Contraband Trade: Research Methods

Muttukrishna Sarvananthan
Point Pedro Institute of Development (PPID)
Point Pedro, Sri Lanka.
www.pointpedro.org
Purpose of the Presentation

To share knowledge of methodologies for

researching informal markets with the
research staff of LIRNEasia
 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
What is Contraband Trade?

Illicit Trade between any

two or more countries.
 Types of Contraband Trade
• False invoicing
(Technical Contraband Trade – TCT)
Partial evasion of tariffs

• Unrecorded trade
(Physical Contraband Trade - PCT)
Total evasion of tariffs
 Types of False Invoicing
• Under-invoicing of exports

• Over-invoicing of exports

• Under-invoicing of imports

• Over-invoicing of imports
 Detecting False Invoicing
• Partner-Country Data Comparison Method

• Unit Price Comparison Method

 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
 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 faking
takes place at both ends.
• Entrepot trade (growing feature of
globalisation) recording
• Recording trade on the basis of the parent
country of the company concerned
 Partner-Country Data Comparison Method –
limitations continued

• Recording transshipment goods

 Unit Price Comparison Method
• Qualitative differences
• Capital goods – made-to-order
• Market imperfections
 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 trade
taking place
• Market price comparison method
If the market price is less than tariff + domestic
taxes inclusive price we could infer contraband
trade. This methods would be less effective if
there is non-tariff barrier (quantitative restriction)
 Unrecorded Trade
estimation methods
• Survey method – semi-structured
interviews, questionnaire-based interviews,
survey of markets for contraband goods.
Extrapolation
• Delphi technique
 Definition of Delphi
• Delphi is basically a technique for gathering and
processing the judgments / informed opinions of a
group of individuals that are well informed
(knowledgeable people) and question them on the
issues/trends occurring in the area/field on the
basis of their informed judgments.

(Chaudhari, 1995: 6)
 Definition of Delphi - continued
• Basic characteristics of this technique are as
follows: (a) structured questionnaire based
interrogation of experts (knowledgeable people)
on the issue/s being probed. (b) controlled
feedback of summarised responses to the
respondents of the first round, so as to enable
review his/her earlier response to every
respondent of the previous round. (c) anonymity of
responses. (d) repeat iterations till broadly
converging responses are received or reason for
unlikely convergence are documented.
(Chaudhari, 1995: 6)
 Relevant Issues
• Source of official data
• ‘goods’ vs. ‘bads’
• goods vs. services