site.btaEPPO Uncovers Chinese Import Fraud Scheme in 13 EU Countries, Including Bulgaria

A coordinated raid code-named “Calypso”, led by the European Public Prosecutor’s Office (EPPO) and conducted in Bulgaria and 13 other European Union (EU) member states, has dealt a significant blow to criminal networks importing goods from China into the EU while fraudulently evading customs duties and VAT, the EPPO reported on Thursday.

The investigation was carried out in Bulgaria, China, Czechia, Denmark, France, Germany, Greece, Hungary, Italy, Poland, Portugal, Slovakia, Slovenia and Spain. 

The fraudulent scheme starts with the introduction of the goods from China into the EU, mainly through the port of Piraeus (Greece), with a substantial undervaluation or misclassification of the goods, in order to evade custom duties using false documents to conceal the true value and nature of the merchandise. A network of professional enablers operating at the customs entry point, such as customs brokers, service providers and accounting firms, facilitate the initial clearance, and the apparent purchase and transport of the merchandise by companies mainly registered in Bulgaria, but operating in Greece with a Greek VAT registration number. 

Through a chain of buffer and shell companies, the goods are apparently sold to companies in specific Member States, where they are supposed to be sold on the market. These fraudulently declared destinations include Bulgaria, Czechia, Denmark, Germany, Hungary, Italy, Slovakia, Slovenia and Spain. However, these fake ultimate acquirers of the goods never receive the merchandise, and operate as a missing trader, thus not paying VAT. In some cases, the criminal organizations used identity documents from legitimate companies, fraudulently hijacking their VAT numbers to conceal the true destination of the goods.

In reality, after the goods enter the EU, they are stored in warehouses and places controlled by the criminal organizations, and from there they are transported, using false documents, to France, Italy, Poland, Portugal and Spain (the real countries of destination). These Chinese logistics centres, where all goods are stored, operate as highly controlled warehouse districts, functioning almost like exclusive communities, accessible only to members of the criminal groups managing them.

The transport documents are destroyed as soon as the goods are delivered, and the merchandise is sold to end customers mostly on the black market, in cash, as part of a highly concealed parallel economy. 

The criminal scheme, which involved the massive importation of textile, shoes, e-scoters, e-bikes and other goods, is believed to have caused an estimated damage of approximately EUR 700 million. 

A total of 101 searches were conducted at the offices of customs brokers, companies controlled by the organized criminal groups under investigation, the premises of the suspects, and at the offices of tax advisers and representatives, lawyers, accountants and transport companies, in Bulgaria, Greece, France and Spain. Ten suspects were arrested, including two customs officers. In addition, firearms and cold weapons were found and seized in the houses of three of the suspects.

At issue are several criminal networks, mainly controlled by Chinese nationals, that handle the full circuit of the goods imported from China into the EU market, including money laundering and sending the profits back to China, while defrauding the payment of customs duties and committing large-scale VAT fraud, EPPO said.