Court of Justice of the European Communities (including Court of First Instance Decisions)

OPINION OF ADVOCATE GENERAL

PIKAMÄE

delivered on 9 September 2021 (1)

Case C-213/19

European Commission

v

United Kingdom of Great Britain and Northern Ireland

(Failure of a Member State to fulfil obligations – Article 4(3) TEU – Article 310(6) and Article 325 TFEU – Action to counter fraud – Requirement of effectiveness – Obligation to make own resources available to the EU budget – Financial liability of Member States – Customs union – Council Regulation (EEC) No 2913/92 – Community Customs Code – Regulation (EU) No 952/2013 – Union Customs Code – Customs duties – Imports of textiles and footwear from China – Widespread systemic fraud – Organised crime – Missing importers – Customs value – Undervaluation – Customs controls based on risk analysis – Pre-release controls – Lodging of security – Lack of controls – Articles 16 and 17 of the Charter of Fundamental Rights of the European Union – Own resources of the European Union – Council Decisions 2007/436/EC and 2014/335/EU – Council Regulations (EC, Euratom) No 1150/2000 and No 609/2014 – Establishment of a customs debt – Obligation to make own resources available to the European Union – Estimate of loss of traditional own resources – Statistical method based on the cleaned average price and the lowest acceptable price – Value added tax (VAT) – Council Directive 2006/112/EC – Taxable amount for VAT – Own resources accruing from VAT)

Table of contents

I.      Introduction

1.        In the present case, the European Commission has brought an action for failure to fulfil obligations under Article 258 TFEU against the United Kingdom of Great Britain and Northern Ireland alleging that, during the period between November 2011 and 11 October 2017 inclusive (‘the infringement period’), the United Kingdom did not, first, enter in the accounts the correct amounts of customs duty and make available the correct amount of traditional own resources and own resources based on value added tax (VAT) relating to certain imports of textiles and footwear from China, and, secondly, provide all the information required by the Commission for the purpose of establishing the amount of traditional own resources lost. (2)

2.        According to the Commission, the United Kingdom thus failed to fulfil its obligations under Article 4(3) TEU, which lays down the principle of sincere cooperation, under Article 310(6) and Article 325 TFEU, and under an entire set of provisions of secondary legislation relating to EU customs law, traditional own resources and VAT.

3.        Consequently, the present case will require the Court to develop its case-law on the scope of the obligations to counter fraud and protect the financial interests of the European Union imposed by the provisions cited in the preceding point, in circumstances where the Commission claims that the Member State in question did not correctly determine the customs value of imported goods, those goods having been undervalued on importation because there were no effective control measures. This case raises fundamental questions, such as whether the Commission is able to determine the amount of its claim for loss of own resources using a statistical method, namely the cleaned average prices for goods imported at EU level, where the Member State in question has failed correctly to establish the value of the goods. Finally, the Court will have to decide whether the Member State of importation of the goods is liable for the loss of own resources accruing from VAT in the context of a customs procedure under which customs duties are paid on importation but VAT must be paid at a later stage in the Member State of destination.

II.    Legal context

A.      Law on traditional own resources

1.      Decisions relating to the own resources system

4.        Under Article 2(1)(a) and (b) of Council Decision 2014/335/EU, Euratom, (3) applicable from 1 January 2014, the wording of which is essentially identical to that of Article 2(1) of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources, (4) revenue from the following is to constitute own resources entered in the EU budget: ‘traditional own resources consisting of … Common Customs Tariff duties and other duties established or to be established by the institutions of the Union in respect of trade with third countries’ and ‘the application of a uniform rate valid for all Member States to the harmonised VAT assessment bases determined in accordance with Union rules’.

5.        The first subparagraph of Article 8(1) of those decisions states that Common Customs Tariff duties, as the European Union’s own resources, are to be collected by Member States in accordance with the national provisions imposed by law, regulation or administrative action, which are, where appropriate, to be adapted to meet the requirements of EU rules. The third subparagraph of Article 8(1) of Decision 2007/436 and Article 8(2) of Decision 2014/335 provide that Member States are to make the resources provided for in Article 2(1)(a) to (c) of those decisions available to the Commission.

2.      Regulations on the methods and procedure for making available own resources

6.        Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728, (5) applicable to the first part of the infringement period, was replaced on 1 January 2014 by Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI (6)-based own resources and on the measures to meet cash requirements. (7) Article 2(1) of Council Regulation No 609/2014, the content of which corresponds, in essence, to that of Article 2(1) of Council Regulation No 1150/2000, provides:

‘For the purpose of applying this Regulation, the Union’s entitlement to the traditional own resources referred to in Article 2(1)(a) of Decision 2014/335 shall be established as soon as the conditions provided for by the customs regulations have been met concerning the entry of the entitlement in the accounts and the notification of the debtor.’

7.        Article 6(1) and the first and second subparagraphs of Article 6(3) of Regulation No 609/2014, which reproduce, in essence, Article 6(1) and (3)(a) and (b) of Regulation No 1150/2000, are worded as follows:

‘1.      Accounts for own resources shall be kept by the Treasury of each Member State or by the body appointed by each Member State and broken down by type of resources.

…

3.      Entitlements established in accordance with Article 2 shall, subject to the second subparagraph of this paragraph, be entered in the accounts [commonly known as “the A account”] at the latest on the first working day after the nineteenth day of the second month following the month during which the entitlement was established.

Established entitlements not entered in the accounts referred to in the first subparagraph, because they have not yet been recovered and no security has been provided, shall be shown in separate accounts within the period laid down in the first subparagraph [commonly known as “the B account”]. Member States may adopt this procedure where established entitlements for which security has been provided have been challenged and might, upon settlement of the disputes which have arisen, be subject to change.

…’

8.        Under the first subparagraph of Article 9(1) of Regulation No 609/2014, the wording of which corresponds to the first subparagraph of Article 9(1) of Regulation No 1150/2000:

‘In accordance with the procedure laid down in Article 10, each Member State shall credit own resources to the account opened in the name of the Commission with its Treasury or the body it has appointed.’

9.        With effect from 1 October 2016, that provision was amended by Article 9(1) of Council Regulation (EU, Euratom) 2016/804, (8) which now reads as follows:

‘In accordance with the procedure laid down in Articles 10, 10a and 10b, each Member State shall credit own resources to the account opened in the name of the Commission with its treasury or national central bank. Subject to the application of negative interest as referred to in the third subparagraph, that account may only be debited upon instruction by the Commission.’

10.      Article 10(1) of Regulation No 609/2014, the content of which corresponds, in essence, to that of Article 10(1) of Regulation No 1150/2000, provides:

‘After deduction of collection costs in accordance with Articles 2(3) and 10(3) of Decision 2014/335 …, entry of the traditional own resources referred to in Article 2(1)(a) of that Decision shall be made at the latest on the first working day following the 19th day of the second month following the month during which the entitlement was established in accordance with Article 2 of this Regulation.

However, for entitlements shown in separate accounts under the second subparagraph of Article 6(3), the entry must be made at the latest on the first working day following the 19th day of the second month following the month in which the entitlements were recovered.’

11.      As originally worded, Article 12(1) and (3) of Regulation No 609/2014, the content of which was, in essence, identical to that of Article 11(1) and (3) of Regulation No 1150/2000, read as follows:

‘1.      Any delay in making the entry in the account referred to in Article 9(1) shall give rise to the payment of interest by the Member State concerned.

…

3.      In the case of Member States not belonging to the Economic and Monetary Union, the rate shall be equal to the rate applied on the first day of the month in question by the Central Banks for their main refinancing operations, increased by two percentage points, or, for the Member States for which the Central Bank rate is not available, the most equivalent rate applied on the first day of the month in question on the Member State’s money market, increased by two percentage points.

This rate shall be increased by 0.25 of a percentage point for each month of delay. The increased rate shall be applied to the entire period of delay.’

12.      With effect from 1 October 2016, following the entry into force of Council Regulation 2016/804, Article 12(3) of Regulation No 609/2014 was replaced by Article 12(5), which is worded as follows:

‘In the case of Member States not belonging to the Economic and Monetary Union, the interest rate shall be equal to the rate applied on the first day of the month in question by the central banks for their main refinancing operations, or 0 per cent, whichever is higher, increased by 2.5 percentage points. For the Member States for which the central bank rate is not available, the interest rate shall be equal to the most equivalent rate applied on the first day of the month in question on the Member State’s money market, or 0 per cent, whichever is higher, increased by 2.5 percentage points.

This rate shall be increased by 0.25 of a percentage point for each month of delay.

The total increase pursuant to the first and the second subparagraphs shall not exceed 16 percentage points. The increased rate shall be applied to the entire period of delay.’

13.      Article 13(1) and (2) of Regulation No 609/2014, which reproduces, in essence, Article 17(1) and (2) of Regulation No 1150/2000, provides:

‘1.      Member States shall take all requisite measures to ensure that the amounts corresponding to the entitlements established under Article 2 are made available to the Commission as specified in this Regulation.

2.      Member States shall be released from the obligation to place at the disposal of the Commission the amounts corresponding to entitlements established under Article 2 which prove irrecoverable for either of the following reasons:

(a)      for reasons of force majeure;

(b)      for other reasons which cannot be attributed to them.

Amounts of established entitlements shall be declared irrecoverable by a decision of the competent administrative authority finding that they cannot be recovered.

Amounts of established entitlements shall be deemed irrecoverable, at the latest, after a period of five years from the date on which the amount has been established in accordance with Article 2 or, in the event of an administrative or judicial appeal, the final decision has been given, notified or published.

…’

3.      Council Regulation (EU, Euratom) No 608/2014

14.      Concerning the period after 1 January 2014, Article 2 of Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union, (9) headed ‘Control and supervision measures’, provides:

‘1.      The own resources referred to in Article 2(1) of Decision 2014/335 … shall be inspected as specified in this Regulation, without prejudice to [Council Regulation No 1553/89 (10)] …

2.      Member States shall take all measures that are necessary to ensure that the own resources referred to in Article 2(1) of Decision 2014/335 … are made available to the Commission.

3.      Where control and supervision measures concern the traditional own resources referred to in Article 2(1)(a) of Decision 2014/335 …:

(a)      Member States shall conduct the checks and enquiries concerning the establishment and the making available of those own resources.

…

(c)      Member States shall, if the Commission so requests, associate it with the inspections which they carry out. Where the Commission is associated with an inspection, the Commission shall have access, in so far as the application of this Regulation so requires, to the supporting documents concerning establishing and making available own resources, and to any other appropriate document related to those supporting documents.

(d)      The Commission may itself carry out inspections on the spot. The agents authorised by the Commission for such inspections shall have access to documents as set out for the inspections referred to in point (c). Member States shall facilitate those inspections.

…’

15.      Article 5 of Regulation No 608/2014, headed ‘Reporting fraud and irregularities affecting entitlements to traditional own resources’, provides, in paragraph 1:

‘In the two months following the end of each quarter, Member States shall send the Commission a description of cases of fraud and irregularities detected involving entitlements of over EUR 10 000 concerning the traditional own resources referred to Article 2(1)(a) of Decision 2014/335 …

Within the period referred to in the first subparagraph, each Member State shall give details of the position concerning cases of fraud and irregularities already reported to the Commission whose recovery, cancellation or non-recovery was not indicated earlier.’

4.      Regulation No 1553/89

16.      Article 2(1) of Regulation No 1553/89 provides:

‘The VAT resources base shall be determined from the taxable transactions referred to in Article 2 of [Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1)] …’

17.      Under Article 3(1) of that regulation:

‘For a given calendar year, and without prejudice to Articles 5 and 6, the VAT resources base shall be calculated by dividing the total net VAT revenue collected by a Member State during that year by the rate at which VAT is levied during that same year.’

B.      Customs law

1.      The Community Customs Code

18.      Article 13 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, (11) as amended by Regulation (EC) No 648/2005 of the European Parliament and of the Council of 13 April 2005 (12) (‘the Community Customs Code’), provided:

‘1.      Customs authorities may, in accordance with the conditions laid down by the provisions in force, carry out all the controls they deem necessary to ensure that customs rules and other legislation governing the entry, exit, transit, transfer and end-use of goods moved between the customs territory of the Community and third countries and the presence of goods that do not have Community status are correctly applied. Customs controls for the purpose of the correct application of Community legislation may be carried out in a third country where an international agreement provides for this.

2.      Customs controls, other than spot-checks, shall be based on risk analysis using automated data processing techniques, with the purpose of identifying and quantifying the risks and developing the necessary measures to assess the risks, on the basis of criteria developed at national, Community and, where available, international level.

The committee procedure shall be used for determining a common risk management framework, and for establishing common criteria and priority control areas.

Member States, in cooperation with the Commission, shall establish a computer system for the implementation of risk management.

3.      Where controls are performed by authorities other than the customs authorities, such controls shall be performed in close coordination with the customs authorities, wherever possible at the same time and place.

…’

19.      Title II of the Community Customs Code included a Chapter 3 headed ‘Value of goods for customs purposes’, comprising Articles 28 to 36.

20.      Article 29 of that code provided:

‘1.      The customs value of imported goods shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community, adjusted, where necessary, in accordance with Articles 32 and 33 …:

…

2.      (a)      In determining whether the transaction value is acceptable for the purposes of paragraph 1, the fact that the buyer and the seller are related shall not in itself be sufficient grounds for regarding the transaction value as unacceptable. Where necessary, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted provided that the relationship did not influence the price. …

…

3.      (a)      The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods and includes all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. …

…’

21.      Under Article 30 of that code:

‘1.      Where the customs value cannot be determined under Article 29, it is to be determined by proceeding sequentially through subparagraphs (a), (b), (c) and (d) of paragraph 2 to the first subparagraph under which it can be determined …

2.      The customs value as determined under this Article shall be:

(a)      the transaction value of identical goods sold for export to the Community and exported at or about the same time as the goods being valued;

(b)      the transaction value of similar goods sold for export to the Community and exported at or about the same time as the goods being valued;

(c)      the value based on the unit price at which the imported goods for identical or similar imported goods are sold within the Community in the greatest aggregate quantity to persons not related to the sellers;

(d)      the computed value …

…’

22.      Article 31 of the Community Customs Code read as follows:

‘1.      Where the customs value of imported goods cannot be determined under Articles 29 or 30, it shall be determined, on the basis of data available in the Community, using reasonable means consistent with the principles and general provisions of:

–        the agreement on implementation of Article VII of the General Agreement on Tariffs and Trade of 1994,

–        Article VII of the General Agreement on Tariffs and Trade of 1994,

–        the provisions of this chapter.

2.      No customs value shall be determined under paragraph 1 on the basis of:

(a)      the selling price in the Community of goods produced in the Community;

(b)      a system which provides for the acceptance for customs purposes of the higher of two alternative values;

(c)      the price of goods on the domestic market of the country of exportation;

(d)      the cost of production, other than computed values which have been determined for identical or similar goods in accordance with Article 30(2)(d);

(e)      prices for export to a country not forming part of the customs territory of the Community;

(f)      minimum customs values; or

(g)      arbitrary or fictitious values.’

23.      Article 68 of that code provided:

‘For the verification of declarations which they have accepted, the customs authorities may:

(a)      examine the documents covering the declaration and the documents accompanying it. The customs authorities may require the declarant to present other documents for the purpose of verifying the accuracy of the particulars contained in the declaration;

(b)      examine the goods and take samples for analysis or for detailed examination.’

24.      Article 71 of that code was worded as follows:

‘1.      The results of verifying the declaration shall be used for the purposes of applying the provisions governing the customs procedure under which the goods are placed.

2.      Where the declaration is not verified, the provisions referred to in paragraph 1 shall be applied on the basis of the particulars contained in the declaration.’

25.      Article 217 of the Community Customs Code stated:

‘1.      Each and every amount of import duty or export duty resulting from a customs debt … shall be calculated by the customs authorities as soon as they have the necessary particulars, and entered by those authorities in the accounting records or on any other equivalent medium (entry in the accounts).

…

2.      The Member States shall determine the practical procedures for the entry in the accounts of the amounts of duty. Those procedures may differ according to whether or not, in view of the circumstances in which the customs debt was incurred, the customs authorities are satisfied that the said amounts will be paid.’

26.      Under Article 218(1) of that code:

‘Where a customs debt is incurred as a result of the acceptance of the declaration of goods for a customs procedure other than temporary importation with partial relief from import duties or any other act having the same legal effect as such acceptance the amount corresponding to such customs debt shall be entered in the accounts as soon as it has been calculated and, at the latest, on the second day following that on which the goods were released.’

27.      Article 220(1) of that code provided:

‘Where the amount of duty resulting from a customs debt has not been entered in the accounts in accordance with Articles 218 and 219 or has been entered in the accounts at a level lower than the amount legally owed, the amount of duty to be recovered or which remains to be recovered shall be entered in the accounts within two days of the date on which the customs authorities become aware of the situation and are in a position to calculate the amount legally owed and to determine the debtor (subsequent entry in the accounts). That time limit may be extended in accordance with Article 219.’

28.      Article 221 of that code stated:

‘1.      As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures.

…

3.      Communication to the debtor shall not take place after the expiry of a period of three years from the date on which the customs debt was incurred. This period shall be suspended from the time an appeal within the meaning of Article 243 is lodged, for the duration of the appeal proceedings.

4.      Where the customs debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three-year period referred to in paragraph 3.’

2.      The Union Customs Code

29.      Article 3 of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (13) (‘the Union Customs Code’) provides:

‘Customs authorities shall be primarily responsible for the supervision of the Union’s international trade, thereby contributing to fair and open trade, to the implementation of the external aspects of the internal market, of the common trade policy and of the other common Union policies having a bearing on trade, and to overall supply chain security. Customs authorities shall put in place measures aimed, in particular, at the following:

(a)      protecting the financial interests of the Union and its Member States;

(b)      protecting the Union from unfair and illegal trade while supporting legitimate business activity;

(c)      ensuring the security and safety of the Union and its residents, and the protection of the environment, where appropriate in close cooperation with other authorities; and

(d)      maintaining a proper balance between customs controls and facilitation of legitimate trade.’

30.      Under Article 46 of the Union Customs Code, headed ‘Risk management and customs controls’:

‘1.      The customs authorities may carry out any customs controls they deem necessary.

Customs controls may in particular consist of examining goods, taking samples, verifying the accuracy and completeness of the information given in a declaration or notification and the existence, authenticity, accuracy and validity of documents, examining the accounts of economic operators and other records, inspecting means of transport, inspecting luggage and other goods carried by or on persons and carrying out official enquiries and other similar acts.

2.      Customs controls, other than random checks, shall primarily be based on risk analysis using electronic data-processing techniques, with the purpose of identifying and evaluating the risks and developing the necessary counter-measures, on the basis of criteria developed at national, Union and, where available, international level.

3.      Customs controls shall be performed within a common risk management framework, based upon the exchange of risk information and risk analysis results between customs administrations and establishing common risk criteria and standards, control measures and priority control areas.

Controls based upon such information and criteria shall be carried out without prejudice to other controls carried out in accordance with paragraph 1 or with other provisions in force.

4.      Customs authorities shall undertake risk management to differentiate between the levels of risk associated with goods subject to customs control or supervision and to determine whether the goods will be subject to specific customs controls, and if so, where.

The risk management shall include activities such as collecting data and information, analysing and assessing risk, prescribing and taking action and regularly monitoring and reviewing that process and its outcomes, based on international, Union and national sources and strategies.

5.      Customs authorities shall exchange risk information and risk analysis results where:

(a)      the risks are assessed by a customs authority as being significant and requiring customs control and the results of the control establish that the event triggering the risks has occurred; or

(b)      the control results do not establish that the event triggering the risks has occurred, but the customs authority concerned considers the threat to present a high risk elsewhere in the Union.

6.      For the establishment of the common risk criteria and standards, the control measures and the priority control areas referred to in paragraph 3, account shall be taken of all of the following:

(a)      the proportionality to the risk;

(b)      the urgency of the necessary application of the controls;

(c)      the probable impact on trade flow, on individual Member States and on control resources.

7.      The common risk criteria and standards referred to in paragraph 3 shall include all of the following:

(a)      a description of the risks;

(b)      the factors or indicators of risk to be used to select goods or economic operators for customs control;

(c)      the nature of customs controls to be undertaken by the customs authorities;

(d)      the duration of the application of the customs controls referred to in point (c).

8.      Priority control areas shall cover particular customs procedures, types of goods, traffic routes, modes of transport or economic operators which are subject to increased levels of risk analysis and customs controls during a certain period, without prejudice to other controls usually carried out by the customs authorities.’

31.      Article 53 of the Union Customs Code, headed ‘Currency conversion’, provides, in paragraph 1:

‘The competent authorities shall publish and/or make available on the Internet the rate of exchange applicable where the conversion of currency is necessary for one of the following reasons:

(a)      because factors used to determine the customs value of goods are expressed in a currency other than that of the Member State where the customs value is determined;

(b)      because the value of the euro is required in national currencies for the purposes of determining the tariff classification of goods and the amount of import and export duty, including value thresholds in the Common Customs Tariff.’

32.      Articles 70 and 74 of that code contain rules on the value of goods for customs purposes which correspond, in essence, to those contained in Articles 29 to 31 of the Community Customs Code.

33.      Under Article 101(1) of the Union Customs Code, the amount of import or export duty payable is to be determined by the customs authorities responsible for the place where the customs debt is incurred, or is deemed to have been incurred in accordance with Article 87 of that code, as soon as they have the necessary information.

34.      Article 103 of the code, headed ‘Limitation of the customs debt’, provides, in paragraphs 1 and 2:

‘1.      No customs debt shall be notified to the debtor after the expiry of a period of three years from the date on which the customs debt was incurred.

2.      Where the customs debt is incurred as the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the three-year period laid down in paragraph 1 shall be extended to a period of a minimum of five years and a maximum of 10 years in accordance with national law.’

35.      Article 105 of the Union Customs Code, headed ‘Time of entry in the accounts’, states, in paragraph 3:

‘Where a customs debt is incurred in circumstances not covered by paragraph 1, the amount of import or export duty payable shall be entered in the accounts within 14 days of the date on which the customs authorities are in a position to determine the amount of import or export duty in question and take a decision.’

36.      In accordance with Article 188 of that code, headed ‘Verification of a customs declaration’:

‘The customs authorities may, for the purpose of verifying the accuracy of the particulars contained in a customs declaration which has been accepted:

(a)      examine the declaration and the supporting documents;

(b)      require the declarant to provide other documents;

(c)      examine the goods;

(d)      take samples for analysis or for detailed examination of the goods.’

37.      Article 191 of that code, headed ‘Results of the verification’, provides:

‘1.      The results of verifying the customs declaration shall be used for the application of the provisions governing the customs procedure under which the goods are placed.

2.      Where the customs declaration is not verified, paragraph 1 shall apply on the basis of the particulars contained in that declaration.

3.      The results of the verification made by the customs authorities shall have the same conclusive force throughout the customs territory of the Union.’

3.      Implementing Regulation I

38.      Under Article 181a of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation No 2913/92, (14) as amended by Commission Regulation (EC) No 1335/2003 of 25 July 2003 (15) (‘Implementing Regulation I’):

‘1.      The customs authorities need not determine the customs valuation of imported goods on the basis of the transaction value method if, in accordance with the procedure set out in paragraph 2, they are not satisfied, on the basis of reasonable doubts, that the declared value represents the total amount paid or payable as referred to in Article 29 of the Code.

2.      Where the customs authorities have the doubts described in paragraph 1 they may ask for additional information in accordance with Article 178(4). If those doubts continue, the customs authorities must, before reaching a final decision, notify the person concerned, in writing if requested, of the grounds for those doubts and provide him with a reasonable opportunity to respond. A final decision and the grounds therefor shall be communicated in writing to the person concerned.’

39.      Article 248(1) of Implementing Regulation I provides:

‘The granting of release shall give rise to the entry in the accounts of the import duties determined according to the particulars in the declaration. Where the customs authorities consider that the checks which they have undertaken may enable an amount of customs duties higher than that resulting from the particulars made in the declaration to be assessed, they shall further require the lodging of a security sufficient to cover the difference between the amount according to the particulars in the declaration and the amount which may finally be payable on the goods. However, the declarant may request the immediate entry in the accounts of the amount of duties to which the goods may ultimately be liable instead of lodging this security.’

4.      Implementing Regulation II

40.      Article 48 of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code (16) (‘Implementing Regulation II’), headed ‘Provisions on tariff exchange rate’, provides, in paragraph 1:

‘The value of the euro, where required in accordance with Article 53(1)(b) of the Code, shall be fixed once a month.

The exchange rate to be used shall be the most recent rate set by the European Central Bank prior to the penultimate day of the month and shall apply throughout the following month.

However, where the rate applicable at the start of the month differs by more than 5% from the rate set by the European Central Bank prior to the 15th of that same month, the latter rate shall apply from the 15th until the end of the month in question.’

41.      Article 140 of Implementing Regulation II, headed ‘Non-acceptance of declared transaction values’, which is intended to implement Article 70(1) of the Union Customs Code, provides:

‘1.      Where the customs authorities have reasonable doubts that the declared transaction value represents the total amount paid or payable as referred to in Article 70(1) of the Code, they may ask the declarant to supply additional information.

2.      If their doubts are not dispelled, the customs authorities may decide that the value of the goods cannot be determined in accordance with Article 70(1) of the Code.’

42.      Under Article 144 of Implementing Regulation II, headed ‘Fall-back method’, which is intended to implement Article 74(3) of the Union Customs Code:

‘1.      When determining the customs value under Article 74(3) of the Code, reasonable flexibility may be used in the application of the methods provided for in Articles 70 and 74(2) of the Code. The value so determined shall, to the greatest extent possible, be based on previously determined customs values.

2.      Where no customs value can be determined under paragraph 1, other appropriate methods shall be used. In this case the customs value shall not be determined on the basis of any of the following:

(a)      the selling price within the customs territory of the Union of goods produced in the customs territory of the Union;

(b)      a system whereby the higher of two alternative values is used for customs valuation;

(c)      the price of goods on the domestic market of the country of exportation;

(d)      the cost of production, other than computed values which have been determined for identical or similar goods under Article 74(2)(d) of the Code;

(e)      prices for export to a third country;

(f)      minimum customs values;

(g)      arbitrary or fictitious values.’

43.      Article 244 of Implementing Regulation II, headed ‘Provision of a guarantee’, which is intended to implement Article 191 of the Union Customs Code, provides:

‘Where the customs authorities consider that the verification of the customs declaration may result in a higher amount of import or export duty or other charges to become payable than that resulting from the particulars of the customs declaration, the release of the goods shall be conditional upon the provision of a guarantee sufficient to cover the difference between the amount according to the particulars of the customs declaration and the amount which may finally be payable.

However, the declarant may request the immediate notification of the customs debt to which the goods may ultimately be liable instead of lodging this guarantee.’

C.      VAT law

44.      Under Article 2(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, (17) as amended by Council Directive 2009/69/EC of 25 June 2009 (18) (‘Directive 2006/112’):

‘The following transactions shall be subject to VAT:

…

(b)      the intra-Community acquisition of goods for consideration within the territory of a Member State by:

(i)      a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such …

…

(d)      the importation of goods.’

45.      Article 73 of that directive provides that ‘the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party’.

46.      According to Article 83 of that directive:

‘In respect of the intra-Community acquisition of goods, the taxable amount shall be established on the basis of the same factors as are used in accordance with Chapter 2 to determine the taxable amount for the supply of the same goods within the territory of the Member State concerned. In the case of the transactions, to be treated as intra-Community acquisitions of goods, referred to in Articles 21 and 22, the taxable amount shall be the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of the supply.’

47.      Article 85 of Directive 2006/112 reads as follows:

‘In respect of the importation of goods, the taxable amount shall be the value for customs purposes, determined in accordance with the Community provisions in force.’

48.      Article 86(1) of that directive states:

‘The taxable amount shall include the following factors, in so far as they are not already included:

(a)      taxes, duties, levies and other charges due outside the Member State of importation, and those due by reason of importation, excluding the VAT to be levied;

(b)      incidental expenses, such as commission, packing, transport and insurance costs, incurred up to the first place of destination within the territory of the Member State of importation as well as those resulting from transport to another place of destination within the Community, if that other place is known when the chargeable event occurs.’

49.      Article 87 of Directive 2006/112 provides:

‘The taxable amount shall not include the following factors:

(a)      price reductions by way of discount for early payment;

(b)      price discounts and rebates granted to the customer and obtained by him at the time of importation.’

50.      In accordance with Article 138 of that directive:

‘1.      Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.

2.      In addition to the supply of goods referred to in paragraph 1, Member States shall exempt the following transactions:

…

(c)      the supply of goods, consisting in a transfer to another Member State, which would have been entitled to exemption under paragraph 1 and points (a) and (b) if it had been made on behalf of another taxable person.’

51.      Article 143 of that directive states:

‘1.      Member States shall exempt the following transactions:

…

(d)      the importation of goods dispatched or transported from a third territory or a third country into a Member State other than that in which the dispatch or transport of the goods ends, where the supply of such goods by the importer designated or recognised under Article 201 as liable for payment of VAT is exempt under Article 138;

…

2.      The exemption provided for in paragraph 1(d) shall apply in cases when the importation of goods is followed by the supply of goods exempted under Article 138(1) and (2)(c) only if at the time of importation the importer has provided to the competent authorities of the Member State of importation at least the following information:

(a)      his VAT identification number issued in the Member State of importation or the VAT identification number of his tax representative, liable for payment of the VAT, issued in the Member State of importation;

(b)      the VAT identification number of the customer, to whom the goods are supplied in accordance with Article 138(1), issued in another Member State, or his own VAT identification number issued in the Member State in which the dispatch or transport of the goods ends when the goods are subject to a transfer in accordance with Article 138(2)(c);

(c)      the evidence that the imported goods are intended to be transported or dispatched from the Member State of importation to another Member State.

However, Member States may provide that the evidence referred to in point (c) be indicated to the competent authorities only upon request.’

III. Facts and pre-litigation procedure

A.      Background to the dispute

52.      With effect from 1 January 2005, the European Union abolished all quotas on imports of textiles and clothing from World Trade Organisation countries, including China.

53.      On 20 April 2007, the European Anti-Fraud Office (OLAF) sent Member States a mutual assistance message (2007/015) to inform them of the risk of undervaluation of textiles and footwear imported from China.

54.      In that message, OLAF requested all Member States, first, to analyse imports of textiles and footwear from, inter alia, China in order to identify possible evidence of undervalued imports and, secondly, to carry out appropriate checks at customs clearance for such imports.

55.      Subsequently, to assist Member States in identifying undervalued consignments of textiles and footwear, OLAF, in cooperation with the Joint Research Centre of the Commission (‘the JRC’), developed a risk assessment tool based on EU-wide data (‘the OLAF methodology’). That tool consists, first of all, in calculating a cleaned average price for each textile and footwear product imported from China falling within Chapters 61 to 64 of the Combined Nomenclature of the Customs Tariff. (19) The cleaned average prices are calculated on the basis of the monthly import prices of the products concerned from China taken from the statistical database Comext, a reference database for international trade managed by Eurostat, over a period of 48 months. Those prices express a per kilogram value for each of the 495 eight-digit product codes of the combined nomenclature concerned, specifying the country of origin and the country of destination in the European Union. Next, an average is calculated for the entire European Union (the EU-28 cleaned average prices) based on the arithmetic average (non-weighted average) of the cleaned average prices of the 28 Member States. (20) In calculating those averages, outliers, namely values that are unusually high or low, are excluded, which is why the average price is described as ‘cleaned’. Lastly, a value corresponding to 50% of the cleaned average price is calculated and constitutes the ‘lowest acceptable price’, also expressed as a per kilogram price, which is used as a threshold enabling the customs authorities of Member States to detect particularly low values declared on importation and thus identify high-risk imports.

56.      Mutual assistance message AM/2009/001, sent by OLAF on 23 January 2009, concerned Operation Argus, a six-month operation during which OLAF monitored the trade in textiles and footwear from a number of third countries but mainly from Asia and, each month, forwarded Member States a list of imports from the previous month identified as being at risk in terms of customs value. In that message, OLAF asked Member States to notify it, within four months, of the establishment of risk filters, to identify high-risk consignments and to carry out post-clearance checks on the basis of its communications.

57.      In 2011, during the priority control action ‘Discount’ (‘PCA Discount’), coordinated by the Commission’s Directorate-General for Taxation and Customs Union and in which all Member States, including the United Kingdom, participated, the lowest acceptable prices were used to detect and check imports of textiles and footwear from China with a customs value so low as to be suspect.

58.      In 2014, OLAF coordinated the joint customs operation ‘Snake’ (‘Operation Snake’), the operational phase of which took place between 17 February and 17 March 2014 and in which all Member States and the Chinese customs authorities participated. The purpose of those authorities’ involvement was to secure export declarations so that the declared value of the products concerned on importation into the European Union could be verified. In the final report on Operation Snake, Member States were asked to continue to use the risk profiles based on the lowest acceptable prices as applied during that operation.

59.      Following checks carried out by the United Kingdom authorities as part of that operation on the basis of those risk profiles, those authorities established additional customs duties for 24 traders in respect of their imports over a three-year period between November 2011 and November 2014.

60.      During inspection visit 14-11-1, carried out in the United Kingdom from 27 to 31 October 2014, the Commission examined risk information forms, mutual assistance notifications and 24 random import transactions, 23 of which were entered in the B account.

61.      Between November 2014 and February 2015, the United Kingdom authorities sent payment notices for those amounts to the traders in question by issuing 24 post-clearance demands, known as ‘C18 payment notices’ (‘the Snake C18 payment notices’), which were subsequently cancelled.

62.      On 16 January 2015, OLAF opened an investigation specifically targeting certain Member States, including the United Kingdom, covering a period beginning in 2013.

63.      Between 2013 and 2016, Her Majesty’s Revenue and Customs (‘HMRC’) and the United Kingdom Border Force conducted Operation Badminton. That operation, which mainly concerned VAT fraud, laid the groundwork for an initial criminal investigation into four major traders importing the products concerned from China under ‘customs procedure 42’, namely the procedure under which customs duties are paid on importation but VAT must be paid at a later stage in the Member State of destination (‘customs procedure 42’). (21)

64.      Between February 2015 and July 2016, the United Kingdom attended 10 meetings organised by OLAF concerning the undervaluation of textiles and footwear from China.

65.      On 19 and 20 February 2015, OLAF organised a first bilateral meeting with HMRC to discuss the follow-up to Operation Snake and the use of cleaned average prices as indicators of customs undervaluation risk. At that meeting, OLAF pointed out that the volume of imports likely to be fraudulently undervalued had not decreased and that statistics showed that the United Kingdom was attracting more fraudulent traffic on account of the measures taken by other Member States. HMRC stated that they intended to issue demands for evaded VAT and customs duties to the undertakings identified during Operation Snake and following their own analyses, demands totalling more than 800 million pounds sterling (GBP).

66.      The United Kingdom reiterated its intention to proceed with those demands at an ad hoc meeting held on 25 and 26 February 2015 on ‘undervaluation fraud’, organised by OLAF and attended by Member States’ authorities. During that meeting, OLAF ‘strongly recommended’, inter alia, that Member States use appropriate risk filters to identify potentially undervalued consignments, that they require the lodging of security for consignments identified as suspicious and that they carry out investigations to establish the customs value. OLAF also outlined the loss of traditional own resources which could occur at EU level as a result of imports likely to be undervalued, particularly as regards imports into the United Kingdom. (22)

67.      On 16 June 2015, OLAF sent mutual assistance message 2015/013 in which it asked Member States to take all precautionary measures necessary to protect the financial interests of the European Union against the risk of undervalued imports of textiles and footwear from China.

68.      In May 2015, the United Kingdom launched Operation Breach to combat undervaluation fraud. One of the aims of that operation was, according to the United Kingdom, to determine – following the cancellation of the 24 Snake C18 payment notices – the customs value of the undervalued goods detected during Operation Snake and to claim the amounts of traditional own resources evaded. That operation involved, among other things, pre-clearance controls and post-clearance visits relating to suspect consignments, documentary analyses, audits and inspections, reviewing the commercial nature of the relevant sales, examining the links between the importers, freight agents and other companies, and educational activities for importers on how to identify fraudulent activity. Approximately 30 pre-clearance inspections were also carried out and samples were taken. Several C18 payment notices were issued. At the hearing, the United Kingdom stated that the measures adopted within the framework of that operation were still ongoing.

69.      On 28 July 2015, OLAF organised a second bilateral meeting with HMRC. HMRC reported, inter alia, that it was continuing to take steps in the recovery of more than GBP 800 million and would have recourse to the courts, if necessary. It also stated that it had set up a multi-disciplinary task force as part of Operation Breach with the aim of examining the background of the importers involved in fraudulent trade. However, according to HMRC, the use of risk indicators based on average prices would be counterproductive and disproportionate given the volume of imports into the United Kingdom.

70.      On 3 February 2016, OLAF organised a third bilateral meeting with HMRC, which announced that the United Kingdom had audited the 16 undertakings concerned in Operation Snake. OLAF again recommended that HMRC use EU-wide risk indicators based on the lowest acceptable price. It drew attention to the high percentage of imports into the United Kingdom which were regarded as undervalued and were causing significant losses of customs duties.

71.      On 22 and 23 March 2016, OLAF organised a fourth bilateral meeting with HMRC. OLAF reiterated the usefulness of implementing EU-wide risk indicators as a preventive measure on importation and proposed practical ways in which the United Kingdom authorities could progressively implement them. As before, OLAF gave an update of the prevailing situation, which showed that the loss of traditional own resources in the United Kingdom was worsening, mainly because of the misuse of customs procedure 42.

72.      At a bilateral meeting held in July 2016, OLAF submitted a report demonstrating that the loss of traditional own resources was increasing in the United Kingdom.

73.      On 18 and 19 September 2016, at a multilateral meeting, the French authorities presented the results of Operation Octopus, an operation led by them with the participation of 10 Member States (including the United Kingdom) and the support of OLAF. It is apparent from the final report on that operation that organised criminal networks were behind the undervaluation fraud. The consignee entered in the customs import declarations was almost always either a missing trader or a ‘phoenix’ undertaking. They also concluded that the vast majority of transported goods – checked in France on the basis of predefined criteria – bore understated values fraudulently declared to the United Kingdom under customs procedure 42.

74.      In October 2016, the United Kingdom authorities conducted a test operation, known as Operation Samurai, targeting the imports of two traders who ceased business immediately after HMRC challenged their customs declarations.

75.      On 1 March 2017, OLAF closed its investigation into the undervaluation of imports into the United Kingdom and delivered its report (‘the OLAF report’), which found that importers in the United Kingdom had evaded large amounts of customs duty by submitting false and fictitious invoices and incorrect customs value declarations. OLAF indicated that there had been a dramatic increase in the scale of the undervaluation fraud scheme routed through the United Kingdom between 2013 and 2016. That period coincided with the implementation by other Member States of risk profiles established using the risk assessment tool based on cleaned average prices, as recommended by OLAF.

