The Fine Art of Customs Workaround, Part I
The free interchange of goods around the world, unlimited free trade, might sound like a noble aspiration. The counter argument is that taking down all customs barriers is bad for economies, for social order and public safety. But whatever the rules, there are plenty of people willing to work around them.
How to smuggle up to your neighbour?
One country where the customs workaround has developed into a fine art is Brazil. A big proportion of the imported products in the Brazilian market may have come into the country illegally. This has a big, negative impact on domestic producers.
Much lower duties imposed in Brazil’s neighbour Paraguay are a particular problem. The prices of imported products in Paraguay can be up to 80% cheaper than in Brazil. There’s a healthy, illicit cross-border trade from that country into its much more restrictive neighbour.
Contraband goods flow over the border in buses and cars. One hotspot is around the international Friendship Bridge, connecting the cities of Foz do Iguaçu, in Brazil, and Ciudad del Este, in Paraguay. You are an unusual Brazilian if you’re seen here without a big bag full of goods, reasonably hopeful of making it across without penalty.
Brazil is clamping down, imposing high taxes on imported goods. It tightened customs controls, gave preferential treatment to domestically-produced products, and increased police surveillance.
Yet the flood of illegal imports continues. It includes cigarettes, perfumes, electronics, watches, textiles, handbags and alcohol. An estimated 20% of the foreign wine drunk in Brazil entered the country without duty being paid.
One dodge troubling the Brazilian authorities is triangulation. This is where the exporter fakes the country of origin of the goods, to take advantage of customs concessions. In one recent case blankets produced in China had Paraguay given as their country of origin, qualifying for lower import duty. Blankets made in Brazil were being severely undercut.
Another scam involves exporter and importer agreeing to an invoice being made out to a much lower value than the real price. A lower duty is paid, and both benefit. This is said to be a widespread practice in e-commerce, where hard-pressed customs officials may only carry out cursory checks on the flood of neatly-packaged goods coming in.
Another way is simply to put something valuable in a parcel outside Brazil, declare the contents as books, for example, and hope busy Post Office supervisors don’t get round to checking it when it reaches Brazil.
The rise of the consolidators
One interesting development in the international shipping business is the rise of the consolidators. These are companies that allow customers to receive goods from online shops that do not offer international shipping. Customers may buy from multiple online shops. The goods are then repackaged into a single shipment to send to the buyer.
Writing for zdnet.com, Liau Yun Qing referred to the “benefit of using shipping consolidators to help navigate customs and restrictions”. While there is no suggestion that the consolidators break the law, she does quote one retailer who sells VPN routers online.
“About 40 percent of our products are shipped internationally. We sell a product that helps users get around internet restrictions in their host country.’
The retailer is quoted as saying many of its customers use a shipping consolidator to avoid heavy scrutiny at customs. “Ecuador, for instance, is very difficult to get electronics through. So many of our customers use a consolidator to grease the wheels at customs as a package with multiple items inside, which attracts less attention.
“We have had reports of some items not even being checked by customs when they come in through these companies.”
Contributing to the torrent of goods moving about is the low cost of carriage. And governments can find themselves powerless to deal with it.
If you are one of the biggest shippers of goods in the world, you can afford to be openly nonchalant about the way you interpret the rules. Recently Amazon circumvented a French ban on free shipping of book orders, perfectly legally, by charging its customers the princely rate of 0.01 Euros.
France’s National Assembly had ruled against free deliveries for book orders to protect the country’s 3,500 bookstores from online competitors. Amazon introduced a charge with a straight face. Its website notes: “We are unfortunately no longer allowed to offer free deliveries for book orders.”
The goods established carriers won’t carry
The established carriers make it perfectly clear what goods they will not carry around the world in those neat and securely-sealed cardboard boxes or thick plastic bags. DHL’s hit list, for example includes items “which are prohibited for carriage by any law, regulation or statute of any federal, state or local government of any country from, to or through which the items may be carried.” And there are lots of those.
Banned items include antiques; works of art and fine art with an individual value in excess of £5,000; bullion; complete original and imitation firearms and firearm parts; dangerous and hazardous goods including dry ice and biological substances.
In addition you may not ship furs and ivory, human remains or ashes, live animals and loose lithium batteries. Among other iteams are clinical and or biological samples including but not limited to bodily fluids and tissue samples, pornography and tobacco.
There’s an even darker side to the customs-workarounds in part 2, the smuggling of diamonds to fund wars and the contraband of arms.