A little-used customs mechanism has become the favourite tool of fraudsters draining the EU budget, and the bloc’s anti-fraud office is finally tightening the screws. In late April the European Anti-Fraud Office (OLAF) revealed a sprawling scheme that abused so-called customs procedure 42, a rule that lets importers defer value-added tax when goods land in one member state but are destined for another. Investigators traced false confirmations of arrival, misdeclared goods and fabricated transport documents across several countries before handing the case to the European Public Prosecutor’s Office, which detained nine suspects.
The episode is no outlier. OLAF’s 2025 annual report, published in April, recommended the recovery of almost 600 million euros and flagged a marked rise in complex procurement fraud and conflict-of-interest cases. The office opened 254 new investigations last year and closed 209, and over the past decade it has helped retrieve or protect roughly 6.8 billion euros. Customs and VAT fraud, much of it tied to undervalued e-commerce parcels arriving from outside the bloc, sits at the centre of that workload.
What makes procedure 42 so attractive is precisely what makes it useful for legitimate traders: it removes friction. Goods can move from a port in one country to a warehouse in another without VAT changing hands at the border, on the promise that tax will be settled at the final destination. When that promise is broken, the revenue simply vanishes, and the cross-border paper trail makes the loss hard for any single national authority to follow.
The deeper problem is structural. Twenty-seven tax administrations, each with its own data systems and priorities, are being asked to police a single market in which goods move freely but information does not. OLAF can investigate and recommend, but it cannot prosecute; that power rests with national authorities and, increasingly, the EPPO. A push last November to knit together Eurofisc, the EPPO and OLAF reflected a belated recognition that fragmented enforcement is no match for organised networks that treat the internal market as one open hunting ground.
For honest importers, the losses are not abstract. Every euro of evaded duty undercuts competitors who pay in full, and the shortfall ultimately lands on national treasuries and, through the EU’s own-resources system, on ordinary taxpayers. The flood of low-value parcels from non-EU online sellers has only widened the opening, with undervaluation and split consignments designed to slip under duty thresholds.
The looming overhaul of the Union Customs Code, which would create a centralised EU customs data hub and a new EU Customs Authority, is meant to close exactly these gaps by giving enforcers a single view of goods entering the bloc. Whether member states surrender enough control over their customs data to make that work is the open question. Until they do, schemes like the one OLAF just exposed will keep finding the seams between national systems.