76.      According to that report, during that period, fraudulent imports routed through the United Kingdom had increased significantly on account of inadequate checks. In 2016, more than 50% of all textiles and footwear imported into the United Kingdom from China were declared below the lowest acceptable prices, while some 80% of the total losses of traditional own resources were attributable to the undervaluation of textiles and footwear imported into the United Kingdom.

77.      The OLAF report further stated that organised criminal groups operating throughout the European Union were behind the fraud. Most of the imports into the United Kingdom were supplies intended for the black market in textiles and footwear in other Member States and were made through the improper use of customs procedure 42. (23) Accordingly, OLAF took the view that the evasion of VAT due in the Member States of final destination of the goods, in particular Germany, Spain, France and Italy, was also substantial. OLAF noted that the United Kingdom had not applied risk profiles based on the lowest acceptable prices, as it recommended, and had not carried out appropriate customs controls on importation, except during one month of Operation Snake. (24)

78.      Consequently, according to that report, the United Kingdom released undervalued textiles and footwear from China for free circulation, without conducting customs controls, with the result that a substantial proportion of customs duties were not collected or made available to the EU budget. Therefore, in its report, OLAF calculated the resulting loss of traditional own resources for the period between 2013 and 2016. (25) Specifically, for the combined nomenclature code for each product concerned, it determined the quantity (in kg) of the undervalued goods (taken to be the goods declared at a value below the lowest acceptable price concerned) and the difference between the declared value and the cleaned average price concerned (the EU-wide cleaned average price) of the product in question, and then applied the applicable rate of customs duty to that difference. Against that background, OLAF recommended that HMRC take all appropriate measures to recover that amount and to implement risk indicators.

79.      Between November 2016 and October 2018, pursuant to the provisions of Regulation No 608/2014 on the control and supervision of traditional own resources, authorised agents of the Commission carried out five inspections concerning, inter alia, undervaluation.

80.      During inspection 16-11-1, which took place between 14 and 18 November 2016, the Commission first of all found that the amounts of customs duty which had been cancelled in the B account corresponded to the additional debts initially claimed in the 24 Snake C18 payment notices concerning undervalued imports detected in the course of Operation Snake, debts which were subsequently withdrawn. It then requested the United Kingdom authorities to determine the customs value of all the relevant import declarations, to recalculate the additional duties due based on that value, to enter the corresponding debts in the B account and to recover the amounts concerned as soon as possible.

81.      It also asked those authorities whether they applied the corrected average price tool developed by OLAF in order to detect undervalued imports, whether they carried out physical checks at customs clearance and whether they consistently requested the provision of security covering the duties likely to be payable in accordance with Article 248(1) of Implementing Regulation I.

82.      During inspection 17-11-1, carried out from 8 to 12 May 2017, the Commission selected 12 import declarations submitted during the first quarter of 2017 containing particularly low values for the purposes of conducting an on-the-spot check. The examination confirmed that all 12 consignments covered by those declarations had been released for free circulation in the European Union without being checked and without any security being lodged. The United Kingdom authorities confirmed that they had not implemented the measures requested by OLAF following Operation Snake in 2014 and again in inspection report 16-11-1. They explained that this was mainly due to their legal advisers’ assessment that no acceptable valuation method was available. However, they stated that the imports in question would be examined by the task force as part of Operation Breach.

83.      During inspection 17-11-2, which took place between 13 and 17 November 2017, five import declarations with particularly low values relating to importers already identified in Operation Snake as potential defrauders were examined by the Commission’s agents on the basis of one of the 24 Snake C18 payment notices arising from that operation totalling GBP 62 003 024.23. However, it proved impossible to trace the debts back to individual import declarations, which, according to HMRC, justified the cancellation of those debts.

84.      During that inspection, the United Kingdom authorities informed the Commission’s agents that HMRC had launched Operation Swift Arrow on 12 October 2017. The United Kingdom explained that the risk profiles used in that operation were based not on the thresholds set by OLAF but on national thresholds or risk profiles established by HMRC on the basis of imports into the United Kingdom alone. However, those profiles were applied only to certain traders identified beforehand as being active in fraudulent trade. The containers detected by those risk profiles were subject to physical checks by the United Kingdom authorities at customs clearance. If those authorities took the view that the declared value was not justified, they would require a security payment before the goods were released.

85.      During inspection 18-11-1, carried out between 16 and 20 April 2018, 25 import declarations concerning the period from 12 October 2017, when Operation Swift Arrow was launched, to 31 December 2017 were inspected by the Commission’s agents. It was found that only 7 of the 25 entries with an extremely low value had been detected by the risk profile developed by HMRC and that the other 18 containers had been released for free circulation without the customs value having been challenged. The United Kingdom authorities stated that, since the launch of Operation Swift Arrow, the risk profile had been adjusted in order to include more traders, combined nomenclature (CN) codes and points of entry, so that, if the imports in question had occurred in April 2018, the profile would have detected a further 11 entries.

86.      Furthermore, according to those authorities, several of the selected traders stopped importing as soon as they were included in the risk profiles, were subjected to pre-release controls and were requested to provide security before the goods were released.

87.      However, those authorities refused to disclose details of the calculation method used by HMRC to determine the security required within the framework of Operation Swift Arrow and to draw up the post-clearance demands, namely the Snake C18 payment notices.

88.      In May 2018, as part of Operation Breach, the United Kingdom issued C18 payment notices (‘the Breach C18 payment notices’) totalling GBP 25 million covering a period dating back to 2015.

89.      During inspection 18-11-2, which took place between 8 and 12 October 2018, the United Kingdom authorities maintained their refusal. By contrast, they confirmed that, in April 2018, they had established additional duties for seven traders – a number of which had already been targeted during Operation Snake – totalling GBP 19 434 197.73.

B.      Pre-litigation procedure

90.      By letters of 24 March 2017 and 28 July 2017, the Commission asked the United Kingdom about the action taken in response to the OLAF report. It noted that it had not received any specific additional information from the United Kingdom and that there was no reason to believe that that State had taken appropriate steps to prevent the undervaluation fraud identified in that report. In the absence of information to the contrary, the Commission stated that it was obliged to ask the United Kingdom to make available an amount of traditional own resources corresponding to the losses calculated by OLAF (less collection costs).

91.      In one of the three letters of 28 July 2017, it also asked for information about the action taken by the United Kingdom authorities in response to the report on inspection 16-11-1, reiterating in this connection its request for sight of the legal assessment that resulted in cancellation of the 24 Snake C18 payment notices and for sight of the list of entries relating to each of the 24 cases, including the calculations performed to establish the customs debts.

92.      By letters of 8 August 2017 and 12 October 2017, the United Kingdom replied to those requests. As regards, first of all, the OLAF report, the United Kingdom stated that measures had been taken to address the problem of undervaluation such as the launch of Operation Breach. It observed that, since EU law does not impose a specific control model, it is for each Member State to decide on the best way to enforce the law. In addition, pre-release controls, including the provision of security, are not inherently more effective than post-release measures such as those developed by the United Kingdom. The OLAF methodology, in so far as it is based on the application of EU-wide data, is neither a sound nor appropriate methodology for the United Kingdom. Since that model was a questionable one, the United Kingdom developed its own approach which is not affected by the shortcomings of the OLAF methodology. Next, as regards the action taken in response to the report on inspection 16-11-1, the United Kingdom stated that the 24 Snake C18 payment notices were cancelled and the corresponding amounts removed from the B account because it was unable to prove the actual value of the imported goods, but that a group of experts would address that issue as part of Operation Breach. Lastly, the United Kingdom reiterated that it was not in a position to accede to the request for sight of the legal assessment of HMRC that resulted in cancellation of the Snake C18 payment notices, citing in this connection confidentiality and legal professional privilege.

93.      On 9 March 2018, the Commission sent the United Kingdom a letter of formal notice.

94.      The United Kingdom replied to that letter on 22 June 2018. In an annex to that reply, the United Kingdom requested that a full version of the OLAF report be sent to it, since it had only an incomplete version, and asked the Commission to provide it with answers to detailed questions on the method used to calculate the amounts of traditional own resources claimed.

95.      On 24 September 2018, the Commission sent a reasoned opinion to the United Kingdom in which, in particular, it responded to the requests made by that State in an annex to its letter of 22 June 2018 and set a time limit of two months for replying.

96.      Having received no reply from the United Kingdom to the reasoned opinion within the prescribed time limit, on 19 December 2018, the Commission decided to bring the present action for failure to fulfil obligations before the Court, after informing the United Kingdom on 18 December 2018 that it would take that decision the following day.

97.      On 9 January 2019, a technical meeting took place between the United Kingdom authorities and the Commission at which a consultancy firm presented the findings of a report that the United Kingdom had commissioned from it.

98.      On 11 February 2019, the United Kingdom sent the Commission its reply to the reasoned opinion, consisting of a cover note and an annex containing a report from a consultancy firm.

IV.    Procedure before the Court

99.      On 7 March 2019, the Commission brought the present action, having taken the view that the arguments put forward by the United Kingdom were not capable of rebutting the complaints made in the reasoned opinion.

100. The Kingdom of Belgium, the Republic of Estonia, the Hellenic Republic, the Republic of Latvia, the Portuguese Republic and the Slovak Republic (together, ‘the interveners’) lodged statements in intervention in support of the United Kingdom in this case.

101. By letter of 6 June 2020, the United Kingdom applied for measures of inquiry or measures of organisation of procedure seeking an order from the Court requiring the Commission to answer a list of questions, some of which had already been submitted in the requests for information which the United Kingdom had sent to the Commission on 22 June 2018 and 22 March 2019. By letter of 11 April 2019, the United Kingdom asked the Court to order the Commission to answer the questions set out in the request of 22 March 2019 (‘the reframed request for information’). (26)

102. By letter of 14 October 2020, the Court sent the Commission and the United Kingdom a number of questions with a request for a written reply. By documents of 16 November 2020, the parties replied to those questions.

103. A hearing was held on 8 December 2020 at which oral observations were submitted (i) by the United Kingdom, in support of which the Republic of Estonia, the Republic of Latvia and the Portuguese Republic intervened, and (ii) by the Commission. Those parties were requested to concentrate their oral pleadings on the content of the replies mentioned in the previous point of this Opinion.

V.      Forms of order sought

104. By its application, the Commission seeks a declaration from the Court that:

–        by failing to enter in the accounts the correct amounts of customs duty and to make available the correct amount of traditional own resources and VAT-based own resources in respect of certain imports of textiles and footwear from China, the United Kingdom has failed to fulfil its obligations under Articles 2 and 8 of Decision 2014/335, Articles 2 and 8 of Council Decision 2007/436, Articles 2, 6, 9, 10, 12 and 13 of Regulation No 609/2014, Articles 2, 6, 9, 10, 11 and 17 of Regulation No 1150/2000, Article 2 of Regulation No 1553/89, Article 105(3) of the Union Customs Code and Article 220(1) of the Community Customs Code;

–        as a consequence of its failure to fulfil its obligations under Article 4(3) TEU, Article 325 and Article 310(6) TFEU, Articles 3 and 46 of the Union Customs Code, Article 13 of the Community Customs Code, Article 248(1) of Implementing Regulation I, Article 244 of Implementing Regulation II and Article 2(1)(b) and (d), Articles 83, 85, 86 and 87 and Article 143(1)(d) and (2) of Directive 2006/112;

–        [The corresponding losses of traditional own resources to be made available to the EU budget (less collection costs) amount to:

–        EUR 496 025 324.30 in 2017 (until 11 October 2017 inclusive);

–        EUR 646 809 443.80 in 2016;

–        EUR 535 290 329.16 in 2015;

–        EUR 480 098 912.45 in 2014;

–        EUR 325 230 822.55 in 2013;

–        EUR 173 404 943.81 in 2012;

–        EUR 22 777 312.79 in 2011.] (27)

–        by failing to provide all the information necessary to enable the Commission to determine the amount of traditional own resources lost and by failing to provide, as requested, the content of the legal assessment of HMRC’s legal department or the reasons for the decision that resulted in the cancellation of established customs debts, the United Kingdom has failed to fulfil its obligations under Article 4(3) TEU and Article 2(2) and (3)(d) of Regulation No 608/2014; and

–        order the United Kingdom of Great Britain and Northern Ireland to pay the costs.

105. The United Kingdom contends that the Court should:

–        declare the action inadmissible in whole or in part;

–        in the alternative, declare that:

–        the United Kingdom has not failed to fulfil its obligation to combat fraud in respect of either traditional own resources or sincere cooperation;

–        the measures taken by the United Kingdom did not cause any loss to the EU budget and therefore it cannot be required to compensate the European Union for any amount whatsoever;

–        in the alternative, if the Court finds that a specific failure caused the European Union to sustain a loss, allow the United Kingdom to assess and account for the additional traditional own resources arising from the finding of liability and not determine the amount of the losses of those resources itself;

–        in the further alternative, if the Court decides to rule on the claim relating to losses of traditional own resources, examine the United Kingdom’s assessment of those losses;

–        in the further alternative, if the Court fails to endorse the United Kingdom’s methodological choices, find that ‘the Commission must prove its assessment of [the losses of traditional own resources] to the standard of proof applicable to an action for damages against a Member State, which it has failed to do’;

–        dismiss the claim relating to own resources accruing from VAT on the ground that it has no legal basis and is unquantified; and

–        order the Commission to pay the costs.

106. All the intervening Member States contend, in essence, that the action should be dismissed. The Slovak Republic and the Portuguese Republic also contend that the Commission should be ordered to pay all the costs.

VI.    The action

107. Before examining the pleas in law put forward by the Commission in support of its action, it is necessary to consider the objections of inadmissibility raised by the United Kingdom in the defence (part A). On the substance, the action essentially revolves around four pleas in law. In the first place, the Commission submits that, during the infringement period, the United Kingdom did not take any measures to protect the financial interests of the European Union, which constitutes a failure to fulfil both the general obligations to protect the European Union’s financial interests and to counter fraud and the obligation on customs authorities to take measures to protect the European Union’s financial interests, to carry out checks on the basis of risk analysis and to require the provision of security (part B). In the second place, the Commission maintains that the United Kingdom infringed the rules governing own resources, since the customs duties on imported goods were miscalculated and the amounts of own resources relating to those duties were not established or made available to the EU budget when they ought to have been (part C). In the third place, it is necessary to examine the argument alleging breach of the duty of sincere cooperation enshrined in Article 4(3) TEU (part D). In the fourth place, the Commission claims, in essence, that, since the United Kingdom did not correctly determine the customs value of the undervalued goods at the time of importation due to the lack of effective control measures, it infringed VAT legislation and did not make available to the EU budget the full amount of own resources accruing from VAT (part E).

A.      Admissibility

108. In the defence, the United Kingdom raises five objections of inadmissibility, alleging (i) infringement of the rights of the defence during the pre-litigation procedure and the procedure before the Court; (ii) irregularity of the pre-litigation procedure and the application as regards the entry of VAT in the accounts under customs procedure 42; (28) (iii) infringement by the Commission of the principles of the protection of legitimate expectations, legal certainty, estoppel and sincere cooperation; (iv) that the making available of amounts cannot be ordered under Article 258 TFEU; and (v) that the action was brought prematurely as regards the period from 1 May 2015 to 11 October 2017.

109. The fifth objection of inadmissibility is intrinsically linked to the examination of the substantive arguments put forward in the second plea in law relating to the failure to establish and make available to the EU budget, within the prescribed time limit, the amounts of own resources corresponding to customs duties. Thus, the United Kingdom’s argument that the action was brought prematurely as regards the period from 1 May 2015 to 11 October 2017, submitted in the context of that objection of inadmissibility, actually seeks to challenge the infringement complained of in the second plea and to reduce the extent of the losses of traditional own resources which the Commission seeks to have established. I therefore propose that the fifth objection of inadmissibility be analysed in the context of the examination of the substance of that plea.

110. Accordingly, the first four objections of inadmissibility should be considered at the outset in order to determine whether the present action for failure to fulfil obligations brought by the Commission is admissible.

1.      Objection of inadmissibility alleging infringement of the United Kingdom’s rights of the defence during the pre-litigation procedure and the procedure before the Court

111. The United Kingdom submits, in essence, that the present action is inadmissible because its rights of the defence were not respected in either the pre-litigation procedure or the procedure before the Court.

112. As a preliminary point, it should be recalled that the Court has consistently held that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity to comply with its obligations under EU law and to avail itself of its right to defend itself against the complaints made by the Commission. (29) The proper conduct of that procedure constitutes an essential guarantee required by the TFEU not only in order to protect the rights of the Member State concerned, but also so as to ensure that any contentious procedure will have a clearly defined dispute as its subject matter. (30)

113. Moreover, while the reasoned opinion must contain a coherent and detailed statement of the reasons which led the Commission to conclude that the Member State in question has failed to fulfil one of its obligations under the Treaty, the letter of formal notice cannot be subject to such strict requirements of precision, since it cannot, of necessity, contain anything more than an initial brief summary of the complaints. There is therefore nothing to prevent the Commission from setting out in detail in the reasoned opinion the complaints which it has already made more generally in the letter of formal notice. (31)

114. In addition, as regards the procedure before the Court, it is settled case-law that, where an action is brought under Article 258 TFEU, the application must set out the complaints coherently and precisely, so that the Member State and the Court can know exactly the scope of the alleged infringement of EU law, a condition that must be satisfied if the Member State is to be able to present an effective defence and the Court to determine whether there has been a breach of obligations, as alleged. (32) In particular, the Commission’s application must contain a coherent and detailed statement of the reasons which have led it to conclude that the Member State in question has failed to fulfil one of its obligations under the Treaties. (33)

115. It is in the light of that case-law that it is necessary to determine whether the Commission has respected the rights of the defence with regard to the United Kingdom during the pre-litigation procedure and the procedure before the Court.

116. In the first place, the United Kingdom submits that its rights of the defence were infringed, since the Commission did not give an adequate reply to either its first request for information (34) or the reframed request for information, particularly as regards the information needed to enable that State to retrace the amount of traditional own resources claimed by the Commission in the application.

117. In the rejoinder, the United Kingdom submits that the detailed technical information provided by the Commission in the reply still does not enable it to retrace that amount. Significant uncertainty remains, particularly as to the data cleaning method used by the Commission and as to whether the non-aggregated data available to the United Kingdom correspond to the daily aggregated data used by the Commission to calculate the losses of traditional own resources, namely Surveillance 2 data.

118. The United Kingdom argues that the Commission infringed its rights of the defence and the principle of sincere cooperation by communicating to it belatedly, namely at the stage of the reply, some of the requested information. It also challenges the Commission’s refusal to provide it with information on the measures taken by other Member States to combat the undervaluation fraud at issue. The United Kingdom states that it needed that information to defend itself against the Commission’s claims that appropriate measures had been taken in other Member States which had produced results in preventing undervalued imports. Such information is also relevant for determining whether the measures taken by the United Kingdom fall within its discretion and are a reasonable way to combat the fraud concerned and for constructing arguments concerning the causal link between the wrongful conduct of the United Kingdom authorities and the failure to enter traditional own resources in the accounts.

119. In the second place, the United Kingdom complains that the Commission undermined its ability to access all the data necessary for its defence, since it did not provide that State with the required information on its calculations relating to traditional own resources for the period from 2011 to 2014.

120. In my view, those arguments must be rejected.

121. In that regard, concerning the objection of inadmissibility alleging failure to respond to the request for information attached to the reply to the letter of formal notice of 22 June 2018, it must be noted that, in its reasoned opinion of 23 September 2018, (35) the Commission expressly responded to that request.

122. Specifically, in its reply to the letter of formal notice, the United Kingdom had complained to the Commission that Annex 2 to the OLAF report of 1 March 2017 was incomplete and that several pages were missing. In the reasoned opinion, the Commission stated that that annex had been replaced by Annex 7 to the OLAF report of 1 March 2017, which contained full details of the methodology used by OLAF. It added that Annex 2 was based on the documents distributed to that State at the meeting of 28 July 2015 between OLAF and the United Kingdom. Thus, the Commission explained the OLAF methodology in its reasoned opinion in the form of two documents attached as Annex 7 to the OLAF report, (36) documents which were, moreover, attached to the application before the Court.

123. It follows that the reasoned opinion fully explains that replacement, which is not, in my view, capable of rendering the claims made against the United Kingdom in the reasoned opinion unintelligible. Accordingly, the exercise by that State of its rights of the defence cannot be regarded as having been interfered with.

124. In addition, the United Kingdom submits that its rights of the defence were infringed as the Commission did not respond to its reframed request for information, which was sent to the Commission after the lodging of the present action on 7 March 2019. That claim can essentially be broken down into four complaints.

(a)    Disclosure of data relating to calculations concerning the cleaned average price, the lowest acceptable price and the estimated losses of own resources

125. By this first complaint, the United Kingdom contends that the Commission did not provide it with either the data used in the calculations concerning the cleaned average price, the lowest acceptable price and the estimated losses of own resources, or the tools to understand how it used those data.

126. In that regard, it should be noted that, in the reply, the Commission provides an answer to the questions set out in the reframed request for information concerning the calculation of the cleaned average price and the lowest acceptable prices as well as the estimated losses of traditional own resources. It explains, in particular, that the United Kingdom always had full access to the data used, including the ‘DL 53’ download, to arrive at the EU-28 cleaned average price and the estimated losses of traditional own resources through the JRC’s Theseus website, (37) having had full access to that site since 2010 and having performed simulations based on those data. (38) Specifically, the reports in Annex 7 to the OLAF report, (39) first, explained the methodology for calculating the cleaned average price and the lowest acceptable price and, in particular, for ‘cleaning’ the data, and also explained the methodology for calculating the estimated losses (namely the difference between the declared price and the cleaned average price), secondly, provided the list of cleaned average prices used for each product category, thirdly, gave an overview of how to access the EU-28 cleaned average price on the Theseus website and, fourthly, stated the reasons for the decision to set the lowest acceptable price at 50% of the cleaned average price. Annex 7 to the OLAF report was, moreover, attached to Annex 35 to the application (40) and the Commission referred to it in the reasoned opinion. Consequently, it appears that those data and documents were known to the United Kingdom and were capable of enabling it, if necessary, to reproduce the calculations performed by the Commission. Furthermore, as regards the volume of goods for the purpose of estimating the losses of traditional own resources, the United Kingdom asked for a copy of the entire Surveillance 2 database used so that it could calculate those losses itself. In that connection, as the Commission explained, the Surveillance 2 database was developed by that institution and combines the data on, inter alia, the volumes provided by Member States themselves. Thus, in the reply, the Commission explained that those data were based exclusively on the import data forwarded by the United Kingdom to the Commission’s services and were simply recorded in that database. (41)

127. In the rejoinder, the United Kingdom acknowledges that the information provided by the Commission in the reply satisfied the two requests for information. However, it criticises the belated disclosure of that information. In that regard, in the light of the explanations set out in the preceding point, it must be found that the method used by the Commission to calculate the cleaned average price and the lowest acceptable price as well as that used to estimate the losses of traditional own resources were forwarded to the United Kingdom (and were therefore known to it), as is apparent from the explanations provided in Annex 7 to the OLAF report. Therefore, the information in the reply cannot be regarded as new information.

128. Consequently, since the data used by the Commission were comprised of documents to which the United Kingdom had access – the Commission having explained, both before and during the present case, how that Member State could access those data and replicate its calculations – it must be considered that all the information requested by the United Kingdom in its reframed request for information concerning the EU-28 cleaned average prices, the lowest acceptable prices and the losses of own resources was already available to the United Kingdom.

(b)    Information on calculations performed in respect of 2011 to 2014 on the basis of the Snake C18 payment notices

129. By this second complaint, the United Kingdom takes issue with the Commission in the defence for being unable to access all the data needed to defend itself, inasmuch as the customs declarations prior to 2014 had been destroyed, having been stored for only four years. In addition, by its reframed request for information, the United Kingdom sought information on the calculations performed by the Commission in respect of 2011 to 2014.

130. It should be noted that, as an annex to the rejoinder, (42) the United Kingdom provided the Court with a table of the 23 Snake C18 payment notices which it had issued, copies of those notices and spreadsheets containing the calculations it had used. Therefore, the objection of inadmissibility raised concerning the information on the calculations performed in respect of 2011 to 2014 on the basis of the Snake C18 payment notices cannot succeed. In addition, in so far as the United Kingdom seeks to challenge the validity of the calculations performed by the Commission on the basis of those payment notices, it is actually attempting to question the Commission’s assessment of the losses of traditional own resources for that period. However, that challenge will be examined in the second plea in law in the present action, relating to infringement of the provisions governing traditional own resources and estimates thereof.

(c)    Knowledge of other Member States’ practices as regards use of the OLAF methodology

131. By this third complaint, the United Kingdom enquires about the practices of other Member States as regards use of the OLAF methodology as a risk analysis tool, with a view to carrying out checks prior to customs clearance (or not).

132. In that regard, although a comparative analysis of the conduct of other Member States may be of interest for the purpose of establishing whether the choices made by the United Kingdom were reasonable, an analysis of the practices of other Member States in the field cannot affect the exercise by the United Kingdom of its rights of the defence or the outcome of the present action for failure to fulfil obligations. It is settled case-law that a Member State cannot justify its failure to fulfil obligations under the TFEU by pointing to the fact that other Member States have also failed, and continue to fail, to fulfil their own obligations. (43) The admissibility of the present action against the United Kingdom cannot be called in question even though the practices of other Member States as regards use of the OLAF methodology as a risk analysis tool, with a view to carrying out checks prior to customs clearance (or not), may be different.

(d)    Request for evidence regarding the nature of the undervalued goods and their Member State of destination

133. By this fourth complaint, the United Kingdom seeks evidence of the nature of the undervalued goods and their Member State of destination.

134. It appears that, by this complaint, the United Kingdom actually seeks to challenge the merits of the second and third pleas in law relating, respectively, to the estimate of own resources and infringement of the provisions governing own resources accruing from VAT. The truth is that this complaint questions the Commission’s assessment of the nature of the goods taken into account for those estimates and the possible destination of the goods. I also consider it appropriate to uphold the argument put forward by the Commission which, in rejecting the complaint alleging lack of data as regards the nature and volume of the goods taken into account for the purposes of the present proceedings, maintains that the United Kingdom itself entered the information into the Surveillance 2 database on which the Commission relied in its reasoned opinion and in the application. (44) Accordingly, no infringement of the rights of the defence relating to the lack of information on the nature of the goods and their Member State of destination can be found.

135. Having regard to the foregoing, the first objection of inadmissibility raised by the United Kingdom, alleging infringement of the rights of the defence during the pre-litigation procedure and the procedure before the Court, must be rejected.

2.      Objection of inadmissibility alleging irregularity of the pre-litigation procedure and the application as regards customs procedure 42 in particular

136. The United Kingdom submits that, by not disclosing to it – first during the pre-litigation stage and then in the application – detailed information on the factual basis of the alleged failures to fulfil obligations, particularly under customs procedure 42, the Commission did not put it in a position to understand those complaints, with the result that it was unable to comply with its obligations or prepare its defence. It states that no information is provided on the amount of losses of own resources accruing from VAT, on the identity of the traders concerned and the Member States of destination or on the measures taken by those States to recover the VAT owed by those traders. It infers from this that the complaint made on that head is inadmissible.

137. Nevertheless, I note, first of all, that this objection of inadmissibility concerns the content and sufficiency of the facts and evidence adduced by the Commission in support of its claim. It seems to me that such matters are more concerned with the examination of the merits of the alleged failure to fulfil obligations than with the validity of the pre-litigation procedure and the subsequent application. (45) Thus, the argument alleging that the information provided by the Commission was insufficient must, in my view, be examined in the Court’s analysis of the evidence submitted by the Commission.

138. Next, even if the Court were to uphold the classification of that argument as a plea of inadmissibility, it is apparent from the documents before the Court that the information disclosed during the pre-litigation exchanges and reproduced in the application was sufficient to enable the United Kingdom to defend itself. It follows from the OLAF report, on which the Commission relied, that the final destination of most of the undervalued imports, in so far as they were subject to customs procedure 42 and their destination could be determined, was not the United Kingdom but other Member States, which resulted in substantial VAT losses in the Member States of destination of the goods. (46) OLAF also observed that, in the fraud scheme at issue, a large proportion of the goods were diverted to the black market, with the consequence that no VAT was paid at all. Those claims were subsequently set out in the reasoned opinion and reproduced in the application. In the light of those considerations, I consider – as the Commission contends in the reply – that the information disclosed during the pre-litigation stage and thereafter expanded on in the application did not prevent the United Kingdom from defending itself against the claims relating to those losses.

139. Accordingly, I propose that the second objection of inadmissibility raised by the United Kingdom be rejected.

3.      Objection of inadmissibility alleging infringement by the Commission of the principles of the protection of legitimate expectations, legal certainty, estoppel and sincere cooperation

140. The United Kingdom maintains that the present action, in so far as it covers the period to the end of February 2015, should be dismissed because it infringes the principles of the protection of legitimate expectations, legal certainty, estoppel and sincere cooperation. It submits that the numerous statements made by OLAF in 2014 and 2015 and in its report of March 2017 caused it to entertain legitimate expectations. (47) It is apparent in particular from the OLAF report that at no time before the end of the operational phase of Operation Snake in March 2014 (48) did OLAF find that the United Kingdom had failed to fulfil its obligations under EU law. In particular, the United Kingdom refers to three specific assurances allegedly given by the Commission and OLAF during the infringement period, showing that they considered, first, that the United Kingdom was not in breach of its obligations under EU law to protect the European Union’s financial interests and to counter fraud and, secondly, that that State would not be subject to infringement proceedings. Accordingly, the Commission should not be permitted to reverse its position as founded on those three assurances.

141. First of all, according to the United Kingdom, it follows from the record of a meeting held with OLAF on 13 June 2014 drawn up by representatives of the United Kingdom that OLAF was ‘pleased with the progress the UK have made and the actions that have been and are planned’. That was an unequivocal assurance that OLAF did not regard the United Kingdom as being in breach of its obligations to protect the financial interests of the European Union and to counter fraud. (49)

142. Next, a second statement made in October 2014 by a Commission official, informing the United Kingdom that its participation in PCA Discount was ‘satisfactory’ and that the actions required to implement that operation ‘[had been] implemented in a timely and effective manner’, was a clear and unequivocal assurance that the United Kingdom had not failed to fulfil its obligations under EU law as regards its participation in that operation. (50) As regards the Commission’s counter-argument that that assurance concerned only one case arising from PCA Discount, the United Kingdom submits that the Commission cannot call that assurance into question because it now considers the review of a single case to be an insufficient ground for that assurance, thereby reversing its initial decision to take only one case as a basis for reassuring the United Kingdom.

143. Lastly, the United Kingdom refers to the first bilateral meeting between OLAF and HMRC held on 19 and 20 February 2015, during which an OLAF official stated, according to the minutes of that meeting drawn up by United Kingdom officials, that, ‘to now’, that Member State had ‘done the right thing’. According to the United Kingdom, that assurance covered all the measures it had taken up to that point and not only the issue of the Snake C18 payment notices.

144. The United Kingdom contends that the Commission’s decision now to go back on those three assurances is at variance not only with the principle of the protection of legitimate expectations, but also with the principle of legal certainty, which may be invoked by Member States, (51) the principle of venire contra factum proprium nemini licet and the principle of sincere cooperation laid down in Article 4(3) TEU. (52) The provisions of customs law allow a degree of flexibility with regard to the measures to be taken to combat fraud of the kind at issue in this case and do not expressly require a control system based on risk filters and pre-clearance controls, so that it was open to the Commission and OLAF to reassure the United Kingdom that, until February 2015, its customs control system was in conformity with EU law.

145. In examining the United Kingdom’s arguments, it should be recalled at the outset that the right to rely on the principle of the protection of legitimate expectations extends to any person in a situation in which an institution of the European Union has caused him or her to entertain expectations which are justified by precise assurances provided to him or her. (53) Although that right is a general principle of EU law which confers rights on individuals, (54) the Court has also extended its application to relations between the Commission and the Member States. (55)

146. However, the right to rely on the principle of the protection of legitimate expectations presupposes that precise, unconditional and consistent assurances originating from authorised, reliable sources have been given to the person concerned by the competent authorities of the European Union. That right applies to an individual in a situation in which an institution, body, office or agency of the European Union, by giving that person precise assurances, has led him or her to entertain well-founded expectations, (56) all the more so when, in the context of the examination of an objection of inadmissibility alleging breach of legitimate expectations raised by a Member State, in accordance with the maxim reus in exceptione fit actor, the onus is on the Member State to prove that breach. (57)

147. In the present case, it is apparent, in my view, from the documents before the Court that the United Kingdom did not receive assurances from the Commission or OLAF from which it could derive a legitimate expectation.

148. Specifically, as regards the three statements to which the United Kingdom refers, none of them seems to me to be a precise and unconditional assertion that the actions and inaction of the United Kingdom were in line with EU law or that that State did not infringe EU law. First, the alleged statement by the OLAF official at the meeting held on 13 June 2014 (58) is too general to be able to support a legitimate expectation that an action for failure to fulfil obligations would not be brought. In addition, that statement should be considered in its context, from which it is clear that the statement was made during a meeting between OLAF and the United Kingdom concerning Operation Snake and, in particular, in the course of discussions concerning the possible issue by the United Kingdom of the Snake C18 payment notices. However, it is common ground that the United Kingdom withdrew those notices after the meeting, with the result that the value of that statement, which takes note of the progress made by the United Kingdom, is significantly diminished. The same is true of OLAF’s observations at the meeting held on 19 and 20 February 2015, which were based on the premiss that the United Kingdom had issued those payment notices. (59) Secondly, it must be found that the observation made by OLAF in October 2014, to the effect that the United Kingdom’s participation in PCA Discount was satisfactory and that the actions required to set up that operation ‘were implemented in a timely and effective manner’, (60) does not constitute an assessment of that State’s compliance with EU law on the protection of the European Union’s financial interests, since it concerned only one case arising from PCA Discount and does not necessarily reflect the content of all the exchanges which the United Kingdom had with the Commission and OLAF at that particular time.

149. It follows that the three statements or assertions on which the United Kingdom relies cannot be described as ‘precise, unconditional and consistent’ assurances, particularly since they were made in a context characterised by intense and continuous dialogue over a relatively long period between OLAF and the Commission, on the one hand, and the United Kingdom, on the other. Thus, as the Commission contends, they were made in connection with action taken by OLAF (61) to persuade Member States to adopt customs control measures prior to customs clearance based on risk analysis, such as the lowest acceptable price threshold. It is clear from that context that no such assurances were given by either OLAF or the Commission.

150. In any event, such statements or assertions cannot, moreover, preclude an objective finding of a failure on the part of a Member State to fulfil its obligations under the procedure laid down in Article 258 TFEU. The Court has consistently held that that procedure is based on the objective finding that a Member State has failed to fulfil its obligations under EU law and that the principles of the protection of legitimate expectations and sincere cooperation cannot be relied on by a Member State in order to preclude such an objective finding, since to admit that justification would run counter to the aim pursued by that procedure. (62) As regards, in particular, the Commission’s feedback and its possible effect on the substance of the alleged failure by the United Kingdom to fulfil its obligations, it is settled case-law that the Commission is not empowered to give guarantees concerning the compatibility of particular practices with EU law and in no circumstances does it have the power to authorise practices which are contrary to EU law. (63) It follows, in my view, that Member States cannot, in a system in which they are responsible for the proper implementation of EU customs legislation in their national territory, sidestep liability for an infringement of EU law which they may have committed by arguing that the Commission did not take issue with them for such an infringement at a given point in time.

151. Lastly, suffice it to note that the claims based on legal certainty, the principle of estoppel and the Commission’s lack of sincere cooperation with the United Kingdom have no independent content, as is apparent from the United Kingdom’s defence. In the defence, the United Kingdom does not state, in essence, the reasons why those principles were infringed, (64) with the result that those claims are dependent on the arguments alleging infringement of legitimate expectations analysed above and must be rejected on the same grounds as those set out in the context of that analysis.

152. Accordingly, that objection of inadmissibility must, in my view, be rejected.

4.      Objection of inadmissibility alleging that the making available of amounts cannot be ordered under Article 258 TFEU

153. The United Kingdom contends that the action is inadmissible in so far as it essentially seeks an order requiring that State to make payments of specific and exceptionally large sums to the EU budget.

154. Specifically, relying on the Court’s case-law, (65) the United Kingdom submits that the part of the form of order sought in the application relating to the making available to the EU budget of a specific amount of traditional own resources of approximately EUR 2.7 thousand million is inadmissible because, in an action for failure to fulfil obligations under Article 258 TFEU, the Court cannot order a Member State to enter in the EU budget specific amounts of own resources remaining unpaid as a result of that State’s alleged failure to fulfil obligations. Accordingly, the third paragraph of the first head of claim set out in paragraph 370 of the application is inadmissible, all the more so because, according to settled case-law, in the context of such actions, the Court may only declare that a Member State has failed to fulfil its obligations under EU law and may not order that Member State to take specific measures.

155. The United Kingdom also rejects the Commission’s argument that it carefully ‘structured’ the form of order sought in the application in the present case so as to avoid the error committed in the two Commission v Germany cases mentioned above. It claims that this is a device intended to circumvent the Court’s lack of jurisdiction since the Commission seeks to achieve the same result as that sought in those two cases by using different wording.

156. Furthermore, the Commission’s approach would deny the United Kingdom the opportunity afforded to it under Article 260 TFEU to remedy any breach found under Article 258 TFEU and so fails to observe the respective competences of the Commission, the Court and Member States under the EU Treaties.

157. The United Kingdom states that this case differs from that at issue in the judgment of 15 November 2005, Commission v Denmark. (66) While it is true that the Court upheld the action in that case seeking a declaration that the Member State concerned had failed to fulfil its obligation to make a specific amount of own resources available to the European Union, it is apparent from paragraph 56 of that judgment that neither the existence of a customs debt nor the amount of own resources lost was disputed in that case.

158. In my view, those arguments are untenable. In that regard, it follows from the third paragraph of the first head of claim that, by listing the amounts of traditional own resources lost for the period from 2011 to 2017, the Commission’s application seeks to describe the scale of the failure to fulfil obligations by quantifying those losses. Although the third paragraph contains the words ‘the … TOR [traditional own resources] losses to be made available to the Union budget’, (67) which the United Kingdom criticises, it seems to me that that part of the sentence should not be construed as a request for an order requiring that State to pay the amounts at issue in the context of present action; rather, its purpose is to provide a quantitative description of the failure to fulfil obligations and is thus intended to demonstrate the specific amounts which the United Kingdom has not made available to the EU budget.

159. As regards the line of argument based on the two cases giving rise to the judgments in Commission v Germany, (68) it is sufficient, in my view, to note that the wording of the form of order sought by the Commission in those cases, which was the subject of a critical assessment by the Court in those judgments, is different from the wording of the form of order sought here. In those cases, the Commission asked the Court to order the defendant Member State to pay the amounts if it were established that that Member State had failed to fulfil its obligations under EU law. (69) In those two judgments, the Court observed that what the Commission was seeking was not a declaration that the Member State concerned had failed to fulfil its obligations, but an order requiring that Member State to take certain specific measures. (70) It follows, to my mind, that, in the context of an action for failure to fulfil obligations under Article 258 TFEU, the jurisdiction of the Court is limited to finding that a Member State has failed to fulfil its obligations under EU law and the Court may not require the Member State concerned to take steps to cure that failure. That conclusion follows, moreover, from the formulation that ‘when there is a finding of infringement … the Member State in question [is] to take the measures necessary to comply with the judgment of the Court of Justice’, (71) which now appears in Article 260 TFEU. Proceedings before the Court under Article 258 TFEU are therefore infringement proceedings, not proceedings for a court order.

