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Brussels, 31 August 2010

Questions and answers: EU-China customs cooperation and combating illicit trade

What is the volume of trade between the EU and China?

Up to 2008, EU imports from China were growing by around 18% per year, and accounted for €248 bn in 2008. This figure dropped to €215 bn in 2009, primarily due to the global economic downturn. The main categories of goods that the EU imports from China are machinery, manufactured goods, office/telecommunication, textiles and clothing.

China is also the EU's fastest growing export market. The EU exports to China accounted for €78 bn in 2008 and €82 bn in 2009. The EU’s main exports include machinery, transport equipment, chemicals, raw materials and agricultural products. Yet, the absolute level of EU exports to China remains lower than it should: China was ranked as the fourth export destination after the US, Russia, and Switzerland in 2008, while in 2009 it was ranked third after US and Switzerland.

The EU's trade deficit with China was €164 bn in 2008 – the largest deficit ever with any single trading partner. It dropped to €133 bn in 2009, but this drop appears to be driven mainly by cyclical factors, such as the drop in Chinese export demand due to the crisis and a greater demand for imports driven by China's large stimulus programme. The EU has called on China, bilaterally and in international fora, to rebalance the growth model of China’s economy.

Why is EU-China customs cooperation so important?

Customs play a crucial role in ensuring the balance between protecting society and facilitating legitimate trade. EU customs have information on every single import and export that crosses EU borders, and use sophisticated methods to control these goods. Europe is China's largest export market; China is Europe's largest source of imports. Cooperation between customs authorities on both sides is essential to secure and facilitate this trade. Given the enormous amount of goods traded, it is important that there is a common understanding on the controls needed, as well as good cooperation and information exchange, in order to facilitate the work of customs authorities on both sides.

What progress has been made in recent years in EU-China customs cooperation to improve security and facilitate trade?

In 2005, the EU-China Customs Cooperation and Mutual Administrative Assistance Agreement entered into force. This was a landmark step in EU-China customs cooperation, and since then major progress has been achieved in working together to protect the safety of citizens and to facilitate legitimate trade flows. The Joint Customs Cooperation Committee (JCCC) was established and has become the principal forum for cooperation, dialogue, information exchange and problem resolution between the EU and China. The EU-China Action Plan on IPR enforcement, launched in 2009, is an important joint project aimed at combating the trade in counterfeit (“fake”) goods and pirated products.

There has also been good progress in enhancing the security of the supply chain. The “Smart and Secure Trade Lanes” pilot project (see below) is an important part of EU-China customs cooperation. The Commission believes that there is ample scope for enhancing mutually beneficial cooperation between Europe and China, and will continue to work closely with the Chinese authorities to this end.

What proportion of detained goods suspected of infringing an IPR at EU borders come from China? What are the main goods from China detained by EU customs?

China is the main source of products entering the EU which are suspected of infringing an intellectual property right (e.g. trademark, copyright, patent). In fact, in 2009, 64% of all articles detained by customs on suspicion of violating IPR came from China. The main product categories coming from China included tobacco products, labels, tags and stickers, clothing and accessories, shoes, unrecorded CD/DVDs, toys and body care items.

What measures have been taken to improve EU-Chinese customs cooperation tackling counterfeit goods?

The Action Plan on EU-China cooperation on IPR customs enforcement is a cornerstone in improving cooperation in this area. It aims to strengthen the application of customs controls to combat the illegal trade in counterfeited and pirated products between the EU and China. This plan contains 4 key areas of action: the exchange and analysis of seizures, trends and general risk information; the creation of a network of ports and airports to target high risk consignments; the enhanced cooperation with other enforcement authorities; joint partnerships with business communities in China and the EU. Activities have been developed in all 4 key areas, and the Commission is keen to extend the Action Plan until the end of 2012 to allow full and efficient implementation of its measures on both sides.

Counterfeit cigarettes from China are a big problem for the EU. What is being done to tackle this trade flow?

Counterfeit and contraband cigarettes are a serious problem, costing the EU and national budgets around €10 billion in lost revenues every year. China is the main source of counterfeit cigarettes entering the EU, alone accounting for several billion euros in losses.

The Commission, led by the European Anti-Fraud Office (OLAF), has worked hard for many years to tackle this illegal trade. In order to ensure good communication links with the Chinese authorities and enable better information exchange on this issue, OLAF posted a liaison officer in Beijing in 2008. All intelligence gathered on the production and trade of illegal cigarettes helps to feed into more targeted and risk-based controls at customs, as well as operations carried out by OLAF and Member State authorities.

The Joint Customs Operations coordinated by the Commission/OLAF over the past few years, have been hugely successful in identifying the risky trade routes and promoting better customs cooperation between the EU and trading partners. For example, the Diabolo II operation The Diabolo operations (see IP/10/99) were carried out with 13 ASEM partners, and resulted in the seizure of more than 65 million counterfeit cigarettes, as well as other counterfeit products.

What is the Joint Customs Cooperation Committee?

The Joint Customs Cooperation Committee (JCCC) was set up within the framework of the EU-China Customs Cooperation and Mutual Administrative Assistance Agreement. It consists of representatives of the customs authorities of the European Union and China. It is an important forum enabling both sides to discuss key issues related to customs, exchange information and work towards finding common solutions to problems that need to be addressed.

What will be discussed at the meeting of the JCCC in Shanghai?

Among the main topics for discussion at the 5th meeting of the JCCC in Shanghai are IPR enforcement, supply chain security and the fight against fraud.

The JCCC will take important decisions regarding the extension of the IPR Action Plan until the end of 2012. The EU is committed to strengthening cooperation further with customs in China, through this Action Plan, in particular with regard to the exchange of information between key seaports and airports. The JCCC is also expected to agree on the expansion of the Smart and Secure Trade Lanes project to cover a wider geographical area and integrate more complex trade lanes.

What is the Smart and Secure Trade Lanes (SSTL) project?

The Smart and Secure Trade Lanes (SSTL) project was launched in 2006, to test the security measures applied to shipments and containers throughout the entire journey, as well as to facilitate better data exchange and mutual recognition on key customs issues between the EU and China. It enabled the participating customs authorities to determine joint risk rules to prevent unwanted goods from entering the supply chain, and to work together in testing container security devices. The SSTL pilot project was also a useful means of comparing the Authorised Economic Operator (AEO) programmes of China and the EU. An Authorised Economic Operator is one who proves that he/she is willing to invest in the security of his/her shipments, and in return receives favourable trade facilitation benefits, such as a reduction in controls.

The first phase of this pilot project involved the ports of Shenzhen in China, Felixstowe in the UK and Rotterdam in the Netherlands. The EU and China are now preparing to launch the next phase of the SSTL, with participation extended to include Belgium, France, Germany and Italy, as well as the port of Shanghai. The long term goal of this project is to facilitate agreement on the mutual recognition of security measures, control results and authorised economic operators.

Link to IP/10/1079

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