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Contraband Trade: Research Methods

Muttukrishna Sarvananthan

Point Pedro Institute ofDevelopment (PPID)Point Pedro, Sri Lanka.

www.pointpedro.org

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Purpose of the Presentation

To share knowledge of methodologies for

researching informal markets with the

research staff of LIRNEasia

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Objectives of the Presentation

Provide a snapshot of all available methods

of detecting and estimating contraband

trade in goods and services

Discuss what method/s would be most

useful for the study of the

telecommunication goods & services

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What is Contraband Trade?

Illicit Trade between any

two or more countries.

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Types of Contraband Trade

False invoicing

(Technical Contraband Trade TCT)

Partial evasion of tariffs

Unrecorded trade

(Physical Contraband Trade - PCT)

Total evasion of tariffs

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Types of False Invoicing

Under-invoicing of exports

Over-invoicing of exports

Under-invoicing of imports

Over-invoicing of imports

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Detecting False Invoicing

Partner-Country Data Comparison Method

Unit Price Comparison Method

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Partner-Country Data Comparison Method -

limitations

Exports fob (free-on-board)

Imports cif(cost, insurance & freight)

Difference in classification:

SITC (standard International Trade Classification)

HS (Harmonised System) of classification

Time lag between export and import

difference in fiscal year

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Partner-Country Data Comparison Method

limitations continued This method becomes ineffective if one

partner country is a free port.

This method may not be effective if fakingtakes place at both ends.

Entrepot trade (growing feature of

globalisation) recording Recording trade on the basis of the parentcountry of the company concerned

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Partner-Country Data Comparison Method

limitations continued

Recording transshipment goods

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Unit Price Comparison Method

Qualitative differences

Capital goods made-to-order

Market imperfections

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Unrecorded Trade

detection methods Comparison of production data with

consumption, net exports & inventory

production + imports = consumption + exports +inventory

If Left < Right then we may infer contraband tradetaking place

Market price comparison methodIf the market price is less than tariff + domestictaxes inclusive price we could infer contrabandtrade. This methods would be less effective if

there is non-tariff barrier (quantitative restriction)

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Unrecorded Trade

estimation methods Survey method semi-structured

interviews, questionnaire-based interviews,

survey of markets for contraband goods.Extrapolation

Delphi technique

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Definition of Delphi - continued

Basic characteristics of this technique are asfollows: (a) structured questionnaire basedinterrogation of experts (knowledgeable people)on the issue/s being probed. (b) controlled

feedback of summarised responses to therespondents of the first round, so as to enablereview his/her earlier response to every

respondent of the previous round. (c) anonymity ofresponses. (d) repeat iterations till broadlyconverging responses are received or reason forunlikely convergence are documented.

(Chaudhari, 1995: 6)

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Relevant Issues

Source of official data

goods vs. bads

goods vs. services