160. Since the procedure provided for in Article 258 TFEU is based on the objective finding that a Member State has failed to fulfil its obligations under EU law, judgments delivered by the Court under that provision are, in essence, declaratory in nature, (72) so that, in actions for failure to fulfil obligations under Article 258 TFEU relating to amounts of traditional own resources, the Court may declare that a Member State has not made those amounts available to the EU budget. (73) Contrary to the United Kingdom’s assertions, that conclusion also follows from the judgment in Commission v Denmark, (74) in which the Court ruled admissible a request seeking a declaration from it that, by failing to make available to the Commission a certain amount of own resources and the associated default interest, the Danish authorities had failed to fulfil their obligations. Furthermore, in a recent judgment, (75) the Court declared that, ‘by refusing to make available traditional own resources amounting to EUR 2 120 309.50, … the Italian Republic [had] failed to fulfil its obligations’ under EU law. It follows, in my view, that the Court may regard as admissible a request contained in the form of order sought in an application filed by the Commission which is intended to set out a specific amount of losses of own resources which it considers is owed.

161. That conclusion cannot be called into question by the United Kingdom’s argument that the case-law cited above must be read in the light of whether or not the Member State concerned by the action for failure to fulfil obligations under Article 258 TFEU denies the scale of the losses of traditional own resources resulting from the failure. My view is that the existence of such a denial is irrelevant because of the very nature of infringement proceedings, which entitle that Member State to challenge before the Court both the facts submitted in support of the Commission’s action and the legal basis for the action, including, logically, the scale of the losses of traditional own resources. That follows from the Commission’s ability to submit to review by the Court, in infringement proceedings, a dispute between the Commission and a Member State regarding the latter’s obligation to make available to the Commission a certain amount of the European Union’s own resources, which is inherent in the system of own resources, as currently configured in EU law. (76) In addition, in its most recent decision on the matter, the Court upheld a request by the Commission seeking a declaration that EU law had been infringed because a specific amount of own resources had not been made available even though the Member State concerned challenged the European Union’s entitlement to that amount. (77)

162. Furthermore, it is necessary to dismiss the objection raised by the United Kingdom that the present action is inadmissible because it is a ‘disguised’ action for damages and because it seeks a finding of fault against that Member State on the ground that it did not make specific amounts available to the EU budget. In an action for failure to fulfil obligations relating to own resources, it is clear that pecuniary obligations are in issue, and no rule of EU law prevents the Commission from relying on them in the context of the alleged infringement. In that specific field, it is precisely because Member States dispute their obligation to make the sums requested by the Commission available to the EU budget that actions for failure to fulfil obligations are brought before the Court.

163. Lastly, it should be noted that, in the reply, the Commission states that the third paragraph of the first head of claim should be construed as a claim relating to certain specific amounts which the United Kingdom has not made available to the EU budget. Thus, the Commission itself acknowledges that ‘the present action is not an action for damages’ but rather one which seeks a finding that the United Kingdom has failed to fulfil its obligations under EU law, in particular by failing to make certain specific amounts available to the EU budget, such a formulation being, as stated above, consistent with the case-law on actions for failure to fulfil obligations under Article 258 TFEU.

164. In the light of the abovementioned case-law and the clarifications provided by the Commission, I consider that the third paragraph of the first head of claim must be construed as seeking a declaration from the Court that the United Kingdom has not made certain specific amounts available to the EU budget, in breach of EU law, and that, in the light of that case-law, such a request is admissible.

165. In the alternative, the United Kingdom submits that, if the Court decides to fix an amount to be made available to the European Union, it should have primary regard to the United Kingdom’s estimate because it is a matter for the Member State to assess the amount owed. According to the United Kingdom, the correct approach in principle in order to determine the amount of own resources lost comprises three stages which the Commission’s application merges into one (namely the State’s failure to fulfil its obligations, the causal link and proof of the amount resulting from that failure).

166. The arguments put forward by the United Kingdom are based on the premiss that the Commission is required to demonstrate that any measures taken by the Member State were manifestly inappropriate. The examination of those arguments falls within the scope of the question whether the first and second pleas in law are well founded.

167. In the light of the foregoing, I propose that the Court reject the first to fourth objections of inadmissibility raised by the United Kingdom.

B.      Failure to fulfil obligations to protect the financial interests of the European Union and to counter fraud and obligations under EU customs legislation

168. By its first plea, the Commission claims, in essence, that, during the infringement period, the United Kingdom did not take any measures to protect the financial interests of the European Union despite repeated warnings and requests from the Commission and OLAF concerning the risk of fraud. That omission infringed the general obligations to protect the European Union’s financial interests and to counter fraud laid down in Article 310(6) and Article 325 TFEU. It also infringed the obligation on the customs authorities, first, to take measures to protect the financial interests of the European Union under Article 3 of the Union Customs Code, in conjunction with Article 4(3) TEU, next, to carry out checks on the basis of risk analysis, pursuant to Article 13 of the Community Customs Code and Article 46 of the Union Customs Code, and, lastly, to require the provision of security under Article 248(1) of Implementing Regulation I and Article 244 of Implementing Regulation II.

169. Before considering the specific complaints put forward by the Commission, I will first of all examine the obligations of Member States under Article 310(6) TFEU and Article 325 TFEU, on which the Commission relied in support of its action and, in particular, their objectives and the relevant case-law. It will then be necessary to assess the merits of the specific claims made under those provisions and the provisions of secondary legislation mentioned in the preceding point.

1.      Obligations of Member States to counter illegal activities affecting the financial interests of the European Union

170. Since Article 310(6) TFEU, which provides that ‘the Union and the Member States, in accordance with Article 325, shall counter fraud and any other illegal activities affecting the financial interests of the Union’, is merely a provision referring to Article 325 TFEU, the plea put forward by the Commission, in so far as it alleges infringement of provisions of primary law, must actually be regarded as a complaint that the United Kingdom has failed to fulfil its obligations under Article 325 TFEU. That article is a key provision in the field of action to counter fraud at the level of primary law, (78) inasmuch as it sets out the content and scope of the obligations of the European Union and the Member States in that area, to which concrete expression is given at the level of secondary legislation by the Union Customs Code, the Community Customs Code, Implementing Regulation I and Implementing Regulation II.

171. The protection of financial interests is a priority and has been in the sights of the Member States and the European Union for many years, (79) since traditional own resources (consisting of customs duties and sugar levies) are collected by the former on behalf of the latter. (80) In 2017, Member States retained, by way of collection costs, 20% of traditional own resources. (81) Customs fraud is increasingly prevalent and has an adverse impact on collection and, therefore, on the financial interests of the European Union. In 2013, the losses associated with that fraud were estimated at EUR 185 million per year. (82) The detrimental consequences of customs fraud go beyond the realm of EU budget-related financial interests, extending to the political, economic and financial spheres, and have a direct repercussion on the functioning of the internal market. (83)

172. Against that background, Article 325(1) and (2) TFEU does not merely lay down an abstract obligation for Member States to counter fraud and any other illegal activities affecting the financial interests of the European Union, (84) but lays down minimum requirements as regards the measures which those States are duty bound to implement in order to counter fraud and prevent such activities. In particular, under that provision, the measures taken by Member States to counter illegal activities affecting the financial interests of the European Union must, in accordance with paragraph 1 of that article, act as a deterrent and be effective and, in accordance with paragraph 2 thereof, be the same as the measures they take to combat fraud affecting their own financial interests.

173. Reference is also made to those requirements by the case-law, from which it follows, in particular, that Article 325(1) and (2) TFEU imposes on Member States a precise obligation as to the result to be achieved that is not subject to any additional condition. (85) Since tackling illegal activities affecting the financial interests of the European Union through effective deterrent measures involves the collection of customs duties and the making available of the corresponding amounts to the EU budget as traditional own resources of the European Union, any lacuna in the collection of those duties potentially results in a reduction of those resources. Therefore, Member States are required to take the measures necessary to ensure that customs duties are actually collected and are collected in full, which presupposes that customs controls are carried out properly. (86) In addition, it should be recalled that, in accordance with the second subparagraph of Article 4(3) TEU, the Member States of the European Union are required to take all appropriate measures, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the European Union. (87) In that regard, it follows from the case-law of the Court concerning agricultural legislation that the requirement imposed on Member States to take all measures necessary to ensure that the EU’s financial interests are effectively protected is a specific expression of the general duty of sincere cooperation incumbent on Member States under what is now Article 4(3) TEU. (88) Similarly, in the field of action to counter customs fraud, Article 325 TFEU is, in my view, the specific expression of the principle of sincere cooperation enshrined in Article 4(3) TEU, (89) Article 325 TFEU itself having been implemented in the field of EU customs law by the provisions of the Customs Code. It follows that the principle of sincere cooperation enshrined in Article 4(3) TEU cannot be relied on autonomously in the field of action to counter customs fraud. (90)

174. Two lessons may be drawn from the abovementioned case-law. First, in addition to the obligation on Member States under Article 325(1) TFEU to provide for appropriate penalties to counter fraud and other activities affecting the financial interests of the European Union, the requirements flowing from the abovementioned case-law also apply to the administrative activities of Member States, since the commitments they have entered into under the Treaties are binding on them in full. (91)

175. Secondly, it is apparent from that case-law that Article 325(1) and (2) TFEU imposes on Member States binding obligations as to the result to be achieved as regards, in particular, the objectives laid down in that provision and, specifically, their obligation to counter fraud and activities affecting the financial interests of the European Union, so as to minimise possible losses to the EU public purse as a whole. In consequence, since the aim of that provision is for such action to be taken by means of operative measures, the effectiveness of an individual measure or set of measures can be determined only in the context of a clearly defined situation, not in the abstract. Crime, including its particularly dangerous facet – namely organised crime in the field of fraud and other activities affecting the financial interests of the European Union – is, by definition, a phenomenon in constant flux that progressively adapts to its surroundings. That is why the measures adopted by Member States to combat that phenomenon must be capable of continuously counteracting it. Although measures taken in recent years by Member States to curb activities affecting the financial interests of the European Union may have been regarded as effective, that might no longer be the case now. Consequently, Article 325(1) and (2) TFEU, as a provision containing an obligation as to the result to be achieved, requires Member States not only to adopt individual measures to prevent activities adversely affecting the financial interests of the European Union, but also to assess and adapt those measures continuously over time, so as to guarantee their effectiveness.

176. For those reasons, the United Kingdom’s defence argument that Member States enjoy a broad discretion as to the means used to prevent illegal activities contrary to the financial interests of the European Union in the field of customs and own resources has no prospect whatsoever of success. The United Kingdom appears to suggest that, since responsibility for the implementation of customs procedures and the collection of customs duties lies with Member States through their national authorities, Member States also enjoy a broad discretion as regards the implementation of preventive measures to counter customs fraud.

177. In my view, that approach is wrong on two counts. In the first place, there is a direct link in EU law between, on the one hand, the collection of customs duties carried out directly through Member States and, on the other, the European Union’s own resources, a link which the United Kingdom does not appear to deny. (92) In the second place, although Member States indeed have a certain measure of latitude as regards the choice of measures to prevent fraud and harm to the financial interests of the European Union, the fact remains that, according to the case-law of the Court, (93) that discretion is not unlimited and is subject to the principle of effectiveness, which requires that the measures taken be effective and dissuasive and, specifically, that they ensure the effective collection of the European Union’s own resources, namely, inter alia, Common Customs Tariff duties, provided however that the fundamental rights guaranteed by the Charter of Fundamental Rights of the European Union (‘the Charter’) and the general principles of EU law are observed. (94) Thus, the Court has already held that, where a Member State accepts measures by waiving, in a general and indiscriminate manner, the collection of VAT, despite being under an obligation to ensure the collection in full of VAT payable in its territory and the effective collection of the European Union’s own resources, it has failed to fulfil its obligations under EU law. (95)

178. The United Kingdom also submits that the implementation of EU law by a Member State infringes the principle of effectiveness only if there is a ‘clear and major risk of impunity’ or if it leads to the absence of a penalty. (96) I am of the opinion that such an interpretation is invalidated by the case-law, from which it follows that the effectiveness of the protection of the European Union’s financial interests prevails over the discretionary power of Member States. (97)

179. I must also reject the United Kingdom’s arguments alleging, first, that the obligation to ensure the effective collection of own resources requires only reasonable efforts to verify and recover duties and taxes contributing to those resources and, secondly, that Member States are required to show ‘due care’ in the collection of own resources. (98) It follows from this Opinion (99) that the effectiveness of a measure adopted to protect the financial interests of the European Union can be assessed only in the context of specific circumstances in which it is necessary to determine whether the efforts made to achieve that objective were reasonable and diligent. It goes without saying that widespread, organised customs fraud requires Member States to invest more resources than they normally would in order to meet their obligations under the founding Treaties. (100)

180. It is also necessary to dismiss the argument put forward by the United Kingdom that the Commission must prove not only that national anti-fraud measures are ineffective, but also that the Member State is guilty of negligence or arbitrariness. In that regard, the United Kingdom misinterprets the case-law on which it relies, (101) from which it is in no way apparent that the Commission was required to demonstrate negligence or arbitrariness on the part of a Member State in order to prove the existence of a failure to fulfil obligations. On the contrary, I consider that that case-law should be read as meaning that a Member State cannot, in an arbitrary fashion, unilaterally dispense with establishing the existence of the customs debt and crediting it to the Commission’s account as own resources. (102)

181. Admittedly, it must be accepted, as the United Kingdom points out, that those provisions of the Treaties do not expressly impose an absolute result or require customs control measures to eliminate all instances of fraud against the European Union’s own resources. However, it follows from Article 325 TFEU and from the case-law cited above that measures adopted on the basis of the provisions of the Community Customs Code or Union Customs Code must be effective. The principle of effectiveness laid down at the level of primary law cannot be interpreted in the context of the Customs Code as requiring the complete eradication of all customs fraud; such a requirement is unrealistic as wrongful conduct, including in customs matters, will always form part of civic life. Nevertheless, that principle lays down the obligation to monitor acts that are detrimental to the financial interests of the European Union and to address recognised risks of fraud, both foreseeable and current, in an appropriate manner.

182. Since, as pointed out above, it follows from the obligations which Member States have entered into under the founding Treaties that the measures they adopt must be effective in the light of the objectives those measures are intended to achieve, and, even though Member States enjoy some latitude with regard to the measures they take, that latitude is limited by the abovementioned principle of effectiveness, this implies that the effectiveness of those measures cannot be assessed in the abstract, but must be assessed in the context of a specific situation. It is now necessary to consider the merits of the complaints made against the United Kingdom during the infringement period.

2.      Measures to be taken under customs legislation to protect the financial interests of the European Union in the fraud scheme at issue

183. By its action, the Commission alleges, in essence, that the United Kingdom failed to eradicate the risks of customs fraud and adopt effective measures to counter those risks. In order to rule on the merits of this action, it should be recalled, as a preliminary point, that the Court has consistently held that, in proceedings for failure to fulfil obligations, it is for the Commission to prove the existence of the alleged infringement and to provide the Court with the information necessary for it to determine whether the infringement is made out, and in so doing the Commission may not rely on any presumption. (103) In the present case, the question arises as to whether the Commission has demonstrated to the requisite standard that the measures adopted by the United Kingdom during the infringement period to combat import undervaluation fraud were ineffective for the purpose of collecting in full the European Union’s own resources in respect of customs duties, in spite of the fact that the United Kingdom authorities were aware of the distinguishing features and the scale of the fraud committed at its borders. (104)

(a)    Characteristics of the fraud committed by the importers in question and the United Kingdom authorities’ knowledge of that fraud

184. The Commission and the United Kingdom appear to agree that widespread, organised fraud occurred in that State both before and during the infringement period. It is also common ground that the fraud at issue consisted in extremely low import values being declared by the importers – Chinese criminal gangs – which operated through a network using ‘phoenix’ companies, namely undertakings with negligible resources formed for the sole purpose of carrying out the fraud, and which were wound up or disappeared as soon as the accuracy of the declared values was questioned by the customs authorities, making any post-clearance recovery of customs duties unlikely, if not practically impossible. (105) The fraud was both dynamic and highly reactive, in that the fraudulent imports were moved quickly from one Member State to another and, within the same Member State, from one port to another at the slightest hint of controls by the national authorities. Thus, the fraudulent activities involved very large volumes of goods which could be moved to Member States where the likelihood of controls being carried out was relatively low.

185. In that regard, it is telling that, although it denies having failed to fulfil its obligations under EU law, the United Kingdom acknowledges, in the report annexed to its reply of 11 February 2019 to the reasoned opinion, that ‘there was doubtless under-declaration fraud occurring [in the United Kingdom] in respect of textile and footwear imports from China during the period covered by the Commission’s claim’. (106) That report also acknowledged that ‘fraud was doubtless occurring and counter-fraud measures of course needed to be taken to terminate the fraud and to support fair trade for legitimate traders’. (107) In the defence, the United Kingdom submits that it is a victim of fraud and that it has no interest in allowing that criminal activity to continue or grow.

186. Therefore, it is apparent from the documents before the Court that, during the pre-litigation procedure and the procedure before the Court, the United Kingdom nevertheless admitted the existence of fraud, arguing on numerous occasions in the defence that it became aware of that fraud only gradually. (108) Thus, according to the United Kingdom, during PCA Discount in November and December 2011, the Commission and the Member States obviously did not have a clear picture of the prevalence of import undervaluation fraud, given that the purpose of that operation was to ‘test the risk of undervaluation’ of the products concerned. The United Kingdom contends that, at the very earliest, it was not until the end of 2014 and during Operation Snake that OLAF and some of the affected Member States began properly to understand the fraud facing them. In that connection, the OLAF report states only that the United Kingdom was sufficiently aware of the fraud from 2014 onwards. After that operation, at the beginning of 2015 (109) and in the course of 2017 (110) in particular, Member States acquired further knowledge of the fraud, including its actual scale and its European dimension.

187. The Portuguese Republic supports that defence argument of the United Kingdom, submitting, in essence, that the United Kingdom authorities were not aware of a widespread practice of making false customs declarations when they received a formal mutual assistance message from OLAF in 2015. (111) Furthermore, the fact that a Member State was aware, as early as March 2012, of the existence of undervaluation fraud involving missing traders does not mean that it had concrete indications as to the existence of inaccurate customs declarations requiring it to conduct systematic checks.

188. In the present case, it is apparent from the documents before the Court that the United Kingdom was fully aware of the undervaluation fraud, of the characteristics mentioned above and of the need to adopt effective measures to counter that fraud during the infringement period. Indeed, as early as April 2007, in a mutual assistance message, OLAF referred to the risk posed by textiles and footwear from China and provided details. (112) By that message, OLAF requested all Member States, first, to analyse imports of textiles and footwear from, inter alia, China in order to identify possible evidence of undervalued imports and, secondly, to carry out appropriate checks at customs clearance for such imports. (113) In view of the abovementioned characteristics of the import fraud, OLAF stated even then that all Member States were likely to be affected, pointing out that there was a risk of the fraud being diverted to other EU ports. (114) It follows that, in 2007, OLAF had already established the key elements of the fraudulent trade and had immediately brought them to the attention of Member States.

189. Furthermore, in the defence, the United Kingdom submits that, in 2009, the Commission referred to irregularities that had been detected in Belgium and the Netherlands, but not in the United Kingdom. In that regard, it should be noted that the mutual assistance message sent by the Commission to Member States expressly stated that ‘all Member States [were] concerned’, and requested them to ‘take appropriate action to counter the endemic undervaluation phenomenon’. (115) It is true that the purpose of such mutual assistance messages was to transmit information (116) and they could not impose an obligation to carry out customs controls, responsibility for which lies with the national authorities. (117) However, those messages were factors capable of motivating the United Kingdom to implement specific measures to counter fraud and protect the financial interests of the European Union. (118)

190. Consequently, contrary to what the United Kingdom maintains, it is not apparent from the documents before the Court that it was on the completion of Operation Snake that OLAF and the Member States actually began to understand the fraud mechanism at issue. First, a joint customs operation, such as Operation Snake, is the response to a problem which has previously been clearly identified at EU level. (119) According to the final report on that operation, the operation was prepared on the basis of a ‘thorough threat assessment on the customs undervaluation fraud affecting the EU, [which] confirmed that the textile sector [wa]s highly affected by … undervaluation [and] the most concerned chapters [were] CN 61 to 64’, that assessment having been conducted beforehand by OLAF. Furthermore, it is apparent from a report of the Court of Auditors that the Commission had provided ‘clear guidelines to Member States on how to tackle undervaluation during the implementation of [PCA Discount] on undervaluation of textiles and footwear imported from Asian countries’. (120) It follows that, when they conducted PCA Discount in 2011, Member States were already fully aware of the fraud and of how to counter it. (121)

191. Finally, the Portuguese Republic relies on the special report of the Court of Auditors of 2015 (122) to show that a joint customs operation was the first to uncover the existence of fraud. Suffice it to note that, according to that report, a joint customs operation by OLAF had found that ‘40% of [textiles and footwear from China] released into free circulation under CP [customs procedure] 42 were undervalued’ and that its aim was to shed light on the pre-existing problem and set out the measures to be taken. Such an assertion does not constitute a finding that tackling customs undervaluation fraud was a new problem, but rather confirms one of the major causes of undervaluation.

192. It follows from the foregoing that, during the entire infringement period and, in particular, from the beginning of that period, the United Kingdom was fully aware of the essential characteristics of both the fraud and the measures that could be taken to counter it. That knowledge was liable to cause the national customs authorities to entertain concerns. In the light of those factors, the question arises as to what counter-measures those authorities were required to take under EU law.

(b)    The obligation to introduce risk analysis and to carry out pre-release controls and the need to lodge security

193. The Commission complains that the United Kingdom failed to take a number of control measures at the earliest opportunity, even though the risk of fraud had been established and it had been shown that the fraud was widespread. The Commission argues that it repeatedly asked Member States to apply value thresholds as indicators of undervaluation risk, to conduct physical checks of consignments declared at values below the lowest acceptable price thresholds, to challenge the declared customs value, where appropriate, and to require the provision of security to cover any additional duties payable before releasing goods for free circulation. Specifically, in circumstances such as those of the present case, pre-release controls were necessary because the undertakings involved in the fraud would disappear as soon as the declarations were challenged, making it impossible for duties to be recovered after the goods had been released for free circulation. Furthermore, physical checks of goods still under customs supervision made it possible to assess the quality of the goods in order to determine their customs value. Except for in Operation Snake, the United Kingdom did not take such measures.

194. The Commission requested Member States to apply preventive tools to detect possible fraudulent imports and, to that end, offered them a number of possibilities, including the OLAF methodology, which essentially consists in calculating undervaluation risk thresholds, namely the lowest acceptable price, for each product code of the combined nomenclature concerned (at eight-digit level) based on the cleaned average price, that is to say, a (non-weighted) arithmetic average of the average values declared on importation in the 28 Member States for each of those codes over a four-year period. (123) The price is cleaned in the sense that extremely low or extremely high values which appear to be incorrect are eliminated. The lowest acceptable price is then calculated as equal to 50% of the cleaned average price for the various product codes. The Commission bases that methodology on the judgment in EURO 2004. Hungary, (124) from which it follows that, the ‘declared price was more than 50% lower than the statistical mean value’ and thus below the lowest acceptable prices, serious concerns arise as to the validity of the declarations in question, with the result that those goods cannot be released for free circulation without prior control. The Commission also relies on the judgment in Commission v Portugal, (125) in which the Court held that customs declarations should be verified particularly where the customs authorities have concrete indications that they are inaccurate.

195. In addition, the Commission complains that the United Kingdom did not require security to be lodged for all customs declarations the declared value of which could be regarded as unreasonably low and which, for that reason, should have been verified. Under Article 248 of Implementing Regulation I and Article 244 of Implementing Regulation II, where a customs declaration is filed, the applicable duties must either be paid or be covered by security before the goods can be released. The Commission argues that the United Kingdom failed to request security based on the total import duties likely to be payable and thus infringed those provisions.

196. The United Kingdom contends, in essence, that the onus is on the Commission to prove that the choices it made as regards anti-fraud measures were manifestly inappropriate or wholly unreasonable. It maintains that it was not required to carry out checks or require security for all declarations lower than 50% of the average price established by OLAF. (126) In its judgment in EURO 2004. Hungary, (127) the Court explained that national customs authorities were permitted, but not required, to rely on a difference in price to reject the declared value. As regards the judgment in Commission v Portugal, (128) the United Kingdom submits that the Commission blurs the distinction between, on the one hand, the grounds on which verification may be justified under Implementing Regulations I and II and, on the other, the point at which verification becomes necessary within the meaning of the abovementioned judgment.

197. The United Kingdom considers itself to have been a victim of fraud, with the result that it had no interest in allowing that criminal activity to continue. It maintains that, as the fraud in question was very difficult to control, it required a period of time to grasp its full scale and to decide on how best to tackle it. The United Kingdom asserts that it fulfilled its obligation to combat that fraud by actively participating in the anti-fraud operations organised by OLAF, namely PCA Discount in 2011 and Operation Snake in 2014. Furthermore, in 2015, the United Kingdom took steps to tackle undervaluation fraud through Operation Breach, in the course of which its authorities issued numerous C18 payment notices, with a value of approximately GBP 35 million in customs duties. In addition, 2016 saw the launch of Operation Samurai, which focused on pre-clearance test and learn activities in relation to customs procedure 42. Based on the information from the latter operations, the United Kingdom launched Operation Swift Arrow in October 2017.

198. Concerning the lodging of security, the United Kingdom submits that, first, an approach as general as that proposed by the Commission as regards the requirement for security entails an unacceptable interference with the property rights of importers, both under Articles 16 and 17 of the Charter and under Article 1 of Protocol No 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Paris on 20 March 1952 (‘the First Additional Protocol’), and, secondly, in order for a request for security to be valid, there must be an appropriate basis for determining the real value of the goods. Recourse to the average price per product code in the OLAF methodology leaves Member States extremely vulnerable to claims from traders.

(1)    Preliminary observations

199. It is apparent from the parties’ submissions that the Commission does not deny that, during the infringement period, the United Kingdom implemented a number of measures to counter fraudulent undervaluation, but it submits that some of the measures used were not effective in protecting the financial interests of the European Union, while others were not applied at all. Therefore, in order to examine the arguments raised in the first plea in law of the action, it is necessary to determine the objectives and scope of Member States’ obligations under EU customs law, which will make it possible to assess the effectiveness (or otherwise) of the measures implemented by the United Kingdom. (129)

200. It must be borne in mind that, since a range of different measures may be contemplated to ensure the effective protection of the financial interests of the European Union, a comparison of their effectiveness in a situation such as here may be less than straightforward, as EU law grants Member States a certain measure of latitude as to the choice of measures. (130) However, measures taken which, in view of the particular circumstances of a given situation, clearly do not enable the objectives pursued by primary and secondary EU law to be achieved must, in my opinion, be regarded as ineffective. To that effect, it is necessary to uphold one of the defence arguments put forward by the United Kingdom in the present proceedings, according to which the onus is on the Commission to show, inter alia, that the measures which that State claims to have implemented during the infringement period in order to prevent the fraud at issue were manifestly ineffective for ensuring the efficient collection in full of the European Union’s own resources in respect of customs duties. (131) Having regard to the duration of the infringement alleged against the United Kingdom, I consider that account should be taken of the fact that the level of effectiveness of a measure implemented by a Member State can be gauged only by means of a detailed analysis of that measure. Accordingly, in order to ensure that a Member State is not retroactively placed at a disadvantage in the light of knowledge acquired subsequently, any claim that the measures actually applied were ineffective may be made only ex ante, that is to say, in the light of the knowledge available to the competent national authorities when those measures were implemented. The position is different, however, when EU law imposes an obligation on Member States to adopt certain specific measures. In that situation, the effectiveness of the measure concerned should already have been weighed up by the EU legislature itself, so that its non-implementation alone constitutes an infringement of EU law.

(2)    The obligation to have recourse to risk analysis

201. Both Article 13(2) of the Community Customs Code and Article 46(2) and (4) of the Union Customs Code, applicable before and after 1 June 2016, respectively, require national authorities to carry out customs controls based on ‘risk analysis’ and to apply ‘risk management’. Regulation (EC) No 648/2005 (132) and its implementing provisions (133) established a common risk management system in the European Union, under which customs controls are based, inter alia, on risk analysis using data processing techniques. (134) Currently, the rules on risk management are contained in Article 46 of the Union Customs Code, paragraph 2 of which essentially reproduces Article 13(2) of the Community Customs Code. That latter article, in particular, applicable at the beginning of the infringement period (from November 2011 to June 2016), provided that customs controls other than spot checks ‘shall be based on risk analysis using automated data processing techniques, with the purpose of identifying and quantifying the risks and developing the necessary measures to assess the risks’. (135) Therefore, those provisions essentially require Member States to introduce a risk management system to carry out ordinary customs controls. (136)

202. Risk management has become an important tool for customs control worldwide (137) and has been the subject of several studies. (138) In the absence of Community provisions on the matter, the Commission incorporated a definition of the concept of ‘risk management’ into its proposal for Regulation (EC) No 648/2005, (139) being the ‘systematic identification and implementation of all measures necessary for limiting exposure of risks’, a term which includes ‘activities such as collecting data and information, analysing and assessing risk, prescribing and taking action and regular monitoring and review of the process and its outcomes, based on international, Community and national sources and strategies’. (140) The concept of ‘risk analysis’ was inserted into the Community Customs Code by Regulation No 648/2005, which amended Article 13 of that code. The Commission explained that that insertion arose out of the need to introduce ‘an obligation of Member States to use risk analysis techniques’, making clear that, ‘as long as no Community or international criteria exist, national criteria [would] be applied (as [was] the case [when that proposal was adopted])’. (141) By that new provision, the Commission sought, inter alia, to establish a ‘common risk management framework’, while allowing national risk analysis systems and national criteria to continue to be used. (142)

203. Thus, a contextual analysis of EU customs law supports the conclusion resulting from a literal interpretation of Article 13(2) of the Community Customs Code and Article 46(2) and (4) of the Union Customs Code, to the effect that the implementation of risk analysis and risk assessment based on a systematic analysis of data by Member States, in accordance with Community and EU customs law, is mandatory and not optional. The customs control measures implemented must, for their part, be based on risk analysis, which means that they must be selected having regard to the risks identified by the risk assessment and be capable of neutralising those risks. Consequently, as I have already explained, (143) Article 13(2) of the Community Customs Code and Article 46(2) of the Union Customs Code, interpreted in the light of Article 325 TFEU, must be construed as imposing, inter alia, an obligation requiring Member States to adapt their risk analysis tools on an ongoing basis, so that they cover at all times the risks detected by customs controls and respond continuously to developments in those risks. That means that the risk analysis carried out by Member States should, inter alia, determine which goods should be checked and how they should be checked.

204. It follows from the foregoing that, in the present case, once a significant risk of customs fraud throughout the customs territory of the European Union concerning products imported from China had come to light at EU level, Member States were required, in particular, under Article 13(2) of the Community Customs Code (and subsequently under Article 46(2) of the Union Customs Code), to adapt their national risk management methods in customs matters. As has already been pointed out, (144) the United Kingdom customs authorities were fully aware of the risk in question, which means that they should also have adapted their risk analysis methods within a reasonable time, taking into account the available information and carrying out the necessary customs controls. (145) Since it is apparent from the documents before the Court that the United Kingdom was aware of the evidence concerning the customs fraud scheme in 2007 and that, subsequently, it received regular updates primarily through the Commission on how the scheme was developing, I find it difficult to accept the defendant’s argument that the failure to adopt and implement a risk analysis tool by the beginning of the infringement period in November 2011, that is, four years after the authorities of that State received the relevant information, is consistent with Article 13(2) of the Community Customs Code.

205. It is apparent from its submissions that the United Kingdom does not deny, in essence, that it did not use a risk analysis method to detect undervaluation-related customs fraud during the infringement period. However, in response to the Commission’s claims, the United Kingdom explains that the development of an appropriate risk analysis method took some time because of, among other factors, the complexity of the fraud at issue, (146) while the OLAF methodology was unsuited to the specific situation of the United Kingdom. It is true that, as the defendant State points out, Articles 3 and 46 of the Union Customs Code (the latter provision corresponds to Article 13 of the Community Customs Code) do not require Member States to establish a certain type of risk assessment method and therefore do not in any way preclude a Member State, for the purpose of detecting undervaluation-related customs fraud, from not relying on statistical average prices and instead using a method with a targeted and specific focus on traders specialising in that type of fraud, as the United Kingdom authorities ultimately did in Operation Swift Arrow. However, the fact of the matter is that, in so doing, the United Kingdom implicitly acknowledges that it did not have at its disposal during the infringement period an appropriate method for carrying out risk analysis. It seems to me that such a justification is irrelevant in the light of the obligation laid down in Article 13(2) of the Community Customs Code and Article 46(2) of the Union Customs Code.

206. That finding is borne out by an examination of the evidence in the file relating to the customs control operations conducted by the United Kingdom during the infringement period, from which it is apparent, in particular, that the authorities of that Member State used risk analysis tools only in Operation Snake, the operational phase of which took place between 17 February and 17 March 2014, during which the Commission recommended that Member States apply, inter alia, value thresholds as risk indicators. (147) It is not disputed that the United Kingdom participated in that operation, using the risk profiles recommended by OLAF, namely the OLAF methodology as a risk threshold, and carried out appropriate controls during that operation. However, as the Commission argued without being contradicted in that respect by the United Kingdom, those measures lasted only one month, that is, during the operational phase of that activity. In other words, apart from that operational phase, the United Kingdom authorities did not carry out controls based on risk analysis and, at that time, checked importers after customs clearance, issuing them with demands at a later point in time. (148)

207. Furthermore, in the defence – in response, in particular, to the Commission’s claims relating to the failure to carry out risk analysis – the United Kingdom submits that one of the reasons for that failure was the fact that the OLAF methodology did not take account of the particular features of the United Kingdom market and resulted in a large number of lawful imports being identified as undervalued goods. (149) In that regard, it should be noted that that criticism is based on the incorrect premiss that the infringement under EU law arises from the fact that the United Kingdom did not adopt a particular form of customs control recommended by the Commission or OLAF. (150) However, it is apparent from the description of the infringement which is the subject of the first plea in law of the application and from the Commission’s other submissions that the Commission argues that the United Kingdom did not have recourse to any risk analysis method whatsoever. It follows from the foregoing analysis that Article 3 and Article 46(2) of the Union Customs Code and Article 13(2) of the Community Customs Code require Member States to establish risk analysis in the context of customs controls so that, even if, for reasons known to it alone, the United Kingdom did not consider it appropriate to apply the Commission’s method, that did not prevent it from developing and implementing customs controls itself. (151) Consequently, I consider that the United Kingdom’s criticisms of the OLAF methodology as a risk tool are irrelevant.

208. That said, for the sake of completeness, it should be recalled that Article 28(1) TFEU provides that the Union ‘shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries’ and that Article 3(1)(a) TFEU confers exclusive competence in the field of the customs union. (152) In that regard, in accordance with Article 2(1) TFEU, in the exercise of that competence, the customs rules of the European Union are codified in the Union Customs Code (and in Implementing Regulations I and II) and are directly applicable in the Member States. (153) Pursuant to Article 291 TFEU, Member States have the power to implement that legislation. (154) Although the collection of customs duties remains a matter for Member States, (155) the performance of that task requires close cooperation between them and the EU institutions. (156) Thus, first, in the field of action to counter fraud, on the basis of Article 325 TFEU, (157) a number of powers of inspection and investigation were conferred on the Commission and, in particular, OLAF. (158) Secondly, as regards, in particular, risk management, the European Union has adopted a strategy to ensure compliance with minimum standards of customs risk management and controls, (159) by providing that national customs administrations are to take action to overhaul procedures, techniques and resources with regard to checks on goods. (160) Having regard to the abovementioned provisions and in the light of the tasks in the general interest entrusted to the Commission by Article 17(1) TEU, (161) I consider that the Commission was empowered to draw up non-binding criteria, such as the OLAF methodology, in order to enable Member States to carry out risk analysis as part of their customs controls, particularly since, in the present case, the customs fraud at issue concerned the European Union as a whole and there is no limit on the mechanisms for cooperation between the Member States and the Commission. (162) That being so, it must be pointed out that, although the Commission specified the objectives of risk management in its communications, (163) in the absence of harmonised rules on risk analysis methods, (164) Member States were free to choose specific risk management tools during the infringement period and continue to enjoy such freedom, (165) as, moreover, the Commission acknowledged in its submissions and at the hearing.

209. As regards the substantive criteria of the OLAF methodology as a risk analysis tool in the present case, it should be noted that, as is apparent from the Commission’s replies to the written questions put by the Court, as a means of detecting customs fraud, that methodology was the subject of detailed discussion between Member States. Therefore, its introduction, as a risk analysis tool, was based on a consensual decision between them. (166) The explanations put forward by the Commission, according to which the undervaluation risk thresholds (the lowest acceptable price) for each product code of the combined nomenclature concerned (at eight-digit level) were calculated on the basis of the cleaned average price, that is, the (non-weighted) arithmetic average of the average values declared on importation in the 28 Member States for each of those codes over a four-year period, show that that methodology is not arbitrary. This is all the more so because it follows from the case-law that the use of statistical data to challenge the accuracy of the declared customs value, namely the existence of a declared customs value lower than 50% of the cleaned average price, is evidence of undervaluation fraud which may give rise to concerns. (167) It therefore seems to me that the OLAF methodology, as a risk analysis tool, is based on objective and neutral criteria.

210. Lastly, I consider it necessary to reject the United Kingdom’s argument that the OLAF methodology detects a large number of lawful imports, which could constitute, for the traders concerned, an interference with Articles 16 and 17 of the Charter relating, respectively, to the freedom to conduct a business and the right to property. In that regard, since the risk analysis provided for in Article 13(2) of the Community Customs Code and Article 46(2) of the Union Customs Code is an abstract form of risk management, whereby customs risks are examined and the necessary counter-measures are planned, in other words, an action plan for the implementation of customs control measures, I do not see how such management could interfere with the fundamental rights referred to in those provisions of the Charter.

