Import value de minimis level in selected economies as cause of undervaluation of imported goods

Abstract

Undervaluation of goods imported by any country is a phenomenon observed daily by those involved in international trade. However, the reasons that goods exported from certain countries are accompanied by invoices showing deliberately lowered values that do not reflect the true value of the goods are not yet fully understood. It has been suggested that a willingness to avoid duties and taxes by those involved in foreign trade may be the sole reason for this behaviour. Undervaluation practices may also be caused by a misfit of existing regulations of some national economies, especially levels of import value de minimis levels and other types of trade facilitation measures. Using three hypotheses, this paper investigates whether a link exists between the European Union (EU) import duty and VAT de minimis levels and deliberate undervaluation below that threshold. Although the research was unable to prove a direct correlation between certain taxes and undervaluation, it indicates the need for greater understanding and cooperation between business and Customs to better ensure compliance with changing international trade regulations.