Trade and compliance cost model in the international supply chain

Trade costs for international supply chain are huge, even in the absence of formal barriers. It is necessary for all the stakeholders, both private and public organizations, to support an effective and efficient border compliance process. Very little trade cost model research has been done at the level of an individual company. Furthermore, customs-related compliance costs are only one of the many aspects in existing trade cost models, such as e.g. the well-known model of Anderson and van Wincoop, and hence not broken down into the constituent components that become crucial when individual companies want to assess specific business processes. Company level and compliance specific trade cost models are needed when individual companies want to assess their own specific costs of compliance in their international supply chains, and how they could benefit from IT-enabled trade facilitation, such as the data pipeline, to reduce these costs. Hence, we argue, based on a case study conducted by the CORE project, that it is essential to actively conduct further research into what are company level compliance costs. In this paper, we present the first outline of a Company Level Compliance Cost (CLCC) model and show how it can be applied by individual companies to assess costs. The CLCC model can be seen as a tool that can be used by companies to make their trade and compliance costs explicit. This is a key step in the further articulation of potential benefits and value proposition of IT-enabled trade facilitation solutions for specific actors in the chain, which is crucial for the further adoption and upscaling of IT-enabled trade facilitation innovations.