imports. Customs duties aren't levied on imports of goods equal to or less than €150. "These low value consignment reliefs (LVCR) can be abused via: (i) undervaluation of goods, which are declared below the thresholds for the VAT and/or customs exemptions; (ii) splitting consignments to be under the threshold limit; (iii) importing of either commercial consignments declared as gifts or of goods which are ineligible for the relief," the auditors said.

The auditors tested how susceptible some member states' customs entry systems are to abuse of the exemptions. "With the exception of Austria, the customs electronic clearance systems of the other four visited Member States accepted import declarations applying for the customs duty relief for B2C [business to private consumer] consignments, even though the declared intrinsic value was higher than €150."

The EU would also benefit from more international cooperation through mutual administrative assistance, the auditors said. "Without such information exchanges, customs authorities in the Member State of consumption cannot be aware of the unreported transactions," they said. The European Commission should "monitor to what extent non-EU countries meet the requests sent by Member States pursuant to the mutual administrative assistance agreements concluded with them in both customs and tax matters and make use of structures and frameworks set up in the context of these agreements to address specific challenges resulting from trade in goods through e-commerce," the auditors recommended.

“Any shortfall in the collection of VAT and customs duties affects the budgets of the Member States and the EU,” said Ildikó Gáll-Pelcz, from the European Court of Auditors, in a news release. “E-commerce is particularly open to abuse and its vulnerability to irregularities and fraud has not yet been fully mitigated.”