Valuation
Fraud:
Detecting Undervaluation or
Misrepresentation of Imported
Goods
Valuation Fraud
Evasion of duty through undervaluation or
misdescription of imports
https://www.elibrary.imf.org/downloadpdf/display/book/9781589062115/ch06.pdf
- James T. Walsh
Intentional misrepresentation of the value of imported
goods.
Lowering customs duties by declaring false values.
Other relevant terms:
Valuation Fraud
Deliberate misrepresentation of
the value of imported goods to
avoid or reduce customs duties.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Kinds of Valuation Fraud
Under-valuation
to make a false declaration
indicating a value lower than the
actual transaction value. This
type of fraud is attempted, in
principle, to pay fewer amounts
of duty/excise taxes and/or
evade import restrictions, such as
anti-dumping duty.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Kinds of Valuation Fraud
Over-valuation
to make a false declaration
indicating a value higher than the
actual transaction value aiming
at, for example:
Obtaining higher export
refunds and higher duty
compensation;
Evading internal taxes;
Avoiding anti-dumping
duties; and money laundering
schemes.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Kinds of Valuation Fraud
Misclassification
shall refer to the use of
insufficient or wrong. description
of the goods or the use of
erroneous tariff heading/s and.
sub-heading/s resulting in
deficiency between the duty and
tax that. should have been paid
and the duty and tax actually
paid; and/or to.
https://customs.gov.ph/wp-content/uploads/2023/01/CAO_01-2020-
Fines_and_Surcharges_for_Clerical_Error-1.pdf
Kinds of Valuation Fraud
Falsification of origin
any attempt to knowingly violate
or abuse rules of origin and/or
Customs documentary
requirements as laid down by
bilateral or multilateral
agreements in force in the
country concerned.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Kinds of Valuation Fraud
False declaration of quantity
False declaration may occur
when any information furnished
to Customs authorities
concerning the physical
attributes, nature, volume,
quantity or measure of goods
declared is untrue.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Kinds of Valuation Fraud
Off-record transaction
This fraud covers off-record
transaction relating to internal
taxes and duties, such as sales
tax, value add tax and excise
duties imposed on: hydrocarbon
oils; tobacco; alcoholic
beverages; playing cards,
matches, lighters, etc.
https://rocb-europe.org/uploads/1/e-training/materials/en/enforcement/3-
commercial-fraud-typologies-summary.pdf
Other relevant terms:
Valuation Methods
Transaction value, transaction value of
identical goods, transaction value of
similar goods, deductive value,
computed value, and fallback method.
Detection
Methods
Data Comparison and Customs agencies often compare declared
values with historical data or known market
Historical Analysis values for similar goods. This method helps
identify suspiciously low values, which may
indicate fraud.
Government agencies involved:
BOC
Risk Management System
Post Clearance Audit
DTI and NEDA
provide reports on import/export data
https://customs.gov.ph/wp-content/uploads/2023/08/BOCMidYearReport2023.pdf
Advance Ruling Importers request official confirmation on the
valuation of goods before they import. This
can help detect potential fraud upfront.
Additionally, risk analysis and historical data
comparison, managed by the BOC’s risk
management division, help uncover
discrepancies in declared values versus
market norms
https://www.bakermckenzie.com/en//-/media/files/insight/publications/resources/ap-imt-webinar-series-
philippines-presentation.pdf?sc_lang=en&hash=4DF8692733FDFC6CB52A6D968C7D4279
RIAC Remote Image Analysis Centers
The RIACs are a combination of hardware and
software, which will allow BOC to receive and
interpret radioscopic images sent from
operational scanner sites in real time. The
RIACs will be fully integrated into the
Customs Processing System, allowing BOC to
leverage its modern risk management
functions for more effective targeting.
https://customs.gov.ph/wp-content/uploads/2023/02/TOR-PSQA.pdf
The research proposes a model for detecting
smugglers who evade customs duties by
Algorithms and Block- selling goods through social media without
Chain Tech proper authorization. The model operates in
three phases and employs three algorithms:
Logistic Regression, Gated Recurrent Unit
(GRU), and Long Short-Term Memory (LSTM),
with LSTM proving to be the most accurate.
This approach analyzes unstructured social
media data to identify smuggling activities,
ensuring that customs duties are paid.
thereby promoting economic stability.
Additionally, the research suggests using
blockchain technology to create a
decentralized platform for sharing smuggler-
related data.
https://www.bakermckenzie.com/en//-/media/files/insight/publications/resources/ap-imt-webinar-series-
philippines-presentation.pdf?sc_lang=en&hash=4DF8692733FDFC6CB52A6D968C7D4279
The research introduces a novel approach to
detecting customs valuation fraud,
Cluster-based approach particularly in identifying the manipulation of
declared goods values during customs
clearance. By applying a cluster-based and
density-based analysis algorithm to customs
data, the study proposes an effective method
for detecting undervaluation and fraudulent
declarations that often result in revenue
leakage. The methodology consists of two
main stages: a distance-based analysis that
focuses on identifying irregularities in
shipment declarations based on the spatial
distance between data points, and a density-
based analysis that confirms the findings by
evaluating the concentration of these data
points.
https://www.researchgate.net/publication/379626494_Customs_valuation_assessment_using_cluster-
based_approach
Case Study #1
An invoice covering the importation of rice into the Republic of Guinea from China was
forged.
Two separate importers imported rice, using the same supplier. Strangely, the two invoices
were not made out in the same typeface, and the FOB value per ton was much lower on the
first invoice than on the second. The first response was to look back over all the old invoices
from that supplier, so the typefaces were compared. The supplier was contacted via the
Internet to find out the FOB value per ton. The gathered from this is that the importer had
under-valued the imported rice.
Case Study #2
Specific information was obtained that a U.S. importer was importing catfish but mislabeling
as Grouper to avoid payment of anti-dumping duties. This information was analyzed and ICE
conducted the investigation. Search warrants were executed which conducted resulting in
the seizure of imported catfish labeled as Grouper, as well as numerous documents and
emails proving the owners of the U.S. company were involved with the foreign exporter in
mislabeling the fish.
The investigation resulted in a total of 15 indictments, 3 criminal arrests, 6 convictions and
seizures of approximately 395,850 pounds of seafood, with a domestic value of
approximately of $687,787. In addition, the U.S. Company was ordered to pay $1,139,275 in
anti-dumping duties evaded, as well as forfeit business property.
Case Study #3
The 1×40’ container shipment consigned to Subic Red Dragon which arrived at the Port last
year was seized and forfeited by the Port for violation of National Resolution No. 079-2005
and Sec. 155 of RA 8293 (Intellectual Property Code of the Philippines), concerning Section
1113 (f) of Republic Act. No. 10863 (Customs Modernization and Tariff Act) after the shipment
was found to contain counterfeit cigarettes and clothing against its declaration of assorted
textiles.
https://customs.gov.ph/boc-subic-destroys-assorted-brands-of-counterfeit-cigarettes/
Thank You
