# **Section IV. Methodology**

In this section, we describe our empirical strategy. Neither the FVA reform nor the data lend themselves directly to clean tests of causal mechanisms, but we are able to use a rich set of fixed effects and a rich set of variables to control for many (if not all) sources of plausible confounding variation. Given the complete absence of studies in this area, we view this as an important step forward for the literature. We are also able to study various phenomena that have not been studied before, including the conformity of sampling activities on the ground to the sampling plan and the empirical study of the rates of non-compliance.

# **_IV.1 Adherence to sampling plan_**

Our first empirical exercise studies the implementation of the reforms. In the new system, the FVA conducts a risk analysis using available evidence on the frequency of non-compliant shipments and the severity of the harm that would occur if a non-compliant shipment would be allowed onto the market. The main outcome of this process is the sampling plan indicating the number of shipments to be sampled at each border post for groups of products originating from certain source countries or regions in a given year. In principle, the plan represents the informed view of the FVA administration about levels of risk of noncompliance and the degree of harm, combined with resource constraints as well as the obligations of FYR Macedonia under the SPS agreement and its other trade agreements. If the FVA administration accurately forecasts numbers of import shipments and levels of non-compliance in each group, one should expect variation across products and regions in samples actually taken to match variation in the sampling plan. Border agents have discretion over which samples they take, but the sampling plan should offer strong guidance as to the number of samples taken within each category.<sup>32</sup> There are perfectly legitimate reasons not to follow the sampling plan in certain circumstances. FVA border agents have discretion, and they are empowered to deviate from the plan when individual shipments are deemed worthy of further scrutiny. During the year, there may also be news, such as a finding of aflatoxin or salmonella in particular imported products from a given source region, which would warrant additional sampling activity for those products if imported from that source region.<sup>33</sup> It may also be that the number of import shipments differs from what is expected or that new products or shipments from new source countries are being imported and therefore the border agent is obliged to take samples from that shipment.<sup>34</sup>

> 32 One would also hope that FVA border agents would select riskier shipments within each category in the sampling plan.  The empirical implications of this behavior for our statistical tests are not immediately obvious.  We find very low rates of noncompliant shipments overall, which probably indicates that shipments are generally compliant.

> 33 The EU’s RASSF database reports the identification of hazardous samples anywhere in the EU.  Such reports are likely to trigger increased scrutiny of shipments with the same characteristics as the shipments identified in the database.

> 34 Taking samples from new shipments is a recommendation set forth in the FVA sampling plan.

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