(3)    The obligation to carry out pre-release controls

211. Article 13(1) of the Community Customs Code, which was applicable at the beginning of the infringement period, provided that ‘customs authorities may, in accordance with the conditions laid down by the provisions in force, carry out all the controls they deem necessary’. (168) Its successor, Article 46(1) of the Union Customs Code, contains a similar provision in its first subparagraph, while the second subparagraph adds a non-exhaustive list of different customs controls to which Member States may have recourse. It seems to me that it follows from the wording of those provisions and, more specifically, from the use of the verb ‘may’ that they are not intended to rank the various types of customs control in order of priority. (169) Accordingly, in my view, those provisions confer on national customs authorities, when they carry out customs controls, some latitude in the choice and application of customs control procedures. (170) That interpretation is, moreover, supported by the provisions governing the release of goods. (171)

212. However, as previously stated above, (172) with respect to the interpretation of the scope of the obligations laid down in Article 325 TFEU, the discretion enjoyed by the customs authorities of Member States as to the choice of customs control measures is limited by the requirement to ensure that the financial interests of the European Union are effectively protected. Furthermore, as I have already pointed out, it is for national customs authorities, pursuant to Article 3(1)(a) of the Union Customs Code, to take measures aimed at ‘protecting the financial interests of the Union and its Member States’. The importance of that objective in the Union Customs Code is underlined by the position occupied by that provision at the very beginning of the code, Member States thus being duty-bound to ensure performance of that task. (173) In short, although Article 13(1) and (2) of the Community Customs Code and Article 46(1) and (2) of the Union Customs Code confer responsibility for the implementation and choice of customs control methods on the authorities of Member States, which enjoy some latitude in that regard, the measures chosen must not be ineffective.

213. I therefore consider that customs control methods, such as those at issue, which, in order to safeguard the financial interests of the European Union, enable the effective management of serious risks identified at a given point in time and in a given area, based on the risk analysis described in the preceding points of this Opinion, are consistent with the objective of protecting the financial interests of the European Union. As pointed out on several occasions during the infringement period, the main risk identified to the financial interests of the European Union during the infringement period was, in particular, the mass importation of textiles and footwear from China, imports that were undervalued and were characterised, first, by the systematic and deliberate declaration of the goods below their real value and, secondly, by the untrustworthy nature of the companies involved, which, on the whole, were formed for the sole purpose of perpetrating the fraud and were wound up as soon as the customs declarations they had submitted were questioned by the customs authorities. Therefore, that customs fraud scheme significantly reduced the customs duties that could have been levied on goods released for free circulation. It is in the light of that factual situation that the effectiveness of the customs control measures adopted by the United Kingdom during the infringement period should be assessed, comparing them with the measures which the Commission claims that that Member State failed to implement.

214. In that regard, the parties appear to agree that, before the commencement of Operation Swift Arrow in October 2017, the United Kingdom did not, as a rule, implement any pre-release customs control measures such as checks prior to customs clearance or the taking of samples, with the exception of those carried out during Operation Snake, at the beginning of 2014, and Operation Samurai, in September 2016. Without challenging that fact, the United Kingdom argues that the risk assessment method proposed by OLAF was not suitable for detecting the imports affected by the undervaluation fraud and asserts that it opted for a strategy of post-clearance customs controls, the main example of which is Operation Breach, which began in 2015. (174) The United Kingdom states that those post-clearance customs controls include visits relating to suspect consignments, documentary analyses, audits and inspections, reviewing the commercial nature of the relevant sales, examining the links between the importers, freight agents and other companies, and educational activities for importers on how to identify fraudulent activity.

215. As regards the defence argument raised by the United Kingdom to the effect that it was impossible to carry out pre-release controls due to the unsuitability of the OLAF methodology, it should be noted that, as has already been stated in this Opinion, (175) although Member States are not required to follow the risk analysis method proposed by the Commission, they are nevertheless subject to the obligation laid down in Article 13(2) of the Community Customs Code and Article 46(2) of the Union Customs Code requiring them to implement controls based on risk analysis. Therefore, by pointing to the absence of an appropriate risk analysis method to justify the lack of pre-release controls, the United Kingdom essentially acknowledges that it failed to fulfil the obligation to provide for such controls. Furthermore, I consider that the Commission’s argument that the post-clearance measures listed by the United Kingdom cannot, on any view, be regarded as effective must be upheld. It is difficult to see how the ex post strategy chosen by the United Kingdom could be regarded as effective, having regard to the objective of protecting the financial interests of the European Union, when the customs fraud consisted in the undervaluation of imported textiles and footwear, that is to say, the intentional declaration of imports below their real value. It appears inconceivable that the measures described by the United Kingdom would ensure recovery of the customs duties actually owed if it has failed to make a genuine determination of the imported goods beforehand, which necessarily presupposes physical checks prior to customs clearance and the taking of samples before the goods in question are released for free circulation. (176) The carrying out of customs controls prior to release is essential where the customs authorities have doubts as to the accuracy of the customs declaration, but it is all the more necessary in cases where the sole objective of the traders is to commit fraud. In that regard, as has already been shown, the United Kingdom customs authorities were fully aware of the customs undervaluation fraud and, by participating in Operation Snake, they indeed confirmed first-hand that it was necessary to adopt effective measures (including pre-clearance measures) to counter that fraud. It follows from the foregoing that the United Kingdom authorities were aware, from the beginning of the infringement period, of the nature of the customs fraud at issue, in the light of which they ought to have entertained serious doubts as to the effectiveness of the abovementioned post-clearance measures.

216. The United Kingdom also submits that, according to the judgment in Commission v Portugal, (177) the Court stated that customs authorities are required to carry out additional checks only if they have ‘concrete indications’ that a customs declaration is inaccurate. That defence argument is, in my view, based on a misreading of that judgment. Where the Court found that, ‘in order to ensure that customs legislation is correctly applied, it is necessary to check a customs declaration exceeding the threshold [concerned], particularly where the customs authorities have concrete indications that such a declaration is inaccurate’, it did not, in my view, circumscribe the source of the information from which the inaccuracy in the customs declaration arises. In the light, in particular, of the tasks entrusted to national customs authorities under Article 3(1) of the Union Customs Code, those authorities are duty-bound to take action against customs fraud, even if the information relating to the inaccuracy of a customs declaration is channelled to them through the Commission or other Member States. That interpretation is borne out by the system for the exchange of information between Member States laid down in Article 46(3) of that code, as an expression of the EU customs union. (178) Given that the United Kingdom customs authorities were aware of the existence of a high risk of customs fraud, as explained in this Opinion, I agree with the Commission that the United Kingdom cannot maintain that, as regards the values declared in the present case, its customs authorities did not have concrete indications of the inaccuracy of a declaration such as that at issue in the case giving rise to the judgment in Commission v Portugal. (179)

(4)    The obligation to lodge security

217. Under Article 248(1) of Implementing Regulation I and Article 244(1) of Implementing Regulation II, (180) where a customs declaration is filed, the applicable duties must either be paid or be covered by security before the goods can be released. Thus, if the customs authorities consider that the verification of the customs declaration may result in a higher amount of import duty (or any other charges) to become payable than that resulting from the particulars of the customs declaration, the release of the goods will be authorised once security sufficient to cover the difference between those amounts has been lodged.

218. In that regard, concerning whether Article 248(1) of Implementing Regulation I (181)requires the lodging of security, it should be noted that the language versions which I have examined appear to indicate that the lodging of security is a necessary prerequisite for release. (182) The different language versions of Article 244(1) of Implementing Regulation II, a provision which corresponds, in essence, to Article 248(1) of Implementing Regulation I, vary. Indeed, the German- and Estonian-language versions suggest that the lodging of security is optional, while the other abovementioned versions appear to indicate that it is an obligation. (183) In view of the discrepancies between the different language versions of Article 244(1) of Implementing Regulation II, its wording does not, in my view, enable a clear conclusion to be reached as to whether that provision requires the lodging of security as a condition for release of the goods or whether the customs authorities of Member States have a measure of discretion in the light of the particular circumstances of each individual case. (184) Where there is divergence between the various language versions of an EU legislative text, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms part. In that regard, concerning the context of the abovementioned provisions, I think it must be borne in mind, for the purposes of interpreting Article 248(1) of Implementing Regulation I and Article 74(1) of the Community Customs Code, that ‘the goods covered by [a customs declaration] shall not be released unless the customs debt has been paid or secured’. (185) As for Article 244 of Implementing Regulation II, Article 89 et seq. of that regulation list the various situations in which the lodging of security is required and, moreover, the situations in which it is not. (186) It follows, for the purposes of this plea in law, that, although the customs authorities of a Member State enjoy some latitude when deciding whether to require the lodging of security, that latitude is, in my view, limited by the requirement to ensure that the financial interests of the European Union are effectively protected, for the purposes of Article 325 TFEU, as I have already made clear in this Opinion. (187) The need to safeguard the financial interests of the European Union and of the Member States follows, moreover, from recital 27 of Implementing Regulation II, which states, in particular, that, ‘considering the need to ensure a proper protection of the financial interests of the Union and of the Member States and a level playing field between economic operators, it is necessary to lay down procedural rules regarding the provision of a guarantee’, and from recitals 36 and 37 of the Union Customs Code. (188) I therefore consider it appropriate to endorse the Commission’s approach that the application of customs control measures and the requirement to lodge security must be treated differently depending on whether established undertakings are involved which own assets (189) or whether, as in the present case, ‘phoenix’ companies are involved whose sole purpose is to commit fraud and which are wound up once the goods they have declared are released for free circulation.

219. As regards, in the present case, the evidence relating to the United Kingdom’s failure to require security during the infringement period, that evidence has already been examined in this Opinion, particularly in the section relating to the obligation to carry out risk analysis and pre-clearance controls, with the result that there is no need for it to be restated in this section. (190)

220. In addition, the United Kingdom submits that an approach as general as that proposed by the Commission as regards the requirement for security entails an unacceptable interference with the property rights of importers, under Article 17 of the Charter and Article 1 of the First Additional Protocol. It also maintains that its authorities had no evidential basis for establishing a replacement value, in consequence of which they were not in a position to require the lodging of security on the basis of that replacement value.

221. In my view, those arguments must be rejected.

222. Concerning the United Kingdom’s argument that the right to property, as enshrined in Article 17 of the Charter, does not allow customs authorities to make blanket requests to importers for the lodging of security, I note that the United Kingdom does not give precise reasons why a request to lodge security would interfere with that right. In accordance with the maxim actor incumbit probatio, reus in excipiendo fit actor, it is for that Member State to prove its claim, which seeks to question the obligation to lodge security on which the Commission relies. (191)

223. In any event, it seems to me, at first sight, that the United Kingdom does not claim that Article 248 of Implementing Regulation I or Article 244 of Implementing Regulation II were themselves at odds with the fundamental rights enshrined in Article 17 of the Charter. In addition, it is useful to review briefly the criteria relating to Article 1 of the First Additional Protocol, as set out in the case-law of the European Court of Human Rights (‘the ECtHR’), which must be taken into consideration when interpreting Article 17, in accordance with the requirement of homogeneity laid down in Article 52(3) of the Charter. (192) According to that case-law, the levying of taxes constitutes, in principle, an interference with the right to property, (193) but that interference is justified in accordance with the second paragraph of Article 1 of the First Additional Protocol, which expressly provides for an exception as regards the payment of taxes or other contributions. (194) In that context, it is important to note that when States frame and implement policies in the area of taxation, they enjoy a broad discretion. (195) Moreover, as the Commission submits, the lodging of a customs security is only temporary in nature and that security will be lifted once the correct customs duties have been paid or the importer has demonstrated that no undervaluation took place. It seems to me that, by arguing that customs authorities cannot adopt an approach as general as that envisaged by the Commission as regards the requirement for security, the United Kingdom is challenging the compatibility of the administrative practice advocated by that institution with the fundamental right to property laid down in Article 17 of the Charter. While it is true that, according to the Court’s settled case-law, the fundamental rights guaranteed in the legal order of the European Union are applicable in all situations governed by EU law, but not outside such situations, the implementation of EU law may include administrative practices (196) such as those at issue here. (197) However, the abovementioned objection of the United Kingdom appears to be a hypothetical one in the circumstances of the present case, inasmuch as the compatibility of the decisions and conduct of national authorities with the Charter cannot be assessed in the abstract, but only in the context of a specific administrative measure. Since the United Kingdom has not provided a single example in which the lodging of security under EU law would have led to a breach of a fundamental right enshrined in the Charter by a trader concerned, there is no need, in my view, for the Court to examine that defence argument.

224. As regards the United Kingdom’s argument that its authorities were not in a position to require security because they had no evidential basis for establishing a replacement value for the imported goods, it seems to me that the United Kingdom is justifying the failure to implement one customs measure by the failure to adopt another, namely not carrying out pre-release controls and not taking samples. Specifically, the effect of that omission was that the United Kingdom was not in a position to determine, in accordance with Articles 70 and 74 of the Union Customs Code, the value of the products concerned, something which is, however, necessary for the lodging of security. Finally, reference must be made to an inconsistency in the defence submissions of the United Kingdom, which essentially argues that, in a situation where its customs authorities have misapplied the provisions of the Union Customs Code relating to the determination of the customs value of the goods in question, it is nonetheless possible, as the United Kingdom stressed in connection with Operation Breach, (198) to determine the difference between the value of the goods on the basis of which the customs duties were levied and their real value.

3.      Summary of the evidence adduced against the United Kingdom

225. By way of summary, it has to be concluded that the measures taken by the United Kingdom during the infringement period cannot be regarded as effective for the purposes of Article 325 TFEU and the provisions of secondary legislation in the customs field. I consider that, as regards the products concerned, the United Kingdom failed, during the infringement period, to carry out customs controls based on risk analysis and controls prior to release of the goods, and also failed to require security before those goods were released for free circulation. The control measures taken after the goods were cleared through customs were neither sufficient nor effective under those provisions. Thus, the measures adopted by the United Kingdom were manifestly ineffective, in view of the characteristics of the fraud at issue and the knowledge that the United Kingdom authorities were able to have of it during the infringement period.

226. That conclusion also follows from the statistical data provided by the Commission, which show that, based on the OLAF methodology, while the declared value of 32.44% of imports was lower than the lowest acceptable price in 2013, that figure rose to 50.50% in 2016. (199) The United Kingdom acknowledges that, following the approach developed by HMRC, 35.2% of all imports from China falling within Chapters 61 to 64 were undervalued during the infringement period, whereas, if the OLAF methodology were applied, that figure would be 44.8%. (200) It must be stated that both parties are in agreement that Operation Swift Arrow had the effect of reducing the volume of undervalued products; the figures for the first quarter of 2017 and 2018 showed import volumes below the negligible lowest acceptable price. (201) The parties also acknowledge that the customs controls carried out during that operation consisted of controls prior to release of the goods based on risk analysis, accompanied by the taking of samples. In my view, those data support the conclusion that there is a direct link between the presence of undervaluation fraud and the customs control methods used by the Member State, which means that the mass undervaluation fraud at issue committed during the infringement period was not inevitable. I therefore consider it necessary to reject the pivotal argument of the United Kingdom’s defence that it cannot be inferred from the success of Operation Swift Arrow that the measures taken previously were manifestly inappropriate, since the empirical data examined above confirm precisely the opposite.

227. The foregoing conclusion concerning the inadequacy of the measures taken by the United Kingdom during the infringement period to counter undervaluation fraud is not invalidated by its argument that it participated in all the operations conducted by the Commission and initiated operations itself, the Commission having, moreover, confirmed that the United Kingdom had taken all the necessary steps in that regard. (202) As the United Kingdom itself stated, it is for Member States to ensure the application of EU customs law, which means that they are responsible for carrying out appropriate customs controls and effectively protecting the financial interests of the European Union. The performance of that task requires those authorities to work continuously, consistently and systematically to protect the EU customs border, work which cannot be circumscribed to the occasional participation in customs operations, the effects of which can only be temporary.

4.      The obligation of Member States to determine the amounts of customs duty and enter the corresponding amounts in the accounts

228. The Commission submits that, during the infringement period, the United Kingdom committed a continuous infringement of Article 105(3) of the Union Customs Code and the parallel provision in Article 220(1) of the Community Customs Code, since it failed to enter in the accounts the customs debts outstanding for recovery in respect of the fraudulently undervalued imports at issue as soon as the customs authorities became aware of the situation which led to the establishment of those debts.

229. The United Kingdom, on the other hand, essentially contends that, since it is not required to check the customs declarations at issue or calculate the additional duties, it is under no obligation to enter the customs debts in question in the accounts.

230. First of all, under Article 104(1) of the Union Customs Code and the parallel provision in Article 218(1) of the Community Customs Code, customs authorities are to enter in their accounts, in accordance with national legislation, the amount of import or export duty payable. Although the entry in the accounts provided for in those articles is the corollary of the obligations to establish and make available to the European Union traditional own resources, which stem, in particular, from the provisions of Regulations No 1150/2000 and No 609/2014 examined in the second plea in law in this Opinion, (203) it is independent of those obligations (204) and must therefore be distinguished from them. (205) Furthermore, the obligation to enter amounts of duty in the accounts under the abovementioned provisions is, in the present case, a direct and inevitable consequence of the adoption of customs measures, such as the use of risk analysis and the pre-release customs controls examined above, so that their omission necessarily entails a failure to enter those amounts in the accounts. Accordingly, I consider that the complaint alleging breach of the obligation to enter the amounts concerned in the accounts must be analysed together with the complaints relating to the obligation to adopt the necessary customs measures, which have already been discussed in the context of the present plea in law.

231. As to the substance, according to the case-law, the entry in the accounts of amounts of customs duty consists, in particular, of the entry by the customs authorities in the accounting records or on any other equivalent medium, where those authorities are in a position to calculate the amount legally owed and to determine the debtor, (206) of the amount to be recovered. Thus, where a customs authority makes a finding of total or partial non-payment of customs debts and is in a position to calculate the amount of duty arising from such a debt and determine the debtor, it is required to enter that amount in the accounts in accordance with the abovementioned provisions. In the present case, as has already been pointed out, the United Kingdom was aware of the undervaluation fraud, as a result of which its authorities were under an obligation not only to determine the correct customs values and to check the customs declarations, but also to determine the amounts relating to the imports in question and to enter them in the accounts, under Article 105(3) of the Union Customs Code and the parallel provision in Article 220(1) of the Community Customs Code. (207) Inasmuch as the United Kingdom did not make those determinations and account entries, the complaint based on those provisions – which does not actually have any independent content – should also be regarded as well founded as a direct consequence of the infringements examined in the preceding points of this Opinion. Since it did not adopt the necessary measures referred to above under the relevant provisions of the Community Customs Code and the Union Customs Code, read in the light of the principle of effectiveness enshrined in Article 325 TFEU, the United Kingdom inevitably did not determine the amounts relating to the imports in question and failed to enter them in the accounts, under Article 105(3) of the Union Customs Code and the parallel provision in Article 220(1) of the Community Customs Code.

232. In those circumstances, the first plea in law must be considered to be well founded in so far as it concerns the obligations under Article 325 TFEU, Article 13 and Article 220(1) of the Community Customs Code, Articles 3, 46 and Article 105(3) of the Union Customs Code, Article 248(1) of Implementing Regulation I and Article 244 of Implementing Regulation II.

C.      Infringement of EU legislation on own resources and on the estimate of losses of traditional own resources constituted by customs duties

233. The Commission claims that the United Kingdom infringed the legislation on traditional own resources and, in particular, Articles 2 and 8 of Decisions 2007/436 and 2014/335, and Articles 2, 6, 9, 10, 11 and 17 of Regulation No 1150/2000, to which Articles 2, 6, 9, 10, 12 and 13 of Regulation No 609/2014 correspond, respectively. According to the Commission, the United Kingdom did not carry out appropriate customs controls during the infringement period, with the result that fraudulently undervalued goods were not declared correctly at customs. In the light of that incorrect assessment, the customs duties payable in respect of those goods were miscalculated and the amounts of own resources corresponding to the duties which should have been established were not so established and were therefore not made available to the EU budget when they ought to have been. The Commission also takes issue with the United Kingdom for the fact that its authorities established, and then cancelled, customs debts relating to certain imports of undervalued goods, thereby committing an administrative error. In short, the Commission considers that the United Kingdom is liable for the resulting losses of traditional own resources.

234. Before analysing the merits of this plea in law, it is necessary to clarify the legal rules governing the making available of traditional own resources in order to determine the obligations of Member States in that area (part 1). As regards the merits of this plea, the first task is to examine the Commission’s argument that, by failing to take appropriate measures after establishing additional customs debts in respect of certain undervalued goods for the period from November 2011 to November 2014, and by cancelling those established additional debts, the United Kingdom authorities committed an administrative error for which the United Kingdom is financially liable (part 2). I will then analyse the thorny issue of the determination of traditional own resources lost as a result of the alleged infringement (part 3) and, finally, in the alternative, I will consider the United Kingdom’s defence arguments relating to default interest (part 4).

1.      Legal rules governing the entry in the accounts of amounts due and the making available of traditional own resources

235. Revenue from Common Customs Tariff duties constitutes, in accordance with Article 2(1)(a) and (b) of Decision 2007/436 and Article 2(1)(a) of Decision 2014/335, traditional own resources of the European Union. (208) They are defined as ‘revenue allocated irrevocably to the Union to finance its budget and accruing to it automatically without the need for any subsequent decision by the national authorities’. (209) Although Member States are responsible, in accordance with Article 8(1) of those decisions, for collecting the European Union’s own resources, they are nevertheless under an obligation to make them available to the European Union and have no possibility of refusing to do so. (210)

236. The mandatory nature of the making available of traditional own resources to the European Union follows from the provisions of Regulation No 609/2014 (211) on the methods and procedure for making available, inter alia, traditional own resources. (212) In that regard, under Article 2(1) of Regulation No 609/2014, (213) the European Union’s entitlement to traditional own resources is to be established as soon as the conditions provided for by the customs regulations have been met concerning the entry of the entitlement in the accounts and the notification of the debtor (214) and, under Article 13(1) of that regulation, (215) Member States are to take all requisite measures to ensure that amounts corresponding to established entitlements are made available to the Commission. Moreover, the Court has already stated that that provision is a sincere expression of the obligation of genuine cooperation under Article 4(3) TEU, which, inter alia, requires Member States, when they encounter problems in the application of EU law, to submit those problems to the Commission. (216)

237. Since shortfalls in revenues of own resources must be offset either by another own resource or by an adjustment of expenditure, Member States have the obligation to establish the European Union’s entitlement to traditional own resources, otherwise it would have to be accepted that the financial equilibrium of the European Union may be disrupted by the conduct of a Member State. (217) For the purpose of making own resources available, Article 9(1) of Regulation No 609/2014 requires each Member State to credit own resources to the account opened in the name of the Commission in accordance with the procedure laid down in Article 10 of that regulation. (218) In that regard, Article 6(1) of Regulation No 609/2014 provides that Member States are to keep accounts for own resources with the Treasury or with the body appointed by them. Where the conditions for establishing a customs debt are fulfilled, Member States are required to enter the debt in the accounts in accordance with the provisions of the first subparagraph of Article 6(3) of that regulation (the A account) or, if the ad hoc conditions are fulfilled, to enter it duly in the accounts provided for in the second subparagraph of Article 6(3) of that regulation (the B account). (219)

238. In that regard, it must be stated that the general protection of the European Union’s financial interests constitutes an independent objective which is placed in Part Six, Title II (Financial provisions) of the TFEU, separate from the customs union for which provision is made in Part Three, Title II, Chapter 1 of the TFEU on Union policies. (220) However, as Advocate General Trstenjak observed, (221) there is a connection between the customs provisions and the provisions on the European Union’s own resources, in the sense that, under the customs provisions applicable, customs duties established as own resources have to be assessed, imposed and collected by the competent national customs authorities. (222) In that context, the Court has held that there is an inseparable link between the obligation to establish the European Union’s own resources, the obligation to credit them to the Commission’s account within the prescribed time limits and the obligation to pay default interest. (223) That interest is moreover payable regardless of the reason for the delay in entering those resources in the Commission’s account. (224)

239. The Court takes particular care in its interpretation of the abovementioned provisions, noting, in particular, that the financial provisions of EU law are among the fundamental rules of the EU legal structure, which must be strictly observed if the European Union is to function properly. (225) Given that the European Union must have own resources ‘in the best possible conditions’, (226) the Court has pointed out that the objective of various rules on the recovery of customs duties is to ensure the uniform and diligent application of the customs provisions, in order to secure rapid and effective availability of the own resources of the European Union. (227) Therefore, it is apparent from settled case-law that, although an error committed by the customs authorities of a Member State prevents the recovery of the European Union’s own resources, such an error does not affect that Member State’s obligation to pay the entitlements which have been established together with default interest. (228) By way of example, justifications put forward by Member States which have been unsuccessful include those based on an accounting error on the part of national authorities, (229) on the distinction between a clerical error and a legal error, and on the unintentional nature of the delay in entering the amounts in the Commission’s account. (230) It follows that a Member State which fails to establish the European Union’s own resources and to make the corresponding amount available to the Commission, without one of the conditions laid down in Article 13(2) of Regulation No 609/2014 being met, falls short of its obligations under EU law. (231)

240. In the light of those observations, I can only share the Commission’s view that a breach of the obligation imposed on Member States under EU law to protect the financial interests of the European Union, to counter fraud, to carry out customs controls based on risk analysis and to require the lodging of security, as found in this Opinion, is necessarily accompanied by a miscalculation of the amounts of traditional own resources to be made available to the EU budget and a failure to establish and make available those resources when they ought to have been.

2.      Breach of the United Kingdom’s obligation to make available to the Commission amounts corresponding to the customs duties established in Operation Snake

241. It follows from the above considerations that the United Kingdom was required, under Article 2(1) of Regulation No 1150/2000, to which Article 2(1) of Regulation No 609/2014 corresponds, to establish the existence of the European Union’s own resources and, pursuant to Articles 6, 9 and 10 of those two regulations, to make them available to the European Union. In the application, by its first complaint, the Commission essentially takes issue with the United Kingdom authorities for having cancelled large amounts of customs debts in the B account. It claims that those amounts correspond to the additional debts established following Operation Snake, conducted in 2014, which were notified by the United Kingdom authorities by issuing Snake C18 payment notices but which were withdrawn by them between June and November 2015. (232) According to the Commission, by failing to take appropriate customs measures after establishing the additional customs debts and by cancelling the debts, those authorities committed an administrative error for which the United Kingdom should be held financially liable.

242. The United Kingdom criticises the present complaint, in essence, for two reasons. First, it maintains that, when the Snake C18 payment notices were issued, there was no methodology for determining the customs value ex post facto, after the undervalued goods had been released. Secondly, the United Kingdom submits that the amounts in question proved to be ‘irrecoverable’, within the meaning of those provisions, for reasons which were not attributable to the United Kingdom authorities, since the importers referred to in the 23 Snake C18 payment notices were ‘phoenix’ companies, that is to say, companies which disappear as soon as their goods are released for free circulation. Therefore, recovery of the entitlements concerned was impossible for reasons which could not be attributed to it, in accordance with Article 17(2) of Regulation No 1150/2000 and Article 13(2)(b) of Regulation No 609/2014. It follows that the United Kingdom was released of its obligation to make available to the EU budget amounts corresponding to established entitlements.

243. Thus, in the context of the present complaint, the question which arises is whether, by failing to recover the customs duties established by the Snake C18 payment notices, the United Kingdom acted in a manner incompatible with the abovementioned provisions of Regulations No 1150/2000 and No 609/2014.

244. In that regard, under Article 13(1) of Regulation No 609/2014 and the parallel provision in Article 17(1) of Regulation No 1150/2000, Member States are required to take all requisite measures to ensure that amounts corresponding to established entitlements are made available to the EU budget. In the present case, it should be noted that the United Kingdom authorities found a number of imports which had been checked in the course of Operation Snake to have been undervalued and that they entered the amounts in question in the accounts, served the 23 Snake C18 payment notices on the traders and established the corresponding customs debts. The amounts corresponding to those debts were initially entered in the B account, in accordance with Article 6(3) of Regulations No 1150/2000 and No 609/2014, as established entitlements which had not been recovered and for which no security had been provided. The United Kingdom subsequently cancelled them.

245. Against that background, it must be borne in mind that, under Article 13(2) of Regulation No 609/2014 and Article 17(2) of Regulation No 1150/2000, Member States are to be released from the obligation to make available to the Commission amounts corresponding to established entitlements only if those amounts could not be recovered for reasons of force majeure or it appears that recovery is impossible for reasons which cannot be attributed to them. It should also be noted that the Court has interpreted the concepts of ‘reasons of force majeure’ and ‘other reasons which cannot be attributed to them’ strictly. By way of example, it has held that a foreseeable strike may not be used to justify a delay in the entry of resources (233) and that it is not open to a Member State to determine whether it is expedient to accede to a request to bring forward the entry of resources. (234) Moreover, the Court has rejected a Member State’s justification relating to the fraudulent conduct of customs officials. (235)

246. In the light of the abovementioned case-law, it seems to me that, in the present case, the United Kingdom’s defence arguments cannot succeed. In the first place, it is common ground that the United Kingdom does not rely on force majeure to justify cancellation of the Snake C18 payment notices, but merely argues that it cannot be held liable for the loss of the additional customs duties claimed in those demands for payment. Although the insolvency of the customs debtor is, prima facie, a factor not dependent on the intention of a Member State, it must be borne in mind that, in the present case, the Commission criticises the United Kingdom for failing to take all measures necessary to ensure that amounts corresponding to the European Union’s entitlement to traditional own resources be made available to the EU budget. It is apparent from the parties’ submissions that they do not dispute that the additional customs duties were established, given that the United Kingdom authorities identified the goods whose release had already been authorised, or that security was not requested from the importers concerned to guarantee full recovery of the amounts claimed. (236) It is important to point out that, at that time, the United Kingdom authorities were fully aware of the fraud scheme in question, which consisted, inter alia, in the companies at issue ceasing trade altogether as soon as the customs declarations filed for the purposes of importing the goods were challenged. I therefore find to be unfounded the United Kingdom’s argument that recovery of the additional customs debts referred to in the Snake C18 payment notices was impossible because those claims could not be enforced. Indeed, after establishment of the additional customs duties, that State should have requested, in accordance with the provisions of the Community Customs Code and the Union Customs Code in force, as interpreted in the light of the principle of effective protection of the European Union’s financial interests enshrined in Article 325 TFEU, the lodging of sufficient security to cover the amount payable. (237) Therefore, it seems to me that the justification based on the insolvency of the customs debtors, as relied on by the United Kingdom, is not, in itself, a reason for releasing the Member State of its obligation to recover that customs debt under the provisions at issue.

247. It is also necessary to reject the United Kingdom’s argument that cancellation of the Snake C18 payment notices was inevitable since there was no methodology for correctly determining the customs value of the goods. Specifically, the United Kingdom maintains that its authorities withdrew the Snake C18 payment notices after they had been challenged by certain traders, on the ground that the OLAF methodology which they had used to determine the correct customs value of the undervalued imports and which had been challenged during Operation Snake was not appropriate for ‘revaluing’ those imports. According to the United Kingdom, its authorities had to withdraw the Snake C18 payment notices because they were based on the OLAF methodology alone.

248. In that regard, it should be noted that, according to the Court’s settled case-law, the objective of the EU legislation governing determination of the customs value is to introduce a fair, uniform and neutral system excluding the use of arbitrary or fictitious customs values. (238) The Court has also stated that it follows from Articles 29 to 31 of the Community Customs Code (now Articles 70 to 74 of the Union Customs Code) that the methods for determining the customs value laid down in those provisions are established in hierarchical order and are subordinately linked, so that, where such value cannot be determined by applying a given provision, it is appropriate to refer to the provision which comes immediately after it in the established order. (239) In the present case, it must be recalled that, according to the documents before the Court, as is apparent from the examination of the first plea, (240) the OLAF methodology was intended to be used, initially, only as a risk analysis tool in ordinary customs activities. Furthermore, contrary to what the United Kingdom claims, it was not at the meeting of 20 February 2015 that OLAF stated, for the first time, that the cleaned average price was not to be used for ‘revaluation’ purposes; it was at the beginning of PCA Discount that Member States were informed that the objective of the OLAF methodology was to detect fraud. Consequently, when the United Kingdom authorities used cleaned average prices based on the OLAF methodology to calculate the additional customs duties claimed in the Snake C18 payment notices, (241) they did not use that methodology in consonance with the objectives for which it was designed. I therefore share the Commission’s view (242) that, after identifying the fraudulently undervalued goods, the United Kingdom authorities should have determined their correct customs value, in accordance with the sequential methods set out in the Community Customs Code and the Union Customs Code, on the basis of the abovementioned methods of determination, taking account of the fact that they were imported goods subject to customs controls. (243) Consequently, it seems that, by failing to follow the steps relating to the determination of the customs value, pursuant to the applicable customs provisions referred to in the previous point, in respect of goods which had been identified as undervalued goods in the course of Operation Snake, and by applying the OLAF methodology instead of those provisions, the United Kingdom failed to comply with EU customs legislation, with the result that the amounts determined in the Snake C18 payment notices do not reflect the amounts actually owed by the traders.

249. It is indeed apparent from the documents before the Court that the United Kingdom authorities themselves realised the errors they had made in determining the additional amounts, (244) but, instead of correcting the errors and reissuing the payment demands, they chose to cancel definitively the Snake C18 payment notices. The United Kingdom submits that, without an acceptable methodology, it was preferable to cancel the debts. (245) As the Commission points out, it was open to the United Kingdom to issue the payment notices again, which it chose not to do.

250. In the light of the foregoing, I consider that the United Kingdom, after having established, entered in the accounts and notified to the debtors the customs duties claimed in the 23 Snake C18 payment notices, failed to comply with the obligations under Article 13(1) of Regulation No 609/2014 and the parallel provision in Article 17(1) of Regulation No 1150/2000, under which Member States are required to take all requisite measures to ensure that amounts corresponding to established entitlements are made available to the EU budget. The cancellation of those payment notices and the related previous decisions must be regarded as administrative errors on the part of the United Kingdom authorities, the consequence of which is the non-recovery of the European Union’s traditional own resources. Furthermore, I share the Commission’s view that the United Kingdom preferred to cancel the amounts claimed in the Snake C18 payment notices and entered in the B account rather than follow the procedure laid down in Article 13 of Regulation No 609/2014 and the parallel provision in Article 17 of Regulation No 1150/2000, enabling Member States to be released of the obligation to make available to the EU budget amounts corresponding to entitlements which prove irrecoverable. It follows that the United Kingdom could not, in those circumstances, rely on the exemption laid down in Article 13(2) of Regulation No 609/2014 and the parallel provision in Article 17(2) of Regulation No 1150/2000, since the administrative errors described were attributable to that State. It follows that, in accordance with settled case-law, (246) a Member State which, after establishing the European Union’s entitlement to own resources, fails to make the corresponding amount available to the Commission, without one of the conditions laid down in the abovementioned provisions being met, falls short of its obligations under EU law. Consequently, it must be considered that, on account of the cancellation of the 23 Snake C18 payment notices and the failure to make the associated amounts available, traditional own resources are payable to the EU budget for the period from November 2011 to November 2014.

3.      Assessment of losses of traditional own resources

251. In order to assess the scale of the losses of traditional own resources for the EU budget resulting from the United Kingdom’s infringement of EU law as alleged in the present action, the Commission relied, in the present case, on the OLAF methodology and on the data available to it. On that basis, it considers that, for the period between November 2011 and 11 October 2017, EUR 2 679 637 088.86 (gross amount, less collection costs) should have been made available to the Commission as traditional own resources.

252. By contrast, in the defence, the United Kingdom disputes both the methodology used and the amount calculated by the Commission. Based on its own assessment, it calculated the amount of additional own resources linked to the undervalued imports from China for the infringement period at GBP 217 646 623, (247) a figure which it revised downwards in the rejoinder to GBP 123 819 268. In so doing, although the United Kingdom still challenges the infringement alleged against it, it seems to me that, in actual fact, it implicitly acknowledges, to some degree, that its failure to implement effective measures to counter customs undervaluation fraud led to a loss of traditional own resources for the EU budget. (248) Therefore, the key issue in this plea is how to determine the scale of the losses in question.

253. Before examining the substance of that issue, I think it would be useful to set out my observations on the preliminary objections raised by the United Kingdom concerning, first, the Commission’s lack of competence and the Court’s lack of jurisdiction to assess and establish traditional own resources, since that competence lies with Member States (part 1), and, secondly, the nature of the present action, which the United Kingdom claims is actually an action for damages, with the result that it is for the Commission to prove that there is a direct causal link between the State’s specific failure to fulfil obligations and the damage caused by it (part 2).

(a)    Preliminary observations

(1)    The Commission’s competence to assess losses of traditional own resources and the Court’s jurisdiction to give a ruling thereon

254. The United Kingdom submits that, where the other methods used at an earlier stage in the sequence of procedures laid down in Articles 70 to 74 of the Union Customs Code (249) for the purpose of determining the customs value cannot be applied, (250) it falls within the exclusive competence of Member States to implement, in lieu of the ordinary method based on the transaction value of a product, an alternative method, (251) provided for in Article 74(3) of the Union Customs Code and Article 31 of the Community Customs Code, and thus to determine the customs value of the goods concerned on the basis of the available data and using ‘reasonable means’. (252) That determination involves a number of complex decisions and difficult methodological choices for national authorities, which enjoy a broad discretion in that regard.

255. I am not persuaded by that defence argument based on the application of the customs provisions since, like the Commission, I consider that the use of the OLAF methodology, as a means of estimating losses of traditional own resources, is not intended to determine the customs value of imported goods within the meaning of those provisions, which falls within the exclusive competence of Member States. (253) Under Articles 69 to 74 of the Union Customs Code, Member States are required to determine the customs value of the goods and, if necessary, have recourse to the secondary methods in order to do so. (254) In the present case, it was for the United Kingdom to determine the customs value of the textiles and footwear from China, having regard to the specific indicators suggesting that they had been undervalued. However, no such determinations were made, as is apparent from the examination of the first plea in law. It follows that the Commission may not substitute itself for the Member States in order to conduct such an assessment where the Member State in question has failed to do so in accordance with the abovementioned methods. Such a determination is no longer possible in any event. That fact is inherent in the statistical nature of the OLAF methodology as a tool for calculating losses of traditional own resources, the purpose of which is to determine, on the basis of statistical data, the scale of the losses incurred as a result of the United Kingdom’s infringement of the provisions of EU legislation on traditional own resources, in so far as its authorities did not carry out appropriate customs controls in respect of the goods in question, (255) with the result that the customs duties payable for those goods were miscalculated.

256. It follows from the settled case-law cited above (256) that there is, as a rule, a direct link between the infringement of EU customs law alleged against a Member State and the resulting loss of traditional own resources for the EU budget. In that context, the Court ruled, in the case which gave rise to the judgment of 9 July 2020, Czech Republic v Commission, (257) that it is inherent in the system of own resources of the European Union, as currently configured in EU law, that the Commission has the ability to submit to review by the Court, in infringement proceedings, a dispute between the Commission and a Member State regarding the latter’s obligation to make available to the Commission a certain amount of the European Union’s own resources. (258)

257. In the present case, since the United Kingdom decided not to make available to the Commission, within the period laid down in the reasoned opinion, the amount of traditional own resources at issue and merely challenged the Commission’s position regarding its obligation to apply that amount, I take the view that the Commission was right to consider that the United Kingdom had failed to fulfil its obligations under the rules on traditional own resources and to bring infringement proceedings for that purpose. In that respect, it is for the Commission to prove the existence of the alleged infringement and to provide the Court with the information necessary for it to determine whether the infringement is made out, and in so doing the Commission may not rely on any presumption. (259) Thus, the Court must ascertain whether the Commission has established to the requisite legal standard the amount of own resources lost which it claims in respect of the infringement period. It follows that the United Kingdom’s argument relating to the order in which the methodologies are to be examined, to the effect that the Court should examine that State’s proposed estimate first, must be rejected.

