WCO Recommends Customs Regimes Take Closer Look at Invoicing Disparities

Customs regimes should make sure authority exists to allow for examinations for potential under- and over-invoiced transactions meant to evade customs duties or conceal profits, the World Customs Organization said in a report on illicit financial flows through misinvoicing. "The Report was endorsed by the WCO Council in June and subsequently presented to the G20 Development Working Group in July 2018, which had originally tasked the WCO with the composition of a report" during a 2016 summit, the WCO said in a Nov. 15 news release. In addition to duty evasion, misinvoicing can be used to "disguise capital flight as a form of trade payment" and "bring illicit proceeds into the domestic legal financial system," the WCO said.

The WCO also recommended that customs regimes be allowed to access foreign exchange transactions databases and be equipped "with a mandate to examine whether ‘financial transactions’ between traders
correspond to the ‘value of traded goods,’" it said. The WCO also noted the "potential offered by new technologies such as data analytics ... [and] blockchain to prevent and detect any fraudulent manipulation of trade transactions by sharing and analyzing relevant information in a trusted and secure manner."

The report also includes an analysis of mispriced imports based on U.S. trade data. The WCO reviewed transactions involving subheading 3002.10.0290, which covers “blood fractions not elsewhere specified or included" and is "the commodity with the most import overpricing." Records show significant disparity between the top and bottom price per kilogram in 2016, the WCO said. "The substantially wide variation in price may be partially due to the product heterogeneity, but it is suspicious enough to warrant investigation of import documents," it said. Gas turbine engines classified in subheading 8411.81.8000 is "the commodity with the most export underpricing" from the U.S., it said. The disparity issues there may also be explained by product differences or data entry errors, "but it is suspicious enough to warrant an investigation of export documents," it said.