Lost in transit Discrepancies in international timber trade data

The role of Customs therefore needs to be given particular emphasis and the premise of this study is that illegal logging and illegal timber trade can be further controlled by Customs through changes in requirements for information. This should be reflected by a narrowing of bilateral timber trade statistics discrepancies. This study carried out data analysis to illustrate the extent of discrepancies in international timber trade statistics. It reviewed factors involved in creating discrepancies in international timber trade statistics in general, before narrowing the focus to those linked to Customs protocols and the generation of national statistics records, and assessing the potential for improved control in this area. 

This study relies on previous ITTO studies on timber trade statistics and gained new insight into the object of study through interviews with key stakeholders, especially Customs and staff of statistics departments. It focuses on the functions and protocols of Customs and how they relate to statistics generated for selected producer, processing and consumer entities: Indonesia, Malaysia, Singapore, China, Taiwan, Hong Kong, Republic of Korea (South Korea), Japan, the USA, the UK, Italy, France, the Netherlands and Germany. As this study is supported by the Asia FLEG, the Asia Forest Partnership and the ASEAN Senior Officers on Forestry, key tropical timber-producing countries in South-east Asia—Indonesia and Malaysia—were selected for study. In terms of products, the study is confined to primary timber products and selected secondary timber products in trade, that is, those categorized by the Harmonized Commodity Description and Coding System (HS) code for round wood (HS4403), sawn wood (HS4407), veneer (HS4408) and plywood (HS4412), for tropical timber. Data accessed were those for the period 2000–2006. To uncover discrepancies in trade data between the selected countries and territories for these product categories, export data from one country or territory for one year were compared by category with import data for the same year for each of the other study countries and territories. It is from these pairs of data sets (“pairs of records”) that variances were calculated, by subtracting reported import volume from reported export volume, and dividing by export volume to obtain the percentage difference. 

Factors involved in generating discrepancies in timber trade statistics between trading partners include, but are not limited to, differences in data reporting systems; units of measurement; conversion factors; codification; and scaling methods. Time lapses between export and import; combined shipment of mixed timber products; transshipment; and indirect trade routes can also cause discrepancies. Furthermore, many countries may have quite substantial discrepancies between sets of statistics published by different government sources and, in turn, between such sources and those used by the Food and Agriculture Organization of the United Nations (FAO) and the International Tropical Timber Organization (ITTO). Of particular interest to this study are factors linked to illegal timber trade that could lead to discrepancies in international timber trade statistics, for example under-invoicing, misspecification of products, fraudulent trade data and smuggling—by proxy, significant discrepancies between export and import data for the timber trade could indicate the occurrence of illegal timber trade and, by extension, illegal logging. 

Comparing pairs of records between study countries and territories, 2000–2006, revealed that 3.3%, 5%, 4.4% and 5.2% for HS codes 4403, 4407, 4408 and 4412, respectively, manifested variances of less than 5%. Some displayed almost zero discrepancy. For all the four HS categories, for variances of 5% and less, some of the volumes traded bilaterally were very large and yet variances were practically negligible. The number of countries recording these minor differences varies across the board and, at some stage, practically all the 14 countries and territories in this study recorded imported volumes and weights with a negligible discrepancy when compared with those recorded as exported by the trading partner. These findings are important, as they show that it is possible, with the current system for control and monitoring of the timber trade, for import data to validate export records. Nevertheless, the majority of timber trade statistics show large discrepancies. In the light of this, it is clear that review of the timber trade statistics of just one country is not sufficient to measure the total timber trade of that country and its data must be validated and verified against the records of other countries, and not just those of known trading partners. 

Looking at factors contributing to timber trade statistics linked especially to Customs procedures and subsequent generation of national statistics records, it was found that use of HS codes, though standardized in theory and in use by nearly all countries in the world, does not itself solve the problem of comparative analysis of trade statistics between countries. In analysing the timber trade statistics from the 14 study countries and territories, discrepancies were found between reported exports and imports reflecting variation in use of these codes. Selection and interpretation of the codes appear to present scope for different records, as does the fact that countries use their own extensions of codes to record products in greater detail than the standardized six-digit codes allow. 

The current systems in use for handling international timber trade and the basis for trade statistics compilation in each country or territory in this survey were found to be similar, in that completion of Customs declaration forms (for both exports and imports) is mandatory. In all cases, access to the forms is mainly online and submission principally electronic, to Customs authorities. In general, various documents endorsed by relevant government agencies, together with shipping and business documents, are obliged to be submitted to Customs together with the declaration form. Much of this documentation accompanies an exported shipment to its destination, but the official export declaration form does not, despite being the key official document recording export details with actionable information for enforcement authorities. 

There appears to be very little cross-referencing between countries and limited exchange, if any, between agencies in-country regarding statistics declared on export and corresponding import forms. Cross-referencing of export information for a shipment with that supplied on import is sometimes possible if specific concerns arise, but such verification does not happen routinely. In other words, according to the status quo, Customs export information is not verified on import, except in so far as certain accompanying documentation allows. There is no standard designated documentation to use to double-check information in the Customs declaration forms in either exporting or importing countries. Customs export declarations could contain fraudulent, inaccurate or misleading information which, if not detected at export, are by no means guaranteed to be picked up on import, unless protocols for cross-referencing exist. Shipping protocols and documents provide an avenue for falsification of characteristics of an export, likewise business documents, although business importers are likely to go to some lengths to check the accuracy of shipment details. 

In conclusion, this study found that factors linked to Customs protocols figure among the several possible factors contributing to discrepancies in international trade statistics. These relate to use of HS codes and, above all, the fact that there is lack of continuity between checks and authorizations made at export and those made on import. One of the reasons for this is that there is no uniformity over which export documents should be used to verify shipment details on import and the most useful such document—the official export declaration form—does not even accompany an exported consignment on its journey. As this document carries key information, which it would be difficult to amend in transit, its transmission to importing countries and territories with relevant timber shipments, and inspection on arrival, could play a part in reducing discrepancies in bilateral trade data. In short, alignment of the type of information required by exporting and importing countries and territories would be an obvious measure to use in the interests of closer control of the timber trade.