July 19, 2016
According to a new study by the United Nations Conference on Trade and Development (UNCTAD) some commodity-dependent developing countries are losing as much as 67 percent of their exports earnings, worth billions of dollars, due to trade misinvoicing.
Trade misinvoicing is thought to be one of the largest drivers of illicit financial flows from developing countries. Countries lose valuable foreign exchange earnings, taxes and income that might otherwise be spent on development.
The study uses up to two decades' worth of data covering exports of commodities such as cocoa, copper, gold and oil from Chile, Côte d'Ivoire, Nigeria, South Africa and Zambia.
The under reporting of exports is established by comparing declared export values to the import values in destination countries.
The analysis shows patterns of trade misinvoicing for exports to China, Germany, Hong Kong (China), India, Italy, Japan, the Netherlands, Spain, Switzerland, the United Kingdom, the United States and others.
The study's findings include the following:
• Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67 per cent of total gold exports. Trade with the leading partners exhibited the highest amounts, as follows: India ($40 billion); Germany ($18.4 billion); Italy ($15.5 billion); the United Kingdom ($13.7 billion).
• Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the United States was worth $69.8 billion, or 24.9 per cent of all oil exports to the United States.
• Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth $3 billion.
Canada only accounts for 1.4% of the total misreporting, the largest shares concern exports to China, Japan and the United States.
Link: Trade Misinvoicing in Primary Commodities in Developing Countries