The effect of nontariff barriers on unreported trade: exploring a customs duty reform

Abstract Nontariff barriers (NTBs) are a central yet understudied dimension of trade policy, particularly in their influence on customs duty compliance. Using detailed administrative import records and a Brazilian tariff reform, this article shows that NTBs significantly reduce customs duty evasion by curbing value underreporting and virtually eliminating quantity misreporting. These effects vary substantially across firms, products, and trade partners: final consumption goods, nonmanufacturing importers, and transactions with MERCOSUR countries exhibit weaker responsiveness to NTB enforcement. NTBs operate as an additional layer of regulatory enforcement, strengthening compliance incentives and shaping strategic trade reporting behavior.