International investigations carried out by the European Anti-Fraud Office (OLAF) have resulted in the uncovering of fraudulent sugar imports to Malta through the use of false documentation in 2004 and 2005 – after Malta joined the European Union and in clear contravention of EU laws.
Administrative and judicial proceedings have been initiated against the violating companies, significant quantities of sugar have been seized and assets have been frozen as a result of the investigation’s findings, OLAF has confirmed.
Recent investigations coordinated by OLAF have established that sugar originating in Brazil and refined in Bulgaria has been imported into Malta, and that false documentation was presented in Malta at the import stage in order to disguise the true origin of the consignments.
In addition to Maltese importers, British importers have also been implicated in the practice.
Altogether, OLAF has established that, between Malta and the UK, over 4,000 tonnes of raw cane sugar had been “misdescribed” at import stage in 2004 and 2005, resulting in tax evasion of some e2 million.
In a statement released late last week, OLAF explained: “The fraudsters tried to take advantage of the system of preferential trade arrangements with the Africa-Caribbean-Pacific (ACP) countries and falsified relevant documents to execute their plans.
“It is estimated that a total of up to e30 million could be involved in all the sugar cases that OLAF is currently investigating.”
OLAF describes how false documentation (EUR.1 movement certificates) had been presented at import to disguise the real origin of the goods, and that the importer had already previously been involved in similar irregularities with regard to imports of sugar from the Western Balkans.
The EU holds a preferential trade agreement on sugar with the ACP countries, under which the price of sugar is guaranteed and the beneficiary countries are allowed to export a fixed amount of sugar at zero duty to the EU.
In the case of the illegal Maltese and British sugar imports, the OLAF investigation was triggered by initial information that was received from the UK Customs Department.
Several suspect imports of sugar – declared as having originated in ACP countries such as Zimbabwe, Malawi and Zambia – had been identified. As such, the imports would have been entitled to benefit from an exemption from customs duties, thanks to the preferential treatment given to products originating from ACP countries.
In addition to the post-membership sugar fraud, the government is also facing a e1.2 million fine for having failed to prevent companies from building up surplus sugar stocks before EU accession in May 2004.
The fine will have to be paid over the next fours years, with the first instalment payable when the decision is notified to the government and the other instalments being due on 15 October 2007, 2008 and 2009.
The fine stems from Malta’s pre-accession obligation to ensure that there was no speculative stockpiling of agricultural products, including sugar, which the EU insists would have upset the balance of the entire EU market.
The measure was also meant to prevent companies that use sugar in their products hoarding sugar imported from non-EU markets in the lead-up to accession, and as such benefiting from the fact that EU sugar prices are three times higher than world market levels.
Malta’s fine had originally been in excess of e7 million, but was reduced to the e1.2 million level after negotiations between the European Commission and Malta’s Rural Affairs and Environment Ministry.
During discussions on the matter, the Ministry had successfully argued that one particular local private company found to have a sugar surplus uses its sugar for the export of products to third countries and therefore not for local consumption.
Although the fine stems from surpluses held by the private sector, it is the Maltese government that is liable for the fine’s payment. At the time, the Ministry had stressed that the government “can still investigate if there has been any possible speculation on the market”.
Malta and the other member states in violation had been given extra time to eliminate the surplus stocks that had been discovered, and by the deadline Latvia had disposed of 1,743 tonnes, Slovakia 1,797 tonnes and Cyprus 190 tonnes, but Malta had taken no such action.
Calculated on the basis that countries were charged e499.50 per surplus tonne, Malta’s surplus stock amounted to 2,452 tonnes.
Of the five member states fined, Malta received the lowest overall fine compared to Estonia (e45,686,268), Cyprus (e19,991,489), Latvia (e4,418,577) and Slovakia (e4,209,786).