Flawed Avocado Info or The UK "Subtle Boycott"

From the UK Commons Debate on the subject (see here) of the EU-Israel Trade Agreement on January 27, 2010:

Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab): This debate relates to the information given to Her Majesty's Revenue and Customs by those exporting goods from Israel and Israeli settlements to the United Kingdom and the effectiveness or, as I shall demonstrate, the ineffectiveness of HMRC checks in preventing fraud.

Under the EU-Israel trade agreement, produce from Israel enters the UK and other EU member states under a preferential agreement that exempts it from import duties. The agreement only applies to Israeli territory that is within its internationally recognised borders, and that has recently been reaffirmed in a legal ruling from the European Court of Justice.

The Israeli authorities have long had a cavalier attitude to compliance with the agreement...Israel has also unilaterally interpreted the agreement as applying not just to Israel but to the numerous settlements in East Jerusalem and the west bank, even though they are illegal under international law. Settlement produce has been routinely labelled "Made in Israel" and thereby exemption has been claimed from import duty. Not only is that defrauding the EU taxpayer by avoiding legitimate import duty, but it sets a dangerous precedent that could allow other countries unilaterally to reinterpret their agreements with the EU...it is clear that these checks are not working and that goods from settlements are still being misrepresented as originating in Israel.

An indication of the likely scale of abuse can be estimated from the total duty raised on settlement goods in 2009, which was just under £22,000, compared with the demands for duty in 2005-08 that averaged £110,000 per annum, which is five times the level raised in 2009 and suggests that at least 80 per cent. of settlement goods are imported without duty being paid on them. The information and powers available to HMRC are so weak that the controls are unenforceable and the European Commission oversight is ineffective...

...The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): Her Majesty's Revenue and Customs is sensitive of the need to ensure that settlements products do not receive preferential tariff treatment incorrectly. Over the past eight years, it has been monitoring UK imports under the agreement and taking steps to identify consignments that have been mis-declared. Of course, the Department is always happy to receive information to aid its targeting, and to listen to suggestions for ways in which controls and checks in this sensitive area may be improved. I am therefore grateful to my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) for highlighting a number of areas that merit further consideration.
...My hon. Friend may be interested to know that each year, Revenue and Customs checks around 3,000 import declarations on which a preferential rate of duty has been claimed. Those checks result in around 370 verification inquiries, covering some 2,400 proofs of preferential origin. The monitoring of Israeli imports is an important part of those overall checks.

In June 2008, Revenue and Customs received information that suggested that the fact that an Israeli place of production and postcode is included on the proof of preferential origin does not necessarily mean that the products concerned-notably fresh fruit, vegetables and herbs-originated in Israel. There were concerns that the location and code may simply refer to a company's head office or distribution centre in the state, the produce concerned having actually been grown or produced on a farm in a settlement.

Such concerns were repeated in various press articles and television news stories, which also raised concerns about the labelling by UK supermarkets of fresh produce, such as herbs and avocado pears, which some had admitted to purchasing from Israeli-managed farms in the settlements. While the correct labelling of products after importation is not the responsibility of Revenue and Customs, it recognised that it is not possible to establish from documentary checks alone whether produce is labelled as originating in a place other than an Israeli location.

Since the end of July 2008, officials in the UK Border Agency have, at the request of Revenue and Customs, undertaken 51 targeted physical examinations of dates, frozen sweetcorn, fresh herbs, avocado pears, grapes and tomatoes imported under the EU-lsrael agreement. We now understand that in the case of avocados, the intelligence received may have been flawed...

There is no blanket legal requirement for the place of production to be inserted on all produce or its packaging. In the absence of such a marking, as was the case in a number of the examinations undertaken to date, there is little that customs can do when the accompanying proof of preferential origin shows that the produce was produced in an Israeli location. Similarly, the Department does not have sufficient evidence to the effect that the goods were not produced in Israel where "produce of Israel" has been inserted on the product or its packaging. Most of the products that have been examined to date bore such an origin marking.

With the voluntary labelling guidelines that Revenue and Customs contributed to DEFRA's issuance of its guidelines, we are hopeful that those UK supermarkets that decide to implement the voluntary arrangement will persuade their suppliers to display clearly the place of production on their products or their packaging. That could have a useful knock-on effect in helping Revenue and Customs with its series of targeted physical examinations. In the meantime, we will extend our series of targeted examinations to include peppers, halva and tahini.

We are aware that certain supermarkets may be able to identify the origin of their products from their tracking systems and we would be very happy to utilise those systems, where possible, to refuse claims to preference immediately at the time of importation into the UK. However, when we look at our import declaration database, supermarkets are rarely shown as the importers on the customs declaration. In effect, it would be possible only to utilise a tracking system post-importation of the goods and the checks would have to start at the supermarket end of the chain...

...My hon. Friend referred to provisions in section 167 of the Customs and Excise Management Act 1979, which enable Revenue and Customs to take action against traders who commit an offence...

However, new civil penalty provisions came into force on 24 December 2009, as a result of which Revenue and Customs can issue a financial penalty where an importer persistently claims preference on products that are not entitled to such treatment, which will be in addition to the liability to pay the full rate of customs duty.

Although legal constraints mean that the Department has no alternative other than to initiate verification inquiries with the Israeli customs authorities, it is happy to make improvements to its risk assessment and to include further fresh produce in its series of targeted physical examinations. We will also pay further attention to imports of particular products, such as cosmetics, which were mentioned by my hon. Friend. We will explore with supermarkets the possibility and feasibility of using their tracking systems post-importation to identify imports of goods that were not entitled to the preference claimed.

We will continue to work closely with the European Commission and other Government Departments with the objective of ensuring compliance with the rules in this complex and sensitive area. That will include pressing the Commission to monitor the operation of the 2005 technical arrangement even more closely.