A Conversation on Government Trade and Balance of Payments DataWhat are the policy implications of trade misinvoicing?

Anders Hjorth Agerskov, Head, Corruption Prevention Unit, World Bank 21 September 2015 National Press Club

What criminal acts can explain why import

and export statistics are not matching up?

1. Evade export duties. A country may have instituted an export tax on timber

because it is easier to collect at a few ports and border points. In response,

logging companies bypass customs or bribe customs officials.

2. Evade import duties. Importers reclassify goods to items with lower duties,

underreport the number of items or their value, bribe customs officials or

simply smuggle items through unpatrolled border crossings.

3. Mask embezzlement of national resources. Companies hide the theft of the

bunkering of oil, theft of gas, metals and diamonds.

[World Bank research also found in Tunisia that customs duties were correlated with the extent to which major

companies had political connections, although this is another matter altogether, see

All in the Family: State Capture in Tunisia (Rijkers et al.)]

What action can the international community take to curb trade mispricing?Policy Coherence in Developed Countries

1. Scrutinize imports in those areas (by HS) with a large discrepancy between values reported in import and export statistics

2. Enact laws that prohibit import of items taken, possessed or transported in violation of national laws (e.g., akin to the Lahey Act)

3. Require firms to disclose the use of high-risk products such as conflict minerals (e.g., the Dodd Frank Act)

Transparency and Enforcement in Developing Countries

4. Publish top importers and exporters in national newspapers with indication of value of import/export and duties paid (e.g., as in the Philippines)

5. Strengthen customs enforcement and collaboration with counterparts in other countries (e.g., DHS support to other governments)

6. For major items acquired under national procurement, compare contract value with value in customs declarations

What action can the international community take to curb trade mispricing?

Integrity Compliance Throughout the Supply Chain

7. Certify throughout the supply chain that key inputs are acquired legally, i.e., items have not been stolen or acquired through corrupt means (similar to ensuring decent labor conditions, i.e., no use of child labor)

International Data and Risk Management Efforts

8. Develop and advance initiatives such as Global Tax Identification Numbers in all trade in order to end anonymous flows (currently being discussed in ASEAN)

9. Produce and update for all countries heat maps highlighting industries with the greatest discrepancies between import and export statistics

10. Strengthening cooperation with maritime companies, e.g., through the Maritime Anti-Corruption Network (MACN)