International trade has, “permanent and accumulative,” benefits for consumers according to the US Congress’ Joint Economic Committee.1 It drives improvements in efficiency, gives consumers greater choice, and generates revenue for governments that will have a direct impact upon the lives of citizens.
Why international trade matters to consumers
In 2000, global trade was valued at around USD 6.4 trillion. By 2019, it had reached USD 19 trillion.2 This dramatic growth has helped to create the modern consumer societies we all enjoy. Retailers now rely on long, complex supply chains, delivering goods to the shelves in our local stores that may have started their journey on the other side of the world.
Our reliance on global trade and the impact of disruption to the free flow of goods is clearly demonstrated by two recent events. Firstly, when COVID-19 forced Chinese authorities to close a terminal at Ningbo-Zhoushan port, the world’s third largest, it was instantly reported that this would have an impact on Christmas sales in the West.3 Secondly, the blocking of the Suez Canal by the Ever Given created disruption that it is predicted will take months to clear. This matters because 12% of international trade goes through the canal, equating to roughly USD 9 billion a day.4
These two events and their impact on our daily lives, show how important seamless global trade is to our modern, consumer-based lifestyles.
Under and over-invoiced goods
International trade does not only matter to consumers. For governments it is a vital revenue stream – in some cases it can account for up to 30% of their total revenue base. Pressure to lower tariff barriers combined with new trade facilitation requirements bring new challenges for numerous customs authorities. They must maintain revenue levels while striving to reduce clearance times.
At the same time, the bell has been ringing on pre-shipment and destination inspection programs. While these programs brought steady revenue to many developing countries, they also hampered the flow of trade and proved costly to importers and exporters. Governments therefore need to find innovative ways to protect their revenue streams from fraudulent activities and simultaneously look towards improving the customs process environment to speed up the clearance of goods.
One fraudulent activity used by unscrupulous operators is the under-invoicing of consignments at the border. This results in a significant reduction in the customs duty and taxes charged on the goods, and therefore less revenue for the government.
In some cases, consignments may be over-invoiced. In this case, the unscrupulous operator is effectively syphoning money out of the economy and depleting foreign currency reserves.
The goal for governments is to ensure that the price declared on the invoice matches the true value of the goods within the consignment. To achieve this, they need an efficient way to accurately estimate the true value of each consignment passing across their border. This will remove their reliance on external influences and ensures the full and correct duty is paid.
Whatever solution a government chooses, it must be in full compliance with World Trade Organization (WTO) and international trade obligations. It must also be seamless as border delays can have a major impact on trade and therefore revenue streams for governments.
SGS solution
We have developed SGS E-Valuator® to support customs authorities and governments in collecting the full and correct amount of duty. This dynamic and automated solution pinpoints suspicious consignment values in real-time by constantly analyzing shipments and checking their declared values against a continuously updated database.
The system uses a purpose-built, state-of-the-art IT matching engine that gathers and validates data against an extensive, fully substantiated database of real and recent import transactions. It enables customs officials to target their efforts more profitably by focusing only on consignments with a high probability of fraud. Moreover, unlike pre-shipment and destination inspection programs, E-Valuator is used autonomously by governments for a concrete transfer of capacity and technology.
Learn more about SGS E-Valuator.
For more information, please contact:
Darius Rao
Service Development Manager
Trade Facilitation Services, Connectivity & Products
t: +258 84 310 8053
References
1 Consumer Benefits from International Trade2 Trends in global export value of trade in goods from 1950 to 2020
3 Ningbo: Global supply fears as China partly shuts major port
4 The ship that blocked the Suez Canal may be free, but experts warn the supply chain impact could last months
