We are winning the war against smuggling

Illicit trade fell by 36.8% in 2020, thanks to a major effort and support from international partners to dismantle smuggling and money-laundering networks.

By Juan Carlos Buitrago Arias | May 20, 2022

Image from the original article: https://www.las2orillas.co/estamos-ganando-la-guerra-contra-el-contrabando/

Smuggling costs the nation US$6.722 billion annually, generating a fiscal loss of 4.6 trillion Colombian pesos in uncollected taxes.

Colombia’s National Tax and Customs Directorate (DIAN) has just published its annual report estimating distortions in the value of Colombian imports. It uses a “mirror” methodology to compare imports into Colombia with exports reported by 36 countries—its main trading partners, accounting for 91.7% of all goods transactions into Colombia—to estimate the annual cost of smuggling and related tax evasion.

The 2020 report is distinctive not only because it was prepared by trusted DIAN specialists, but also because its information-gathering methodology was improved. Sources were expanded to include rigorous estimates of goods entering free-trade zones from the rest of the world, following the United Nations’ recommendation to measure products imported for processing and assembly.

Smuggling in Colombia fell by 36.8% in 2020. Of that percentage, 33.7% corresponds to customs fraud: goods entering through customs posts under four methods intended to evade official controls or involving corruption within the inspection process. The remaining 3.1% corresponds to outright smuggling across open borders, bypassing customs clearance. This means smuggling costs the nation US$6.722 billion annually and generates a fiscal loss of 4.6 trillion pesos in uncollected taxes.

China, the United States, Germany, the United Kingdom, Panama, Mexico, Bolivia, India, Thailand, Brazil and Belgium top the list of countries of origin for goods entering Colombia illegally through different methods. The most frequently smuggled products include electrical, recording and imaging equipment; vehicle parts and accessories; fuels and mineral oils; and cigarettes and alcoholic beverages.

Are we winning the war against smuggling? The progress is undeniable, and the trend is encouraging. Beyond the technical figures, it reflects the tireless, sustained work of tax, customs and judicial authorities, supported by international partners, to dismantle networks involved in illicit trade, counterfeiting, adulteration, corruption and money laundering. The substantial 36.8% reduction follows the pattern set in 2018, when the decline reached 33.7%. This is good news for the country and reinforces the sustained, direct fight against the problem. Another factor is the pandemic, which reduced global international trade by 17.7% and forced tighter risk controls and inspections of goods moving around the world, particularly imports from China, the origin of COVID-19 and of 40.3% of the smuggled goods entering Colombia.

Also noteworthy is the technological modernization vision introduced at the DIAN by José Andrés Romero and continued by the current director. A US$250 million loan from the Inter-American Development Bank will enable Colombia, in the short term, to have one of the world’s most sophisticated and automated customs systems. Equally significant is the creation of the Special Unit for Investigating Tax and Customs Offenses, arising from Law 1762 of July 6, 2015—the Anti-Smuggling Law, which urgently needs reform. Activated under the current administration of the prosecutorial authority, the unit provides exceptional institutional strength in pursuing tax evasion, smuggling and corruption arising from these criminal activities.

The previous week, the Latin American Anti-Smuggling Alliance (ALAC) met in Honduras. Founded and promoted by regional industrial associations under the leadership of Colombia’s ANDI, it has become a regional meeting point for the public and private sectors to strengthen methods and strategies against illicit trade, although it needs greater operational impact. In this regard, the private sector’s constant, immense effort to combat smuggling, counterfeiting and other forms of illegal trade deserves recognition. Dynamic associations in Colombia, Europe, the United States and Latin America connect public and private actors through practical, effective road maps. Just two weeks ago, Washington hosted the annual conferences of two prestigious international organizations promoting lawful trade, intellectual-property protection and good business practices: the IACC and INTA. Within INTA, Colombia has the honor of chairing the Anti-Counterfeiting Committee, which brings together more than 6,000 members worldwide. The appointee is Claudette Vernot, an industry leader who enjoys exceptional prestige and professional standing.

In August 2021, the Latin American Parliament adopted a Model Law to Combat Illicit Trade, which some countries have used as a reference to update their legislation and institutional capacity against smuggling. Ecuador has just enacted a new anti-smuggling law, while Guatemala’s Security Council approved the development of a National Anti-Smuggling Strategy. These are important signs of progress and growing awareness of the need for a comprehensive regional response to illicit trade.

The fight against illicit trade is not solely the responsibility of the state and private business. Tax increases are not the solution either: they can have the opposite effect, and the problem is complex. This makes it important to build regional coalitions bringing authorities and industry together, while diligently adapting procedures to the market standards established by the OECD. Society also has a role: as the final consumers of these goods, people must stop buying counterfeit, adulterated or illegally sourced products, especially when lives may be at risk. We still remember the tragic episode in 2016 when 17 newborns died at a clinic in Valledupar after receiving smuggled medicines intended to mature their lungs. These expired medicines had entered Colombia illegally from Venezuela after being held in containers for years in Puerto Cabello. The lesson is clear: buying legally is about more than economics.

LPNSN: Venezuela’s dictatorial regime is making the continuation of talks with the opposition in Mexico conditional on Alex Saab’s release from a U.S. prison. We continue to maintain that the Colombian holds key secrets about Maduro. You can read more in Los Principios No se Negocian (Principles Are Non-Negotiable), published by Planeta.

general.buitrago@gmail.com

Article originally published at: https://www.las2orillas.co/estamos-ganando-la-guerra-contra-el-contrabando/