## Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade

_IMF Working Papers, May 1, 2005_

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## Bibliographic details
- Published: May 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861211.001

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### Summary and Research Question
- Traditional explanations for indirect trade via an entrepôt focus on savings in transport costs and on the role of specialized agents in processing and distribution.
- This paper provides an alternative perspective: entrepôts may facilitate tariff evasion.
- Empirical focus: comparison of direct exports to mainland China and indirect exports to mainland China via Hong Kong SAR.

### Key Findings
- The indirect export rate rises with the Chinese tariff rate.
- This relationship holds despite there being no legal tax advantage to sending goods via Hong Kong SAR.
- Authors conduct a number of extensions to rule out plausible alternative hypotheses.

### Data and Scope
- Empirical comparison uses data on:
  - Direct exports to mainland China.
  - Indirect exports to mainland China via Hong Kong SAR.
- Publication Details:
  - Pages: 18
  - Volume: 2005
  - Issue: 102
  - Series: Working Paper No. 2005/102
  - DOI: https://doi.org/10.5089/9781451861211.001
  - Stock No: WPIEA2005102
  - ISBN: 9781451861211
  - ISSN: 1018-5941
  - Publication date on landing page: May 1, 2005

### Subjects and Keywords
- Subject: Demand elasticity, Exports, Imports, Tariffs, Tax evasion
- Keywords: tariff rate, WP

### Implications and Extensions
- Policy-relevant implication: higher tariff rates are associated with greater use of indirect routes (entrepôts), suggesting a channel for tariff evasion.
- Robustness: the paper undertakes multiple extensions to exclude alternative explanations for the observed pattern.

*Source: Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade, IMF Working Papers, Working Paper No. 2005/102 (May 1, 2005).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/outsourcing-tariff-evasion-a-new-explanation-for-entrep%c3%b4t-trade-18202_