COMTRADE: Using Trade Data to Uncover Fraud and Smuggling
Trade information collected by the United Nations was key to uncovering Big Tobacco’s role in oversupplying cigarettes to a West African war zone. Here’s how we did it.
By Aisha Kehoe Down, OCCRP Investigative Reporter
In 2020, a World Health Organization economist suggested we take a look at cigarette smuggling in West Africa’s Sahel region, where militant groups have been fighting national and international forces for more than a decade. The tip was a great start, but it was import-export information from a United Nations database that tied the story together.
Preliminary reporting showed that billions of cigarettes flow into one of the most violent regions in Africa each year, funding armed groups and organized crime. UN reports and local media connected the illicit trade to government officials and influential businessmen.
Obtaining documentation was another matter. The scant public records for companies involved often consisted of little more than entries in internet phone directories.
So we turned to a time tested method of investigating international trade: the UN’s Commodity Trade Statistics Database, or Comtrade. This database aggregates trade information from national authorities in 200 countries. While the UN can’t compel countries to accurately report their statistics, Comtrade is still the largest repository of global trade data, and it includes a few opaque jurisdictions.
How to Use Comtrade
Comtrade data is publicly available on a UN website. Click on “Trade” under the tab marked “Data”” at the top and use the search matrix to request information about goods imported or exported from countries of interest during certain years. The matrix is user-friendly; use the drop-down menus to specify countries, their trade partners, and goods of interest.
To run a search, you have to look up the HS code of the good that interests you. These codes are part of an international system for numerically classifying trade, and they are usually easy to find. For example, if you wanted to look up Jordan’s sesame seed exports since 2019, you would need HS code 120740. To find that code, simply Google “HS code sesame seeds.”
Keep in mind that country-level reporting is not always precise. If you see no data for the six-digit HS code it pays to run a search for the more general, four-digit code for a commodity, which authorities sometimes use instead. For sesame seeds, that would be 1207, the code for “other oil seeds,” a category that also includes melon and mustard seeds, as well as palm fruits.
Gaps in the Data
Understanding what’s fraudulent and what’s just bad data takes practice and intuition. The challenge in Comtrade analysis is disentangling patchy statistics — often the result of bad bookkeeping — from possible fraud.
There are a few things to keep in mind.
Authorities don’t communicate with each other about trade flows. In our example, Jordan reported sending 21,128 kilograms of sesame to the Netherlands in 2018. Yet the Netherlands recorded no sesame imports from Jordan.
This is not necessarily evidence of something wrong. Comtrade is riddled with discrepancies, many of them innocuous. Months of time can pass between a country exporting a good and another country importing it, leading to mismatches in data.
Goods are routed through other ports on their way to final destinations, meaning that if Jordan’s sesame exports were routed through Beirut, Dutch customs might have recorded the flow as originating from Lebanon instead. And there’s the possibility of human error: officials and exporters may miscategorize goods or make mistakes on far-off destinations.
In the case of Jordan’s reported sesame exports to the Netherlands, the amount is so insignificant that it’s probably not worth investigating. Or, if there’s a ten-percent difference in the recorded weight of a good traded between two countries, chalk it up to the challenges of weighing shipping containers and forget about it.
On the other hand, major trade gaps may be clues that there is something worth investigating. For example, VOA reported that Singapore said it exported US$15 billion dollars of gold to Cambodia between 2012 and 2017.
According to VOA’s reporting, Cambodia’s gold imports were five times more than the total of all other goods shipped from Singapore — an odd statistic. The gold sent by Singapore to Cambodia, a country of only about 16 million people, was second only to the amount it shipped to China, with its population of 1.4 billion. Finally, the commodity itself was suspicious. As a metal that retains a high value and can be physically moved to different jurisdictions where it can be bought and sold, gold is great for laundering money.
One thing to keep in mind: if you have a choice, import data is better to use than export data. Customs authorities tax imports, which makes accurately reporting them a matter of the national budget. Accurately reporting exports isn’t as important to them.
Here are a few more ideas of where to look for leads in Comtrade:
Oversupply and Smuggling
When reporters analyzed Comtrade data for the Sahel, they found the region appeared dramatically oversupplied with cigarettes. This was particularly true in Mali, a war-torn country that received billions more cigarettes than the market demanded. That finding was confirmed in a report by a French strategic intelligence and risk management firm. The report, which was not public but was provided by a source in Mali, estimated that the region was oversupplied annually by over 16 billion cigarettes.
