Searching for the bad apples in the sector

Step by step Dutch Customs obtains just a bit more grip on the oil trade. "This industry is constantly changing."

In 2017, Dutch Customs levied just under 12 billion Euros in excise duties that were directly routed to the Dutch treasury. More than two thirds of that amount was comprised of taxes on mineral oils, such as fuels. Goods which, in the experience of Daan Huntelaar and Herman Willemsen, are highly sensitive to tampering. These two customs officers know virtually everything there is to know about the fiscal aspects of diesel, petrol and related items.

Huntelaar: “As intelligence staff member at the Customs National Tactical Centre, one of my tasks is to provide customs regions with input on mineral oil audits. Naturally, we direct our attention to where we suspect fraud and on parties that use a substantial amount of fuel. These include: agricultural companies, transport companies and machinery contractors; they easily use over 250,000 litres of diesel per year. For such players, fuel often accounts for a third of their total operating costs. It is also the only item for which they can really achieve savings: a few cents per litre quickly makes a big difference. But this comes with its own fiscal risks. For instance, you often see low-cost fuel being acquired in Belgium, which in itself is permitted under certain conditions. However, we often find this fuel not in the standard tank, but in an IBC container. And that is not allowed. During inspections by end users, we encounter irregularities in approximately 10% of cases, according to our latest calculations.”

“With a percentage score of over 38, one sector is particularly interesting for us: commercial inland navigation. In this sector, fuels remain outside the levy of excise duties on a grand scale. This is due to, for example, shipmasters using their own cargo to sail on, which, naturally, is quite cheap. Or because they sell a portion of their cargo on the side. The law applies standards for so-called natural loss – the accepted differences between the loaded and unloaded cargo – and these margins are abused. You can pinch a complete tank lorry, roughly 28,000 litres, from the contents of a large tank barge, and no one the wiser. It just disappears into the illegal circuit. Criminal organisations store diesel in this way before reselling it to rogue petrol stations. Due to these kinds of practices, the state is missing out on a fortune in excise taxes.
At the Customs National Tactical Centre, we utilise lists bearing the names of ships where such abuses have been previously identified, and we can also verify the trips of these vessels. Given that you never know exactly what is taking place on board, we send our colleagues out on operations with a fairly open assignment: if you come across such a barge, go for it and see what you find.”

Willemsen: “It is not easy to supervise this market because the oil industry is constantly changing. Company A may be called Company B tomorrow, and the ships are also constantly changing their name. The hardest part, however, remains the goods that you are handling. Oil is fluid, so the volume varies depending on the weather conditions. If the temperature rises, the product expands: so you are constantly performing conversions during audits. Oils are also interchangeable, so their origin by definition is difficult to determine. What’s more, you cannot see or smell which kind of variety you have; this requires laboratory testing. And even then, on the chemical spectrum, the various types are often close to one another. For example, designer fuels are increasingly being used in products that have been developed for propulsion, but which are not classified as fuel due to the addition of all manner of chemicals, and so are not subject to excise duties. In terms of composition, these are either indistinguishable or are scarcely distinguishable from diesel.”

“In essence, the work that we do is no different from that of our colleagues who count liquor bottles or cigarettes at points of sale for excisable goods – it’s just more complicated. For us, there is always the question of whether what has been recorded on paper is accurate. A vessel audit always starts with a conversation with the shipmaster and a thorough look at his administration, such as the cargo papers and the overview of the ship’s journeys, always neatly recorded; each journey has its own number. We then proceed all the way from the fore peak to the aft peak: the fuel tank, the cargo tanks and the slop tank: a reservoir where residual cargo can be temporarily stored. We take manual measurements, calculate the quantities present and, if necessary, sample the contents. If everything matches the accounting, there is nothing to worry about. If there is an amount missing here or there, the shipmaster may provide an explanation for that. If he cannot come up with a plausible story, then an audit may end with an additional assessment of excise duties and a fine. We perform part of the process ourselves, so that portion has to be legally airtight from all sides. It is vital that you speak the shipmaster’s language, so, knowing the shipping terms. Likewise, the specific jargon of the oil industry. For us, that is a piece of cake. We have all been trained at the shipping college and have been working in this business for years.”

Huntelaar: “The information about audits – compliant or non-compliant – that we get back from Herman and other colleagues from their physical supervision is extremely valuable. At the Customs National Tactical Centre, we can bring the picture into better and better focus: which ships deserve our particular interest and which do not? This helps us each time to obtain just a bit more grip on this industry.”

Willemsen: “Within the industry itself, people are generally happy with that. Shipmasters are true craftsmen: proud of their profession, proud of their ship. You see that when you come on board: everything is spic and span; you could eat off of the deck or the floor of the engine room. Most of those people just want to earn an honest living. They are also upset by the bad apples in the industry.”

This is only one of the many interviews in our recently issued overview ‘Dutch Customs in 2017’. All together these stories give a good impression of the broad and exciting playing field in which our service operates. Click here to read the full publication.

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