UNCTAD report reveals commodities trade misinvoicing haemorrhage

News | 29 July 2016


Some commodity-dependent developing countries are losing as much as 67% of their exports earnings, worth billions of dollars, due to trade misinvoicing, according to a new study by UNCTAD, which for the first time analyses this issue for specific countries and commodities.

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.

Released during the UNCTAD Global Commodities Forum, 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.

“This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budgets,” UNCTAD secretary-general Mukhisa Kituyi said.

Commodity exports may account for up to 90% cent of a developing country’s total export earnings, he said, adding that the study generated fresh lines of enquiry to understand the problem of illicit trade flows.

“Importing countries and companies that want to protect their reputations should get ahead of the transparency game and partner with us to further research these issues,” Kituyi said.
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 of Great Britain and Northern Ireland, the United States of America and others.

The UNCTAD Global Commodities Forum was held in Nairobi, Kenya 17 to 22 July 2016. Themes from the Afreximbank annual general meeting running in Seychelles at the time of diversification from raw commodities exports dependence were underlined in the UNCTAD secretary general’s opening remarks. Kituyi urged governments of commodity-dependent developing ecnomies and their parthers to take“decisive action to reduce their commodity dependence and diversify their economies, to have the best chance of achieving their national development priorities and the Sustainable Development Goals”.

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Study findings
  • Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to US$78.2bn, or 67% of total gold exports. Trade with the leading partners exhibited the highest amounts, as follows: India (US$40bn); Germany (US$18.4bn); Italy (US$15.5bn); the UK (US$13.7bn).
  • Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the US was worth US$69.8bn, or 24.9% of all oil exports to the US.
  • Between 1995 and 2014, Zambia recorded US$28.9bn in copper exports to Switzerland, more than half of all its copper exports, yet these exports did not appear in Switzerland’s books.
  •  Between 1990 and 2014, Chile recorded US$16.0bn in copper exports to the Netherlands, but these exports did not appear in the Netherlands’ books.
  •  Between 1995 and 2014, Côte d’Ivoire recorded US$17.2bn in cocoa exports to the Netherlands, of which US$5bn (31.3 per cent) did not appear in the Netherlands’ books.
  • Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth US$3bn.

Source: www.unctad.org

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