{{The importer, a front man for the Calabrian mafia, tells the Chinese seller, who speaks fluent Italian and lives in Rome, that he wants to fix a lower price on the next shipment.}}
Their business is not drugs or weapons, but Chinese T-shirts, jeans and shoes. The buyer for the mob in Italy’s impoverished south wants to declare a falsely low price to reduce the customs duties he must pay because, as he says in a wiretap, “it goes to the state”.
This police recording offers a glimpse of the criminal underbelly of trade between the European Union and China, whose mind-boggling size – worth well over 1 billion euros a day – makes it fiendishly hard to police.
Making matters worse, the EU is a single market of 300 million people but which has 28 national customs authorities with differing priorities.
Italy, a high-fashion Mecca and home to a culture obsessed with elegant appearances, was the top EU importer of low-cost Chinese clothing a decade ago, before Italian customs agents cracked down on the illicit practice of undervaluation.
Criminal groups trying to evade tariffs by lying about the real value of clothing sold in the EU, China’s biggest export destination, had singled out the southern Italian port of Naples as their entry point.
There they were declaring pairs of jeans for as little as a euro each and T-shirts for 50 cents.
“The profit margins are high, the volumes are huge and the laws are lax,” said Rocco Burdo, the top intelligence officer at the Italian customs agency’s anti-fraud unit.
“Undervaluation is a grave threat to all of Europe, and so EU integration should be accelerated to make a unified fight against fraud across the region,” he told Reuters at his office’s headquarters on the outskirts of Rome.
After the crackdown led by Burdo, the savvy dealers simply re-routed goods through other EU ports such as Hamburg. Italy dropped to number six as importer of Chinese clothing in the region, but it became the top collector of textiles duties, customs data show.
National authorities collect customs duties, which vary but amount to 12 percent of the value of a pair of denim jeans or cotton T-shirts made in China, but hand three-quarters of the revenue to the EU’s central budget.
Europe has become a bonanza for trade gangs which exploit the free movement of goods within the EU by importing where there are fewest controls.
The increasingly sophisticated practice of undervaluation costs taxpayers billions in lost duties, and it is often accompanied by counterfeiting and value-added tax (VAT)
evasion.
Undervaluation accounts for only a small fraction of overall customs fraud, and European officials stress that criminal gangs, not the Chinese government or state-owned companies, perpetrate this type of fraud.
Nevertheless, it illustrates broader trends in an often difficult trade relationship, where China’s aggressive business strategy has brought on more than 50 EU trade defense measures for unfair practices.
Duty-dodging is made easier by the Chinese strategy of controlling both production and distribution to maximize profit.
Diverging opinions between EU countries on trade disputes, such as in a recent row over Chinese-made solar panels, also reflect an inconsistent approach to fighting undervaluation.
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