Frequently Asked Questions
- What does the Trading across Borders indicator measure?
- How is the Trading across Borders ranking calculated?
- Who are the contributors for the Trading across Borders indicator?
- Does Trading across Borders record the de jure (the law) or de facto (the practice) situation?
- What does border compliance measure?
- What does documentary compliance measure?
- What does domestic transport measure?
- How does the Trading across Borders indicator measure time?
- How does the Trading across Borders indicator measure cost?
WHAT DOES THE TRADING ACROSS BORDERS INDICATOR MEASURE?
Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods.
HOW IS THE TRADING ACROSS BORDERS RANKING CALCULATED?
The ranking of economies on the ease of trading across borders is determined by sorting their distance to frontier scores for trading across borders. These scores are the simple average of the distance to frontier scores for the time and cost for documentary compliance and border compliance to export and import.
Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these data in calculating the distance to frontier score for trading across borders or the ranking on the ease of trading across borders. The main reason for this is that the time and cost for domestic transport are affected by many external factors—such as the geography and topography of the transit territory, road capacity and general infrastructure, proximity to the nearest port or border, and the location of warehouses where the traded goods are stored—and so are not directly influenced by an economy’s trade policies and reforms. In addition, Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, the number of documents are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required.
WHO ARE THE CONTRIBUTORS FOR THE TRADING ACROSS BORDERS INDICATOR?
The data on trading across borders are gathered through a questionnaire administered to local freight forwarders, customs brokers, traders and government agencies. Questionnaire responses are verified through several rounds of follow-up communication with respondents as well as by contacting third parties and consulting public sources. The questionnaire data are confirmed through teleconference calls and/or on-site visits. The trading across borders questionnaire is available online on the website.
DOES TRADING ACROSS BORDERS RECORD THE DE JURE (THE LAW) OR DE FACTO (THE PRACTICE) SITUATION?
The Trading across Borders indicator records the time and costs estimates reported by local experts in practice associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods.
WHAT DOES BORDER COMPLIANCE MEASURE?
Border compliance captures the time and cost associated with compliance with the economy’s customs regulations and with regulations relating to other inspections that are mandatory in order for the shipment to cross the economy’s border, as well as the time and cost for handling that takes place at its port or border. The time and cost for this segment includes time and cost for customs clearance and inspection procedures conducted by other government agencies. For example, the time and cost for conducting a phytosanitary inspection would be included here.
The computation of border compliance time and cost depends on where the border compliance procedures take place, who requires and conducts the procedures and what the probability is that inspections will be conducted. If all customs clearance and other inspections take place at the port or border, the time estimate for border compliance takes this simultaneity into account. It is entirely possible that the border compliance time and cost could be negligible or zero, as in the case of trade between members of the European Union or other customs unions.
If some or all customs or other inspections take place at other locations, the time and cost for these procedures are added to the time and cost for those that take place at the port or border. In Kazakhstan, for example, all customs clearance and inspections take place at a customs post in Almaty that is not at the land border between Kazakhstan and China. In this case border compliance time is the sum of the time spent at the terminal in Almaty and the handling time at the border.
If inspections by other agencies take place in 20% or more of cases, the time and cost measures account for clearance and inspections by all agencies. Different types of inspections may take place with different probabilities—for example, scanning may take place in 100% of cases while physical inspection occurs in 5% of cases. In cases like this Doing Business would count only the time for scanning because it occurs in more than 20% of cases while physical inspection does not. The border compliance time and cost for an economy do not include the time and cost for compliance with the regulations of any other economy.
WHAT DOES DOCUMENTARY COMPLIANCE MEASURE?
Documentary compliance captures the time and cost associated with compliance with the documentary requirements of all government agencies of the origin economy, the destination economy and any transit economies. The aim is to measure the total burden of preparing the bundle of documents that will enable completion of the international trade for the product and partner pair assumed in the case study. A document is defined as any piece of information that is required by a government agency. The time and cost for documentary compliance include the time and cost for obtaining documents, preparing documents, processing documents, presenting documents, and submitting documents. All electronic submissions of information requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process.
WHAT DOES DOMESTIC TRANSPORT MEASURE?
Domestic transport captures the time and cost associated with transporting the shipment from a warehouse in the largest business city of the economy to the most widely used port, or land border. This is done by the most widely used mode of transport (truck, train) and the most widely used route as reported by contributors. This set of procedures captures the time and cost of the actual transport, any traffic delays and road police checks as well as time spent on loading or unloading at the warehouse or border. For an economy trading through its national port, domestic transport captures the time and cost from the loading of the shipment at the warehouse until the shipment reaches the economy’s port. For an economy trading through a land border, domestic transport captures the time and cost from the loading of the shipment at the warehouse until the shipment reaches the economy’s land border.
HOW DOES THE TRADING ACROSS BORDERS INDICATOR MEASURE TIME?
Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as 22 × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose that documents are submitted to a customs agency at 8:00 a.m., are processed overnight and can be picked up at 8:00 a.m. the next day. In this case the time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours.
HOW DOES THE TRADING ACROSS BORDERS INDICATOR MEASURE COST?
It is assumed that the exporting/importing firm hires and pays for a freight forwarder or customs broker (or both) and pays for all costs related to international shipping, domestic transport, clearance and mandatory inspections by customs and other government agencies, port or border handling, documentary compliance fees and the like. If government fees are determined by the value of the shipment, the value is assumed to be $50,000. Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector experts in international trade logistics and are informed about exchange rates and their movements.