Journalists then dug deeper into Mali’s Comtrade statistics. While demand was 3.2 billion cigarettes in 2020, the country imported up to 5.9 billion annually in the years between 2016 and 2019. That was in addition to local production of some 2 billion cigarettes each year. Clearly something was wrong here.
Then it was time for some old-fashioned shoe leather reporting. Sources said Marlboros and Dunhills comprised most cigarettes smuggled from Mali through Libya and onward to Europe. Both these brands are produced by British American Tobacco (BAT). Because Mali has few trade partners, it was possible to trace the origin of many of these smuggled smokes to the tobacco giant’s South Africa headquarters. A leaked internal document from BAT confirmed this.
Comtrade data was invaluable in backing up the main finding of our investigation: that cigarette smuggling was a major source of income for militant groups fighting in the Sahel.
Clues in False Data
A close look at Comtrade data can reveal scams involving the misrepresentation of the value of a product that was shipped — or supposedly shipped.
For example, a company may purposefully include false information in an invoice in order to avoid tax on excisable goods, such as tobacco and alcohol.
Transfer price manipulation is a more complicated scheme that often involves using shell companies in offshore tax havens. A multinational corporation sells a commodity at an artificially high price to its own subsidiary in a tax haven, allowing it to avoid paying tax in the country of origin since they can claim there was no profit made on the sale. The subsidiary then sells the goods on to a related company registered in a tax haven, which sells them in another country at market price. This allows the corporation to transfer profits into a jurisdiction where they will be taxed very little or nothing.
To see signs of transfer price manipulation, compare the value of an export recorded in Comtrade data with its weight. Then check the market price for that commodity to see if the recorded value is inflated.
When we examined tobacco trade data for West Africa, we found an apparent example of transfer price manipulation in Burkina Faso, where one state-backed company called MABUCIG has the monopoly on manufacturing cigarettes. This means that almost all imports of cut rag tobacco — cured tobacco used to make cigarettes — are orders for MABUCIG. A key bit of information to remember is that MABUCIG is part-owned by a subsidiary of the UK’s Imperial Brands.
You can see the Comtrade figures for Burkina Faso’s imports of cut rag tobacco, HS code 2403, from 2016 to 2019 in the image below.
Two things stand out.
The first is that almost 100 percent of Burkina Faso’s cut rag imports are from Cote D’Ivoire. A bit of internet research will show that Cote D’Ivoire is also home to a tobacco monopoly, SITAB. Like Burkina Faso’s MABUCIG, SITAB is an Imperial Brands subsidiary. Annual reports from SITAB list regular cut rag exports to MABUCIG.
The second is, MABUCIG apparently pays a very high price to SITAB for these shipments. Our reporting, backed up by Comtrade data, indicated that Burkina Faso’s monopoly bought cut rag from its affiliate in Cote D’Ivoire at an average rate of over US$20 per kilogram. This is about three times the usual market price, and $4 more than the price at which Burkina Faso generally imports finished cigarettes. The pattern is consistent over the course of four years.
Comtrade analysis isn’t sufficient to say what exactly is going on between these two Imperial Brands subsidiaries. But it’s a good starting point for an investigation. We didn’t end up including this finding in our published story, but knowing about it was key to understanding what was going on with these companies and the people behind them.
Limitations and Possibilities
Comtrade is limited to aggregate, country-level data. The database, and most customs authorities, won’t tell you who is importing or exporting sesame from Jordan, and in what quantities.
That’s where industry knowledge is necessary to help you understand your leads and look for bad actors, such as our MABUCIG and SITAB example above. The good news is, for many goods in many smaller jurisdictions, it’s not too difficult to figure out who exactly is behind trade flows.
In the OCCRP investigation on Mali’s cigarette smuggling, it was easy to triangulate who was responsible for a large part of the trade, because the country had only one significant trade partner for cigarettes, BAT, in South Africa. That revelation came from industry insiders, and was confirmed by customs officials.
Comtrade data was invaluable to our investigation of cigarette smuggling in West Africa. It didn’t tell the whole story, but it told us enough to tell the story.
