On the same lines, their recent paper of 2023 for price checking of goods in trade transactions is a valuable insight on this complex proposition. This paper provides an in-depth analysis and provokes for a thought process to explore a best possible avenue to address this challenge in implementing controls related to price misrepresentation risk in trade finance transactions.

Post reading this ICC 2023 paper in conjunction with their earlier publication of 2019 on the same issue, consent to discuss this issue further and to find out ways and means to overcome this challenge to Financial Institutions (FIs) more efficiently & effectively.

Currently, FIs are doing price checking of goods in isolation at their part by using different avenues / websites / their own data etc., as explained in ICC paper 2023. However, price validation carried out by FIs do not have solid regulatory basis to ascertain or to challenge over / under invoicing except routine escalation of exceptions for their internal consumption / actions or to report it to the regulators.  

So, who is the right party who may have the basis to perform this task with authority and, legal mandate to challenge abnormal pricing while performing physical assessment of underlying goods and does price check at the time of shipments clearance? More appropriately, it is the Customs authority who physically assesses goods and price validations for imposing levies at their part as per their legal mandate.

Customs also has the authority to challenge abnormal pricing and to take appropriate actions at their part. Experience reveal that FIs often challenge abnormal pricing and escalate it as per their internal SOPs or regulatory directives, but when we see the status of the underlying goods from clearance perspective, we come to know that the goods have been cleared at Customs’ side despite escalations by FIs for abnormal pricing, then what?  

Moreover, in cases of import Sight Bills under Ls/C or D/P Bills under Documentary Collections, the documents are paid first and handed over to the importers for filing Goods Declarations (“GDs”) with Customs authorities for clearance of goods whereafter, Customs authorities clears GDs at a later stage. On this backdrop, banks are left with no option but to carry out post-fact verification and escalate exceptions, if any, for their internal consumption or to report such anomalies in pricing to the regulators. Hence, an industry wide controls is imperative to address this challenge at an appropriate level effectively.  

A thought may be given whereby, price verification role may be assigned to Customs authorities who can adopt below mentioned process:

a) assess and evaluate goods and the pricing.

b) clear goods wherever pricing is found in line with international norm / fair market values.

c) undertake appropriate course of action where irregularity in price declaration is observed on account of over or under invoicing and intimate concerned FI (via EDI) for taking necessary steps by the stake holders mainly FIs, Customs and Central Banks.

d) by doing so, a standard process can be adopted for price validation and exceptions handling.

e) synergies may be created among countries to use international pricing with each other through digital linkage i.e., Customs portals moving forward for transparency at a larger scale.

Thought process may continue …………………………………… no matter if it is right or wrong!