258. The United Kingdom submits, moreover, that, if the Court were to find, as a first step, that the Commission has proved to the requisite legal standard that it failed to fulfil its obligation to counter fraud, (260) the onus would be on the Commission, as a second step, to prove that the methodology proposed by the United Kingdom for determining the additional own resources payable is based on choices and on an assessment of the evidence that are manifestly unreasonable. Specifically, according to the United Kingdom, it follows from the structure of Articles 258 and 260 TFEU that, by including in the subject matter of its action the question of the estimates of traditional own resources lost, the Commission goes beyond the scope of actions for failure to fulfil obligations under Article 258 TFEU, which are limited to whether the Member State has failed to fulfil its obligations under EU law. In those circumstances, the Commission is required to adduce evidence of another type of illegality, namely that the United Kingdom’s assessment of unpaid duty was manifestly unreasonable.

259. In that regard, I note that that argument does not take account of the fact that the present action seeks a declaration from the Court that, in particular, the United Kingdom has failed to fulfil its obligations concerning own resources under EU law, which necessarily means that the Commission must adduce evidence in relation to the scale of the losses of those resources and the failure to fulfil obligations. Such an estimate does not affect the possibility of having recourse to the procedure under Article 260 TFEU if the Member State has not paid the principal amount or interest following a judgment finding it to be in breach of the obligations arising from the system of own resources. In any event, the question whether the Member State acted reasonably in ‘revaluing’ the undervalued imports does not arise in the present case. The case-law relied on by the United Kingdom to support its argument concerning the ‘revaluation’ of goods relates to the obligations of the Member State, where customs controls have caused it to entertain doubts and it therefore makes a determination of the customs value of the imported goods. (261) As already pointed out, the Commission does not seek, in the context of this second plea in law, to determine the customs value of specific goods, but rather to estimate the losses of traditional own resources based on statistical data.

260. Furthermore, in its requests for information of 22 June 2018 and 22 March 2019, the United Kingdom asked the Commission, inter alia, to provide it with information on the calculation of the losses of own resources claimed in the amount of EUR 2 679 637 088.86 in order to be able to recalculate that amount. In that regard, I note that, in the reply, the Commission explained that the United Kingdom had always been aware of the methodology applied and the data used to calculate the amount in question since, among other things, that information had originated from the United Kingdom itself by means of the Surveillance 2 database.

(2)    The alleged obligation to demonstrate damage and a causal link, and the counterfactual scenario

261. The United Kingdom submits that the onus is on the Commission to substantiate its claim to the standards applicable to liability proceedings, since it seeks an order from the Court requiring that State to pay damages. It argues that, in the present case, the Commission has not succeeded in proving either the existence of specific and quantifiable damage or the existence of a direct causal link between the United Kingdom’s failure to fulfil obligations and that damage.

262. In that regard, first of all, it should be borne in mind that proceedings before the Court under Article 258 TFEU are infringement proceedings, not liability or compensation proceedings. Therefore, in the context of an action for failure to fulfil obligations, it is for the Commission to show that the United Kingdom has failed to fulfil its obligations under EU law. (262) Since the present action does not seek an order from the Court requiring the defendant State to pay damages, the Court does not have to examine the evidence adduced by the United Kingdom concerning the existence of damage and the causal link between the failure to fulfil obligations in the customs field and the alleged damage. In any event, that argument of the United Kingdom must be rejected in the light of the Court’s settled case-law, from which it follows that an action for failure to fulfil obligations is objective in nature. (263) Since the failure to comply with an obligation imposed by a rule of EU law is itself sufficient to constitute a breach, the fact that such a failure had no adverse effects is irrelevant. (264) Thus, I am of the view that, on account of the characteristics of infringement proceedings, the present action does not seek an order from the Court requiring the defendant Member State to pay damages.

263. However, it should be noted that, in the application, the Commission does not, in any event, seek compensation for damage. The United Kingdom’s position that it is for the Commission to demonstrate the existence of ‘damage’, the quantification of which is possible only after first establishing the existence of a causal link resulting from the Member State’s wrongful conduct, is, in my view, based on a misreading of the application and other submissions in the proceedings in question. Specifically, it is apparent from the third paragraph of the first head of claim that the Commission takes issue with the United Kingdom for failing to make the correct amounts of traditional own resources available to the EU budget, which, according to the Commission, resulted in the infringement of the provisions governing those resources. As has already been stated, the onus is on Member States, under Articles 9 and 10 of Regulation No 1150/2000, to which, respectively, Articles 9 and 10 of Regulation No 609/2014 correspond, read in conjunction with Articles 2 and 8 of Decisions 2007/436 and 2014/335, to establish the European Union’s entitlement to traditional own resources as soon as the conditions provided for by the customs regulations have been met concerning the entry of the entitlement in the accounts and the notification of the debtor.

264. Consequently, it is patently clear from the application and, in particular, from the provisions of EU law cited therein that the Commission takes issue with the United Kingdom not for the damage caused to the European Union, but for failing to make available to the European Union the correctly calculated amounts of traditional own resources. The failure described in the petitum of the application (and, in particular, the words ‘by failing to enter into the accounts the correct amounts of customs duties and to make available the correct amount of traditional own resources’) therefore constitutes, by its very nature, an application for a declaration that the State has failed to fulfil its obligation to act, namely that it has not complied with its obligations under EU law, not that that State has caused damage.

265. Next, as regards the United Kingdom’s argument that it is necessary to demonstrate a causal link between the Member State’s specific failure to fulfil its obligations and the loss of own resources, the Court has already made clear that there is a ‘direct link’ between the collection of revenue deriving from customs duties and the availability to the EU budget of the corresponding resources. (265) I take the view that it follows from that case-law that if, as a result of an error committed by the customs authorities of a Member State, customs duties are not recovered, that does not affect the Member State’s obligation to make available the amounts which should have been established and to pay default interest. Although there is a correlation sine qua non between, on the one hand, the failure of a Member State to fulfil its obligations in the field of customs legislation and, on the other, the amount of own resources not made available to the EU budget, as the former inevitably has an effect on the latter, that does not mean that those two factors should be analysed in terms of damage caused by the wrongful conduct of the Member State. A Member State which fails to establish the European Union’s own resources and to make the corresponding amount available to the Commission, without one of the conditions laid down in Article 17(2) of Regulation No 1150/2000 or Article 13(2) of Regulation No 609/2014 being met, falls short of its obligations under EU law and, in particular, those deriving from Articles 2 and 8 of Decisions 2000/597 and 2007/436. (266) That conclusion is borne out by the case-law relied on by the United Kingdom in the defence, from which it follows that the wrongful conduct of the customs authorities in calculating the customs duties payable inevitably leads to losses of traditional own resources for which Member States are liable. (267) In that context, Article 340 TFEU and the related case-law relied on by the United Kingdom are irrelevant.

266. Moreover, it seems to me that a different conclusion cannot be drawn from the case which gave rise to the judgment in Commission v United Kingdom, (268) relied on by the United Kingdom and the interveners, since the situation at issue in that case was different from the situation here. That case was actually concerned with whether the United Kingdom could be held liable as a result of any wrongful issue of EXP certificates by the authorities of Anguilla, an overseas country and territory (OCT), contrary to the ‘OCT Decision’. The Commission submitted, in particular, that the United Kingdom was required, as a Member State, to assume responsibility for acts adopted by and negligence on the part of the Anguillan authorities contrary to the OCT Decision, in view of the special relationship with its OCT, which is not an independent State. The United Kingdom argued that no act of EU law enabled Anguilla to be held accountable to the European Union for errors committed by its own authorities in the application of that decision or for the resulting loss of own resources, so that the United Kingdom could also not be considered liable for such errors merely because it is the Member State with which Anguilla is linked. (269) Therefore, the pivotal issue in that case was whether a Member State of the European Union could be held liable for the conduct of the authorities of an OCT with which it has special links, conduct which infringed EU law and resulted in the loss of own resources. Consequently, in so far as the present case concerns the liability of the United Kingdom itself and not that of another entity, the findings in that case cannot be transposed to the present case, contrary to what the United Kingdom maintains.

267. Finally, the United Kingdom raises – in the form of an objection of inadmissibility – the argument that the Commission has not demonstrated that the measures which that State opted for to counter undervaluation fraud actually resulted in the loss of traditional own resources for the EU budget. (270) According to the United Kingdom, the Commission’s contention that the undervaluation fraud was able to continue because of the lack of risk analysis and effective checks prior to customs clearance necessarily presupposes that, if such measures had been taken, the trade and losses of traditional own resources associated with the fraud would have been eliminated. Put another way, if it had implemented the anti-fraud measures deemed appropriate by the Commission, the importation of under-declared goods would have been eradicated, from which it infers that no significant additional customs duties would have been payable to the EU budget. The United Kingdom asserts that it should be held liable only for losses to the EU budget corresponding to the difference between the traditional own resources which would have been payable in its counterfactual scenario and the traditional own resources which it actually made available.

268. In that regard, it follows from settled case-law that it is irrelevant whether, in a situation where traditional own resources have been lost because of earlier events due to an administrative error on the part of the Member State’s authorities, those events might have occurred without that error and therefore without any loss of own resources. (271) For the sake of completeness, it must be observed that, except for ad hoc controls, (272) the United Kingdom carried out practically no checks at all during the infringement period. In so doing, it created an irreversible situation which resulted in a considerable loss of traditional own resources, a loss which must, in my view, be established. I am of the view that, in such circumstances, it is not for the Court to speculate about what would have happened had the United Kingdom fulfilled its obligations under EU law. A counterfactual analysis of the kind suggested by the United Kingdom cannot cast doubt on the fact that that loss actually occurred or the fact that it could have been avoided if appropriate checks had been carried out by the United Kingdom customs authorities before the goods in question were released for free circulation. That line of argument is unfounded since it is necessary to take account of the factual situation as it stood on account of the infringements of EU law, not the volume of undervalued goods which could have been imported had the Member State, hypothetically, fulfilled its obligations under EU law. Consequently, I consider that such a counterfactual scenario cannot succeed in connection with the loss of own resources.

(b)    The substance

(1)    Overview of the OLAF methodology and its application as a tool for calculating losses of traditional own resources

269. The Commission submits that recourse must be had to an assessment based on all available information in order to establish the losses of traditional own resources, given that it is no longer possible to establish the correct value of the undervalued goods by applying any of the methods laid down in the Community Customs Code and the Union Customs Code. In view of the United Kingdom’s lack of cooperation, there is no direct evidence of the customs value of the goods concerned. The Commission therefore arrived at an estimate of the traditional own resources lost on the basis of the OLAF methodology, using statistical data and the cleaned average of the prices of the goods in question imported into the European Union.

270. Specifically, the OLAF methodology, as a methodology for determining the scale of the losses of traditional own resources, is applied as follows. First of all, imports falling below the threshold of the lowest acceptable price – which, as a reminder, is calculated as equal to 50% of the EU-wide cleaned average price – are deemed to be undervalued imports. Undervalued imports include imports in a category of products falling within Chapters 61 to 64 of the combined nomenclature (for each of the eight-digit product codes of the combined nomenclature) (273) whose daily aggregated value (daily weighted average) is below the lowest acceptable price for the product code concerned, based on data taken from the Surveillance 2 database and used in the Comext database. (274) Secondly, the scale of the losses of own resources for the quantities deemed to be undervalued is calculated in terms of additional customs duties payable on the basis of the difference between the declared value and the cleaned average price.

271. Therefore, in the absence of any direct information on the volume and nature of the undervalued imports in the United Kingdom during the relevant period, the estimate of the volume of undervalued goods underpinning the action is based, in principle, on the lowest acceptable price for the various product codes (50% of the cleaned average price), (275) whereas the estimate of the value of undervalued quantities is calculated in the light of the cleaned average price. Although the methodology thus described relies on the relevant data provided to the Commission by Member States through the abovementioned databases, the result is that the amounts thus calculated by applying the OLAF methodology constitute a retrospective budget estimate of the losses to the European Union and not direct evidence of the amounts corresponding to established entitlements which the United Kingdom would have had to make available to the EU budget during the infringement period (276) if the appropriate checks during customs clearance had been correctly carried out.

272. The United Kingdom, with the support of the interveners, claims that the Commission cannot use the OLAF methodology to calculate losses of traditional own resources, maintaining that that method is merely a risk analysis tool. In that context, the United Kingdom and the interveners state that the Commission used the OLAF methodology in the application to determine the correct customs value of the undervalued imported goods.

273. In my view, that argument cannot be accepted.

274. First of all, given the nature of the imports and the failure of the United Kingdom customs authorities to carry out the customs controls in question, there is no doubt that, once release for free circulation in the customs territory of the European Union has been authorised by the national customs authorities, it is objectively no longer possible for those goods to be returned for customs controls, even if it subsequently transpires that customs controls were not carried out or were carried out incorrectly. That conclusion also does not appear to be disputed by the United Kingdom. (277) In consequence, I can only share the Commission’s view that there is no direct evidence of the volume or customs value of the goods concerned. Furthermore, while it is true that the OLAF methodology was initially designed and approved by a consensus of Member States as a risk analysis tool to assist national customs authorities in identifying potentially under-declared goods, it is also true that it makes it possible, on the one hand, to determine – on the basis of the statistical customs data provided by Member States to the Commission – the volume of imports declared at a value below the risk threshold and, on the other, by using the method of the EU-wide cleaned average price for the goods concerned – drawn up by applying the same methodology – to estimate the amount of own resources which the Member State would have collected and made available to the EU budget if it had fulfilled its obligations under the rules on traditional own resources. Accordingly, I am of the view that there is no contradiction in the fact that the OLAF methodology, although initially designed as a customs risk analysis tool, may also serve as a basis for estimating the scale of the losses of traditional resources where imports have been released for free circulation in the customs territory of the European Union without appropriate controls for release having been carried out, which translates into a loss to the EU budget.

(2)    Application of the judgment in Commission v Portugal

275. According to the Commission, an approach based on statistical data and developed in the context of the method used to calculate losses of traditional own resources is confirmed by the judgment in Commission v Portugal. (278)

276. I share the Commission’s view that the estimate of own resources lost on the basis of statistical data is not, in principle, uncharted territory for the Court. The case which gave rise to the judgment in Commission v Portugal, (279) on which the Commission relies, concerned the way in which a number of Portuguese customs offices had dealt with the release of bananas for free circulation. In the application, the Commission sought a declaration from the Court that, owing to the systematic acceptance by its customs authorities, between 1998 and 2002, of customs declarations of release for free circulation of fresh bananas, when those authorities knew or ought reasonably to have known that the declared weight of the bananas did not correspond to their actual weight, and owing also to the Portuguese authorities’ refusal to make available own resources corresponding to the loss of revenue and to default interest owed, the Portuguese Republic had failed to fulfil its obligations under EU law. The Court held that, since the amounts actually owed in respect of entitlements to the Communities’ own resources could have been correctly established as soon as the imports were made and subsequently cleared through customs if the national authorities had carried out the necessary checks, the Portuguese Republic had to be treated, for the period in question, as if it had correctly established the entitlements and entered them in the accounts. (280)

277. It must be pointed out that the Court unequivocally rejected the Portuguese Republic’s defence argument that there was no way of quantifying the amount of own resources which had not been duly established during the years in question, noting that the fact that it was impossible to carry out checks in the absence of the goods concerned was the inevitable consequence of the Portuguese authorities’ failure. The Court held that, because of that impossibility, it was not inappropriate, in that case, to quantify the amount of own resources which had not been duly established during the years in question, namely from 1998 to 2002, on the basis of the results of subsequent checks carried out between 1 August and 31 October 2003. (281) However, it should be noted that the Court ultimately rejected the Commission’s request for a determination of the amount of own resources resulting from unlawful customs control practices, since the proposed statistical method featured an incorrect reference framework for making that determination. (282)

278. Thus, the approach taken by the Court in its judgment in Commission v Portugal (283) confirms, first, that it is possible for the Commission to rely – as regards infringements of EU customs law by the Member State in which imported goods have already been released for free circulation in the customs territory of the European Union – on certain statistical data relating to the alleged infringement in order, inter alia, to determine ex post facto the scale of the resulting loss of own resources for the EU budget. Secondly, it must be stated that the case which gave rise to that judgment concerned a clearly defined customs infringement, namely acceptance of the difference between the declared weight of bananas and the actual weight of a box, in respect of which, using accurate data gathered during subsequent checks relating to the same failure, it was relatively easy to draw statistical conclusions on the difference between the declared weight and actual weight of the imported goods during the infringement period. By contrast, the methodology used in the present case to calculate the extent of traditional own resources is distinguished by the multiplicity of relevant indicators, such as the volume of the fraudulently undervalued imports as a proportion of all imports made during the infringement period and the ‘fair’ customs value to be allocated to those imports. Those indicators are thus characteristic of the impact of the undervaluation fraud on the EU budget and, more generally, the scale of the infringement alleged against the United Kingdom, while providing information on losses of traditional own resources in a more indirect manner than the statistical data at issue in the case which gave rise to the judgment in Commission v Portugal. (284)

(3)    Acceptance in principle of the approach proposed by the Commission to assess the losses of traditional own resources

279. The OLAF methodology proposed by the Commission in order to determine the scale of the losses of traditional own resources for the EU budget appears, as is apparent from the foregoing analysis, to go further than the legal problems concerning the quantification of own resources which have thus far been resolved by the Court. Accordingly, in order to determine whether and to what extent the methodological approach proposed by the Commission is consistent with the criteria relating to actions for failure to fulfil obligations under Article 258 TFEU, I think it is necessary to consider the criteria concerning the burden of proof established by the case-law of the Court as well as the essential characteristics of that methodological approach.

280. According to the Court’s traditional case-law, the objective of actions for failure to fulfil obligations provided for in Article 258 TFEU is to achieve the practical elimination of infringements by Member States and the consequences thereof. (285) As already stated in this Opinion, (286) the Court has consistently held that proceedings pursuant to that provision are based on the objective finding that a Member State has failed to fulfil its obligations under the TFEU or any act of secondary legislation. (287) In that regard, it should be recalled that the failure to take measures concerning own resources also constitutes a failure to fulfil obligations for the purposes of that provision. (288) Furthermore, as has already been pointed out, it is for the Commission, which has the burden of proving the existence of the alleged infringement, to provide the Court – in infringement proceedings under Article 258 TFEU – with the information necessary for it to determine whether the infringement is made out, and in so doing the Commission may not rely on any presumption. (289) It is only where the Commission has adduced ‘sufficient evidence of certain matters’ relating to the defendant Member State’s infringement that ‘it is incumbent on the latter to challenge in substance and in detail the information produced and the consequences flowing therefrom’. (290)

281. In my view, it follows from the foregoing that, in the context of infringement proceedings in which the Commission alleges that a Member State, inter alia, has infringed the rules of EU law on the collection of traditional own resources and has failed to fulfil its obligation to make certain amounts available to the EU budget, the Commission must submit to the Court the information necessary for the latter to determine whether the complaint that the United Kingdom has failed to fulfil its obligation to make a certain amount of EU own resources available to the Commission is made out, and in so doing the Commission may not rely on speculative assumptions. That also means that, in order to determine the scale of the losses of those resources, the Court is not required to choose between the different methodological approaches proposed by the parties, as the United Kingdom appears to suggest in the defence, but only to assess the OLAF methodology proposed by the Commission in support of its action.

282. That being so, having regard to the nature of the infringement of EU customs law alleged against the United Kingdom, which is the subject of the first plea in law in the present infringement proceedings, the Court cannot disregard the factual context of the case, as set out in the examination of that plea, (291) from which it follows that, although it was fully aware of the existence and nature of the mass undervaluation fraud involving textiles and footwear from China at the customs borders of the European Union, the United Kingdom failed to take effective measures to counter that customs fraud during the infringement period, in particular by not conducting risk analysis, by not carrying out physical customs controls and by not requiring importers to lodge security. In so doing, the United Kingdom did not take samples to determine the correct customs value of the suspected undervalued imports in accordance with the Community Customs Code and the Union Customs Code. Consequently, the determination of the proportion of goods affected by the undervaluation fraud during the infringement period, and the determination of the ‘correct’ customs value of those goods, is essentially compromised by the infringement described above.

283. The Commission was therefore right, in its submissions, to point out that the non-application of the sequence of customs procedures, as provided for in the Community Customs Code and the Union Customs Code, is the decisive factor, which dictates the scale of the losses of traditional own resources for the EU budget, based on a statistical analysis ex post facto of the data characterising those losses indirectly. It is therefore impossible to revert to a situation that is compatible with EU customs law as regards the fraudulent imports in question, with the result that neither the competent authorities of the United Kingdom nor those of the Commission are able, in particular, to establish the correct customs value in accordance with the valuation rules laid down by EU customs legislation. Since that situation is the objective result of the Member State’s own infringement of the customs provisions, it is for that State – should the infringement be made out – to take responsibility for the losses to the EU budget, as determined solely on the basis of an ‘indirect’ analysis of the data and by applying the highest probability necessarily associated with that determination. Consequently, my view is that the Commission is not, in principle, precluded from demonstrating, in infringement proceedings under Article 258 TFEU, the scope of a Member State’s infringement of EU law on own resources by means of a methodology based on statistical data, where the impossibility of carrying out checks is the inevitable consequence of a failure by the customs authorities of the Member State. That interpretation is also supported by the Member States’ duty to protect the financial interests of the European Union, which stems, inter alia, from Article 325 TFEU.

284. However, because of the nature of the statistics-based OLAF methodology, the associated problems of probative value cannot be underestimated. (292) It cannot be overlooked that, for the purposes of measuring the scale of any budget losses, different methodological approaches may be taken and may produce different results in terms of amounts. The present case is a vivid illustration of that problem, as the applicant and the defendant have each put forward a radically different approach in order to quantify the losses of traditional own resources. The Commission itself does not deny that there is a panoply of methods for assessing those losses, stating, in its replies to the written questions put by the Court, that, in principle, the result of the infringement at issue could also have come about had other methods of assessing those losses been used. Although I have serious doubts about the alleged advantages of the OLAF methodology, namely its ‘robustness’ which the Commission flagged up on several occasions in its submissions, (293) it is the appropriate yardstick for assessing the probative value of the statistical methods and it must be admitted that the scale of the loss to the budget thus appraised remains largely dependent on the imponderables of the specific method chosen.

285. It should also be borne in mind that, in so far as the estimate of traditional own resources lost is calculated on the basis of information contained in the Surveillance 2 database (data relating to imports from China of products falling within Chapters 61 to 64 of the combined nomenclature) and the Comext database (calculation of cleaned average prices) – information which is, by its nature, factual evidence – the definitive amount is also dependent on methodological choices, such as the criteria relating to the determination of the volume of undervalued goods and the establishment of the benchmark value for ‘revaluing’ those goods. Those methodological choices are, by their nature, relatively normative criteria, in that they depend on the choices made by the institution which developed the method in question. I must therefore agree with the United Kingdom’s argument that the technical report on which OLAF’s calculation is based is justified only in the context of a ‘fair price’ predetermined at EU-28 level. (294) The problem of diverging valuation criteria and their impact on the calculation of the amounts lost is underscored, in particular, by the Commission’s written reply to the questions put by the Court, from which it follows that the result of the definitive calculation varies, among other things, according to the lowest acceptable price (between 10% and 50% of the level of average prices) (295) and that the Commission ‘considered that approach’. Although the Commission considers that, as a result of the infringement alleged against the United Kingdom authorities, the losses of traditional own resources for the EU budget would total EUR 2 092 703 277.93 if the lowest acceptable price were set at 10% of the cleaned average price, the fact remains that that amount represents 78.1% of the amount sought by the Commission in the present case, based on a lowest acceptable price set at 50% of the cleaned average price, which, in my view, is not inconsiderable. It must therefore be acknowledged that the use of a methodology based on statistical data goes hand in hand with the possibility of establishing different, but equally valid, reference points, which make the result obtained conditional on that methodology.

286. In the light of the foregoing, I consider that, in the context of infringement proceedings under Article 258 TFEU, it is possible for the Commission to rely in its action on a methodology based on statistical data for the purposes of estimating the losses of traditional own resources for the EU budget due to the failure by the Member State concerned to fulfil its customs obligations, where the lack of direct evidence is the consequence of that Member State’s failure. However, so as not to depart from the objectives and aims of infringement proceedings, the application of such a methodology in order to estimate the traditional own resources lost is acceptable only in so far as the choice of a specific method is justified in the light of the particular circumstances of the case in point, on the understanding that the base references must not be arbitrary or biased, and in so far as the use of that methodology constitutes a coherent quantitative analysis based on all the relevant data available. Furthermore, the less direct evidence there is to corroborate the raw data relating to the methodology in question, the more care must be taken in selecting the normative criteria used by that methodology. That is particularly important since the estimate of traditional own resources lost in the context of infringement proceedings under Article 258 TFEU aims to treat the Member State, for the period in question, as if it had correctly established the entitlements and entered them in the accounts. (296) Lastly, the reliability of the methodology chosen in order to determine the traditional own resources lost as a result of the infringement complained of is enhanced if the methodological choice made is accompanied by details of possible alternative methods, the results obtained from using them and the reasons why the Commission opted for the methodology in question.

(4)    Use of the methodology based on statistical data in the present case

287. First of all, it is apparent from the parties’ submissions and from the documents before the Court as a whole that, because of the nature of the infringement of the provisions of customs law, little direct evidence was gathered to assess the scale of the losses of traditional own resources as regards imports into the United Kingdom during the infringement period. Specifically, that evidence is essentially limited to 12 items analysed in a laboratory by the United Kingdom customs authorities in 2017 (297) and to verification results from the Chinese customs authorities. (298) Such evidence is not representative evidence for the purpose of assessing the correct customs value of the imports in question and the scale of the losses of traditional own resources sustained by the EU budget on account of the fraudulent undervaluation of those imports. (299) As has already been explained on several occasions in this Opinion, the impossibility of quantifying those losses is the result, in the present case, of objective factors, namely the United Kingdom’s failure to take action to address the known risk of undervalued declarations. I therefore concur with the Commission’s argument that, since the undervalued goods have already been released for free circulation in the customs territory of the European Union, their actual value can no longer be determined, so that the amount of losses of traditional own resources for the EU budget can be calculated only by means of a retrospective estimate stricto sensu. It seems to me that that starting point is not actually disputed by the United Kingdom, as it submits its own statistical method for determining possible losses of traditional own resources in the event that the infringement alleged against it in the first plea in law is upheld.

288. In that context, it must be observed that, on the basis of the data available to them, the parties agree that customs fraud was committed in the United Kingdom during the infringement period, on account of the undervaluation of goods imported from China, and also agree that the volume of undervalued imports increased considerably between 2012 and 2016. (300) Similarly, it is common ground between the parties that, based on a comparison of the data from the first half of 2017 and from the first half of 2018, Operation Swift Arrow (301) had the effect of considerably reducing the volume of products concerned imported into the United Kingdom with a fraudulently undervalued customs value, while the volume of lawful imports remained at a comparable level. Even though the parties disagree as to how those facts should be interpreted, they accept that fact as such. Moreover, they do not dispute the appropriateness of using, in principle, a methodology based on statistical data in order to assess the amount of traditional own resources lost due to customs fraud, involving, as a first step, the determination of the volume of imports that were fraudulently understated during the infringement period, followed by the determination of the ‘correct’ customs value of those goods. As a second step, the amount of the additional customs duties is calculated on the basis of the difference between the declared value and that ‘correct’ value.

289. By contrast, the parties are in profound disagreement over the basic aspects of the methodologies used to calculate losses of traditional own resources. In the first place, as regards the determination of the volume of undervalued goods, the Commission contends that it is necessary to take into account the volume of imports falling below the lowest acceptable price, established on the basis of an EU-wide average value and the daily aggregated data contained in the Surveillance 2 database, whereas the United Kingdom maintains that, in order to determine that volume, a ‘compliance threshold’ should be used, established on the basis of the values declared on importation into the United Kingdom alone, below which imports of the products concerned are likely to be undervalued. (302) In the second place, as regards the benchmark value for ‘revaluing’ the undervalued goods, the Commission argues that recourse must be had to the difference between the declared value and the EU-28 cleaned average price, whereas the United Kingdom submits that items falling below the ‘compliance threshold’ may be ‘revalued’ by calculating the difference between the declared value (per item) and the value of that threshold. The diverging methodological approaches lead to a huge disparity in the resulting estimates of traditional own resources lost. Based on the OLAF methodology, the Commission maintains that EUR 2 679 637 088.86 (gross amount, less collection costs) should have been made available to the Commission as traditional own resources. The United Kingdom initially estimated that amount at GBP 217 646 623, (303) before deduction of the Breach C18 payment notices. (304) That figure was subsequently revised downwards to GBP 143 115 553, from which GBP 44 296 285 must be deducted in respect of the Breach C18 payment notices. In short, one of the most significant differences between the methods put forward by the parties lies in the fact that, while the Commission’s approach is based on average prices at EU level as a whole, the United Kingdom’s method is based on the use of data from the United Kingdom alone.

290. That said, it is necessary to examine in turn the two stages of the methodology on which the Commission relied in order to estimate the loss of traditional resources, namely (i) the determination of the volume of undervalued imports and (ii) the benchmark value for ‘revaluing’ those imports.

(i)    Determination of the volume of undervalued imports

291. The United Kingdom submits that there is no cogent reason for using the lowest acceptable price deduced from the EU-28 average prices in order to determine the volume of goods that were undervalued during the infringement period. That State also contends that it is apparent from the application and the pleadings of the Commission submitted during the pre-litigation stage that the losses of traditional own resources established for the period from November 2011 to November 2014 are limited to the additional customs duties claimed by the United Kingdom authorities in the Snake C18 payment notices, which were cancelled.

292. In the light of the abovementioned defence arguments put forward by the United Kingdom, a two-step analysis of the issues arising from the determination of the volume of imports that were undervalued during the infringement period is called for, in which I will take a view, first, on the period from November 2011 to November 2014, and then on the estimates drawn up by the Commission for the period from 1 January 2015 to 11 October 2017.

–       Period from November 2011 to November 2014

293. As regards the subject matter of the claim for the period from November 2011 to November 2014, the Commission stated, in particular, in reply to the questions put by the Court, that it takes issue with the United Kingdom for failing to fulfil its obligations under the rules on traditional own resources and that it claims in that respect amounts relating to the undervalued imports established on the basis of the OLAF methodology.

294. In that regard, it is clear from Article 120 of the Rules of Procedure of the Court and from the case-law relating to that provision that an application must state the subject matter of the proceedings and a summary of the pleas in law on which the application is based, and that that statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application. It is therefore necessary for the essential points of law and of fact on which a case is based to be indicated coherently and intelligibly in the application itself and for the heads of claim to be set out unambiguously so that the Court does not rule ultra petita or fail to rule on an objection. (305) In particular, the Commission’s action must contain a coherent and detailed statement of the reasons which have led it to conclude that the Member State in question has failed to fulfil one of its obligations under the Treaties. Accordingly, a contradiction in the heads of claim put forward by the Commission in support of its action for failure to fulfil obligations does not satisfy the requirements imposed. (306)

295. In the present case, I note that, as regards the assessment of the losses of traditional own resources submitted in the application, the Commission expressly stated that the period from November 2011 to November 2014 was ‘covered because of the debts established by the United Kingdom itself and later cancelled’. In addition, in the section of the application describing the infringement, the Commission goes to great lengths to explain the infringement based on the administrative error committed when the Snake C18 payment notices were cancelled. (307) It claims that, as a result of that administrative error, for which the United Kingdom authorities are financially liable, the United Kingdom caused losses of traditional own resources for the EU budget. To my mind, in so doing, the application demonstrates that there is a link between the administrative error attributable to the United Kingdom and the losses of traditional own resources which that State is required to make available to the Commission. In the reply, the Commission added that ‘the present infringement action concerns customs debts that the United Kingdom established in the wake of [Operation] Snake’.

296. It therefore seems to me that, by that information, with respect to that period, the Commission itself limited the subject matter of the second plea in law to the losses of traditional own resources for which the United Kingdom is allegedly liable on account of the debts which that State itself established in the context of Operation Snake, including the 23 Snake C18 payment notices which were issued to traders and subsequently cancelled. Such an interpretation is, in my view, supported by the complaints made by the Commission in the letter of formal notice and in the reasoned opinion. Thus, it is apparent from the letter of formal notice that, ‘on the basis of the 24 debts established and later cancelled, amounts of traditional own resources are due for the period concerned (November 2011-2014)’. (308) It should also be noted that the reasoned opinion contains, first of all, the same wording as that used in the application and goes on to state unequivocally that, ‘in so far as this argument of the UK is intended to limit the temporal scope of the infringement, it should be observed that the Commission’s claim in respect of the period from 2011 to the completion of [Operation] Snake in 2014 concerns the amounts concerned by the post-clearance demand notes issued by UK customs following that operation but subsequently cancelled’. (309)

297. It follows from the foregoing considerations that, as regards the period from November 2011 to November 2014, the subject matter of the second plea in law is limited to establishing the losses of traditional own resources for which the United Kingdom is liable on account of the additional customs debts established in the course of Operation Snake and, in particular, the 23 Snake C18 payment notices which were cancelled as a result of administrative errors attributable to that Member State. (310)

–       Period from 1 January 2015 to 11 October 2017

298. As regards the period from 1 January 2015 to 11 October 2017, the Commission uses the OLAF methodology in the application in order to determine the amounts of traditional own resources lost and, in particular, the volume of undervalued imports. The Commission’s approach is that the volume of imports declared at a value falling below a risk threshold of 50% of the cleaned average price serves as a basis for determining the amount of those losses, which thus corresponds to the amount of traditional own resources that the United Kingdom would have collected and made available to the European Union if it had fulfilled its obligations. According to the United Kingdom, the choice made by the Commission in that respect is an arbitrary one. Consequently, it disputes the approach whereby every declaration of goods falling below that threshold is automatically treated as an undervalued declaration and maintains that that situation simply provides grounds for entertaining doubts which may lead to additional checks.

299. In that regard, it must be observed that the Commission, in principle, endorses the approach whereby all imported goods with a declared value lower than the average price of products in the same category cannot as a rule be regarded as being, by definition, undervalued goods, stating that the OLAF methodology was not applied to all goods imported into the United Kingdom which were declared at a value falling below the threshold of 50% of the cleaned average price, but that it uses daily aggregates. According to the Commission, the effect of using daily aggregates is that, if certain consignments of goods have a value falling below the threshold of 50% of the cleaned average price and other consignments enable an average above the EU-28 daily lowest acceptable price to be reached, the average daily aggregate will be higher than the lowest acceptable price, with the result that the daily aggregate covering those undervalued consignments will not be included when calculating the resources lost. (311) The Commission asserts that, although the use of daily aggregated data may result in individual legitimate imports being included in the volume of imports declared below the lowest acceptable price, the OLAF methodology excludes, inter alia, a certain proportion of undervalued goods. It seems to me that, in its written replies to the Court’s questions, the United Kingdom departs from its previous position and is actually in agreement with the Commission’s argument, since it states that the sole reason why the sum calculated by the Commission in respect of traditional own resources is much higher than that calculated according to the United Kingdom’s method is that the OLAF methodology uses much higher ‘revaluation’ prices. (312)

300. To conclude, the parties’ difference in approach as regards the volume of undervalued goods imported during the infringement period, used to calculate the losses of traditional own resources, can clearly be explained by the different thresholds chosen by them. While the OLAF methodology is based on the lowest acceptable price of 50% of the EU-28 cleaned average price, the United Kingdom favours a calculation based on individual import declarations collected by its customs authorities in order to establish the undervaluation threshold. (313) In view of the differences between those criteria and the fact that both the OLAF methodology and the methodology proposed by the United Kingdom are intended to evaluate the same losses but at different levels – in other words, at the level, respectively, of the European Union as a whole and of the State concerned – I take the view that the methodology put forward by the United Kingdom could provide a relevant point of comparison for a critical assessment of the volume of imports that were undervalued during the infringement period calculated on the basis of the OLAF methodology. In its replies to the Court’s questions on what the possible impact on the amount of own resources lost would be if the Commission were to use the United Kingdom’s undervaluation threshold instead of the lowest acceptable price as the benchmark value for undervalued imports, the United Kingdom observed that, although it was unable to replicate the Commission’s calculations exactly, the estimated percentage reduction in the losses of traditional own resources would be 4.4% or 4.7%. Therefore, as the United Kingdom rightly pointed out, I consider that the huge disparity between the Commission and the United Kingdom’s respective estimates of the losses of traditional own resources in the present case can be explained mainly by the benchmark value for ‘revaluing’ the under-declared goods rather than the volume. (314)

301. It follows from the foregoing that the Commission’s method does not manifestly overestimate the volume of goods that were undervalued during the infringement period. Having regard to the length of that period and the nature of the fraud in question, it seems to me that the parties’ positions on that point do not differ significantly inasmuch as a variation of less than 5% between the respective estimates of the Commission and the United Kingdom remains within reasonable limits. Accordingly, the estimates of the volume of undervalued imports as a basis for determining the amounts of traditional own resources lost, as put forward by the Commission in the application, must be upheld.

(ii) Benchmark value for determining the amounts of own resources lost

302. As has already been pointed out in this Opinion, the positions of the parties differ mainly on the issue of the price level at which goods considered to be undervalued should be ‘revalued’ in order to calculate the additional customs duties and to determine the scale of the losses of traditional own resources for the EU budget. According to the Commission, that correction must be made at the level of the cleaned average price, since the price of textiles and footwear does not vary significantly over time and, in the absence of physical checks and samples taken by the United Kingdom customs authorities at a statistically representative level, it must be assumed that the prices and the quality of the undervalued goods correspond to the distribution of prices not affected by undervaluation. By contrast, the United Kingdom submits that that methodological choice is not justified, as there is no evidential basis for the assumption that the under-declared goods have the same quality and price profile as other goods imported from China. On the contrary, the evidence gathered appears to suggest that the undervalued imports were directed at the low-value segment of the United Kingdom market.

