Photo: Dr. Jean-Paul Rodrigue, 2016.
The most common form of customs fraud concerns the undervaluation of goods on the customs import declaration since it enables lessening the duties to be paid to the customs authority. Another is an inaccurate marking of the country of origin to avoid a higher duty if the real country of origin is subject to a high duty regime as opposed to a third country from which the origin is fraudulently claimed. The misclassification of goods is also a common issue as it involves declaring a good under a lower duty category than its real duty category. Last, is the failure to pay in full or in part customs duties. Although regular importers and large firms are unlikely to default on their obligations, there is a risk that this can happen for irregular importers or when a product dumping fine has been imposed afterward.
The above photo depicts a customs fraud through product misclassification. In the involved customs regime, chickpeas and black eye beans in dry form are subject to a duty of 5%, while the same goods in a canned form are subject to a duty of 20%. The above box of canned black eye beans was, however, declared as dried black eye beans (paying a 5% duty instead of a 20% duty). This form of fraud enables an importer to be more competitive in the national market than an importer complying with customs regulations. The misclassification can even go as far as declaring cooking oil subject to a 40% duty as powdered milk subject to a duty of 2%. Customs fraud is more likely to occur when customs forms are paper-based instead of a single window where the information is filled and transmitted electronically. Therefore, trade facilitation is an important factor for a higher level of customs regime compliance and fraud avoidance.