The European Commission is demanding the UK pays EUR2.7bn (US$2.39bn) in customs duties not paid on Chinese imports of fashion and footwear.

The Commission has formally written to the UK Government with the request following a warning about the problem by the European Union's (EU) watchdog Olaf last year. It says the UK "refuses to make customs duties available to the EU budget", as required by the bloc's law.

A 2017 Olaf report found that importers in the UK evaded a large amount of customs duties by using "fictitious and false" invoices and incorrect customs value declarations at importation. Further Commission inspections brought to light a "dramatic increase" of the scale of that undervaluation fraud scheme operating through the hub in the UK between 2011 and 2017.

"Despite having been informed of the risks of fraud relating to the importation of textiles and footwear originating in the People's Republic of China since 2007, and despite having been asked to take appropriate risk control measures, the United Kingdom failed to take action to prevent the fraud," the Commission says.

The Commission has calculated that the infringement has resulted in losses to the EU budget amounting to EUR2.7bn – minus collection costs – during the period November 2011 to December 2017.

The UK has also been found to have infringed EU Value Added Tax legislation, leading to potential losses to the EU budget. The UK is also liable for the financial consequences of its infringements of EU legislation, the Commission says.