303. In that regard, as I have already pointed out, the benchmark value, as a normative criterion, cannot be arbitrary and aims to treat the Member State, for the period in question, as if it had correctly established the entitlements and entered them in the accounts. I consider that the benchmark value should be consistent with all the factual and legal circumstances of the infringement at issue, since it is one of the basic criteria for determining the scale of the losses of traditional own resources. (315)

304. First of all, it is apparent from the Commission’s analysis – which, moreover, is essentially not disputed by the United Kingdom – that the undervalued imports of textiles and footwear from China were mostly, in terms of volume, made under customs procedure 42, that is to say they were intended for other Member States in the customs territory of the European Union. By way of example, it is apparent from the OLAF report that, in 2016, 87% of low-value imports of textiles and footwear into the United Kingdom were made under customs procedure 42, whereas, during the same period, customs procedure 40 was used for only 13% of imports of textiles and footwear from China. It seems to me that that divergence confirms the shift to the United Kingdom of fraudulent operations directed at other Member States. (316) In my view, the Commission is also right to maintain that, as regards the collection of customs duties, there is no need to distinguish between the goods covered by those two customs procedures since the remaining 13% of imports declared under customs procedure 40 could have been transported to other Member States after being cleared through customs in the United Kingdom. It follows that the vast majority of undervalued imports were directly or indirectly steered towards the market for textiles and footwear in the European Union as a whole and not specifically towards the United Kingdom market, so that there are no reasonable grounds for ‘revaluing’ them on the basis of a different benchmark value from that characterising the price level of the products concerned in the European Union as a whole.

305. Next, it is apparent from its submissions that the United Kingdom criticises the use of the benchmark value based on the cleaned average prices, themselves based on the EU-wide average prices, because it does not take account of the quality of the goods concerned and their Member State of entry, especially since the Commission has not adduced evidence of the value of the goods in question. Therefore, preference should be given to the data specific to the United Kingdom over the EU-wide cleaned average price. In that regard, as already explained in this Opinion, (317) it is difficult to criticise the Commission for failing to adduce direct evidence relating to the value of the undervalued imports inasmuch as that omission is the result of the inaction of the United Kingdom customs authorities. I am of the view that, in the absence of direct evidence concerning the value of the goods in question, evidence based on statistical data, such as the data at issue, may be accepted in an action for failure to fulfil obligations under Article 258 TFEU in order to determine the losses of own resources for the EU budget.

306. Furthermore, regarding that criticism, it should be borne in mind that the determination of the scale of the losses of own resources in the present case must seek to establish what the Member State concerned would have had to contribute to the EU budget following the collection of customs duties during the infringement period if the irregularities described in the first plea in law in this action had not occurred. As has already been pointed out, (318) revenue from customs duties constitutes traditional own resources of the European Union, which must be made available to the European Union by Member States, under the combined provisions of Regulations No 1150/2000 and No 609/2014. (319) The collection of customs duties on importation is preceded by the determination of the customs value of the goods and the calculation of the related customs duties, those two elements being stages prior to the release for free circulation of the goods imported into the customs territory of the European Union and their definitive release for consumption. Therefore, as regards customs duties in particular, the estimate of the losses to the EU budget resulting from the lack of customs controls cannot be based on the possible destination of the goods concerned in the individual market of a Member State, notably in the low- or high-end segments of that market in terms of product quality, which, in the absence of direct evidence, is speculative, given that the customs value of the goods imported into the European Union is determined by the competent customs authorities. Consequently, I can only concur with the United Kingdom’s argument that the customs value of the goods corresponds to the cost of purchasing them from the exporter, that value being determined by the nature and quality of the goods, not by their destination. (320) It follows that, in order to determine the customs value of the goods on entry into the territory of the European Union, the identification of the Member State of destination is irrelevant, with the result that the Commission was right not to make any distinction based on the destination of the products concerned within the European Union in order to determine the scale of the losses of traditional own resources due to customs fraud involving the undervaluation of goods. (321)

307. For the sake of completeness, regarding the choice of the EU-28 cleaned average price as the benchmark value for assessing the scale of the losses of traditional own resources for the EU budget, as has already been pointed out in this Opinion, (322) the European Union forms a single customs union, so that the adoption of customs legislation falls within the exclusive competence of the European Union. Furthermore, the collection of customs duties, calculated on imports from third countries, determines the size of the EU budget. I infer from this that, in a case such as the one at issue here, where the inaction of the national authorities has resulted in there being no direct evidence enabling the scale of the losses of own resources to be determined, the Commission’s methodological approach based on a common benchmark should be confirmed, without taking into account the specific characteristics of each Member State, such as the standard of living and the purchasing power of its citizens, which are capable of dictating the sale prices of the products concerned in each Member State, taken individually. For those reasons, I am of the view that it is necessary to endorse the Commission’s approach of using, as a benchmark value, the EU-wide cleaned average prices, which are themselves based on the values declared by Member States in the joint database Surveillance 2. (323) That benchmark value is therefore the value which should have been applied in order to calculate the traditional own resources made available to the EU budget if EU customs law had been implemented correctly. Since that methodology is based on the average of the prices declared, that value reflects the nature and quality of all products imported during the infringement period, without according any preference to the market segments to which the goods in question belong. Given that the parties do not dispute the premiss that the textiles and footwear from China at issue are products with relatively stable prices, (324) it must be considered, in my view, that the EU-wide cleaned average prices constitute an appropriate, non-arbitrary reference benchmark for the purpose of assessing the losses of own resources for the EU budget. (325)

(5)    Summary of the assessment of traditional own resources

308. In the light of the above considerations, I do not think that the arguments put forward by the Commission in the application enable the Court to rule with certainty on the precise scale of the losses of traditional own resources at issue in the present action.

309. In the first place, concerning the period from November 2011 to November 2014, the subject matter of the application is, as stated above in this Opinion, (326) limited to the debts corresponding to the Snake C18 payment notices. Thus, the losses of traditional own resources in respect of which the Commission may seek a declaration must logically be those resulting from cancellation of those payment notices and cannot be higher than them. However, in its application, the Commission made a claim for losses of the European Union’s own resources in respect of the abovementioned period in the amount of EUR 1 001 511 991.60. (327) In that regard, as the United Kingdom rightly observes, in my view, that amount does not tally with the Commission’s argument that, for the period referred to above, its claim relates to the amounts concerned by the Snake C18 payment notices issued by the United Kingdom customs authorities, which were subsequently cancelled. It should be noted that, although those authorities determined the customs value of the goods identified as undervalued goods in Operation Snake by applying the EU-wide cleaned average prices, which was an administrative error attributable to the United Kingdom, (328) the estimate of the losses of own resources linked to the Snake C18 payment notices could not, in any event, exceed GBP 357 million. (329) Furthermore, according to the United Kingdom, the amount resulting from the Snake C18 payment notices issued to traders stands at GBP 192 568 694.30. (330) That discrepancy between, on the one hand, the amounts claimed in the form of order sought in the application and, on the other, the grounds of the application, as the basis for the claim seeking a declaration of losses of own resources in respect of the infringement period, can only be explained, in my view, by the Commission’s incorrect choice of point of reference, whereby it includes in its calculation, in addition to the amounts linked to recovery of the Snake C18 payment notices, all undervalued imports for that period on the basis of statistical data. In the present case, since significant uncertainties remain as to the accuracy of the amount claimed by the Commission for the period from November 2011 to November 2014 in respect of losses of own resources for the EU budget, I consider that it has not substantiated to the requisite legal standard the full extent of that amount.

310. In the second place, it follows from the foregoing that the OLAF methodology which the Commission applied in order to estimate the losses of traditional own resources for the period from 1 January 2015 to 11 October 2017 is appropriate and not arbitrary, so that it may be used to determine the volume of goods that were undervalued during the infringement period and to determine the benchmark value for the purposes of their ‘revaluation’.

311. Although the Court may, in principle, grant the Commission’s request to quantify the amount of traditional own resources for the period from 1 January 2015 to 11 October 2017, the question nevertheless arises as to whether, as regards the period from 1 May 2015 to 11 October 2017, corresponding to the additional customs duties referred to in the Breach C18 payment notices that were issued in the context of Operation Breach from May 2018 onwards, the amounts referred to in those payment notices must be ‘taken into account’ in the estimate of the amount in respect of which the Commission seeks a declaration. In that regard, the United Kingdom states that it claimed customs duties totalling GBP 25 million from 27 traders and entered the corresponding amounts (331) in the B account. (332) Specifically, the United Kingdom maintains that, although the Commission had been aware of eight of those payment notices since May 2018, (333) it did not deduct the amounts corresponding to those notices from its estimate of the losses of traditional own resources. The decision to make that entry was not challenged in either the reasoned opinion or the application, whereas, for eight of those Breach C18 payment notices, entries in the B account were made in May 2018, so that the Commission was aware of them during the pre-litigation stage. The Commission replies that, throughout the pre-litigation and litigation stage, the United Kingdom refused to provide details of its calculations (particularly information on the declarations, volumes and ‘revaluation’ values used), with the result that it was unable to separate those imports from the total volume of imports covered by the approach based on the daily aggregated data from Surveillance 2.

312. In that regard, according to settled case-law, an action for failure to fulfil obligations under Article 258 TFEU may be brought only if the Member State concerned has failed to comply with the reasoned opinion within the time limit set therein. (334) Consequently, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in that Member State at the end of that period. (335) In the present case, it is apparent from the defence and it is not disputed by the Commission that the United Kingdom issued, in May 2018 and, therefore, before expiry of the time limit laid down in the reasoned opinion of 24 September 2018, eight Breach C18 payment notices relating to the period commencing on 1 May 2015. Accordingly, given that the Commission was aware of those notices before it sent the reasoned opinion, it should have included the relevant amounts in the reasoned opinion issued on 24 September 2018. Therefore, for the purpose of calculating the definitive amount owed for the period from 1 May to 11 October 2017, the United Kingdom can claim only the deduction of the eight Breach C18 payment notices. In order to determine whether the amounts corresponding to those eight payment notices must be taken into consideration in the present case, as has been pointed out on several occasions in this Opinion, regard must be had to Article 13(1) of Regulation No 609/2014 and Article 17(1) of Regulation No 1150/2000, which require Member States to make available to the Commission all amounts corresponding to established entitlements. (336) It is not apparent from the documents before the Court and, moreover, it is not argued by the parties that the eight Breach C18 payment notices at issue became irrecoverable under the second and third subparagraphs of Article 13(2) of Regulation No 609/2014 or that the claims involved were time barred in accordance with Article 103 of the Union Customs Code. (337) It follows that, to date, the amounts corresponding to those eight payment notices should, in principle, be deducted from the estimate of traditional own resources for the period from 2015 to 2017, particularly since, in its written reply to the Court’s questions, the United Kingdom adduced evidence in favour of that deduction. (338) However, I am of the view that, in the context of infringement proceedings under Article 258 TFEU, it is not for the Court to take the place of the Commission by calculating the precise amount corresponding to those eight Breach C18 payment notices itself, or to ‘deduct’ them from the amount claimed by the Commission in respect of losses of own resources for the EU budget.

313. Based on the foregoing considerations, I conclude that the second plea in law must be upheld in so far as it seeks a declaration that the United Kingdom has failed to comply with the abovementioned provisions on own resources, but that the Commission’s request to quantify the amount of traditional own resources must be rejected.

314. I therefore propose that the Court find that, as regards the period from November 2011 to November 2014, the United Kingdom did not make available the correct amount of traditional own resources relating to the fraudulent imports it identified in Operation Snake and to the Snake C18 payment notices which were subsequently cancelled, and that, in so doing, it infringed Articles 2 and 8 of Decisions 2007/436 and 2014/335, as well as Articles 2, 6, 9, 10, 11 and 17 of Regulation No 1150/2000, to which Articles 2, 6, 9, 10, 12 et 13 of Regulation No 609/2014, respectively, correspond. However, I propose that the Court reject in its entirety the request set out in the third paragraph of the first head of claim of the application in so far as it concerns that period, since the Commission has not demonstrated the accuracy of the amounts set out therein.

315. As regards the period from 1 January 2015 to 11 October 2017, I conclude that the United Kingdom failed to comply with the abovementioned provisions by failing to make available the amounts due. However, since the amount corresponding to eight Breach C18 payment notices should be subtracted from the amount of traditional own resources, and since it is not for the Court to take the place of the Commission in that determination, the amount of traditional own resources for the period from 1 January 2015 to 11 October 2017 cannot be determined in the present action.

316. If the Court endorses my proposed conclusion on the second plea in law, the question relating to the exchange rate to be used to calculate the amount of own resources lost becomes devoid of purpose. It is therefore in the alternative, and only if the Court decides to quantify the amount claimed by the Commission in respect of losses of traditional own resources, that I briefly examine the merits of that argument below.

4.      Default interest

317. As regards the objection of inadmissibility raised by the United Kingdom, according to which the Commission’s head of claim in respect of default interest under Article 12 of Regulation No 609/2014 is inadmissible because, in its reasoned opinion, the Commission did not mention any failure to fulfil obligations with regard to the payment of default interest, I note that that opinion expressly refers, inter alia, to Article 12 of that regulation, (339) which corresponds to Article 11 of Regulation No 1150/2000. The application does not therefore extend the scope of the dispute established in the reasoned opinion, contrary to what the United Kingdom claims, with the result that its objection of inadmissibility must be dismissed.

318. The Commission states that, since there is an inseparable link between, on the one hand, the obligations to establish the European Union’s own resources and to credit them to the Commission’s account within the prescribed time limits, and, on the other, the obligation to pay default interest, (340) the United Kingdom was required to pay that interest under Article 12 of Regulation No 609/2014. Referring to the wording of that provision, it maintains that the amount of such interest will not be calculated until the United Kingdom has made the principal amount available, thus bringing an end to its delay in crediting the amounts of traditional own resources in question to that account. In response, the United Kingdom submits that the claim for default interest is inadmissible since any such claim is premature, given that the obligation to pay default interest does not arise until a later stage. In that regard, as has already been explained, (341) the case-law of the Court has established the existence of an inseparable link between, on the one hand, the obligations to establish the European Union’s own resources and to credit them to the Commission’s account within the prescribed time limits, and, on the other, the obligation to pay default interest. The relationship between the obligation to credit own resources and the obligation to pay default interest for delay in crediting them is that of principal obligation to ancillary obligation. (342) It follows that, if the Court upholds the second plea in law and considers that the United Kingdom has failed to fulfil its obligations in respect of the establishment and entry of own resources, then that State is required to pay default interest. For the sake of completeness, I note that the parties appear to agree that, when the time comes for the United Kingdom to pay the amounts in question, the 16% ceiling provided for in Article 1(6) of Regulation 2016/804 should be applied to it. (343)

D.      Breach of the principle of sincere cooperation enshrined in Article 4(3) TEU

319. The complaint alleging breach of the duty of sincere cooperation as enshrined in Article 4(3) TEU must, in my view, be examined independently in so far as it concerns the Commission’s claims relating to the non-disclosure of information. (344) By its complaint, the Commission takes issue with the United Kingdom for refusing to provide it, first, with a copy of the legal assessment or any other information concerning the content of that assessment which led to the cancellation of the Snake C18 payment notices and, secondly, with all the information necessary to determine the resulting losses of traditional own resources. Those claims are separate from the argument put forward by the Commission in the first plea in law to the effect that the failure to take customs control measures constitutes an infringement of the obligation on the customs authorities to take measures aimed at protecting the financial interests of the European Union.

320. It should be recalled at the outset that it follows from the principle of sincere cooperation, enshrined in Article 4(3) TEU, that Member States are required to take all appropriate measures to guarantee the application and effectiveness of EU law. (345) It must be pointed out that it is for Member States, under Article 4(3) TEU, to facilitate performance of the Commission’s tasks, which consist, inter alia, pursuant to Article 17(1) TEU, in ensuring that the provisions of the Treaties and the measures taken by the institutions pursuant thereto are applied. (346)

321. In the present case, in the first place, as regards the Commission’s first complaint, (347) it is apparent from the documents before the Court that the Commission had asked the United Kingdom to provide it with a copy of the legal assessment at issue, which set out the reasons for cancelling the Snake C18 payment notices. (348) In its reply of 22 June 2018 to the letter of formal notice, the United Kingdom stated that the debts had been cancelled on the basis of an independent decision by the review officer (349) who did not rely on any legal assessment, an assessment which the United Kingdom denied even existed. Instead, the national authorities simply provided copies of various cancellation letters they had sent. The United Kingdom maintains that the legal assessment at issue concerned liquidation proceedings against certain traders, but that it did not result in cancellation of the Snake C18 payment notices.

322. In that regard, it should be noted that, in the specific context of the disclosure of customs documents, in order to assist the Commission in its task of ensuring compliance with the Treaties, Member States must, inter alia, provide it with the means of checking that the own resources credited are correct. (350) It follows, in my view, that, even if the legal assessment at issue was not relevant for the purpose of examining the legal basis for the cancellation decision taken by the review officer, the Commission was entitled to require the Member State to provide it with that document, since the documents before the Court show that the United Kingdom had acknowledged its existence on several occasions. (351) It must also be pointed out that, although it was the explanations put forward by the United Kingdom which caused the Commission to form the view that the legal assessment was the basis for the cancellation of the Snake C18 payment notices, it was because of the failure to recover the amounts due under those notices that it made its request for production of the document at issue, since those amounts related to the European Union’s traditional own resources and, therefore, its budget. The fact that it subsequently transpired that the Snake C18 payment notices had been cancelled for other reasons does not, in my view, affect the validity of the Commission’s request, which falls within its task as mentioned above.

323. I note that it is common ground between the parties, in principle, that the United Kingdom did not produce the legal assessment at issue. Without denying that non-production, the United Kingdom nevertheless maintains that, even if the Snake C18 payment notices had been cancelled on the basis of the legal assessment at issue, rather than an independent decision of the review officer, that assessment would in any event be protected by professional privilege and it would not be possible to override the fundamental protection accorded to its confidentiality. According to the United Kingdom, the obligation to make relevant documents available to the Commission is subject to ‘reasonable conditions’, (352) so that it was not obliged to disclose that document to the Commission.

324. In my view, that argument cannot be accepted. I consider, as the Commission rightly pointed out, that that obligation stems from a misinterpretation of the judgment in Commission v Italy (353) relied on by the United Kingdom. It appears that, in that case, the Commission had asked the Italian Republic for a statement justifying all the amounts in question, including references to all underlying customs documents. It was in response to the argument put forward by that Member State, according to which the request submitted by the Commission required a ‘substantial amount of preparatory work’ and for that reason it was unable to accede to the request ‘in the period laid down’, (354) that the Court observed that, where the Commission requests documents, it must do so under reasonable conditions. Consequently, that judgment does not seem to me to be relevant to the present case and I note that it does not relate to the issue of disclosure of documents covered by professional privilege.

325. As regards, in particular, the defence argument put forward by the United Kingdom that the legal assessment at issue was ‘privileged’ and thus confidential, I take the view that the United Kingdom has not shown, in the instant case, why a document drawn up by a department of HMRC, through a review officer, who by all appearances is also a member of that authority’s staff, (355) could not be disclosed to the Commission, even assuming it were covered by professional privilege. Since the legal assessment at issue was addressed to a department belonging to the same authority, it seems to be caught by the Court’s case-law on in-house advice. (356) It should also be borne in mind that, according to settled case-law, a Member State cannot plead provisions, practices or situations prevailing in its domestic legal order to justify a failure to observe obligations arising under EU law. (357) It follows that the United Kingdom cannot, in order to justify its failure to fulfil the abovementioned obligation to cooperate, invoke difficulties of that kind to justify its decision not to disclose documents relating to the Snake C18 payment notices to the Commission.

326. Concerning the second complaint alleging breach of the principle of sincere cooperation advanced by the Commission, (358) according to which the United Kingdom failed to provide all the information necessary to determine the amounts of own resources lost as a result of the Snake C18 payment notices, despite the Commission’s repeated requests, it seems to me that the United Kingdom does not actually challenge those claims. In addition, it is apparent from the documents in the case that it was only in the course of the procedure before the Court that the United Kingdom responded to those claims. In the light of those considerations, it must therefore be found that the United Kingdom has failed to fulfil its obligations under the principle of sincere cooperation.

327. Having regard to the foregoing, I am of the opinion that, by failing to disclose to the Commission the legal assessment at issue and all the information necessary to determine the amounts of own resources lost as a result of the Snake C18 payment notices, the United Kingdom has failed to fulfil its obligations under Article 4(3) TEU.

E.      Failure to fulfil obligations under the legislation on VAT and own resources accruing from VAT

328. By its third plea in law, the Commission submits that the United Kingdom has failed to fulfil its obligations under Article 4(3) TEU, Article 310(6) and Article 325 TFEU and Article 2(1)(b) and (d), Articles 83, 85 to 87 and Article 143(1)(d) of Directive 2006/112. In support of this plea, the Commission submits, in essence, that the incorrect determination of the customs value of imported goods covered by both customs procedure 40 and customs procedure 42 had the effect of reducing the taxable amount for VAT, with the result that the European Union was deprived of part of its own resources.

329. As regards customs procedure 40, the Commission maintains that, under Article 2(1)(d) and Articles 85 to 87 of Directive 2006/112, VAT must be collected by the Member State of importation and the taxable amount for that tax includes the customs value as well as customs duties and incidental expenses. It asserts that, since VAT was not collected taking account of the correct customs value of the imported goods, the corresponding amounts were not factored in when determining the base for own resources accruing from VAT.

330. Under customs procedure 42, the Commission notes, first of all, that, according to the OLAF report, in 2016, 87% of goods were imported through the United Kingdom to other Member States. Next, it states that, in respect of goods covered by customs procedure 42, the taxable amount for VAT is, under Article 83 of Directive 2006/112, the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of supply. Lastly, it submits that, if the customs value of imported goods is incorrect, the calculation of the VAT to be levied on them by the Member State of destination or of transport will therefore be incorrect.

331. The Commission infers from all of those considerations that, by failing to take action to address undervaluation of the customs value of imported goods, the United Kingdom has failed to fulfil its obligations under Article 4(3) TEU and Article 310(6) and Article 325 TFEU, and, having failed to ensure the collection of VAT revenue in full, has deprived the European Union of a proportion of the own resources accruing from that tax. Specifically, the Commission adds that Article 143(2) of Directive 2006/112, which lays down the conditions applicable to imports covered by customs procedure 42, requires Member States to take all appropriate measures to ensure the recovery of VAT. Consequently, by failing to adopt such measures, the United Kingdom undermined the ability of other Member States to collect VAT and should be held liable for that situation.

332. The United Kingdom contends, by contrast, that the Commission’s complaint has no legal basis. In that regard, it states that neither the provisions of Directive 2006/112 nor those of Article 4(3) TEU render a Member State liable for losses of traditional own resources or own resources accruing from VAT arising in other Member States. It adds that the Commission, which simply invokes general obligations to provide sincere cooperation and to counter fraud, is unable to specify the legal basis on which a Member State may be held accountable, beyond its borders, for the levying of VAT in another EU Member State. It also observes that, if the Commission’s proposition were to be accepted, it would be impossible to determine the degree of liability of one Member State for the loss of own resources arising in another Member State as a result of the former’s failure to fulfil its obligations.

333. The United Kingdom also maintains that, under Article 83 of Directive 2006/112, the taxable amount for VAT determined for imported goods covered by customs procedure 42 is based on the purchase price charged to the final purchaser in the Member State of destination. It contends that it is for the second State to check and ensure that VAT on those purchases is properly accounted for. It infers from this that the alleged causal link relied on by the Commission has not been established. Finally, the United Kingdom asserts that none of the factual evidence submitted by the Commission shows that, by its conduct, it prevented other Member States from collecting VAT.

334. In the light of those arguments, it is necessary, first of all, to clarify the legal rules governing own resources accruing from VAT (part 1), and then to analyse, in turn, the complaints specific to customs procedure 40 (part 2) and customs procedure 42 (part 3).

1.      Legal rules governing the making available to the EU budget of resources accruing from VAT

335. In order to ensure the establishment of an internal market within which competition is not distorted and the free movement of goods and services is guaranteed, the EU legislature has endeavoured to harmonise the rules relating to turnover taxes by means of a system of VAT, which is a tax on consumption extending to most aspects of the economy. To that end, Directive 2006/112 lays down a common rule on the taxable amount. Specifically, under Article 73 of that directive, the taxable amount to which the rate of VAT is applied is to include ‘everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply’. (359) Beyond that principle, the taxable amount is governed by specific rules, particularly as regards intra-Community acquisitions of goods (360) and the importation of goods. (361)

336. Furthermore, in accordance with Article 2(1)(b) of Decision 2007/436 and Article 2(1)(b) of Decision 2014/335, the European Union’s own resources include, in addition to traditional own resources, revenue from the application of a uniform rate (362) to the harmonised VAT assessment bases determined according to EU rules. That uniform rate is a ‘rate of call’ of that resource and not a rate of tax, since it does not impose tax obligations on taxpayers but merely requires States to levy the amount for which they are liable vis-à-vis the European Union on any budget source. (363)

337. As regards the assessment base of that own resource, which differs from the taxable amount provided for in Directive 2006/112, Article 3 of Regulation No 1553/89 states, in essence, that the VAT resources base is to be calculated by dividing the total net VAT revenue collected by a Member State during the year by the rate at which VAT is levied during that same year, or by the weighted average rate of VAT if more than one VAT rate is applied in a Member State. (364)

338. That system of own resources is thus designed, as regards resources accruing from VAT, to impose an obligation on Member States to make available to the European Union as own resources a proportion of the amounts which they collect as VAT. (365)

339. It follows that there is a direct link between the collection of VAT revenue in compliance with the applicable EU law and the availability to the EU budget of the corresponding resources accruing from VAT, since any lacuna in the collection of the first potentially causes a reduction in the second. (366) Consequently, Member States are obliged to ensure the effective collection of the European Union’s own resources by collecting sums corresponding to those resources which, because of fraud, have been withheld from the EU budget. (367)

340. In that respect, it must be recalled that, in relation to VAT, it follows, in particular, from Articles 2 and 273 of Directive 2006/112, read in conjunction with Article 4(3) TEU, that Member States are not only under a general obligation to take all legislative and administrative measures appropriate for ensuring the collection in full of the VAT due in their territory, but must also take action to counter fraud. (368) Furthermore, as already stated, (369) Article 325 TFEU obliges Member States to counter illegal activities affecting the financial interests of the European Union through effective deterrent measures and, in particular, to take the same measures to counter fraud (370) affecting the financial interests of the European Union as they take to counter fraud affecting their own financial interests. (371)

341. In the light of the foregoing considerations, there is little doubt to me that, in the present case, the lack of appropriate measures to counter the risk of fraud and to ensure the correct assessment of imported goods (372) is such as to constitute, from the point of view of own resources accruing from VAT, a failure to fulfil obligations under Article 325 TFEU, giving concrete expression to Article 4(3) TEU, (373) capable of adversely affecting the financial interests of the European Union. That said, it follows from the case-law cited above that the link between the collection of VAT revenue by a Member State and the availability to the EU budget of resources accruing from VAT is only a potential link. Consequently, I consider it necessary to ascertain whether, in the light of the rules specific to each of the customs procedures applicable in the present case, the failure by the United Kingdom authorities to carry out customs controls, as submitted in the first plea in law, actually deprived the EU budget of a proportion of the own resources accruing from VAT.

2.      Complaint relating to the loss of own resources accruing from VAT under customs procedure 40

342. Customs procedure 40 applies where goods imported from a third country are directly released for free circulation. (374) In accordance with Article 2(1)(d) of Directive 2006/112, the importation of goods is included in the transactions subject to VAT. Article 85 of that directive provides that, ‘in respect of the importation of goods, the taxable amount [for VAT] shall be the value for customs purposes, determined in accordance with the Community provisions in force’. That taxable amount is adjusted in accordance with the rules laid down in Articles 86 and 87 of Directive 2006/112. (375) Furthermore, Article 70(1) of the Union Customs Code (376) clarified the definition of the customs value of goods, which is ‘the transaction value, that is the price actually paid or payable for the goods when sold for export to the customs territory of the Union, adjusted, where necessary’. It follows that the objective pursued by Article 85 of Directive 2006/112, read in conjunction with Article 70(1) of the Union Customs Code, is to include within the taxable amount everything constituting the value of the goods for the final purchaser. (377)

343. In the light of those considerations, it is clear that the failure to implement appropriate measures to counter customs fraud prevented the United Kingdom from applying the rules for determining the taxable amount for VAT on the importation of goods covered by customs procedure 40. However, it remains to be determined whether the own resources accruing from VAT were actually affected by that situation. In that regard, the Commission, which bears the burden of proving its allegation that obligations have not been fulfilled, (378) argues in general terms that the reduction of own resources accruing from VAT follows ipso facto from the undervaluation of the customs value of imported goods.

344. Nevertheless, I do not think that that argument is sufficient to establish the existence of a direct link between the United Kingdom’s failure and a possible reduction in own resources accruing from VAT. As I have already stated, (379) it is apparent from Article 3 of Regulation No 1553/89 that the VAT resources base is to be calculated by dividing the total net VAT revenue collected by the Member State by the VAT rate. As regards imported goods, the total net revenue received depends not only on the customs value of the goods but also on the sale price charged to the final purchaser. Thus, the amount of VAT revenue remains the same where the final purchaser has paid a purchase price equivalent to the actual customs value of the goods. It follows that a mere finding that the customs value of imported goods has been undervalued does not automatically lead to a reduction in the assessment base on which own resources accruing from VAT are calculated.

345. In those circumstances, I consider that the general reasoning on which the Commission relies to argue that, as regards imports of goods covered by customs procedure 40, the European Union was deprived of a proportion of the own resources accruing from VAT is not, in itself, sufficient to substantiate that complaint. Consequently, I propose that the Court dismiss the Commission’s claim on that point.

3.      Complaint relating to the loss of own resources accruing from VAT under customs procedure 42

346. First of all, it is worth recalling that, according to the OLAF report, 87% of the total volume of goods imported in 2016 were covered by customs procedure 42. (380)

347. As already explained in this Opinion, customs procedure 42 applies where, at the time of importation, it is clear that the imported goods are intended for another Member State. (381) In that situation, VAT is payable in the Member State of final destination of the goods and not in the Member State of the importer. Specifically, that exemption follows from Article 143(1)(d) of Directive 2006/112, according to which Member States are to exempt the importation of goods dispatched or transported from a third territory or a third country into a Member State other than that in which the dispatch or transport of the goods ends, where the supply of such goods by the importer designated or recognised under Article 201 of that directive as liable for payment of VAT is exempt under Article 138 thereof. In other words, the basis for the VAT exemption provided for in Article 143 of Directive 2006/112 is that the importation is followed by an intra-Community supply, which is itself exempt under Article 138 of that directive.

348. Furthermore, it is apparent from Article 68 of Directive 2006/112 that the chargeable event for VAT occurs when the intra-Community acquisition is made, that is to say, according to the second paragraph of that article, ‘when the supply [within the territory of the country] of similar goods is regarded as being effected’. In that regard, the Court has held that the concept of ‘supply of goods’ does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law, but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he or she were its owner. (382)

349. Lastly, for intra-Community acquisitions of goods, it follows from Articles 76 and 83 of Directive 2006/112 that the taxable amount for VAT is the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of supply.

350. In the present case, I find it difficult to endorse the Commission’s proposition that the incorrect determination by the United Kingdom of the customs value of imported goods had an impact on the amount of own resources accruing from VAT made available to the European Union. In the light of the abovementioned rules applicable to transactions covered by customs procedure 42, that direct link – which, moreover, the Commission has not substantiated in its pleadings – does not seem to me to have been proven for two reasons. First, the taxable amount for VAT applicable to goods covered by that procedure corresponds not to the customs value of the imported goods but to the purchase price of those goods in the Member State of final destination. Secondly, under customs procedure 42, VAT must be charged and paid in full in the Member State where the goods are ultimately supplied.

351. I would add that the systemic weakness of customs procedure 42 precludes a single Member State from being held liable for the loss of own resources accruing from VAT. In that regard, I note that, in Special Report No 13/2011 on the control of customs procedure 42, the Court of Auditors found that the application of the customs procedure had led to significant losses, which it estimated at approximately EUR 2 200 million, (383) and criticised the inadequacy of the checks carried out by the seven Member States selected for its study. (384) The Court of Auditors recommended, inter alia, improving the communication of key data within and between Member States, encouraging the automatic verification of VAT identification numbers and creating a common EU risk profile for imports under customs procedure 42. (385) In Special Report No 24/2015 on tackling intra-Community VAT fraud, the Court of Auditors drew attention to the fact that those difficulties persisted, pointing out that ‘the legislative improvements made by the Commission relating to [customs procedure] 42 and the follow-up of our recommendations in Special Report No 13/2011 [are] positive but the fight against fraud is hindered by poor implementation and cases of non-compliance detected in the Member States during the current audit’. (386) In that regard, the Court of Auditors also noted that there were no effective cross-checks between customs and tax data in most of the Member States visited, and that there were problems with the accuracy, completeness and timeliness of VAT information shared between Member States. (387) Such findings also lead me to reject the Commission’s argument that the United Kingdom, by its omissions, prevented other Member States from collecting VAT in full.

352. In those circumstances, and despite the United Kingdom’s omissions in determining the customs value of the goods in question, it is not possible, in the absence of a direct link, to attribute to that State a reduction in own resources accruing from VAT in respect of transactions covered by customs procedure 42. Consequently, I suggest that the Court dismiss the Commission’s claim on that point.

353. In the light of all those considerations, I propose that the Court reject the third plea in law, both as regards the complaint relating to the loss of own resources accruing from VAT under customs procedure 40 and the complaint relating to the loss of own resources accruing from VAT under customs procedure 42.

VII. Costs

354. Under Article 138(1) of the Rules of Procedure of the Court of Justice, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. In accordance with Article 138(3) of those rules, where each party succeeds on some and fails on other heads, the parties are to bear their own costs. However, if it appears justified in the circumstances of the case, the Court may order that one party, in addition to bearing its own costs, pay a proportion of the costs of the other party. Since the Commission has applied for costs to be awarded against the United Kingdom and the latter has, in essence, been unsuccessful, the United Kingdom must, having regard to the circumstances of the case, be ordered to bear its own costs and to pay four fifths of the costs of the Commission. The Commission is to bear one fifth of its costs.

355. Under Article 140(1) of the Rules of Procedure, Member States intervening in the proceedings are to bear their own costs; it must therefore be held that the Kingdom of Belgium, the Republic of Estonia, the Hellenic Republic, the Republic of Latvia, the Portuguese Republic and the Slovak Republic are to bear their own costs.

VIII. Conclusion

356. For the reasons set out in this Opinion, I propose that the Court should:

(1)      declare that, by failing to take measures during the infringement period to protect the financial interests of the European Union and by failing to enter in the accounts the correct amounts of customs duty relating to certain imports of textiles and footwear from China, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Article 325 TFEU, Article 13 and Article 220(1) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Regulation (EC) No 648/2005 of the European Parliament and of the Council of 1 April 2005, Articles 3, 46 and Article 105(3) of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code, Article 248(1) of Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Regulation No 2913/92, as amended by Commission Regulation (EC) No 1335/2003 of 25 July 2003, and Article 244 of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code;

(2)      declare that, by failing to make available to the European Union the correct amount of traditional own resources relating to those imports, the United Kingdom has failed to fulfil its obligations under Articles 2 and 8 of Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union and Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources, Articles 2, 6, 9, 10, 12 and 13 of Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements, and Articles 2, 6, 9, 10, 11 and 17 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728;

(3)      declare that, by failing to disclose to the European Commission the legal assessment of the legal service of Her Majesty’s Revenue and Customs and all the information necessary to determine the amounts of own resources lost as a result of the post-clearance payment notices issued in the context of Operation Snake, the United Kingdom has failed to fulfil its obligations under the principle of sincere cooperation, as enshrined in Article 4(3) TEU;

(4)      dismiss the action as to the remainder;

(5)      order the United Kingdom to bear its own costs and to pay four fifths of the costs of the European Commission;

(6)      order the European Commission to bear one fifth of its costs;

(7)      order the Kingdom of Belgium, the Republic of Estonia, the Hellenic Republic, the Republic of Latvia, the Portuguese Republic and the Slovak Republic to bear their own costs.

1      Original language: French.

2      I would stress that the Court has jurisdiction under Article 86 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ 2020 L 29, p. 7), approved by Council Decision (EU) 2020/135 of 30 January 2020 on the conclusion of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (OJ 2020 L 29, p. 1), to entertain any actions brought by or against that State before the end of the transition period on 1 January 2021.

3      Council Decision of 26 May 2014 on the system of own resources of the European Union (OJ 2014 L 168, p. 105).

4      OJ 2007 L 163, p. 17.

5      OJ 2000 L 130, p. 1.

6      Gross national income.

7      OJ 2014 L 168, p. 39.

8      Council Regulation of 17 May 2016 amending Regulation No 609/2014 (OJ 2016 L 132, p. 85).

9      OJ 2014 L 168, p. 29.

10      Council Regulation (EEC, Euratom) of 29 May 1989 on the definitive uniform arrangements for the collection of own resources accruing from value added tax  (OJ 1989 L 155, p. 9).

11      OJ 1992 L 302, p. 1.

12      OJ 2005 L 117, p. 13.

13      OJ 2013 L 269, p. 1.

14      OJ 1993 L 253, p. 1.

15      OJ 2003 L 187, p. 16.

16      OJ 2015 L 343, p. 558.

17      OJ 2006 L 347, p. 1, and corrigendum OJ 2007 L 335, p. 60.

18      OJ 2009 L 175, p. 12.

19      The ‘products concerned’ or ‘textiles and footwear from China’.

20      It should be pointed out that the infringement period precedes the entry into force of the withdrawal agreement (see footnote 2 of this Opinion), when the European Union was composed of 28 Member States. For the purposes of this Opinion, reference is thus made to the ‘EU-28’.

21      It follows from Annex B to Implementing Regulation II, in Title II headed ‘Codes in relation with the common data requirements for declarations and notifications’, in point 1/10 headed ‘Procedure’, that, when a customs declaration is lodged, the importer is required to enter a four-digit code, the first two digits of which represent the procedure applied for. ‘Code 40’ corresponds to the simultaneous release for free circulation and home use of goods (‘customs procedure 40’), while code 42 relates to the simultaneous release for free circulation and home use of goods which are the subject of a VAT-exempt supply to another Member State.

22      The ‘potential loss’ for the period between May 2013 and March 2015 stood at EUR 589 676 121 for almost one and a half thousand million kilograms of products concerned.

23      It follows from the OLAF report that, in 2016, 87% of low-value imports of textiles and footwear into the United Kingdom were made under customs procedure 42, whereas, during the same period, that procedure was used for only 15% of imports of textiles and footwear from China recorded in the EU-28 as a whole. According to OLAF, that divergence confirms the shifting of fraudulent operations from other Member States to the United Kingdom.

24      See point 58 of this Opinion.

25       OLAF fixed the total amount of that loss at EUR 1 987 429 507.96, broken down as follows: EUR 325 230 822.55 in 2013; EUR 480 098 912.45 in 2014; EUR 535 290 329.16 in 2015; and 646 809 443.80 in 2016.

26      I note that the Court has not yet replied.

27      The form of order sought in the present action is reproduced twice in the application, once at the beginning and once at the end. However, the heads of claim are not worded in identical terms. Accordingly, although the part between square brackets (‘the third paragraph of the first head of claim’) does not appear in the petitum set out at the beginning of the application, it is included in the form of order sought at the end of the application (paragraph 370) and is repeated in the Commission’s reply (paragraph 285).

