The Agro-Frauders

Having produced its own bureaucracy, its own tariffs and a plan for its own currency, Europe's Common Market was bound to inspire its own kind of crime. That has now appeared in the form of a neat type of smuggling that Eurocrats call agro-fraud. The illegal activity costs the European Economic Community some $10,000,000 a year.

Agro-fraud was conceived by sharpies intelligent enough to understand the Common Market's crazily complex and loophole-perforated farm regulations. The ploy involves one or both of two operations: illegally claiming the subsidies paid by the EEC on exports of farm products to countries outside the Six, and dodging the EEC's stiff tariffs on imports. The subsidies* and tariffs are intended to equalize Common Market commodity prices with world prices, which are generally lower. In agro-fraud, the trick is to move products across borders under the wrong label.

Name of the Grain. Exports of top quality European wheat flour, for example, receive a subsidy equal to 80% of the world market price. Taking advantage of that, one enterprising German trader was convicted of making several hundred thousand dollars by exporting certified "finest wheat flour" to Switzerland and pocketing the subsidy. When EEC officials finally inspected a shipment, they discovered that the flour actually was a nonsubsidized mixture of cattle feed. Conversely, "cattle feed" imported into the Common Market duty-free often turns out to be a mixture of two high-tariff commodities, wheat flour and sugar.

Really sophisticated agro-frauders make profits both coming and going. Their aim is not to sell their products at all, but to keep them moving around in a circle, changing labels at each border as subsidies and tariffs dictate. One Antwerp grain dealer set some kind of agro record by shipping the same boatload of wheat back and forth between Antwerp and Rotterdam for days. The cargo was never unloaded, but simply relabeled with the name of a different kind of grain at each port.

Miraculous Mayonnaise. In a similar case, a German merchant is being tried in Hamburg on charges of illegally pocketing $8,000,000 in subsidies. His 500-ton cargo ships would load up with maize flour (30% subsidy), and in mid-sea they would turn around and head for home. Their expensive cargoes were reimported as cattle feed (no tariff), and the journey would begin all over again. Other revolving traders, according to EEC tariff sheriffs, export melted butter (100% subsidy) that on the return trip miraculously becomes mayonnaise (no tariff). All that is needed for the transformation is a new set of export certificates, because inspectors often do not check the cargoes.

Under other EEC rules, subsidies on the same exported commodity may vary according to stated destinations. Thus, European cheese earmarked for Canada (high subsidy) sometimes pauses there only briefly before finding its way into the U.S. (low subsidy). French and German dairymen collect a 40% subsidy for butter shipped to Vatican City, but no bonus at all for sales to Italy, which is an EEC member. In January EEC statisticians noticed that butter exports to the Vatican had hit 160 tons a year--suspiciously high for a place with a population of only 700. Much of the butter ended up in Italian food stores--until the Vatican recently delivered French and German exporters from temptation by tightening controls on imports.

Gruel Trick. The EEC is expected to adopt an anti-agro-fraud regulation at its monthly ministerial meeting in June. The proposed measure calls for, among other things, closer scrutiny of export-import data and intensified sharing of information on known smugglers. Until Europe develops closer cultural and linguistic ties, tighter security may not be enough. For years a French trader was able to masquerade low-priced gruel as high-subsidized semolina without even changing labels. Foreign customs men were unaware that the French use the same word, gruau, for both products.

* Subsidies are paid out of the Common Market's agricultural fund to exporters of any one of 3,000 commodities.

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