In 1926/27 restrictive measures were applied by
the Government and heavy duties were imposed,
amounting in some instances to as much as 1,340
per cent. ad valorem, with the result that during
the three successive years, the traffic did not exceed
a few million roubles. It revived in 1929/30 when
the food shortage in the Soviet Union became
acute. As many of the parcels consisted of
charitable gifts no considerable transfer of
currency was involved.
{d) ConTrABAND. The amount of smuggled
imports and exports is considerable. According
to the calculations of L. S. Arseniev, an expert
of the Soviet Commissariat of Finance, during
the first years of the restoration of trading relations
with foreign countries such imports reached 40%,
of the value of legal imports. Since 1923 the
position has changed. It is generally admitted
that as a consequence of the activities of the
0.G.P.U. (Soviet Political Police), the guarding
of the Western frontier of Russia is more strict
than before the War. On the Eastern frontiers
and on the Pacific Coast, where, because of geographical
 and technical obstacles control is more
difficult to secure, smuggling on a large scale still
takes place.
In order to ascertain the total value of goods
smuggled, including those not detained, the value
of the detained contraband is multiplied by 10
for imports and 5 for exports. This method was
used before the war and was subsequently adopted
by the Soviet Central Customs Office in Moscow.
The estimate resulting from it is formulated in
internal prices, and for the purpose of the balance
of payments, must be adjusted to those ruling
on the world markets. Obviously no exact estimate
of the value of contraband is possible.
CosT OF SERVICES.
(a) OVERHEAD AND ADMINISTRATIVE EXPENSES.
The U.S.S.R. has a widespread system of trade
delegations, buying and selling agencies and various
commercial undertakings in foreign countries,
as for example, Arcos Ltd. in London, and Amtorg
Inc. in New York; the Russian Oil Products Co.
Ltd. in London, a similar undertaking in Germany
and other countries; and special organisations
established for trading in timber, flax, wheat,

manganese and other goods. In addition, the
U.S.S.R. has two insurance companies, one in
London and one in Berlin, and ten banking
sstablishments in various countries of Europe and
the East.
All the establishments mentioned have large staffs,
high overhead expenses, and taxation liabilities abroad.
In order to cover their expenses they charge a high
sommission to their clients, the Soviet trading and banking
sstablishments in the U.S.S.R. But even this high
commission does not always cover their overhead expenses,
and special subsidies are required to defray losses. Some
nstitutions, however, make substantial profits which,
ufter all administrative expenses have been paid, are
ransferred to the Commissariat of Finance in Moscow
as representing the Soviet Government, the actual holder
>f the share capital of the companies. Part of the profits
70 to increase their working capital. As a rule, the Soviet
rading agencies are reluctant to transfer any money to
Moscow, and resort to various devices to conceal their
profits.
From the aspect of the balance of payments
the maintenance of all these institutions, and also
of various temporary commissions set up by the
Soviet Government abroad for selling or commercial
purposes, should be regarded as a direct charge
upon the currency reserves of the country. Such
expenditure is not included in the prices of
goods, and is not represented in the Customs
returns.
In 1924/25, the administrative expenses of commercial
organisations alone amounted to 20 million roubles, according
 to the calculations of the Commissariat of Finance,
and, including taxes paid to foreign governments,
‘he overhead expenses of banking and insurance com->anies
 and the costs of the upkeep of various temporary
commissions, etc., to 30 million roubles, according to
pur calculations. These expenditures slightly decreased
n 1925/26, as a result of a general reduction of staffs and
various other measures. But since then, owing chiefly to the
growth of trading relations with foreign countries, they
have increased.
During the last two years these expenditures
amounted to 42-50 million roubles per annum,
including the cost of maintenance of various
scientific, technical and commercial delegations,
and individual officials and scientists sent abroad
from time to time by state institutions.
(b) BROKERAGE, COMMISSION, ETC. Overhead
and administrative expenses do not cover brokerage
and other charges. The Customs returns also do
not include various expenses connected with the
sale of Soviet goods on foreign markets. As a rule
these charges are abnormally high, because long