EU-Israel Trade Agreement

Part of the debate – in Westminster Hall at 4:00 pm on 27 January 2010.

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Photo of Phyllis Starkey Phyllis Starkey Labour, Milton Keynes South West 4:00, 27 January 2010

I would rather not, if my hon. Friend does not mind, because I have a lot of densely argued stuff that I want to get on the record.

There is mixing of produce within one consignment. It is well known that the major exporter, Agrexco, which is responsible for 60 to 70 per cent. of settlement produce, mixes settlement and non-settlement produce in its depots and then labels the whole lot as originating in Israel, which means that all of it gets the import duty. It has been confirmed by EU diplomats that that happens in respect of oranges. The answers that I have received to written parliamentary questions give additional indirect proof of that, showing that in the 12 months to March 2009 HMRC identified six consignments as being from settlements although they were validated by the Israeli customs authorities as originating in Israel, and describing a particular consignment which contained two consignments of herbs that were identified because the packaging was properly labelled as coming from the Jordan valley, although they were included in a consignment purporting to be from Israel. Obviously, mixed consignments are hiding settlement goods. Although HMRC undertakes physical inspections, it cannot look at every consignment-there are tens of thousands a year-and it is presumably only detecting the tip of the iceberg.

The trade agreement sets out in detail the documentation that is required from exporters and importers: the original commercial documents accompanying the customs import declaration; the sales invoice and delivery/consignment note or packing list issued by the exporter and showing the UK importer; health documentation where required; and, where a preferential rate of duty is claimed, either a proof of preferential origin showing the place of production and zip code on the invoice or on form EUR1, which is issued by the exporter and stamped by the Israeli authorities. It is clearly stated on EUR1 that anyone signing the form will be committing an offence under section 167 of the Customs and Excise Management Act 1979 if the declaration is incorrect. The importer is also held responsible.

The problem is either that documentation is insufficiently detailed to reveal all settlement goods' origin or there is deliberate falsification at the Israeli end. The first problem is that the EUR1 form does not travel with the goods, and as long as the form has a location and postcode and is stamped by the Israeli customs authorities it can be accepted by HMRC. That is a huge loophole. A report in 2006 in the Israeli business magazine "Globes" helpfully described how it is done:

"The method is easy: you invent an address within the Green Line and operate using this address. In this way you do not have to pay the customs fees that apply to products exported from across the Green Line. The method works, but not for those whose company carries a name that gives away the true location-such as Golan Height Wineries."

The Israeli authorities clearly turn a blind eye to this practice, although it is interesting to see that, at the same time, they have set aside 30 million Israeli shekels through the Israel Export Institute to be used for compensation for manufacturers from across the green line, by paying the import duties for them. However, presumably that is only done for those whose names give away where they are, because only four exporters have applied.

Given the well-documented policy of deliberate falsification, the powers of HMRC are incredibly weak. If HMRC has doubts it can make a verification request, but that request just goes straight back to the same Israeli authorities who mislabelled the produce in the first place. I have received a written parliamentary answer that confirms that the issuing and verifying authorities are the same.

In 2007-09 HMRC asked Israel to verify 65 preference certificates that were doubtful, but even when it asks, the Israeli authorities do not necessarily respond. In the same period HMRC made 21 requests for information to Israel, but 12 were not answered within the 12 months stipulated in the agreement.

Strictly speaking, customs can only levy import duty if they can definitely tell that goods are from settlements. However, it is interesting that, in dealing with BRITA water-carbonating machines manufactured in Maale Adumim, even though the Israelis first said that those were made "under Israeli Customs administration", and then refused to reply when asked to confirm that they came from a settlement, German customs levied import duty in the absence of definite proof from the Israelis that those were manufactured within Israel. HMRC could learn a few lessons from German customs and could perhaps be a bit more robust about levying duty when it has strong suspicions.

There are two other things that HMRC should be doing. First, more information on exactly where the products are from could come from the traceability system set up by retailers and importers, which is primarily to meet food safety requirements but is also there to give information to customers. That system is much more detailed. For example, my hon. Friend Richard Burden asked Tesco about some dubious-looking mangoes in one of its stores and was given the precise name of the farm that they came from, which turned out to be in Israel.

I accept that HMRC cannot demand the traceability information, but it could ask the retailers and importers if it could look at it where suspicions arose about the customs declaration, because that would give HMRC independent, extra information. It is in the interests of retailers that their audit trail is not compromised. They would not want goods in their stores to be labelled as coming from the west bank if that was not so, or to give a different description to HMRC and thereby avoid the import duty.

The second issue is the spot checks that HMRC does on consignments. It has not done any checks at all on sweet peppers, halva or tahini, although all those products are known to be produced in settlements. Halva and tahini, for example, are produced in the Barkan settlement by Achva and sold widely in the UK. It would be an obvious thing to target those products. HMRC does apparently target products and addresses that have misrepresented produce before and where there are known production facilities in settlements, but it does not seem to do that often. I would be grateful if my hon. Friend the Minister said how often imports are challenged. Why does HMRC not step up the spot checks and use the information that is widely available from, for example, the recent report by the School of Oriental and African Studies and the information available from a number of non-governmental organisations in Israel about which goods are most likely to be coming from settlements?

The third issue is that no action seems to be being taken against those who make false declarations, apart from charging the import duty. As I mentioned, however, the form that they all sign confirms that they would be committing an offence if the declaration was incorrect and, in a debate that I introduced before Christmas on consumer labelling of settlement goods, the Minister of State, Department for Environment, Food and Rural Affairs, my hon. Friend Jim Fitzpatrick, clearly said that claiming preference on settlement goods was "an offence".

Section 167 of the Customs and Excise Management Act 1979 is the provision that is used to take action against people who are thought to be smuggling cigarettes by pretending that they are for personal use when they are actually bringing them into the country for resale. Those individuals can be fined or detained and persistent offenders imprisoned for up to seven years. I do not understand why the same rigour is not used against those who are doing it, for purely commercial reasons, from settlements in Israel.

I now turn to a specific case relating to cosmetics in which it seems to me that even more blatant fraud is occurring. Cosmetics, particularly from Dead sea products, are very significant imports into the UK; there were 417 consignments of beauty and skincare products in 2009. I want to focus on Ahava, a firm that is part-owned by two co-operatives based at Mizpe Shalem and Kibbutz Kalia. Both are in the occupied Jordan valley and both are on the EU list of settlements. The products that Ahava produces are based on Dead sea mud, which is extracted at both those sites and processed at Mizpe Shalem. There is no evidence of any other production facilities and certainly none within green line Israel, although the head office is near Tel Aviv.

The Ahava website and product labels clearly give the postcode at Mizpe Shalem and then say "Israel", which is an incorrect description. Its chief executive was totally open in a BBC interview a year or so ago about the fact that it uses the head office address, not the site of production, to justify the "Made in Israel" claim. That could not be more blatant. There is no argument about this one, and when challenged-

Sitting suspended for a Division in the House.

On resuming-

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