The dark side of the digital economy: Bad things come in small packages

Michael Morantz, OECD Public Governance Directorate

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©David Rooney

In a small town just outside Montreal, Jake [not his real name] struggles with drug addiction. His dependence on numerous substances has brought him in and out of hospital and rehabilitation programmes many times. What is striking about Jake’s addiction is how he acquires the drugs: not from a neighbourhood drug dealer, but through the post and courier companies.  “It’s remarkably easy business,” he says. “Just like buying common, everyday items on the surface–as opposed to dark–web. Only there are a few extra steps. After you provide your false personal and delivery information and whatever sum of money is agreed upon, your package arrives at the designated address disguised as something else in order to get through the postal service.”

That “something else” is any of the countless innocent things we buy on the internet and have delivered to the house. Like a pair of shoes. A car part. A smart phone. A handbag. A children’s toy. Thanks to e-commerce, we can purchase these things from nearly anywhere in the world. This has led to a flood of small, individual packages that transit through international shipping every day. The packages arrive at customs facilities by the truck- or plane-load, often with little or no advance information other than the label affixed to the top of the parcel. And even when the information on the labels is accurate, how can inspectors possibly inspect each box and effectively risk-assess the contents without advance information? Criminal networks throughout the world are exploiting this gap.

Opioid-deaths

Small package trade is facilitating the global trade in counterfeits. The total value of fakes shipped globally was $US461 billion in 2013, or 2.5% of global trade, the OECD’s Task Force on Countering Illicit Trade estimates. Of this, over 60% of seizures by volume occurred in the mail stream in small packages. It is also one of the reasons why the current opioid epidemic has reached the proportions it has. The Center for Disease Control in the US reported a 30% increase in opioid overdoses nation-wide in 2016-2017. The high potency of fentanyl, the drug responsible for many of these deaths, means that an importer can smuggle tens of thousands of potentially fatal doses in a single small parcel.

Governments now realise the serious effects the small package trade can have. In an OECD report from 2018 on illicit trade, customs agencies reported that small, low-value shipments are a very real threat to national health, safety and security. Small parcels do not just contain illicit narcotics, but weapons, illegal wildlife products, or indeed nearly anything that will fit in a box.

A small-package delivery system which escapes controls has combined with the democratisation of trade through e-commerce to ignite a boom in illicit trade. Unlike illicit narcotics, customers need only go on the “surface web” to purchase counterfeits from e-stores. Popular social media sites make it even easier to access these marketplaces where you can buy anything from fake shoes and designer watches to deadly fakes like counterfeit medicines.

Fake-goods-1

The trouble is that customs agencies are geared to monitor large commercial shipments rather than a continuous flow of small parcels. Can they adjust? Luckily, this change in the nature of trade is not unprecedented. In the 1970s, authorities had to adapt to “containerised trade”, for instance. The global challenge for customs officials then was to examine and risk-assess goods loaded on and off ships in large, locked steel containers. Customs administrations gradually developed a host of measures to deal with this, such as advance commercial information requirements integrated into risk-assessment software and other trade facilitation procedures. International co-operation among law enforcement bodies was also key to ensure the process went smoothly. Today, many customs administrations can target and risk-assess containers days before they arrive, and scan entire containers without opening them. However, now they must adapt to high-volume shipments of small consignments.

The speed and agility of criminal networks are such that authorities are almost always playing catch-up. And they are doing so in the dark. The same goes for the customers and victims of the shadow economy. Jake notes, “I have no idea where the drugs come from, I have no idea who makes them and I have no idea of their quality. But that’s the name of the game.”

It doesn’t have to be. Though the institutional capacities of individual law enforcements agencies are weak, governments can co-operate with each other, and with courier services, postal administrations, e-commerce vendors and intermediaries, using fora such as the OECD’s Task Force on Countering Illicit Trade. Without these international partnerships pushing for effective regulatory reforms, illicit e-commerce will continue to enrich these criminal networks. People like Jake should not have to pay the price.

Links and references

OECD (2018), Governance Frameworks to Counter Illicit Trade, OECD Publishing, Paris,http://dx.doi.org/10.1787/9789264291652-en.

OECD/EUIPO (2017), Mapping the Real Routes of Trade in Fake Goods, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264278349-en.

OECD/EUIPO (2016), Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264252653-en.

OECD (2016), Illicit Trade: Converging Criminal Networks, OECD Reviews of Risk Management Policies, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264251847-en.

OECD Task Force on Countering Illicit Trade (TF-CIT), www.oecd.org/gov/risk/oecdtaskforceoncounteringillicittrade.htm

See “Opioid Overdoses Treated in Emergency Departments” at www.cdc.gov/vitalsigns/opioid-overdoses/index.html

©OECD Insights May 2018

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