Bulgarian Counter – Undervaluation Methodology



Policy areas

Organisation name Bulgarian National Customs Agency

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Contact person: Iavor Romeo Dokov


The Customs Union is essential to the operation of the EU’s single market. A single market with no internal borders cannot work properly unless common rules apply at its external borders. The volume of goods moving across the external borders of the European Union is staggering. The customs administrations across the European Union are uniquely equipped to play a central role in policing the EU’s external borders. There is not one EU customs service but 27 national customs administrations working together on the basis of a European policy and a common legal framework (the Community Customs Code – CCC) which sets out the rules and procedures to be applied.

As one of those 27 national customs administrations, the Bulgarian National Customs Agency is tasked with protecting the society and the financial interests of the Republic of Bulgaria and the EU as a whole.

Smuggling is one of the most critical risks and an everyday threat for both the economic and personal safety of EU citizens and companies. One of the concerns as a national administration is the underpayment of duties. Undervaluation of imports, for instance, is a form of smuggling, even though it does not involve the physical concealment often associated with the term.

To counter the ever-increasing threat of undervaluation, the National Customs Agency set out on a project that had to both detect undervaluation indicators and provide reasonable doubt during the customs clearance of the goods, to legally and justifiably reject the declared low value. That project came to be the Bulgarian counter-undervaluation methodology – methodology for the detection of undervaluation indicators and for the provision of reasonable doubt during the customs clearance of undervalued goods.

The general objectives were:

  • protection of the society and the financial interests of the Republic of Bulgaria and the European Union;
  • support for the competitiveness of the national and the European economic operators;
  • facilitation of legitimate trade;
  • maintenance, development and enhancement of the cooperation with other law enforcement authorities, the economic operators and the general public.

The first task was to find an irrefutable raw materials price source to formulate an operational solution based on the above CCC articles. The IMF official webpage was used as such a source, where monthly reports and analysis of the prices of raw materials traded on the stock exchanges are published in Commodity Market Monthly.

Considering staff and resource limitations, the approach focused on goods made of cotton, and genuine leather and hides. Preliminary analysis of customs clearances, within the National Customs Information System CIS, revealed goods with declared values lower than the value per kg of the raw materials used in their production.

To refine the approach, and with the help and support of the Bulgarian Industrial Association (www.bia-bg.com), all major national guilds and organisations of textile, clothing and shoe producers were approached. On their part, the specialised producers provided data on the share percentage of raw materials in the prime cost of the intermediate product and based on that, in the prime cost of the final product. The latter provided a solution for devising lower threshold values not based on statistics.

Utilising the above approach and data from the CIS resulted in detection of over 70 economic operators – consignees of goods cleared for free circulation with greatly under-declared values. In order to counter similar cases of undervaluation, national risk profiles were set up to include the detected economic operators but also certain tariff codes.

A monthly results report was produced for the higher management of the National Customs Agency to formulate further actions and solutions in situ at local customs offices.

The most immediate result of all of the above was the massive decrease of ‘suspected’ operators – from over 70 to just 5.

A further boost to the approach was given by the European anti-fraud office OLAF evaluating our methodology and disseminating it to all 27 MS as a ‘good practice and innovation in the fight against undervaluation’. It is worth mentioning that the Bulgarian approach does not include statistics, which are very difficult to defend during judicial appeal but rather builds upon the foundation that it is not possible for a complete good to cost lower than a kilogram of its raw source material.

The project is already implemented within DG orders, and followed by all customs officers dealing with customs clearance of goods in Bulgaria. A very positive characteristic is that there is a lot of space increasing the scope of the project from genuine leather and cotton to metals, wood and electronics.

The methodology has already been devised, cooperation with partners, unions and guilds has been secured, so there are absolutely no financial or organisational threats for this project to grow and expand. The financial resources spent for the project are greatly outweighed by the benefits in terms of financial damages to the national budget revealed, and support and cooperation by public organisations.

No results found.

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