The global south loses big on commodities exports due to bad invoicing

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fraud

South loses up to two-thirds of the value of its commodity exports due to misinvoicing

by the United Nations Conference on Trade and Development (UNCTAD)

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

Trade misinvoicing is thought to be one of the largest drivers of illicit financial flows from developing countries, so that the countries lose precious foreign exchange earnings, tax, and income that might otherwise be spent on development.

Released during UNCTAD’s Global Commodities Forum, the study uses data from up to two decades covering exports of commodities such as cocoa, copper, gold, and oil from Chile, Cote 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’s Secretary-General, Mukhisa Kituyi, said.

Commodity exports may account for up to 90 percent 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, which want to protect their reputations, should get ahead of the transparency game and partner with us to further research these issues,” Dr. Kituyi said.

The analysis shows patterns of trade misinvoicing on exports to China, Germany, Hong Kong (China), India, Italy, Japan, the Netherlands, Spain, Switzerland, the UK, US, and more.

Findings of the report include:

  • Between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67% of total gold exports. Trade with the leading partners exhibited the highest amounts: India ($40 billion), Germany ($18.4 billion), Italy ($15.5 billion), and the UK ($13.7 billion).
  • Between 1996 and 2014, underinvoicing of oil exports from Nigeria to the United States was worth $69.8 billion, or 24.9% of all oil exports to the United States.
  • Between 1995 and 2014, Zambia recorded $28.9 billion of copper exports to Switzerland, more than half of all its copper exports, but these exports did not show up in Switzerland’s books.
  • Between 1990 and 2014, Chile recorded $16.0 billion of copper exports to the Netherlands, but these exports did not show up in the Netherlands’ books.
  • Between 1995 and 2014, Cote d’Ivoire recorded $17.2 billion of cocoa exports to the Netherlands, of which $5.0 billion (31.3%) did not show up in the Netherlands’ books.
  • Between 2000 and 2014, underinvoicing of iron ore exports from South Africa to China was worth $3 billion.

 

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