Measurement

The importance of quantifying and addressing the many indirect costs on trade.

Much of the attention in trade reform has been on measuring the direct costs stemming from complex documentation requirements, delays in border clearances or cargo handling. But quantifying and addressing the many indirect costs on trade is equally important.

To address this data gap and magnify the impact of targeted trade facilitation reforms, we apply our Total Trade and Logistics Cost (TTLC) methodology, originally developed by A.P. Møller-Maersk A/S.

In addition to assessing direct costs such as administrative fees, the TTLC framework considers the impact of another dozen indirect costs related to lost time, including from idle trucks, late delivery penalties, lost orders, extra storage and inventory costs, and demurrage and detention charges.

Such indirect costs have cascading effects and can severely impact supply chains, drive up production costs and hurt the reputations of both importers and exporters, significantly eroding trade competitiveness.

With public and private sector cooperation, the Alliance is collecting data for TTLC in several projects, capturing the time and costs for traders in completing necessary paperwork, including from any additional complications due to rejections. The Alliance validates results with all stakeholders to assess potential savings resulting from digitalising manual processes.