Bulgarian Counter – Undervaluation Methodology

The first task was to find an irrefutable raw materials price source to formulate an operational solution based on the above CCC articles. The IMF official webpage was used as such a source, where monthly reports and analysis of the prices of raw materials traded on the stock exchanges are published in Commodity Market Monthly.

Considering staff and resource limitations, the approach focused on goods made of cotton, and genuine leather and hides. Preliminary analysis of customs clearances, within the National Customs Information System CIS, revealed goods with declared values lower than the value per kg of the raw materials used in their production.

To refine the approach, and with the help and support of the Bulgarian Industrial Association (www.bia-bg.com), all major national guilds and organisations of textile, clothing and shoe producers were approached. On their part, the specialised producers provided data on the share percentage of raw materials in the prime cost of the intermediate product and based on that, in the prime cost of the final product. The latter provided a solution for devising lower threshold values not based on statistics.

Utilising the above approach and data from the CIS resulted in detection of over 70 economic operators – consignees of goods cleared for free circulation with greatly under-declared values. In order to counter similar cases of undervaluation, national risk profiles were set up to include the detected economic operators but also certain tariff codes.

A monthly results report was produced for the higher management of the National Customs Agency to formulate further actions and solutions in situ at local customs offices.

The most immediate result of all of the above was the massive decrease of ‘suspected’ operators – from over 70 to just 5.

A further boost to the approach was given by the European anti-fraud office OLAF evaluating our methodology and disseminating it to all 27 MS as a ‘good practice and innovation in the fight against undervaluation’. It is worth mentioning that the Bulgarian approach does not include statistics, which are very difficult to defend during judicial appeal but rather builds upon the foundation that it is not possible for a complete good to cost lower than a kilogram of its raw source material.