Informal Economy Reports

RUSSIAN FEDERATION: Estimating Volume of Merchandise Exports and Imports That Are Not Captured in the Customs Statistics

Introduction

Insuring reliability of data on external merchandise trade in external sector statistics has been one of the top priorities since Russia has started compiling BoP statistics. The problem of data gaps on export-import transactions comes from a number of factors, both global and specific for the Russian economy, such as:

• Methodological differences in systems used for customs and macroeconomic statistics compilation (such as BoP, SNA, input-output tables);
• Lack of directly reported data on some types of foreign trade in goods transactions;
• High thresholds for duty-free imports of goods by individuals (up to 10 000 Euro or 50 kilograms for air transport, up to 1 500 Euro or 50 kilograms for other modes of transport (sea, road and rail), up to 1 000 Euro or 31 kilograms a month for postal delivery [1]);
• Regular facts of concealment or understatement of data on value or amount of imported goods by Russian enterprises to avoid taxation or custom duties.

These facts lead to significant observed discrepancies with partner countries` statistics, which proves the existence of certain weak points in foreign trade in goods statistics.

To fully reflect export-import transactions in Russian BoP a system of estimates of foreign trade in goods volumes non-registered by customs statistics has been developed.

Scope of Coverage, Methodology, Compilation Methods and Data Sources

The system of estimates of external merchandise trade values that are not captured by customs statistics that has been developed and used in BoP compilation by the Bank of Russia since 1994 includes the following types of transactions:

• Informal exports of goods;
• Hidden (“shadow”) imports and informal imports of goods.

(For list of indices by type of estimated transactions and for list of data sources used for their calculation see Annex 1).

Informal exports of goods cover individuals` transactions in frontier trade. Value of goods purchased in Russia and carried by individuals to neighboring countries (both goods produced in Russia (direct exports) and goods previously imported to Russia (re-exports), is estimated based on data for the previous period adjusted by the change in real purchasing power of these countries` currencies. The Bank of Russia has chosen benchmarks [2] for basic estimation parameters after consulting with the statistical agency and BoP compilers from neighboring countries.

Besides, starting from 2015, the estimate has been supplemented by value of exports in cross-border electronic trade, i.e. value of goods purchased by non-residents in Russian Internet stores (e-commerce). Calculation of this index is based on banks` reports on online payments for goods and services conducted using payment cards issued by nonresidents. Banks` reports provide breakdown of online payments for goods and services via payment (credit and debit) cards issued by residents. Similar online payments conducted via payment cards of non-resident issuers aren’t broken down for goods and services in the banks’ current reporting. Therefore, a sample survey is conducted annually among the banks with the largest value of such transactions. The survey contains a single question about the share of goods in the total value of online payments for goods and services purchased via payment cards of non-resident issuers. Hence, the results of annual sample banking surveys on the share of goods in the above-mentioned payments are used in the calculation.

Estimate of hidden (“shadow”) imports (goods with value below the threshold of declaration for imports and goods with value understated by importing Russian enterprises) is based on a balance model. The model is built on comparison of value of retail trade and value of trade resources supplying it. The aggregate resources are derived from values of national production in the current period and imports (inflow of resources) adjusted by value of intermediate consumption, exports (outflow of resources) and balance of change in stocks of goods owned by producers and in retail trade. Calculation of value of these resources` components in consumer prices is carried out based on information from the statistical agency and the customs service and then converted into US dollars using average exchange rate of the Russian ruble for the period set by the Bank of Russia.

As the calculation of value of domestic production resources is conducted by the statistical agency with an adjustment for unregistered economic activity, stable excess of trade turnover over the value of trade resources is considered to be formed by inflows from abroad, and it is treated as unobserved imports of consumer goods sold by trade enterprises, catering enterprises, and marketplaces.

Indices used for transfer from consumer (retail) prices to imports (FOB) prices are calculated on the basis of price structure of final consumption of imported goods (from “input-output” tables compiled by the statistical agency) and price dynamics in foreign and domestic markets in the current period. With these indices and average exchange rates applied, value of unobserved imported goods for consumption sold in domestic markets is transformed to the format used in the BoP.

Informal imports of goods include value of goods imported by individuals, which is above duty-free threshold. This data is collected by the customs service but not included in totals of customs foreign trade statistics. Value of automobiles imported by individuals into Russia is calculated separately by summing up the data collected by the customs service. Besides, as there are no customs borders between EAEU member states, the Bank of Russia calculates an estimate of value of automobiles imported by individuals from EAEU countries. This estimate is based on administrative data from the customs service on the number of cars imported from these countries and average price level for the models estimated by the Bank of Russia. Besides, informal imports include value of goods ordered via catalogues (Quelle, Otto, La Redoute, etc.) collected from banks` reports on resident individuals` remittances.

Since 2011, due to active digital technology development, the estimate of informal imports of goods was supplemented by value of goods imported by residents via cross-border electronic trade, i.e. purchased in foreign Internet stores (e-commerce). Due to the absence of directly reported data on such transactions (as most goods are delivered to Russia by post and their prices are mostly below duty-free threshold), the calculation was initially based on data received from the Russian Post on the number of incoming international postal deliveries of goods and the Bank of Russia`s estimate of the average value of such a delivery. Starting from 2013, imports of goods via cross-border electronic trade is calculated on the basis of banks` reports on transactions for goods conducted via payment cards issued by residents and information from electronic money systems operators (PayPal, Qiwi etc.).

Besides the purpose of calculating total value of foreign trade in goods, the estimate of non-registered merchandise exports and imports is used in compilation of the corresponding BoP aggregates of foreign and domestic currencies in circulation.

Controls Over the Results, Current Challenges and Conclusions

One of the main issues in estimating value of exports and imports of goods not captured in the customs statistics is the issue of possible double counting. It arises, for instance, while calculating value of imports of goods purchased via cross-border electronic trade. Such goods are considered to be purchased for personal consumption and should not be sold in retail stores. In case there is information on these goods being re-sold, the estimate of hidden imports of goods is being adjusted to avoid double counting.

Estimate of non-recorded merchandise exports and imports is linked with data from other macroeconomic statistical systems – for instance, GDP calculated using final consumption method in SNA and “input-output” tables. Besides, to maintain high level of data quality the Bank of Russia performs regular comparison of its data with “mirror” foreign merchandise trade statistics of partner countries.