"CAMBIO PULITO" THE BATTLE AGAINST UNFAIR COMPETITION HAS STARTED
The whistle-blowing platform
Looking at the geographical location of this illegal phenomena, the North of the country, privileged location for a number of distribution hubs, seems to be a particularly fertile ground for tire imports in total absence of any compliance to VAT and environmental contribution taxes: tire imports via online channels is quite popular in the Veneto region and once these have entered our territory, they can easily make their way to the South of Italy and other regions in between.
An effective tool, against the kind of illegal practices that are negatively affecting the supply chain ranging from irregular sales to ELT generation and management: this is what emerges from the first five months of "CambioPulito", the whistle-blowing platform launched in May by the Observatory on illegal tire flows of and ELT disposal in Italy, which includes consortiums such as Ecopneus, EcoTyre and Greentire, Legambiente, CNA, Confartigianato, Federpneus and Airp – Italian Association of Tire Retreaders. On October 25, members of the Observatory presented the first report of the platform at a press conference in Rome, which turned out to be a rather topical initiative, given the recent approval of a bill that aims to systematically regulate whistle-blowing strategies within the country; Francesca Businarolo, Member of Parliament and first signatory of the bill, took an active part in the proceedings and stressed the importance of the experience which can be considered a precursor of the law itself. It is worth mentioning, that the platform, in line with the indications contained in the new legislation, not only manages reports through codified policies, but guarantees, above all, the confidentiality of the reporters in order to avoid any kind of retaliation or discriminatory act, direct or indirect, for reasons connected directly or indirectly to the report.
The effectiveness of the "Cambio Pulito" program, however, is above all in the numbers: 122 reports recorded in the first five months (almost one a day), 80 companies reported, of which 50 with specific documentation and 14 online operators, the object of 34 reports with precise and detailed descriptions and documentation about illegal practices ranging from VAT evasion or non-payment of the environmental contribution for correct ELT management. All elements that have already been forwarded to the Environmental Protection Division of the Carabinieri, for the necessary investigations into the various causes responsible for generating huge illegal stockpiles of ELTs.
Two major illegal trends emerge from the analysis of the reports: the first concerns online sales channels selling goods not covered by VAT and environmental contribution, mainly from foreign registered websites (mostly in Germany, USA and Belgium), flooding the Italian market with truck loads of new tires travelling to every corner of the country; the second illicit movement, on the other hand, stems from black market activities around spare parts sales, repair jobs and tire replacements, mainly in the southern part of the country.
Considering that “Cambio Pulito” was created as a response to specific requests by the supply chain on emergency disposal of ELTs, it is undeniable that from these results, illegal online trading appears as the real Achilles heel of the entire system. Illegal trading – particularly active in B2B circuits – that could render the Extended Producer Responsibility (EPR) Act introduced back in 2011 totally useless. The Act enforced the principle of responsibility for the collection of ELTs also on Italian producers / importers, for the equivalent amount of new tires placed on the market the previous year. In fact, out of a total of 122 reports, as many as 118 (i.e. 96.7% of the total) are classified as alleged irregularities in commercial transactions, and almost all reports show the usual mechanism, namely online marketing by companies with foreign registered offices, very active in electronic marketing - on social media and specialized channels - which systematically bypass the payment of VAT and environmental contributions. A system, this, that allows several traders to buy tires at extremely low prices and then resell these to the final consumer at prices well below what they could if they had followed the official procedures, including VAT and environmental contribution. An illegal practice that makes them unfairly competitive on the market.
Looking at the geographical location of this illegal phenomena, it’s interesting to note that the North of the country, a privileged location for a number of distribution hubs, seems to be a particularly fertile ground for tire imports in total absence of any compliance to VAT and environmental contribution taxes: tire imports via online channels is quite popular in the Veneto region,a territory that appears to act as a logistic hub for significant incoming flows, especially in Verona, Treviso and Vicenza, although various reports involve also the provinces of Novara and Torino in Piemonte and Como, Bergamo and Cremona in Lombardy. Once in the country, illegal tires find easy marketing channels especially in the South, touching many regions: Campania (provinces of Naples and Caserta the most affected), Puglia (mainly in the industrial areas of Foggia and Bari and the province of Brindisi ), Sicily (in Catania), Calabria (Cosenza and Catanzaro), Basilicata (the industrial area of Potenza).
Still looking at the reports received, what emerges sharply is also the role played by some foreign commercial operators repeatedly called into question for irregular dumping of large quantities of illegal products on the market, systematically evading VAT and the environmental contribution through three way transactions involving producers and foreign intermediaries. The proof, according to all the reports received, is given by the un fair prices, about 20% lower, which basically coincides with the failure to comply to both the above mentioned taxes. Many of these reports include the invoices where the absence of the "VAT" and "environmental contribution" is quite evident, as well as images of online ads, especially on social media.
These reports also highlight the role played by a few actors particularly rooted in their territory of origin but very active throughout the country, two well-known groups from Campania were specifically targeted which, according to several fairly detailed reports, lend themselves both to marketing and replacement activities (and, it seems, quite active also on the black market for second hand tires) violating all prescribed standards.
THE NEXT STEPS
The die is cast, and “Cambio Pulito” represents a clear and decisive action against illegal practices, responsible for generating 30-40 thousand tons of ELTs every year that, according to tax authorities, do not exist and are not accounted for within the fixed targets of the national management system, financed by citizens through regular sales, making it difficult to organize the needed collection points, as ELT specialists know all too well.
Now the industry, as reports continue to be collected, hopes that the work of law enforcement agencies can restore that fairness that is a necessary and inescapable condition for the system to function properly. However, the industry as a whole is perfectly aware that it will take a long time before the whistle-blowing platform against illegal practices will obtain any appreciable results: new solutions will have to be implemented at the same time. Furthermore, the sector appears to have little confidence in the institutions’ ability to do anything about it; the Observatory, in fact, was also set up to tackle issues that would hardly be dealt with at government level, and even if positive proposals from the Ministry of the Environment were to arrive, times will not be short.
Further actions are in agenda because, if “Cambio Pulito” is able to detect illegal practices, allowing the police to contrast the phenomenon, prevention represents the next level, stopping these practices before entering the supply chain. The Observatory members will focus on this activity in the coming months.
HOW DOES “CAMBIO PULITO” WORK?
The whistle-blowing platform "CambioPulito" (www.cambiopulito.it) is the first control instrument created by the Observatory in an attempt to curb illegal tire trading and ELT management in Italy, in order to promote legality and protect both the citizens and the healthy part of our economy, collecting all the information needed to support government actions against illegal practices within the sector and promote correct ELT management models in full harmony with environmental needs and policies. In this first phase, access to the platform is reserved to a network of operators who are also partners within the Observatory, and cannot be accessed by any individual citizen. The software used by the platform, developed in the United States, guarantees total anonymity to the reporting agent, although additional contacts to request further information or details on the reported episodes are provided for in the system. Every single piece of information recorded on the platform is examined by Legambiente and goes through a number of stages, "receiving the report", "evaluating it" and "final decision", with possible request of additional information or clarifications from the reporter (again via the online platform and anonymous), before sharing the results with the rest of the Observatory. The next step is the transmission of particularly serious reports to law enforcement agencies: of the 43 reports currently undergoing the follow-up phase after completing the internal evaluation phase, a part has been forwarded, for further investigations, to the Environmental Protection Division of the Carabinieri.