28      Under customs procedure 42, the importer of goods must enter in the single administrative document a code starting with the number 42 in order to secure a VAT exemption. This applies where goods imported from outside the European Union into a Member State are intended for transport to another Member State. Under Article 143 of Directive 2006/112, where that customs procedure is used, imports are exempt from VAT in the Member State of arrival but must be taxed in the Member State of destination of the goods.

29      See, inter alia, judgments of 8 December 2005, Commission v Luxembourg (C-33/04, EU:C:2005:750, paragraph 70); of 31 May 2018, Commission v Poland (C-526/16, not published, EU:C:2018:356, paragraph 49); and of 18 October 2018, Commission v Romania (C-301/17, not published, EU:C:2018:846, paragraph 32).

30      See judgment of 19 September 2017, Commission v Ireland (Registration tax) (C-552/15, EU:C:2017:698, paragraphs 28 and 29 and the case-law cited).

31      See, to that effect, judgments of 8 April 2008, Commission v Italy (C-337/05, EU:C:2008:203, paragraph 23), and of 13 February 2014, Commission v United Kingdom (C-530/11, EU:C:2014:67 paragraph 40).

32      See judgment of 11 July 2018, Commission v Belgium (C-356/15, EU:C:2018:555, paragraph 33 and the case-law cited).

33      See judgment of 11 July 2018, Commission v Belgium (C-356/15, EU:C:2018:555, paragraph 34 and the case-law cited).

34      Request annexed to its reply to the letter of formal notice of 22 June 2018.

35      See paragraphs 301 to 326 of the reasoned opinion.

36      Those documents are the JRC technical report entitled ‘The estimation of fair prices of traded goods from outlier-free trade data’ and the OLAF document entitled ‘The undervaluation of imports of textiles and footwear: Methodology for the calculation of estimated losses of customs duties’.

37      Concerning the estimated losses of traditional own resources for the EU budget, the download (‘DL 53’) that OLAF used to calculate those losses was already available on the Theseus website when OLAF published its final report on 1 March 2017 and continued to be available thereafter. It was also included in Annex 7 to the OLAF report. In answer to the questions put by the United Kingdom, the Commission referred to paragraphs 307 and 308 of the reasoned opinion.

38      See Annex A.32 to the application, reproducing the tables set out in Annex D to the report annexed to the reply of 11 February 2019.

39      Reports entitled ‘The undervaluation of imports of textiles and footwear: Methodology for the calculation of estimated losses of customs duties’ and ‘The estimation of fair prices of traded goods from outlier-free trade data’ (Annex A.35).

40      It is apparent from that annex that the cleaned average prices are calculated on the basis of data relating to imports extracted from the Comtext statistical database over a period of 48 months. It is a reference database for international trade in goods, managed by Eurostat. The reasoned opinion expressly refers to it in paragraph 309.

41      According to the Commission, the United Kingdom is able to access the non-aggregated data through the SurvRecapp application. It can therefore view, insert, update or delete the range of data in its possession.

42      See Annex D.5, pp. 149 to 1332.

43      See judgment of 18 November 2010, Commission v Spain (C-48/10, EU:C:2010:704, paragraph 33 and the case-law cited).

44      See point 126 of this Opinion.

45      See, to that effect, judgment of 15 December 2009, Commission v Germany (C-372/05, EU:C:2009:780, paragraph 33).

46      See point 77 of this Opinion.

47      See paragraph 116 et seq. of the defence.

48      See paragraph 28 of that report.

49      The United Kingdom submits that that first assurance clearly endorses the efforts made and measures taken by the United Kingdom to achieve that progress up to June 2014; it does not, as the Commission wrongly contends, refer only to that State’s future plans.

50      According to the United Kingdom, the Commission was well aware at the relevant time that, in the context of PCA Discount, the United Kingdom authorities had carried out documentary checks with follow-up visits after release of the goods but had not carried out pre-clearance controls, taken samples or requested security.

51      See judgment of 26 May 1982, Germany and Bundesanstalt für Arbeit v Commission (44/81, EU:C:1982:197, paragraphs 16 to 18).

52      The United Kingdom states that that assertion cannot be called in question by the principle, established by the case-law, that a legitimate expectation cannot be founded on an unlawful practice (judgment of 11 April 2018, SEB bankas, C-532/16, EU:C:2018:228, paragraph 50) and that a legitimate expectation cannot be relied upon against an unambiguous provision of EU law (judgment of 7 April 2011, Sony Supply Chain Solutions (Europe), C-153/10, EU:C:2011:224, paragraph 47).

53      See, to that effect, judgments of 11 March 1987, Van den Bergh en Jurgens and Van Dijk Food Products (Lopik) v EEC (265/85, EU:C:1987:121, paragraph 44 and the case-law cited), and of 7 April 2011, Greece v Commission (C-321/09 P, EU:C:2011:218, paragraph 45 and the case-law cited).

54      See, to that effect, judgment of 19 May 1992, Mülder and Others v Council and Commission (C-104/89 and C-37/90, EU:C:1992:217, paragraph 15).

55      See, to that effect, judgments of 6 December 2001, Greece v Commission (C-373/99, EU:C:2001:662, paragraph 56); of 24 April 2007, Commission v Netherlands (C-523/04, EU:C:2007:244, paragraph 28); of 1 June 2016, Hungary v Commission (T-662/14, EU:T:2016:328, paragraph 57); and order of 23 March 2011, Estonia v Commission (C-535/09 P, not published, EU:C:2011:171, paragraphs 72 and 73).

56      See, inter alia, judgments of 7 April 2011, Greece v Commission (C-321/09 P, EU:C:2011:218, paragraph 25), and of 19 July 2016, Kotnik and Others (C-526/14, EU:C:2016:570, paragraph 62).

57      See, by analogy, as regards the situation whereby the infringement comes to an end within the due period, Opinion of Advocate General Trstenjak in Commission v Germany (C-536/07, EU:C:2009:340, point 39).

58      See the first assurance relied on by the United Kingdom, set out in point 141 of this Opinion.

59      See the first assurance relied on by the United Kingdom, set out in point 140 of this Opinion.

60      See the second assurance relied on by the United Kingdom, set out in point 142 of this Opinion.

61      See, in particular, mutual assistance message AM 2007/015 of 20 April 2007 and the 2011 PCA Discount Guidelines.

62      See, to that effect and by analogy, judgments of 24 April 2007, Commission v Netherlands (C-523/04, EU:C:2007:244, paragraph 28 and the case-law cited), and of 6 October 2009, Commission v Spain (C-562/07, EU:C:2009:614, paragraph 18).

63      See, to that effect, judgment of 15 June 2000, Commission v Germany (C-348/97, EU:C:2000:317, paragraph 45 and the case-law cited).

64      See, inter alia, paragraphs 114, 115 and 131 of the defence.

65      See judgments of 14 April 2005, Commission v Germany (C-104/02, EU:C:2005:219, paragraphs 48 to 51), and of 5 October 2006, Commission v Germany (C-105/02, EU:C:2006:637, paragraphs 43 to 45).

66      C-392/02, EU:C:2005:683.

67      The future is used in the English-language version.

68      Paragraph 237 of the defence, citing the judgments of 14 April 2005, Commission v Germany (C-104/02, EU:C:2005:219, paragraphs 48 to 51), and of 5 October 2006, Commission v Germany (C-105/02, EU:C:2006:637, paragraphs 43 to 45).

69      Specifically, in those cases, the Commission asked the Court to declare, respectively, that the Federal Republic of Germany was ‘required to pay into the Community budget the interest owing in the event of late entry in the accounts’ (judgment of 14 April 2005, Commission v Germany, C-104/02, EU:C:2005:219, paragraph 1) and ‘obliged to credit immediately to the Commission’s account the own resources which remain unpaid due to the failures to fulfil obligations’ (judgment of 5 October 2006, Commission v Germany, C-105/02, EU:C:2006:637, paragraph 1).

70      Judgments of 14 April 2005, Commission v Germany (C-104/02, EU:C:2005:219, paragraphs 49 and 50), and of 5 October 2006, Commission v Germany (C-105/02, EU:C:2006:637, paragraphs 44 and 45).

71      Judgments of 14 April 2005, Commission v Germany (C-104/02, EU:C:2005:219, paragraph 49), and of 5 October 2006, Commission v Germany (C-105/02, EU:C:2006:637, paragraph 44).

72      See von Bardeleben, E., Donnat, F. and Siritzky, D., La Cour de justice de l’Union européenne et le droit du contentieux européen, La Documentation française, Paris, 2012, p. 196, and Opinion of Advocate General Sharpston in Commission v Czech Republic (Temporary mechanism for the relocation of applicants for international protection) (C-719/17, EU:C:2019:917, point 100).

73      See, for example, judgments of 21 September 1989, Commission v Greece (68/88, EU:C:1989:339); of 15 November 2005, Commission v Denmark (C-392/02, EU:C:2005:683); of 3 April 2014, Commission v United Kingdom (C-60/13, not published, EU:C:2014:219); and, more recently, of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601).

74      Judgment of 15 November 2005 (C-392/02, EU:C:2005:683, paragraphs 31 and 34).

75      Judgment of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601, paragraph 76 and the operative part).

76      See judgment of 9 July 2020, Czech Republic v Commission (C-575/18 P, EU:C:2020:530, paragraph 68).

77      See judgment of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601).

78      It should be borne in mind that Article 325 TFEU is the successor to Article 280 EC, which entered into force with the Treaty of Amsterdam in 1999 and itself marked a step forward from the previous Article 209A of the Treaty of Maastricht of 1992.

79      Member States establish traditional own resources and communicate the amounts of the established entitlements to the Commission. Thus, the Convention on the protection of the European Communities’ financial interests was introduced by the Council Act of 26 July 1995 (Council Act of 26 July 1995 drawing up the Convention on the protection of the European Communities’ financial interests, OJ 1995 C 316, p. 48).

80      Those amounts are communicated to the Commission by means of monthly A account statements. Established entitlements that have not been included in the A account because they have not been recovered by Member States and no security has been lodged (or even if security has been provided but the entitlements are disputed) are shown in a separate account. Those entitlements are subject to impairment on the basis of information forwarded every year by Member States.

81      Communication from the Commission to the European Parliament, the Council and the Court of Auditors – Consolidated annual accounts of the European Union 2017 (OJ 2018 C 348, p. 1).

82      SWD (2013) 483 final.

83      See Djurdjevic, Z., ‘Fraud adversely affecting the budget of the European Union: the forms, methods and causes’, Financial Theory and Practice, 2006, vol. 30, pp. 254 and 255.

84      On the definition of the concepts of ‘fraud’ and ‘any other illegal activities’, within the meaning of Article 325 TFEU, and the differences between them, see Opinion of Advocate General Bobek in Scialdone (C-574/15, EU:C:2017:553, point 65 et seq.). On the historical evolution of that provision prior to the Treaty of Lisbon (Article 209a of the EC Treaty), see Opinion of Advocate General Jacobs in Commission v ECB (C-11/00, EU:C:2002:556).

85      See, inter alia, judgments of 8 September 2015, Taricco and Others (C-105/14, EU:C:2015:555, paragraphs 50 and 51), and of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraph 38). Furthermore, the Court has pointed out that, although Member States are required to take effective measures to recover sums wrongly paid to the beneficiary of a subsidy funded in part from the EU budget, Article 325 TFEU does not impose any constraint on them, other than that relating to the effectiveness of the measures, as regards the procedure which must enable such an outcome to be achieved (judgment of 1 October 2020, Úrad špeciálnej prokuratúry (C-603/19, EU:C:2020:774, paragraph 55)).

86      See, to that effect, judgments of 8 September 2015, Taricco and Others (C-105/14, EU:C:2015:555, paragraph 51); of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraph 38); and of 5 June 2018, Kolev and Others (C-612/15, EU:C:2018:392, paragraphs 51 to 53).

87      See, inter alia, judgment of 31 October 2019, Commission v United Kingdom (C-391/17, EU:C:2019:919, paragraph 70).

88      See judgments of 11 October 1990, Italy v Commission (C-34/89, EU:C:1990:353, paragraph 12); of 21 February 1991, Germany v Commission (C-28/89, EU:C:1991:67, paragraph 31); and of 21 January 1999, Germany v Commission (C-54/95, EU:C:1999:11, paragraph 66).

89      See, inter alia, Opinion of Advocate General Bobek in Scialdone (C-574/15, EU:C:2017:553, point 75 et seq.). The substantive overlap of the obligations imposed by Article 325(2) TFEU and the principle of sincere cooperation under Article 4(3) TEU has its roots in the genealogy of the former provision. In a way, Article 325(2) TFEU represents an area-specific codification of the case-law of the Court on the principle of sincere cooperation. Furthermore, the Court has consistently held that, if EU legislation does not provide any penalty for an infringement of that legislation or if it refers to national laws and administrative provisions, Member States are required under Article 4(3) TEU to take all appropriate measures to ensure the application and effectiveness of EU law (see, for example, judgments of 21 September 1989, Commission v Greece (68/88, EU:C:1989:339, paragraph 23), and of 15 January 2004, Penycoed (C-230/01, EU:C:2004:20, paragraph 36)).

90      The same cannot be said of the application of that principle in the context of the Commission’s complaints concerning the disclosure of documents and information to enable it to determine the amounts at issue. Those complaints will be examined in part D of this Opinion.

91      See, to that effect, judgment of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414, paragraph 39).

92      See, by analogy, judgment of 26 February 2013, Åkerberg Fransson (C-617/10, EU:C:2013:105, paragraph 26), in which the Court established a ‘direct link’ between revenue from the application of a uniform rate to the harmonised VAT assessment bases and own resources, with the result that any lacuna in the collection of the first potentially causes a reduction in the second.

93      According to the case-law, although Member States are required to ensure compliance with the obligations to which taxable persons for VAT are subject and they enjoy in that respect a certain measure of latitude, inter alia, as to how they use the means at their disposal, that latitude is nevertheless limited, in particular, by the obligation to ensure the effective collection of the Community’s own resources (judgment of 17 July 2008, Commission v Italy, C-132/06, EU:C:2008:412, paragraphs 21 and 37 to 39). See, also, Article 3(a) to (d) of the Union Customs Code.

94      See, inter alia, judgments of 7 April 2016, Degano Trasporti (C-546/14, EU:C:2016:206, paragraphs 20 and 21); of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraphs 33 to 36); and of 17 January 2019, Dzivev and Others (C-310/16, EU:C:2019:30, paragraphs 27, 30 and 34 and the case-law cited).

95      See judgments of 17 July 2008, Commission v Italy (C-132/06, EU:C:2008:412), and of 11 December 2008, Commission v Italy (C-174/07, not published, EU:C:2008:704), in which the Court held that the Italian Republic had failed to fulfil its obligations under Articles 2 and 22 of Sixth Council Directive 77/388 and Article 10 EC (now Article 4(3) TEU). If EU legislation does not provide any penalty for an infringement of that legislation or if it refers to national laws and administrative provisions, Member States are required under Article 4(3) TEU to take all appropriate measures to ensure the application and effectiveness of EU law (settled case-law since the judgment of 21 September 1989, Commission v Greece (68/88, EU:C:1989:339, paragraph 23)).

96      Opinion of Advocate General Bot in M.A.S. and M.B. (C-42/17, EU:C:2017:564, point 83).

97      According to paragraphs 34 and 35 of the judgment of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936), irrespective of the discretion enjoyed by Member States in choosing their enforcement mechanisms, they must classify serious fraud as a criminal offence in order to ensure that the financial interests of the European Union are effectively protected. Thus, in the Opinion cited by the United Kingdom, Advocate General Bot took the view that the law is effective only if any infringement thereof is subject to penalties and the national legal framework for punishing VAT fraud must be adequate to protect against the risk of impunity (Opinion of Advocate General Bot in M.A.S. and M.B. (C-42/17, EU:C:2017:564, points 82 to 87)). On the requirement of effectiveness, see, also, Opinion of Advocate General Bobek in Scialdone (C-574/15, EU:C:2017:553, point 77).

98      See judgment of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414, paragraph 49).

99      See point 175 of this Opinion.

100      That is why, in accordance with Article 2(3) of Decision 2014/335, Member States are to retain 20% of customs duties by way of collection costs. That percentage used to be 25% under Article 2(3) of Council Decision 2007/436.

101      See judgments of 16 May 1991, Commission v Netherlands (C-96/89, EU:C:1991:213, paragraph 37); of 15 June 2000, Commission v Germany (C-348/97, EU:C:2000:317, paragraph 64); and of 18 October 2007, Commission v Denmark (C-19/05, EU:C:2007:606, paragraph 18).

102      It follows from the case-law that there is an inseparable link between the obligation to establish the existence of the customs debt and the obligation to credit it to the Commission’s account within the prescribed time limit, together with default interest, where appropriate, a link which stands and falls with the establishment of the own resources and which cannot depend on the arbitrary or negligent conduct of a Member State, as Advocate General Geelhoed pointed out in his Opinion in Commission v Denmark (C-392/02, EU:C:2005:142, point 57). Moreover, Member States must determine the claims, even where they dispute them. Otherwise, the Member State concerned risks disrupting the financial equilibrium of the European Union, even temporarily (see, to that effect, judgments of 18 October 2007 (Commission v Denmark, C-19/05, EU:C:2007:606); of 16 May 1991 (Commission v Netherlands, C-96/89, EU:C:1991:213, paragraph 38); and of 15 June 2000 (Commission v Germany, C-348/97, EU:C:2000:317, paragraph 11)). Accordingly, I take the view that a Member State may not unilaterally dispense with determining claims.

103      See judgments of 12 May 2005, Commission v Belgium (C-287/03, EU:C:2005:282, paragraph 27 and the case-law cited), and of 19 May 2011, Commission v Malta (C-376/09, EU:C:2011:320, paragraph 32 and the case-law cited).

104      See, to that effect, judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160, paragraph 54), from which it follows, mutatis mutandis, that Member States cannot be criticised for failing to eradicate the risks of customs fraud and adopt measures relating to those risks unless their authorities were aware of those risks during the infringement period.

105      Summary and section 6 of the OLAF report.

106      See paragraph 2.6 of the report of a consultancy firm annexed to the United Kingdom’s reply of 11 February 2019.

107      Paragraph 2.4 of the report of a consultancy firm annexed to the United Kingdom’s reply of 11 February 2019.

108      The United Kingdom also submits that the Court should reject all claims of failure to fulfil obligations in respect of the period prior to June 2015, since it was only then, when OLAF sent a message of formal mutual assistance to Member States (AM/2015/013 of 16 June 2015) recommending that a number of control measures be taken in order to counter that fraud, that the United Kingdom became sufficiently aware of it.

109      Particularly at the ad hoc meeting of 25 and 26 February 2015 organised by the Commission. During that meeting, OLAF ‘strongly recommended’, inter alia, that Member States use appropriate risk filters to identify potentially undervalued consignments, that they require the lodging of security for consignments identified as suspicious and that they carry out investigations to establish the customs value.

110      Namely during Operation Octopus.

111      According to the Portuguese Republic, it is apparent from mutual assistance message AM/2015/013 of 16 June 2015, which is a formal mutual assistance message sent by OLAF to Member States, and from paragraph 83 of Special Report No 24/2015 of the European Court of Auditors, entitled ‘Tackling intra-Community VAT fraud: More action needed’, that the United Kingdom authorities were not aware of a widespread practice of making false customs declarations.

112      See mutual assistance message AM 2007/015 of 20 April 2007. Moreover, that mutual assistance message referred even then to the existence of that problem, which had been detected in Germany in 2005 following an initial inquiry.

113      That mutual assistance message called on ‘all Member States’ to look for ‘possible indications that invoices [for textiles and footwear from China] have been kept artificially low’, to ‘determine the real value … of the goods [in the light of such indications of undervaluation]’, to ‘carry out appropriate checks at customs clearance on imports of this nature in the future’ and to ‘take appropriate safeguard measures’.

114      See mutual assistance message AM 2007/015 of 20 April 2007, in particular point 12.

115      See mutual assistance message AM 2009/001 of 23 January 2009, in particular points 10 to 12. It also drew Member States’ attention, in that regard, to the advice that OLAF had already given in mutual assistance message AM 2007/015 of 20 April 2007. Specifically, it asked all Member States to ‘identify high risk consignments’ and ‘verify the existence of an importer’. It should also be noted that mutual assistance message AM 2015/013, relied on in particular by the Portuguese Republic in its statement in intervention, recalls the warnings sent by OLAF to Member States in messages AM 2007/015 and AM 2009/001.

116      These are instruments provided for in Articles 17(2) and 18(1) of Council Regulation (EC) No 515/97 of 13 March 1997 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs and agricultural matters (OJ 1997 L 82, p. 1). Under Article 17(2), ‘the Commission shall communicate to the competent authorities in each Member State, as soon as it becomes available, any information that would help them to enforce customs or agricultural legislation’. Article 18(1) provides that ‘the Commission shall convey this information [forwarded by the competent authorities of a Member State, which have become aware of operations which constitute, or appear to constitute, breaches of customs or agricultural legislation that are of particular relevance at Community level] to the competent authorities of the other Member States’.

117      On the competence of the European Union in the field of the customs union and the exercise of control roles by the national authorities, see Albert, J.-L., ‘Section 1 – Un pluralisme national préservé’, Le droit douanier de l’Union européenne, Bruylant, Brussels, 2019, pp. 466-473, and Natarel, V.E., ‘Le phénomène douanier dans le marché intérieur: à propos de l’exemple français’, Revue des affaires européennes, 2005, No 4, p. 637.

118      The United Kingdom also relies on the summary of the conclusions of the meeting of the Customs Code Committee of 9 March 2012 to claim that neither OLAF nor the Member States were fully aware of the scale of the fraud in March 2012. It is apparent from that document that the information contained therein was merely repetition. See the summary of the conclusions of the meeting of the Customs Code Committee of 9 March 2012, point 5(b).

119      Joint customs operations, like Operation Snake, constitute a ‘special watch’ within the meaning of Article 7 of Regulation No 515/97, specifically, under paragraph (c) of that article, a special watch of the movement of goods indicated as being the object of potential breaches of customs legislation. The purpose of the operation is, in particular, to coordinate Member States’ actions at EU level in order to counter a specific instance of fraud more effectively.

120      See Special Report No 19/2017 of the Court of Auditors, entitled ‘Import procedures: shortcomings in the legal framework and an effective implementation impact the financial interests of the EU’, paragraph 94.

121      Accordingly, it is necessary to reject the argument put forward by the United Kingdom that the first time OLAF asked Member States to take specific measures to counter undervaluation fraud was on 16 June 2015, when it sent mutual assistance message AM 2015/013.

122      Special Report No 24/2015, cited above in footnote 111 of this Opinion. In that regard, the Portuguese Republic cites paragraph 83 of that report, in which the Court of Auditors stated that a joint customs operation with OLAF had found that ‘40% of [textiles and footwear from China] released into free circulation under CP [customs procedure] 42 were undervalued’.

123      The OLAF methodology uses an average of Member States’ prices calculated over a period of 48 months.

124      Judgment of 16 June 2016 (C-291/15, EU:C:2016:455, paragraphs 38 and 39).

125      Judgment of 17 March 2011 (C-23/10, not published, EU:C:2011:160, paragraphs 50 and 54).

126      See point 55 of this Opinion.

127      Judgment of 16 June 2016 (C-291/15, EU:C:2016:455).

128      Judgment of 17 March 2011 (C-23/10, not published, EU:C:2011:160, paragraphs 50 and 54).

129      I note that, in the application, the Commission refers to infringement of the general principle of sincere cooperation enshrined in Article 4(3) TEU as the legal basis for the first plea. However, as I have already stated in point 174 of this Opinion, Article 325 TFEU and the customs provisions at issue must be regarded as the specific expression of that general principle, so that there is no need to examine the breach of the general duty of sincere cooperation in the context of the present plea.

130      See points 175 to 177 of this Opinion.

131      It seems to me, on the one hand, that the Commission accepts the United Kingdom’s defence argument in that respect by acknowledging that it is required to demonstrate, in the application, that the measures taken by that State were not effective. On the other hand, the Commission disputes the United Kingdom’s argument that the Commission is required to demonstrate that any measures taken by that State were manifestly inappropriate. In view of the objective of countering fraud laid down in Article 325 TFEU, those arguments are effectively a different way of expressing the same idea.

132      Regulation of the European Parliament and of the Council of 13 April 2005 amending Council Regulation No 2913/92 (OJ 2005 L 117, p. 13).

133      Commission Regulation (EC) No 1875/2006 of 18 December 2006 amending Regulation No 2454/93 (OJ 2006 L 360, p. 64).

134      This refers to the Import Control System (ICS), which entered into force on 1 January 2011. That legislation gave concrete expression to the international programme launched initially by the United States (‘Customs Trade Partnership Against Terrorism’) and subsequently, in 2005, by the World Customs Organisation (WCO), establishing, inter alia, the framework of ‘SAFE’ standards designed to secure trade in goods without adversely affecting the free flow of such trade by sending advance information to the competent authorities.

135      My emphasis. Furthermore, Article 46(2) of the Union Customs Code provides that ‘customs controls, other than random checks, shall primarily be based on risk analysis using electronic data-processing techniques, with the purpose of identifying and evaluating the risks and developing the necessary counter-measures’ (my emphasis).

136      On the distinction between the concepts of ‘risk management’ and ‘risk analysis’, see Drobot, E. and Klevleeva, A., ‘Risk management in customs control’, Munich Personal RePEc Archive, 2016. However, in the light of the provisions of Article 46 of the Union Customs Code and the drafting history of Article 13(2) of the Community Customs Code, the expression ‘risk management’ appears to refer to the national or common management (at EU level) of risks. The concept of ‘risk analysis’ seems to me to refer specifically to the analysis carried out by States, in the context of customs control, with the purpose of ‘identifying and evaluating the risks and developing the necessary counter-measures’.

137      See Widdowson, D., ‘Managing risk in the customs context’, in De Wolf, L. and Sokol, J.B. (eds), Customs Modernization Handbook, World Bank, Washington D.C., pp. 91-99.

138      See Widdowson, D., op. cit. Also see Dunne, M., ‘À propos de la gestion des risques’, OMD Actualité, June 2010, and Jacob, C. and Zaharia, S., ‘Risk management – a new priority system customs and its consequences’, Munich Personal RePEc Archive Paper 39352, made available on 17 June 2012.

139      Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EEC) No 2913/92 (COM(2003) 452 final), see amendment of Article 4.

140      However, to my knowledge, there is no definition of the concept of ‘risk analysis’ in EU law. It is described by the WCO as the ‘systematic use of available information to determine how often defined risks may occur and the magnitude of their likely consequences’. See Berr, C., Répertoire de droit commercial, Douanes, Dalloz, January 2013 (updated March 2019), paragraph 68. See, also, the WCO Compendium for Customs Risk Management, available at https://ec.europa.eu/taxation_customs/general-information-customs/customs-risk-management/international-cooperation_fr#heading_2

141      See Proposal for a Regulation of the European Parliament and of the Council amending Regulation No 2913/92 (COM/2003/0452 final), point 3 of the explanatory memorandum. See, also, press release IP/03/1100. Those proposals were approved by the European Parliament, in consequence of which Regulation No 648/2005 was published in the Official Journal of the European Union on 4 May 2005 (OJ 2005 L 117, p. 13) and entered into force on 11 May 2005.

142      See Proposal for a Regulation of the European Parliament and of the Council amending Regulation No 2913/92.

143      See point 175 of this Opinion.

144      See points 188 to 190 of this Opinion.

145      The Commission also alleges that the United Kingdom infringed its obligation to adopt risk analysis tools within a reasonable time, stating that the United Kingdom should have established those tools earlier.

146      The United Kingdom stresses that it had to ‘obtain suitable facilities to develop and carry out pre-clearance checks away from the port’ and ‘expend considerable time and resources in preparatory work, developing and testing the processes for conducting pre-clearance checks taking account of the scale of the fraud, and putting in place the supporting operational guidance, as well as developing the UK’s policy and processes for taking securities on individual consignments suspected of undervaluation fraud, working on a programme of monitoring suspect traders and their supply chains, as well as the development of a trader education programme’.

147      It is common ground that, in PCA Discount, which was conducted in November and December 2011, the United Kingdom did not use risk analysis, even though the guidelines for that operation provided, inter alia, for the determination of a risk threshold to be applied to the price of goods. Furthermore, Operation Samurai, which took place in September 2016 and during which the United Kingdom was said to have carried out pre-clearance test and learn activities, was limited in scope, covering only two specific importers. Operation Breach, which was launched in May 2015 and is still ongoing, according to the United Kingdom’s assertions at the hearing, was concerned exclusively with measures designed only to challenge ex post facto values deemed to be too low to be credible (see the OLAF report, section 2, particularly 2.1.6 and 2.3, as well as the ‘Guidelines for preventing and Detecting Irregularities (under-invoicing) in imports of textiles and footwear’, paragraphs 5 to 9).

148      Thus, it is apparent from the notes of the meeting between HMRC and OLAF of 13 June 2014 that the United Kingdom was going to conduct investigations into importers likely to undervalue goods. According to those notes, since the United Kingdom authorities had taken measures after release, it was ‘unlikely … that any debts [would] be recovered’.

149      In the context of the present plea, it is necessary to examine the criticism levelled against the OLAF methodology as a risk detection tool, while the analysis of that methodology as a basis for calculating losses of traditional own resources forms part of the examination of the second plea.

150      The United Kingdom’s criticism of the use of the same method to calculate the shortfall in traditional own resources will be examined in the context of the second plea.

151      After examining the results of Operation Snake, a number of Member States, namely the Czech Republic, Hungary, the Republic of Poland, the Republic of Slovenia and the Slovak Republic, decided to develop their own system of acceptable price thresholds, motivated, in particular, by the Czech Republic’s objection that, in that Member State, the average price level of goods was considerably lower. The Commission adds that the Republic of Poland raised issues concerning the OLAF methodology, requesting further documents from the JRC for that purpose. That fact confirms, in my view, that the Commission never considered that methodology to be a mandatory method of assessment for Member States.

152      The external aspect of that competence is the common commercial policy for which the European Union also has exclusive competence under Article 3(1)(e) TFEU, the legal basis for provisions of secondary legislation being, inter alia, Article 207 TFEU, which lays down that policy. As regards, in particular, the determination of the customs value, around which the customs fraud at issue revolves, the provisions of the Community Customs Code and the Union Customs Code are intended to implement the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade of 1994, contained in Annex 1A to the Agreement establishing the World Trade Organisation, those rules also being an area in which the European Union has exclusive competence (see, among others, Opinion 1/94 (Agreements annexed to the WTO Agreement) of 15 November 1994 (EU:C:1994:384, paragraph 34) and Fabio, M., Customs Law of the European Union, 4th edition, Wolters Kluwer, 2012, paragraph 4.01).

153      The legal basis for the Union Customs Code is Articles 33, 114 and 207 TFEU.

154      On the allocation of competences after the Treaty of Lisbon, see Grave J.-M., ‘The Impact of the Lisbon Treaty on Customs Matters: A Legal Assessment’, Global Trade and Customs Journal, vol. 5, No 3, 2010, p. 110. On ‘executive federalism’, see Limbach, K., Uniformity of Customs Administration in the European Union, Bloomsbury Publishing, London, November 2015, p. 132.

155      Member States have been granted certain powers in relation to customs control, even though legal literature refers to the ‘residual competence’ of Member States in the customs field (see, inter alia, Albert, J.-L, ‘L’Union douanière, les apparences d’une solidarité européenne historique’, Gestion & finances publiques, vol. 4, No 4, 2017, pp. 59-69, and Natarel, E., ‘Le phénomène douanier dans le marché intérieur: à propos de l’exemple français’, Revue des affaires européennes, No 4, 2005, p. 637). On the ‘relinquishment’ of States’ traditional competences in customs matters in favour of the authorities of the European Union, see, inter alia, Soulard, C., ‘Union douanière – Taxation des marchandises’, JurisClasseur Europe, fasc. 500, 2016, paragraphs 35 and 58.

156      For that reason, Article 33 TFEU provides a legal basis for customs cooperation between the Member States and the Commission. Concerning, in particular, coordination in respect of fraud, it should also be noted that Article 325(3) TFEU states that Member States are to coordinate their action aimed at protecting the financial interests of the European Union against fraud by organising, together with the Commission, close and regular cooperation between the competent authorities.

157      Formerly Article 280 EC.

158      See, for example, Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1), Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (OJ 1996 L 292, p. 2) and Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) (OJ 1999 L 136, p. 1).

159      See, inter alia, Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on customs risk management and security of the supply chain, COM/2012/0793 final.

160      Specifically as regards customs legislation, the EU legislature has established an obligation to have recourse to risk analysis on the basis of ‘criteria developed at national, Community and, where available, international level’. See the wording of Article 13(2) of the Community Customs Code and Article 46(2) of the Union Customs Code.

161      It is apparent from Article 17(1) TEU that the Commission, inter alia, is to ‘promote the general interest of the Union’, ‘oversee the application of Union law’ and ‘exercise coordinating, executive and management functions, as laid down in the Treaties’. On the application of that provision to customs matters, see Lyons, T., EC Customs Law, Oxford University Press, Oxford, 2018, p. 138.

162      See Lyons, T., op. cit., p. 147.

163      In the ‘Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the EU Strategy and Action Plan for customs risk management: Tackling risks, strengthening supply chain security and facilitating trade’ (COM/2014/527), the Commission made clear that ‘risk management of the movement of goods … [required] the capacity to identify, evaluate and analyse the full range of threats and risks associated with goods and their movements’ and that such management must ‘take account of the diversity of risks, … and their impact and consequences should those risks materialise to undertake risk mitigation and control measures at the most opportune time and place in the supply chain’ (see the annex to the communication, part I).

164      See Charroux, G. and Woerth, E., ‘Rapport sur l’évaluation de l’action de la douane dans la lutte contre les fraudes et trafics’ of 3 June 2015 for the Public Policy Evaluation and Control Committee of the National Assembly, France.

165      Although risk analysis was introduced into the Community Customs Code in 2005, the Commission took nine years to adopt the communication referred to in footnote 163 which analysed the implementation of customs risk management policy and proposed a strategy in that regard. See, in particular, the ‘EU Strategy for customs risk management’ annexed to that document and available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2014%3A0527%3AFIN.

166      The Commission added that, during the review of PCA Discount (November and December 2011) which the Commission’s services carried out after completion of the action, a broad consensus was reached among all Member States that fair price thresholds should be maintained. That is why Operation Snake in 2014 again applied the lowest acceptable price, fixed at 50% of the cleaned average price. Member States did not raise the question of altering that threshold during the analysis of the results of Operation Snake. However, the Commission confirms that none of the Member States asked for the lowest acceptable price to be reduced.

167      See judgment of 16 June 2016, EURO 2004. Hungary (C-291/15, EU:C:2016:455). In paragraph 38 of that judgment, the Court was careful to point out that ‘the customs authority involved [had] considered that the declared transaction value of the imported goods was exceptionally low in relation to the statistical mean value on importation of comparable goods’, thus confirming that the ‘statistical mean value’ of the goods may be used to challenge the accuracy of the declared customs value.

168      That paragraph was expressed in those terms when it was adopted (see Proposal for a Council Regulation (EEC) establishing a Community customs code (COM/90/71final, OJ 1990 C 128, p. 1)) and is currently reproduced using similar wording in Article 46(1) of the Union Customs Code. On the changes to that provision, see point 202 of this Opinion.

169      I also note that Article 5(3) of the Union Customs Code, which defines the concept of ‘customs controls’, refers to ‘specific acts performed by the customs authorities in order to ensure compliance with the customs legislation and other legislation governing the entry, exit, transit, movement, storage and end-use of goods moved between the customs territory of the Union and countries or territories outside that territory, and the presence and movement within the customs territory of the Union of non-Union goods and goods placed under the end-use procedure’.

170      See, inter alia, Albert, J.-L., Le droit douanier de l’Union européenne, Bruylant, Brussels, 2019, p. 525.

171      See, inter alia, Article 73 of the Union Customs Code and Opinion of Advocate General Jääskinen in Codirex Expeditie (C-542/11, EU:C:2013:123, point 51 et seq.).

172      See points 175 to 177 of this Opinion.

173      On the task of the customs authorities under that provision, see Lyons, T., op. cit., p. 72 et seq.

174      The United Kingdom submits that Operation Breach also involved pre-clearance controls. However, it should be noted that the United Kingdom did not explain what those controls consisted of and did not make clear that the action phase of that operation lasted only two days. See the minutes of the meeting of 3 February 2016.

175      See points 175 to 177 of this Opinion.

176      The ineffectiveness of the measures taken and the lack of such measures are borne out by a number of reports on inspections conducted during that period. The Commission states that it identified several specific consignments with very low declared values during the period concerned. By way of example, it is apparent from inspection report 17-11-1 that the United Kingdom authorities confirmed that they had not implemented the measures requested by OLAF following Operation Snake in 2014, measures which OLAF had again requested in inspection report 16-11-1. Furthermore, inspection report 17-11-2 shows that five consignments imported on 29 September 2017 and selected by the Commission’s agents had, on average, a declared value of only 3.3% of the cleaned average price. HMRC confirmed that subsequent consignments declared by those traders had been intercepted and that demands for additional duties had been issued within the framework of Operation Swift Arrow.

177      Judgment of 17 March 2011 (C-23/10, not published, EU:C:2011:160, paragraph 50).

178      As is apparent from the Union Customs Code, EU customs law promotes the exchange of such information. Specifically, according to Article 46(3) of that code, customs controls are to be performed within a common risk management framework, based upon the exchange of risk information and risk analysis results between customs administrations and establishing common risk criteria and standards, control measures and priority control areas. I note that paragraphs 4 and 5 of that article lay down similar obligations.

179      Judgment of 17 March 2011 (C-23/10, not published, EU:C:2011:160).

180      Article 248 of Implementing Regulation I reproduces, to a very large extent, the wording of Article 20 of Commission Directive 82/57/EEC of 17 December 1981 laying down certain provisions for implementing Council Directive 79/695/EEC on the harmonisation of procedures for the release of goods for free circulation (OJ 1982 L 28, p. 38), while Article 244 of Implementing Regulation II is intended to implement the provisions of Title V, Chapter 3, Section 1, entitled ‘Verification’, of the Union Customs Code.

181      The provision that was in force from the beginning of the infringement period until 1 May 2016.

182      The Spanish-, German-, Estonian-, English-, French- and Italian-language versions of Article 248 of Implementing Regulation I appear to indicate that the lodging of security is a necessary prerequisite for release.

183      German-language version: ‘Sind die Zollbehörden der Auffassung, dass aufgrund einer Überprüfung der Zollanmeldung höhere Einfuhr- oder Ausfuhrabgaben oder andere Abgaben zu entrichten sein könnten als aufgrund der Angaben in der Zollanmeldung, so kann die Überlassung der Waren von einer Sicherheitsleistung abhängig gemacht werden, die warden Differenz zwischen dem aufgrund der Angaben in der Zollanmeldung ermittelten Betrag und dem Betrag abdeckt, der letztlich zu entrichten sein könnte.’ Estonian-language version: ‘Kui toll leiab, et tollideklaratsiooni õigsuse kontrollimisest tulenev impordi- või eksporditollimaksu või muude tasutavate maksude summa võib olla suurem kui tollideklaratsiooni andmetest tulenev summa, võib kauba vabastamine sõltuda tagatise esitamisest, mis on piisav deklaratsiooni andmete põhjal kindlaksmääratud summa ja hiljem tasumisele kuuluda võiva lõppsumma vahe tasumiseks.’ (My emphasis.)

