THE European Commission has sent the UK a formal demand for more than £2.4 billion of underpaid customs duties on cheap Chinese fashion imports.
The demand relates to shoes and clothes arriving in UK ports from China since 2007, whose value was under-reported by importers in order to minimise the customs duties collected and passed on to Brussels.
A report by the EU's anti-fraud office Olaf last year found that the UK authorities failed to take action despite being informed of the risk of customs evasion and asked to implement appropriate control measures.
The commission calculates that the UK's failure to clamp down on the "undervaluation fraud scheme" resulted in a loss to the EU budget totalling 2.7 billion euros (£2.4bn).
Announcing its decision to send a "letter of formal notice", the European Commission said in a statement: "Despite having been informed of the risks of fraud relating to the importation of textiles and footwear originating in the People's Republic of China since 2007, and despite having been asked to take appropriate risk control measures, the United Kingdom failed to take action to prevent the fraud.
"The United Kingdom is liable for the financial consequences of its infringements of EU legislation."
The Olaf report found that UK importers evaded a "large amount" of customs duties by using fictitious and false invoices and incorrect customs value declarations.
There was a "dramatic" increase in the scale of the fraud between 2011 and 2017.
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