According to a recent announcement by the European Public Prosecutor’s Office (EPPO), EPPO investigators have conducted multiple searches and investigative measures in the Czech Republic and Slovakia targeting a major case involving alleged large-scale customs fraud and VAT evasion over textiles, footwear and cross-border e-commerce goods imported from China into the EU.

Preliminary estimates show that the evaded customs duties and VAT in this case reach a staggering 137.4 million euros (approximately RMB 1.1 billion).

As stated in the EPPO notice, the investigation was launched by the Criminal Office of the Slovak Financial Administration under the operation codename “Podlimit”. It involves a total of 9 Czech companies, which are accused of exploiting loopholes in Customs Procedure 42 (CP42) to smuggle large volumes of Chinese goods into Slovakia and the Czech Republic.

Customs Procedure 42 (CP42) refers to the commonly known EU tax deferral mechanism. Under this procedure, goods imported into one EU member state that are intended for onward transport to another EU member state are allowed to defer the payment of import VAT.

Specifically, the retrospective investigation covers freight shipments handled by these companies between June 2017 and December 2018, involving nearly 4,000 consignments in total.

The EPPO disclosed that these companies issued false Single Administrative Documents (SAD) to facilitate the entry of Chinese textiles, footwear and e-commerce products into the EU via multiple border entry points, including ports in Germany, Poland and Slovenia.

Investigations revealed that the relevant goods were loaded in containers and transported by truck to Slovakia. After customs clearance and being released for free circulation in Slovakia, the goods were not delivered to their declared destination in the Czech Republic. Instead, they were diverted to undisclosed locations under the instructions of Czech companies.

The EPPO suspects that many declared transactions existed only on paper. The goods eventually flowed into the black market, with no VAT paid in the actual country of destination.

Meanwhile, the EPPO pointed out that the scheme also involved the systematic understatement of import value to reduce customs duties. In addition, parties submitted false information to Slovak customs regarding the final destination of goods, and filed fraudulent declarations with Czech tax authorities concerning intra-EU purchases and supplies.

Such illegal activities were further backed by forged contracts, which falsely indicated goods delivery to entities located outside Slovakia and the declared destination countries.

The case is still under ongoing investigation. According to EPPO estimates, these irregularities have caused at least 137.4 million euros in combined losses of customs duties and VAT — including 24.1 million euros in customs duties and over 113.3 million euros in unpaid VAT across nearly 4,000 shipments.

⚠ EU Intensifies Inspection on Chinese Export Aluminum Products; Tax Evasion Tops 12 Million RMB

Last month, the European Public Prosecutor’s Office (EPPO) launched another large-scale retrospective probe targeting imports from China, focusing on Chinese aluminum products entering the EU. Initial verification shows the confirmed tax evasion alone reaches 1.6 million euros, equivalent to about RMB 12.7 million.

According to an official EPPO release dated March 17, the investigation centers on suspected smuggling and tax evasion involving Chinese aluminum imports into the EU. Law enforcement operations covered five German federal states: Bavaria, Baden-Württemberg, Hesse, Saxony-Anhalt and Saxony, representing a highly targeted and precise inspection campaign.

Customs investigation bureaus in Dresden, Berlin/Brandenburg and Mainz launched joint operations, conducting 17 searches in total to collect case evidence and gradually reconstruct the full chain of this cross-border tax fraud.

Codenamed “Black Forest”, this special operation uncovered a well-orchestrated tax evasion scheme. To avoid EU anti-dumping and anti-subsidy duties on Chinese aluminum products, a Swiss enterprise adopted illegal practices: declaring goods under incorrect tariff codes, submitting false commercial invoices, and deliberately understating the actual value of imported aluminum products to evade customs duties and taxes.

Up to now, the investigation has confirmed that the fraudulent activities between 2021 and 2023 caused approximately 1.6 million euros in tax losses to the EU. Relevant suspects have been detained, though no final convictions have been issued by German courts, and the case remains under further trial.

In recent years, the EU has repeatedly launched special operations to crack down on such fraud. For instance, Operation Calypso in 2025 seized 2,435 containers suspected of smuggling and tax evasion solely at Greece’s Piraeus Port, including large quantities of Chinese export goods. It reflects that the EU’s emphasis on cross-border trade compliance has reached an unprecedented level.

EU customs supervision is no longer a routine formality. Retrospective checks, source tracing and full-chain accountability have become the new normal. Any attempts to cut costs and evade tariffs through irregular operations will inevitably lead to severe consequences — including heavy fines, cargo detention, and being blacklisted by the EU, which will affect all subsequent import and export businesses.

It is recommended that all EU-bound cargo owners and freight forwarders closely follow the latest EU regulatory policies, standardize declaration procedures, and strictly uphold compliance bottom lines. In an increasingly stringent regulatory environment, only compliance ensures long-term stable development.