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Tuesday, December 9, 2014

EU imposes dracula tax on UK's Allium sativum (Garlic) import

“Let food be thy medicine, and medicine be thy food.” ~  famous words from the ancient Greek physician Hippocrates- and we have equivalent saying in our language as well.  Many medicinal systems prescribe garlic to treat a variety of medical conditions. The beneficial effects are confirmed by modern science too.  Some feel repulsive to its odour and desist from taking food garnished with garlic – it is said to propitiate ‘rajas’ guna – being the reason for orthodox people keeping away from it.

Allium sativum, commonly known as garlic, is a species in the onion genus, Allium.  It has been used for both culinary and medicinal purposes. Garlic is easy to grow and can be grown year-round in mild climates.  Garlic plants are usually very hardy, and are not attacked by many pests or diseases. Garlic plants are said to repel rabbits and moles.  Once harvested, at home, garlic is stored warm and dry to keep it dormant (lest it sprout). It is traditionally hung.  Peeled cloves may be stored in wine or vinegar in the refrigerator.  Garlic bulbs should be clean and white with a dried neck and outer skin and quite firm under pressure.  Garlic is  traded globally – the first check is to ensure that the consignment is dry.   The stems, the outer bulb skin and the skin around the individual garlic cloves must be completely dry. Dry garlic can be kept for 6 - 7 months at temperatures of 0 - 1°C and 65 - 70% relative humidity.

The product is not suitable for closed standard containers, as garlic bulbs, like onions, consume large quantities of oxygen and special ventilation measures have therefore to be implemented. Open-sided containers are more suitable, provided that the tarpaulins are rolled up, and wooden dunnage or pallets on the floor of the container improve ventilation.  In damp weather (rain, snow), the cargo must be protected from moisture, since this may lead to self-heating, premature sprouting and root growth.

In International Trade, the duties and obligations between Seller and Buyer are crystallised by ‘Inco terms’ – but perhaps even well drafted Inco terms may not be good enough when this type of tax is imposed.  Daily Mail reports of EU landing  Britain with a £15m 'Dracula Tax'... for importing garlic.  In what is described as bizarre circumstances, Britain has been forced to hand over £15 million to the European Union to settle a bizarre dispute over garlic.

Brussels demanded the sum because it ruled that the UK did not charge enough duty on shipments of garlic from China. Judges at Europe’s top court said the British taxman should have classed the imported garlic as fresh rather than frozen, and so charged a higher tariff. Last night critics mockingly dubbed the charge a Dracula Tax, because of garlic’s fabled anti-vampire powers, and said the case illustrated the power of EU institutions and the way they increasingly get the better of Britain. Just last week, The Mail on Sunday revealed that the European Commission is taking the Government to court to make it easier for migrants to get benefits by scrapping restrictions on who can claim child benefit and tax credits.

Tory Sir Bill Cash, a leading Eurosceptic MP who chairs the European Scrutiny Committee, said last night: ‘This £15 million is a lot of money by any standards, but what I call the Dracula Tax is just yet another example of what is now becoming an endemic problem. ‘We are increasingly losing cases in the court – it’s a natural consequence us our being boxed into a European legal framework that is not dependent on policy. I think this case is petty but it also highlights what we are up against.’ He believes Parliament needs to pass a new law that would enable Ministers to bypass the demands of the European court as well as human rights legislation.

The garlic case took almost a decade to be resolved. It began when the European Anti-Fraud Office inspected ‘imports of fresh garlic originating in China’ and concluded that the authorities in Britain had made ‘obvious administrative errors’. Investigators claimed Her Majesty’s Revenue & Customs (HMRC) staff had not been checking whether the garlic coming into Britain was fresh or frozen, and simply charged the lower rate of duty applied to frozen vegetables when the cargo was fresh.  Eventually the European Commission told the UK to pay it just over £20 million for underpayment of duty on imports of garlic between January 2005 and December 2006. Britain refused to pay up, claiming there was nothing owed, and was taken to court.

The dispute came after Britain did not know whether it was paying for frozen or fresh imported garlic.  HMRC said it originally believed the garlic, which was stored at -3C, counted as completely frozen but later scientific evidence suggested otherwise.  The agreements with the Chinese food companies concerned could not be changed retrospectively, so the extra duty could not be collected later. HMRC has now paid £15 million as it was allowed to keep a quarter of the bill to cover the costs of collection.  ‘The Commission’s case relied heavily on facts regarding the freezing point of garlic which came to light subsequently and which we did not know at the time the classification rulings were issued.’

In an unrelated instance, in 2011, Six containers containing a total of 144 tonnes of smuggled fresh garlic disguised as onions were intercepted in Poland. It was a  result of close cooperation between the European Anti-Fraud Office (OLAF), Polish police and customs authorities. The financial impact on the EU budget of the garlic seized was estimated to be 180,000 Euro in terms of customs’ duties; however, the total impact, in terms of evaded customs’ duties for garlic declared as onions using this modus operandi, is estimated at more than 1 million Euros. Imports of fresh Chinese garlic to the EU are subject to a 9.6% ad valorem duty and, an additional specific duty of 1 200 Euros per tonne (net weight).

So this time, garlic  is unpalatable to Britain too !

With regards – S. Sampathkumar

8th Dec 2014.

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