184      See, inter alia, judgment in Profisa (C-63/06, EU:C:2007:233, paragraph 13 and the case-law cited).

185      See judgment of 1 February 2001, D. Wandel (C-66/99, EU:C:2001:69, paragraph 36), and order of 16 September 2014, Kyocera Mita Europe v Commission (T-35/11, not published, EU:T:2014:795, paragraphs 41 and 42). I note that Article 194 of the Union Customs Code lays down similar obligations.

186      See Lyons, T., op. cit., pp. 462 and 463.

187      See point 177 of this Opinion.

188      Recitals 36 and 37, concerning the lodging of security, draw attention, inter alia, to the objective to ‘safeguard the financial interests of the Union and of the Member States and to curb fraudulent practices’ and state that account should be taken of the level of risk and the particular situation of the economic operators concerned.

189      The proposition that traders be treated differently according to their ‘legitimacy’ is supported, in my view, by the existence of the special status of economic operator authorised under the Union Customs Code (see Article 38 et seq.).

190      See points 201 to 216 of this Opinion.

191      See, by analogy, judgment of 15 December 2009, Commission v Germany (C-372/05, EU:C:2009:780, paragraphs 72 to 77).

192      According to the Explanations relating to the Charter, Article 17 thereof corresponds to Article 1 of the First Additional Protocol (OJ 2007 C 303, p. 17).

193      The ECtHR has pointed out time and again that Article 1 of the First Additional Protocol, which in substance safeguards the right to property, comprises three distinct rules. The first rule, which is set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of peaceful enjoyment of property. The second rule, contained in the second sentence of the first paragraph, covers the deprivation of possessions and subjects it to certain conditions. The third rule, stated in the second paragraph, recognises that the Contracting States are entitled, among other things, to control the use of property in accordance with the general interest, by enacting such laws as they deem necessary for the purpose. However, the rules are not ‘distinct’ in the sense of being unconnected. The second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule (see, inter alia, ECtHR, 21 February 1986, James and Others v. United Kingdom (CE:ECHR:1986:0221JUD000879379, § 37), and ECtHR, 16 June 2015, Sargsyan v. Azerbaijan (CE:ECHR:2015:0616JUD004016706, § 217).

194      See, inter alia, ECtHR, 29 April 2008, Burden v. United Kingdom (CE:ECHR:2008:0429JUD001337805, § 59).

195      See ECtHR, 23 October 1997, National & Provincial Building Society, Leeds Permanent Building Society and Yorkshire Building Society v. United Kingdom (CE:ECHR:1997:1023JUD002131993, § 80).

196      See, for example, judgment of 14 January 2021, Okrazhna prokuratura – Haskovo and Apelativna prokuratura – Plovdiv (C-393/19, EU:C:2021:8, paragraph 31 and the case-law cited).

197      Concerning the abstract example whereby the financial obligation arising from the levying of taxes or a contribution may interfere with the right to property, see ECtHR, 3 July 2003, Buffalo s.r.l. in liquidation v. Italy (CE:ECHR:2003:0703JUD003874697, particularly §§ 36 and 37).

198      The United Kingdom states that, in the course of that operation, 239 high-risk traders were identified and post-clearance demands (C18 notices) were served on a number of them. It maintains that, during that operation, ‘there were also approximately 30 pre-clearance inspections and the taking of samples’, without, however, specifying when and how the samples were taken and why it opted to waive the requirement for security before releasing the goods, when post-clearance recovery is, for practical reasons, less effective.

199      The OLAF report, section 2.1.4.

200      According to its submissions, the Commission is not in a position to confirm the abovementioned figure provided by the United Kingdom.

201      According to the Commission, those data show not only that the United Kingdom was responsible for 74.60% of losses of traditional own resources due to the undervaluation of textiles and footwear from China in 2015, 79.15% of those losses in 2016 and 66.90% in 2017, but also that, since the launch of Operation Swift Arrow and its gradual extension, that figure fell considerably, standing at, for example, 33.86% in November 2017 and 4.73% in June 2018 (the Surveillance 2 database for imports of textiles and footwear from China). The Commission also explains that, although the United Kingdom took relatively limited measures (checking only a few traders, based on low-value thresholds, at just a few ports), undervalued imports fell dramatically and almost immediately (down 90% in three months and 96% in one year).

202      The United Kingdom refers, in particular, to PCA Discount and to Operations Snake, Breach and Samurai.

203      See points 235 to 240 of this Opinion.

204      Although it is clear from the case-law of the Court that Member States are required to establish the European Union’s entitlement to own resources as soon as the customs authorities are in a position to calculate the amount of duty arising from a customs debt and determine the debtor (judgments of 23 February 2006, Commission v Spain, C-546/03, not published, EU:C:2006:132, paragraph 29; of 15 November 2005, Commission v Denmark, C-392/02, EU:C:2005:683, paragraphs 59 and 61; of 17 June 2010, Commission v Italy, C-423/08, EU:C:2010:347, paragraph 40; and of 17 March 2011, Commission v Portugal, C-23/10, not published, EU:C:2011:160, paragraph 59), it is not necessary for the entry in the accounts to have actually been made (see, to that effect, judgment of 15 November 2005, Commission v Denmark, C-392/02, EU:C:2005:683, Rec. p. I-9811, paragraph 58), meaning that two separate sets of legal rules are involved.

205      Order of 9 July 2008, Gerlach & Co. (C-477/07, not published, EU:C:2008:390, paragraph 22).

206      See, inter alia, judgments of 16 July 2009, Distillerie Smeets Hasselt and Others (C-126/08, EU:C:2009:470, paragraph 22); and of 8 November 2012, KGH Belgium (C-351/11, EU:C:2012:699, paragraph 21); and order of 9 July 2008, Gerlach & Co. (C-477/07, not published, EU:C:2008:390, paragraph 17), concerning Article 217(1) and Article 220(1) of the Community Customs Code.

207      See judgment of 17 June 2010, Commission v Italy (C-423/08, EU:C:2010:347, paragraph 37 et seq.).

208      See judgment of 3 April 2014, Commission v United Kingdom (C-60/13, not published, EU:C:2014:219, paragraph 40). For an overview of the rules on own resources, see Albert, J.-L., Le droit douanier de l’Union européenne, Bruylant, Brussels, 2019, pp. 132-144; Berlin, D., Politiques de l’Union européenne, Bruylant, Brussels, 2016, pp. 53-64; and Aubert, M.-H., ‘Rapport: Système des ressources propres des Communautés européennes’, National Assembly, France (information documents of the National Assembly, eleventh legislative period, No 3436), Paris, 2001.

209      European Commission, European Union Public Finance, Publications Office of the European Union, Luxembourg, 2007, p. 143.

210      Potteau, A., ‘Budget de l’Union européenne – Contenu du budget’, JurisClasseur Europe Traité, fasc. 198, 4 November 2016, paragraph 33.

211      That provision corresponds to Article 2(1) of Regulation No 1150/2000.

212      See Berlin, D., op. cit., paragraph 34.

213      That provision replaced Article 2(1) of Regulation No 1150/2000.

214      The Court has already held that ‘an entitlement is deemed to be established as soon as the corresponding claim has been duly determined’ (judgment of 22 February 1989, Commission v Italy, 54/87, EU:C:1989:76). For a more recent example, see judgment of 3 April 2014, Commission v United Kingdom (C-60/13, not published, EU:C:2014:219, paragraph 43 and the case-law cited). Advocate General Sharpston also maintained that Member States have no discretion on that point (Opinion in Czech Republic v Commission, C-575/18 P, EU:C:2020:205, point 43).

215      That provision replaced Article 17(1) of Regulation No 1150/2000.

216      See, to that effect, judgment of 5 October 2006, Commission v Germany (C-105/02, EU:C:2006:637, paragraph 87).

217      The Court has already ruled that the earlier provision, Article 2(1) of Regulation No 1150/2000, must be interpreted as meaning that Member States may not dispense with determining claims, even where they dispute them, since otherwise it would have to be accepted that the financial equilibrium of the European Union may be disrupted, even temporarily, by the conduct of a Member State (judgment of 17 March 2011, Commission v Portugal, C-23/10, not published, EU:C:2011:160, paragraph 58). Also see judgments of 15 November 2005, Commission v Denmark (C-392/02, EU:C:2005:683, paragraphs 54 and 60), and of 7 April 2011, Commission v Finland (C-405/09, EU:C:2011:220, paragraph 37 and the case-law cited).

218      See judgment of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414, paragraph 67).

219      The Court has already held that, under Article 6(3)(a) and (b) of Regulation No 1150/2000, Member States are obliged to include in the A account the entitlements established in accordance with Article 2 of that regulation, at the latest on the first working day after the 19th day of the second month following the month during which the entitlement was established, without prejudice to the option of entering in the B account, within the same prescribed period, the established entitlements which have ‘not yet been recovered’ and for which ‘no security has been provided’, and also entitlements established and ‘for which security has been provided [and which] have been challenged and might, upon settlement of the disputes which have arisen, be subject to change’ (judgment of 8 July 2010, Commission v Italy, C-334/08, EU:C:2010:414, paragraph 66 and the case-law cited).

220      See, in that regard, Lyons, T., op. cit., pp. 52 and 53.

221      See Opinion of Advocate General Trstenjak in Commission v Italy (C-275/07, EU:C:2008:334, point 82 and footnote 39).

222      See, inter alia, judgments of 21 September 1989, Commission v Greece (C-68/88, EU:C:1989:339, paragraph 17); of 16 May 1991, Commission v Netherlands (C-96/89, EU:C:1991:213, paragraph 38); and of 12 June 2003, Commission v Italy (C-363/00, EU:C:2003:335, paragraph 43).

223      See, inter alia, judgment of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601, paragraph 70 and the case-law cited).

224      See the case-law cited in footnote 222 of this Opinion.

225      See, to that effect, Opinion of Advocate General Lenz in Commission v Greece (70/86, EU:C:1987:250).

226      Recital 3 of Regulation No 609/2014 and judgment of 22 February 1989, Commission v Italy (54/87, EU:C:1989:76).

227      See, to that effect, judgments of 5 October 2006, Commission v Belgium (C-275/04, EU:C:2006:641, paragraph 68); of 5 October 2006, Commission v Netherlands (C-312/04, EU:C:2006:643, paragraph 54); of 5 October 2006, Commission v Belgium (C-377/03, EU:C:2006:638, paragraph 69); and of 19 March 2009, Commission v Italy (C-275/07, EU:C:2009:169, paragraph 84).

228      See judgments of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414, paragraph 50 and the case-law cited), and of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601, paragraph 61).

229      See, inter alia, judgment of 22 February 1989, Commission v Italy (54/87, EU:C:1989:76).

230      See, to that effect, judgment of 12 June 2003, Commission v Italy (C-363/00, EU:C:2003:335, paragraph 45 and the case-law cited).

231      See, to that effect, judgments of 3 April 2014, Commission v United Kingdom (C-60/13, not published, EU:C:2014:219, paragraph 50); of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160, paragraph 61 and the case-law cited); and of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601, paragraph 61).

232      As regards the number of C18 payment notices issued in Operation Snake, it follows from the United Kingdom’s explanations concerning Annex D.5 to the rejoinder and from the United Kingdom’s replies to the questions put by the Court that its authorities issued 23 C18 payment notices in the approximate amount of GBP 201 828 809.62, a figure which was revised downwards in the rejoinder to GBP 192 568 694.30, since not all of the goods referred to fell within the scope of the infringement at issue.

233      See judgment of 17 September 1987, Commission v Greece (70/86, EU:C:1987:374).

234      See, to that effect, judgment of 18 December 1986, Commission v United Kingdom (93/85, EU:C:1986:499).

235      See, to that effect, judgment of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414). For a commentary, see Potteau, A., ‘The public finances of the European Union in 2008-2009’, Revue trimestrielle de droit européen, No 2, 2010, p. 380.

236      See points 201 to 216 and 219 of this Opinion.

237      See points 217 to 224 of this Opinion.

238      See judgment of 15 July 2010, Gaston Schul (C-354/09, EU:C:2010:439, paragraph 27 and the case-law cited).

239      See, to that effect, judgment of 16 June 2016, EURO 2004. Hungary (C-291/15, EU:C:2016:455, paragraph 29 and the case-law cited).

240      See points 193 to 210 of this Opinion.

241      Annex D.5 to the rejoinder.

242      The Commission expressed that view immediately after Operation Snake (see inspection report 16-11-1 in Annex A.16 to the application, section 3.1.1).

243      As regards the Snake C18 payment notices, it was necessary to determine the customs value of specific imports and not the estimate of losses of traditional own resources. See, also, point 206 of this Opinion.

244      See the notes of the meeting of 20 February 2015, Annex B.2 to the defence.

245      Reply of the United Kingdom of 22 June 2018, paragraph 147.

246      See, inter alia, judgment of 11 July 2019, Commission v Italy (Own resources – Recovery of a customs debt) (C-304/18, not published, EU:C:2019:601).

247      That amount might have to be reduced by approximately GBP 25 million, that is, the amount entered in the B account corresponding to the sums claimed in the C18 notices arising from Operation Breach for the period from May 2015 to October 2017.

248      That is acknowledged by the United Kingdom only in the alternative, since the thrust of its defence is that the existence of the infringements described in the first plea should be rejected, while proposing, in the context of the second plea, its own methodology for measuring the loss of traditional own resources.

249      Previously Articles 29 to 31 of the Community Customs Code.

250      According to the United Kingdom, the term ‘reasonable means’ involves the taking of decisions falling within the exclusive competence of Member States and implies that Member States must be afforded a very broad discretion in their choice of methods and assessments. The United Kingdom need not prove that its estimate is right or wrong, only that it is reasonable. The burden of proving that the estimate is not reasonable lies squarely with the Commission.

251      I note that Article 74 of the Union Customs Code (formerly Article 31 of the Community Customs Code) provides that, where the customs value cannot be determined under Article 70 of the Union Customs Code, it is to be determined by proceeding sequentially through the methods laid down thereafter, each of which may be used only if the previous one, in the order in which they appear, proves to be unusable, thereby resulting in a methodological hierarchy. The method laid down in Article 74(3), known as the method of ‘last resort’, which is based on ‘reasonable means’, applies where the methods set out in the preceding paragraphs cannot be applied. See, inter alia, Albert, J.-L., ‘Section 3 – La valeur en douane’, Le droit douanier de l’Union européenne, Bruylant, Brussels, 2019, pp. 255-280.

252      The United Kingdom observes that the Court has already established losses of traditional own resources for a specific amount in a number of cases, but that it appears that there were no objections to the heads of claim in those actions and/or that the sums in question were not disputed: see, for example, judgment of 21 September 1989, Commission v Greece (C-68/88, EU:C:1989:339). The situation here is very different.

253      See, to that effect, judgment of 16 June 2016, EURO 2004. Hungary (C-291/15, EU:C:2016:455).

254      It is also for that reason that, in my view, the arguments concerning the alternative method laid down in Article 74(3) of the Union Customs Code must be rejected.

255      See points 193 to 216 and 225 to 227 of this Opinion.

256      See point 177 and footnotes 92 and 265 of this Opinion.

257      C-575/18 P, EU:C:2020:530.

258      See paragraph 68 of that judgment.

259      See, inter alia, judgments of 27 April 2006, Commission v Germany (C-441/02, EU:C:2006:253, paragraph 48), and of 2 May 2019, Commission v Croatia (Biljane Donje landfill) (C-250/18, not published, EU:C:2019:343, paragraph 33).

260      The United Kingdom is also of the view that, in addition to fraud, it is the task of the Commission initially also to prove that there is a causal link between that failure and damage and to demonstrate that its request for payment of a specific amount to the European Union is admissible.

261      See judgment of 16 June 2016, EURO 2004. Hungary (C-291/15, EU:C:2016:455, paragraphs 23 and 36).

262      See points 159 to 162 of this Opinion and the case-law cited.

263      See, inter alia, judgment of 17 November 1993, Commission v Spain (C-73/92, EU:C:1993:891, paragraph 19).

264      See, inter alia, judgments of 21 September 1999, Commission v Ireland (C-392/96, EU:C:1999:431, paragraphs 60 and 61); of 26 June 2003, Commission v France (C-233/00, EU:C:2003:371, paragraph 62); and of 26 October 2006, Commission v Spain (C-36/05, EU:C:2006:672, paragraph 38).

265      See, to that effect, judgment of 5 June 2018, Kolev and Others (C-612/15, EU:C:2018:392, paragraphs 51 and 52).

266      See, to that effect, judgments of 15 November 2005, Commission v Denmark (C-392/02, EU:C:2005:683, paragraph 68); of 18 October 2007, Commission v Denmark (C-19/05, EU:C:2007:606, paragraph 32); and of 3 April 2014, Commission v United Kingdom (C-60/13, not published, EU:C:2014:219, paragraph 50). In legal literature, see Meisse, E., ‘Application du système des ressources propres des Communautés’, Europe, No 346/2006, p. 9.

267      First of all, regarding the judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160), the United Kingdom submits that the Court stated that the defendant State was liable for the ‘corresponding loss of revenue’ and that liability arises ‘if an error made by the customs authorities … results in the customs duties not being recovered’ (paragraphs 57 and 61). Next, as for the judgment of 8 July 2010, Commission v Italy (C-334/08, EU:C:2010:414), according to the United Kingdom, the defendant State was liable for the loss of traditional own resources as a result of the wrongful conduct of its authorities, which had issued a company with irregular authorisations to place certain goods under a duty-free regime, whereas they would normally be liable to pay duty (paragraph 40). Lastly, concerning the judgment of 18 October 2007, Commission v Denmark (C-19/05, EU:C:2007:606), the United Kingdom asserts that there was no suggestion that, if the Danish authorities had not committed the error of exempting the goods in question from customs duty, that is to say, if they had properly interpreted the scope of the end-use scheme, the amount of customs duties collected and entered in the accounts would have been the same.

268      Judgment of 31 October 2019, Commission v United Kingdom (C-391/17, EU:C:2019:919), a case which was heard at the same time as that which gave rise to the judgment of 31 October 2019, Commission v Netherlands (C-395/17, EU:C:2019:918).

269      See, inter alia, judgment of 31 October 2019, Commission v United Kingdom (C-391/17, EU:C:2019:919, paragraphs 92 to 102). It was therefore in order to determine whether a Member State could be held liable for the actions of an OCT resulting in the loss of own resources for the EU budget that the Court considered it necessary to examine whether that Member State was liable vis-à-vis the European Union, by virtue of its obligations as a Member State under Article 4(3) TEU, and whether it was required, pursuant to that provision, to compensate the amount in question.

270      This is the objection of inadmissibility raised in the alternative in the fourth plea in law.

271      See, to that effect, judgment of 18 October 2007, Commission v Denmark (C-19/05, EU:C:2007:606, paragraph 34).

272      Mentioned inter alia in point 197 of this Opinion.

273      See, in particular, the Surveillance 2 data showing quantities above and below the acceptable minimum price for imports falling within Chapters 61 to 64 of the combined nomenclature from China between January 2015 and August 2018, set out in the table entitled ‘UK [lowest acceptable price] quantities of imports’ in Annex A.34 to the application.

274      See footnote 40 of this Opinion.

275      The OLAF report, pp. 8 and 9.

276      That conclusion derives directly from the Commission’s own observations as set out in the application, in its reply and from its replies to the questions put by the Court.

277      In the present action, the United Kingdom puts forward a methodology that is also based on statistical data.

278      Judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160).

279      Judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160).

280      Judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160, paragraph 63).

281      Specifically, the Court pointed out, in paragraph 66 of that judgment, that, in order to quantify the amount of own resources which had not been duly established during the years in question based on the results of the checks carried out after the infringement period between 1 August and 31 October 2003, the Commission had to compare the average weight recorded per box of bananas during those checks with the average weight declared during that same period.

282      The method for calculating the amount to be made available to the Community budget involved checking all imports of fresh bananas between 1 August and 31 October 2003, then calculating, in the light of the results of those checks, the average weight of the bananas imported between 1998 and 2002 (paragraph 30 of that judgment). According to the Commission, the amount to be made available to the Community budget for the period between 1998 and 2002 stood at EUR 16 087 604.41 (paragraph 29 of that judgment).

283      Judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160).

284      Judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160).

285      See, inter alia, judgments of 12 July 1973, Commission v Germany (70/72, EU:C:1973:87,  paragraph 13), and of 16 October 2012, Hungary v Slovakia (C-364/10, EU:C:2012:630, paragraph 68).

286      See point 160 of this Opinion.

287      See, inter alia, judgment of 10 November 2020, Commission v Italy (Limit values – PM10) (C-644/18, EU:C:2020:895, paragraph 70 and the case-law cited).

288      In that respect, the Court has held, in particular, that, where a Member State has failed to make a type of transaction subject to VAT, contrary to the requirements of Sixth Directive 77/388, such an infringement is also liable to result in a failure by that Member State to fulfil its obligation to make available to the Commission, as VAT resources, the amounts corresponding to the tax which should have been levied on those transactions (see, inter alia, judgments of 12 September 2000, Commission v France (C-276/97, EU:C:2000:424, paragraphs 49, 56, 61 and 70); of 12 September 2000, Commission v Ireland (C-358/97, EU:C:2000:425, paragraphs 58, 65, 69 and 78); and of 12 September 2000, Commission v United Kingdom (C-359/97, EU:C:2000:426, paragraphs 70, 77 and 87).

289      See points 183 and 257 of this Opinion.

290      See, inter alia, judgments of 26 April 2005, Commission v Ireland (C-494/01, EU:C:2005:250, paragraph 44), and of 28 March 2019, Commission v Ireland (System for collecting and treating waste water) (C-427/17, not published, EU:C:2019:269, paragraph 39).

291      See points 184 to 227 of this Opinion.

292      The question of the probative value of statistical data has already been the subject of legal discussion. Thus, in the field of anti-dumping, for the purposes of establishing the analogue country in order to determine the normal value of products, the Court held, in its judgment in GLS (C-338/10, EU:C:2012:158, paragraph 30), that it is for the EU institutions to examine with all due care the information they possess, including, in particular, Eurostat statistics, in order to ascertain whether it is possible to select an analogue country. In the case which gave rise to the judgment in Bricmate (C-569/13, EU:C:2015:572, paragraphs 65 and 68), the Court held that ‘the EU institutions did not examine with the required care the data contained in the Eurostat statistics’. That question also arises in the field of indirect discrimination in which the Court, with reference to the founding directives in that area, has pointed out that ‘indirect discrimination may be established by any means, including on the basis of statistical evidence’ (see, inter alia, judgments of 24 September 2020, YS (Occupational pensions of managerial staff) (C-223/19, EU:C:2020:753, paragraph 50), and of 3 October 2019, Schuch-Ghannadan (C-274/18, EU:C:2019:828, paragraph 46 and the case-law cited)).

293      The Commission also draws attention to the scientific nature of the chosen methodology, without, however, explaining what that entails.

294      Report of a consultancy firm in Annex A.32 to the application and Annex B.5 to the defence, paragraph 2.12.

295      See Annex E.4 to the Commission’s replies.

296      See judgment of 17 March 2011, Commission v Portugal (C-23/10, not published, EU:C:2011:160, paragraph 63 and the case-law cited).

297      See Annex B.32 to the defence.

298      Annex 6 to the OLAF report is attached as Annex A.36 to the application.

299      In that regard, I endorse the Commission’s view that the samples of goods taken by the United Kingdom customs authorities in respect of the period after 2017 are irrelevant to the present case, since they fall outside the infringement period covered by the action.

300      See, in particular, the United Kingdom’s written replies to the questions put by the Court.

301      See point 226 of this Opinion.

302      That method involves examining the ‘distribution’ of various ‘populations’ at the level of the ‘end point of the spike’ of the main low price group (in terms of volume).

303      For a more detailed explanation of that figure, see point 252 of this Opinion.

304      See footnote 247 of this Opinion.

305      See, to that effect, judgments of 14 January 2010, Commission v Czech Republic (C-343/08, EU:C:2010:14, paragraph 26); of 15 June 2010, Commission v Spain (C-211/08, EU:C:2010:340, paragraph 32); and of 15 November 2012, Commission v Portugal (C-34/11, EU:C:2012:712, paragraph 44).

306      See judgments of 2 June 2016, Commission v Netherlands (C-233/14, EU:C:2016:396, paragraph 35), and of 2 April 2020, Commission v Poland, Hungary and the Czech Republic (Temporary mechanism for the relocation of applicants for international protection) (C-715/17, C-718/17 and C-719/17, EU:C:2020:257, paragraph 116).

307      The Commission states, inter alia, that, if the United Kingdom authorities had considered the amounts corresponding to the established debts to be incorrect, they should have made the appropriate adjustments and reissued the payment notices.

308      See paragraph 178 of the letter of formal notice.

309      See, inter alia, paragraphs 243 and 338 of the reasoned opinion contained in Annex A.31.

310      See points 241 to 243 of this Opinion.

311      As the Commission explains, assuming that, for a specific eight-digit combined nomenclature code, the EU-28 cleaned average price is GBP 15/kg, the lowest acceptable price is therefore GBP 7.50/kg. Again on the assumption that, on a given day, nine regular low-value imports at GBP 10/kg and one undervalued import at GBP 1/kg are made, the aggregation of daily data results in an average price of GBP 9.1/kg. Since that price is higher than the lowest acceptable price of GBP 7.50/kg, the daily aggregate covering the undervalued consignment would not be included in the calculation of the traditional own resources lost.

312      At the hearing, the Commission maintained that paragraph 1.12 of the report of a consultancy firm (Annex A.32 to the application and Annex B.5 to the defence) showed that the United Kingdom acknowledged that undervalued imports accounted for at least 35% of all imports into the United Kingdom during the infringement period.

313      See, inter alia, report of a consultancy firm in Annex A.32 to the application and Annex B.5 to the defence, paragraph 3.5.

314      In its reply to the Court’s questions, the United Kingdom also referred to the ‘common volume’, that is to say the volume of imports which would be considered to be undervalued under both methodologies. Its estimate of the ‘common volume’ for the period from 2015 to 2017 is 992 326 582 kg.

315      As is apparent from the report of a consultancy firm, 80% of the difference in traditional own resources lost is attributable to the benchmark value (according to the OLAF methodology, that value ranges from GBP 2.26 to 141.95, whereas, if the ‘compliance threshold’ drawn up by the United Kingdom is applied, it ranges from GBP 0.10 to 8.90; Annex B.5 to the defence, paragraph 3.3).

316      The OLAF report, section 2.1.5.

317      See point 274 of this Opinion.

318      See point 235 of this Opinion, which refers, inter alia, to Article 2(1)(a) and (b) of Decision 2007/436 and Article 2(1)(a) of Decision 2014/335.

319      See, inter alia, Articles 2, 9 and 10 of those regulations and points 236 to 240 of this Opinion.

320      See the supplementary report of a consultancy firm in Annex B.6 to the defence, paragraphs 2.25 and 2.26.

321      Also of relevance is the Commission’s assertion that, in 2016, 87% of imports of textiles and footwear into the United Kingdom were made under customs procedure 42, meaning that those goods were intended for other Member States, whereas, during the same period, customs procedure 40 was used for only 13% of imports of such products, which could remain on the United Kingdom market or be moved to other Member States.

322      See point 208 of this Opinion.

323      See point 126 of this Opinion.

324      The OLAF report, section 2.1.2.

325      See, mutatis mutandis, inter alia, judgment of 16 June 2016, EURO 2004. Hungary (C-291/15, EU:C:2016:455, paragraph 23). In addition, it is necessary to reject the Commission’s argument that that judgment permits the EU-wide average prices of the products at issue to be used as a basis for ‘revaluing’ the undervalued imports and subsequently to calculate the losses of traditional own resources. In that case, the Court merely held that, where the declared transaction value is considered to be unreasonably low in comparison with the statistical average of the purchase prices verified in the context of the importation of similar goods, it must be found that such a difference in price appears sufficient to substantiate the customs authority’s doubts and its rejection of the declared customs value of the goods in question. Consequently, the Court did not take a view on the price level of the products concerned which should constitute the benchmark value for determining the appropriate customs value.

326      See points 295 to 297 of this Opinion.

327      That amount is broken down as follows: EUR 480 098 912.45 in 2014, EUR 325 230 822.55 in 2013, EUR 173 404 943.81 in 2012 and EUR 22 777 312.79 in 2011.

328      See points 241 to 250 of this Opinion as regards cancellation of the Snake C18 payment notices.

329      It should also be borne in mind that the United Kingdom authorities used an incorrect basis to calculate that amount, as has already been pointed out (see points 247 to 249 of this Opinion).

330      In its reply to the Court’s questions, the United Kingdom states that the reason why the Snake C18 payment notices claim GBP 201 828 809.62, whereas, in the rejoinder, the United Kingdom refers to a figure of just over GBP 192 568 694.30, is that the latter figure excludes imports from countries other than China and imports under product codes other than textiles and footwear, which are not the subject of the present action. Furthermore, the United Kingdom submits that that amount of GBP 192 568 694.30 should subsequently be reduced to approximately GBP 25 million. It contends that it is necessary to apply the threshold values of the United Kingdom methodology in place of the EU-wide cleaned average prices and to adjust, on the basis of those same thresholds, the volume of the undervalued goods to be ‘revalued’, since that volume is lower than the volume calculated by applying the OLAF methodology (see annexes D.5 and D.10 to the rejoinder).

331      In the defence, the United Kingdom asserts that it had issued 27 Breach C18 payment notices as of the date on which the defence was lodged, that the corresponding amounts were entered in the B account and that, for 8 of those notices, the relevant amounts were entered in May 2018. In the rejoinder, the United Kingdom states that the total amount of duty claimed by means of those demands for recovery had increased in the intervening period and that that figure then stood at GBP 45 882 997.46 (which was revised, after further analysis, to GBP 44 296 285.04).

332      Meaning that customs duties were established but not entered in the A account because they had not yet been recovered and no security had been provided (see Article 6(1) and (3)(a) and (b) of Regulation No 1150/2000).

333      A date occurring during the pre-litigation procedure after the letter of formal notice of 9 March 2018 and before the date corresponding to the time limit of two months given in the reasoned opinion of 24 September 2018.

334      The reasoned opinion was issued on 24 September 2018 and that time limit expired two months after that date.

335      See, inter alia, judgments of 4 May 2017, Commission v Luxembourg (C-274/15, EU:C:2017:333, paragraph 47); of 27 March 2019, Commission v Germany (C-620/16, EU:C:2019:256, paragraph 39 and the case-law cited); and of 2 April 2020, Commission v Poland, Hungary and Czech Republic (Temporary mechanism for the relocation of applicants for international protection) (C-715/17, C-718/17 and C-719/17, EU:C:2020:257, paragraph 54).

336      See footnote 236 of this Opinion.

337      See the arguments set out in the analysis of the Snake C18 payment notice.

338      Nonetheless, I would point out that, contrary to the United Kingdom’s submissions, the taking into account of those amounts does not mean that the action is inadmissible for the period from 1 May 2015 to 11 October 2017, since it affects only the determination of the scale of the losses of traditional own resources.

339      See reasoned opinion, legal framework, paragraph 272 and the operative part.

340      See paragraph 338 of the application.

341      See point 238 of this Opinion.

342      See Opinion of Advocate General Trstenjak in Commission v Italy (C-275/07, EU:C:2008:334, point 89).

343      The third paragraph of Article 2 of Regulation 2016/804 provides: ‘Point (6) of Article 1 shall apply to the calculation of interest for late payment of own resources that are due after the date of entry into force of this Regulation. However, the limitation on the total increase of the interest rate to 16 percentage points … shall also apply to the calculation of interest for late payment of own resources that were due prior to the date of entry into force of this Regulation, where those own resources only became known to the Commission or to the Member State concerned after the date of entry into force of this Regulation’ (my emphasis).

344      I note that the second paragraph of the first head of claim concerning customs provisions includes a reference to the principle of sincere cooperation enshrined in Article 4(3) TEU and that the first plea in law contains a section concerning breach of that principle (see point 173 of this Opinion). I also note that the second head of claim refers to Article 2(2) and (3)(d) of Regulation No 608/2014, but that the Commission does not explain in the grounds of its application how the United Kingdom failed to comply with that provision, with the result that the failure to fulfil obligations under that provision must be rejected.

345      See, to that effect, judgments of 21 September 1989, Commission v Greece (68/88, EU:C:1989:339, paragraph 23), and of 31 October 2019, Commission v United Kingdom (C-391/17, EU:C:2019:919, paragraph 93).

346      See, inter alia, judgments of 25 May 1982, Commission v Netherlands (96/81, EU:C:1982:192, paragraph 7), and of 12 September 2000, Commission v Netherlands (C-408/97, EU:C:2000:427, paragraph 16). From that point of view, it should be borne in mind that, in some fields, such as the tax procedure at issue, the Commission is largely reliant on the information provided by the Member State concerned (see, to that effect, judgment of 12 September 2000, Commission v Netherlands (C-408/97, EU:C:2000:427, paragraph 17).

347      See point 319 of this Opinion.

348      Requests were made for sight of the legal assessment at issue during inspections 16-11-1, 17-11-1 and 17-11-2 carried out by the Commission. Furthermore, it is apparent from inspection report 17-11-2 that, during that inspection, it was not possible to trace the debts back to individual import declarations, which would have justified cancellation of those payment notices. According to that report, the Commission requested a copy of the legal assessment of HMRC which resulted in cancellation of the Snake C18 payment notices, a request that the United Kingdom authorities refused on the grounds that the assessment was confidential and subject to legal professional privilege.

349      Acting pursuant to Article 33E(5) of the Finance Act 2003.

350      See, inter alia, judgment of 7 March 2002, Commission v Italy (C-10/00, EU:C:2002:146), and Opinion of Advocate General Ruiz-Jarabo Colomer in Commission v Finland (C-284/05, C-294/05, C-372/05, C-387/05, C-409/05, C-461/05 and C-239/06, EU:C:2009:67, point 168).

351      See inspection report 16-11-1, section 3.1.2, and inspection report 17-11-1, section 3.1.2., set out, respectively, in Annexes A.16 and A.15 to the application.

352      See judgment of 7 March 2002, Commission v Italy (C-10/00, EU:C:2002:146, paragraph 91).

353      Judgment of 7 March 2002 (C-10/00, EU:C:2002:146, paragraph 91).

354      See, to that effect, judgment in Commission v Italy (C-10/00, EU:C:2002:146, paragraph 44).

355      See paragraph 144 of the defence.

356      The Court has consistently held that the confidentiality of written communications between lawyer and client is protected under EU law provided that such communications are made for the purposes and in the interests of the client’s rights of the defence and emanate from independent lawyers (see, to that effect, judgments of 18 May 1982, AM & S Europe v Commission (155/79, EU:C:1982:157, paragraphs 21 and 27), and of 14 September 2010, Akzo Nobel Chemicals and Akcros Chemicals v Commission and Others (C-550/07 P, EU:C:2010:512, point 70)).

357      See, inter alia, judgment of 12 November 2019, Commission v Ireland (Derrybrien wind farm) (C-261/18, EU:C:2019:955, paragraph 89 and the case-law cited).

358      See point 319 of this Opinion.

359      For more detailed information on the taxable amount, see Berlin, D., ‘Taxe sur le chiffre d’affaires – Fonctionnement de la taxe – Régimes spéciaux’, JurisClasseur Europe Traité, fasc. 1640, February 2021, paragraph 16 et seq.

360      Articles 83 and 84 of Directive 2006/112.

361      Articles 85 to 87 of Directive 2006/112.

362      That uniform rate is set at 0.30% by Decisions 2007/436 and 2014/335.

363      See Potteau, A., ‘Budget de l’Union européenne – Contenu du budget’, JurisClasseur Europe Traité, fasc. 198, 4 November 2016, paragraph 21.

364      According to Potteau, A., Regulation No 1553/89 ruled out any direct link between the VAT resource and taxpayers by imposing as the sole method the revenue method, which consists of a simple statistical calculation (see footnote 210 of this Opinion).

365      See judgment of 15 November 2011, Commission v Germany (C-539/09, EU:C:2011:733, paragraph 71 and the case-law cited).

366      See, to that effect, judgments of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraph 31); of 7 April 2016, Degano Trasporti (C-546/14, EU:C:2016:206, paragraph 22 and the case-law cited); and of 26 February 2013, Åkerberg Fransson (C-617/10, EU:C:2013:105, paragraph 26 and the case-law cited).

367      See judgment of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraph 32).

368      See the case-law cited in points 172 to 175 of this Opinion.

369      See points 172 and 173 of this Opinion.

370      On the impact of fraud, see Boerselli F., ‘Pragmatic Policies to tackle VAT fraud in the European Union’, International VAT Monitor, vol. 19, No 5, 2008, p. 333.

371      See, to that effect, judgments of 5 December 2017, M.A.S. and M.B. (C-42/17, EU:C:2017:936, paragraph 30); of 20 March 2018, Menci (C-524/15, EU:C:2018:197, paragraph 19 and the case-law cited); and of 2 May 2018, Scialdone (C-574/15, EU:C:2018:295, paragraph 27).

372      See point 225 of this Opinion.

373      See point 173 of this Opinion.

374      See footnote 21 of this Opinion.

375      Under Article 86(1) of Directive 2006/112, the taxable amount is to include taxes, duties and levies due outside the Member State of importation and those due by reason of importation. It also includes incidental expenses, such as packing, transport and insurance costs, up to the first place of destination within the territory of the Member State of importation as well as those resulting from transport to another place of destination within the Community, if that other place is known when the chargeable event occurs.

376      Provision corresponding to Article 29(1) of the Community Customs Code.

377      For a detailed description of the valuation of imported goods or services, see Bieber, T., ‘Customs Valuation and Import VAT’, Global Trade and Customs Journal, vol. 14, No 2, p. 73.

378      See, to that effect, judgment of 18 June 2020, Commission v Hungary (Transparency of associations) (C-78/18, EU:C:2020:476, paragraph 36 and the case-law cited).

379      See point 337 of this Opinion.

380      See footnote 23 of this Opinion.

381      See footnote 21 of this Opinion.

382      See judgments of 18 July 2013, Evita-K (C-78/12, EU:C:2013:486, paragraph 33), and of 21 November 2013, Dixons Retail (C-494/12, EU:C:2013:758, paragraph 20).

383      See paragraph VI of the executive summary of Report No 13/2011.

384      See paragraph 26 et seq. of Report No 13/2011.

385      See Report No 13/2011, paragraph 55.

386      See Special Report No 24/2015, paragraph 85, p. 34, cited above in footnote 111 of this Opinion.

387      See the executive summary of that report, paragraph IV, p. 9.

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