When trading in a new market, it’s good to know the administrative, regulatory, and logistical challenges that may lie ahead, for both established or emerging markets.
To understand the new methodology the Doing Business 2016 indicators use to measure information about countries, and to use this information to decide with confidence which countries are best suited to you as an export market.
How Doing Business 2016 indicators can help your business
The time it takes to export and import can differ widely between countries. Knowing which countries have the most efficient import and export processes can save you a great deal of time and money.
Many businesses have used the Doing Business indicators to assess export and import procedures of global economies. To give businesses even more accurate information about the export and importing processes worldwide, Doing Business used a new methodology in 2016.
This new methodology measured the time and cost for three sets of procedures needed for exporting and importing:
- Documentary compliance
- Border compliance
- Domestic transport
For the first time, Doing Business 2016 has considered the product of comparative advantage for each economy when measuring export procedures. For import procedures it has focused on auto parts because they are a single, very common manufactured product. This gives businesses a more accurate, fair, and representative data set to review.
You can dive into the Doing Business index for your markets, or read more about the metric and methodology behind it below.
Doing Business 2016, a new approach
The Doing Business indicators on trading across borders were among the first global measures used to measure the time and cost impact of administration, regulation, and logistics in trading internationally.
In 2016 Doing Business used a new methodology which customised the case study assumptions for exports and imports.
For exports the Doing Business case study measured the time and cost of transport, border, and documentary compliance taken to export a shipment of 15 metric tons of an economy’s top non-extractive export product.
It followed the shipment from a warehouse in the economy’s largest business city to the most widely used land border or port through which the shipment would be exported to the main export partner for the product.
For imports the case study followed the shipment from the economy’s most widely used land border or port to a warehouse in its largest business city. The shipment consisted of 15 metric tons of containered auto parts for all economies.
The new methodology used the premise that international trade flows are governed by:
- Comparative advantage
- Consumer preferences
- The international structure of production
- The size and geographic location of an economy and its trading partners
Doing Business findings for imports
When exporting to countries worldwide, your products will be processed differently through customs depending on what they are and where they are shipped to.
Two examples of this are shown in two case studies: one for imports, and one for exports (next section).
Importing auto parts: a study
All the 189 economies measured by Doing Business 2016 import similar products. Doing Business chose auto parts as the single import product for all these economies.
What the data showed
Importing auto parts involves greater time and cost on average than exporting auto parts.
Imported auto parts face more inspections and procedures than exported auto parts. This increases border compliance time and cost, and documentary compliance time. In fact, 40% of economies require inspections by other agencies in addition to customs when importing auto parts.
The average time and cost to import auto parts is almost the same as the average time and cost to export agricultural products. One of the reasons for this is that another 17% of economies also require pre-shipment inspections. These inspections are conducted by third-party companies in the economy where the auto part originated.
The Doing Business 2016 report notes that among the economies requiring pre-shipment inspections for auto parts, border compliance times range from 56 hours to 1,330 hours.
Doing Business findings for exports
Export processes vary from country to country. Doing Business found that obtaining, preparing, and submitting documents for agricultural export products costs two times as much than for other product categories.
The main reason for these differences is that 81% of economies whose top export is an agricultural product require product-specific inspections and procedures to export that product, while only 21% of other economies require product-specific inspections for their top export product.
Among economies whose top export is an agricultural product, documentary and border compliance times vary widely from 11 hours to 210 hours.
Of 69 economies whose top export is an agricultural product, 56 have product-specific procedures for this export.
Of 118 economies whose top export is a metal-based, heavy manufacturing or light manufacturing product, only 25 have product-specific procedures for it.
These economies span all regions and income groups, from Norway among OECD high income economies to Guinea-Bissau in Africa.
Grenada and Australia, a comparison
What matters is not whether enhanced inspections and procedures are required — but whether they are carried out efficiently.
For example, Grenada and Australia both require sanitary inspections and certificates for their top export product. Yet completing border compliance procedures takes 101 hours and £800 for an exporter of nutmeg in Grenada, while it takes only 36 hours and £580 for an exporter of meat in Australia.
Completing documentary compliance takes 10 times more hours for the exporter in Grenada than it does for the exporter in Australia.
Comparing the data
Comparing the Doing Business data has shown economies that perform well in the time and cost to export their auto parts often also perform well in the time and cost to import auto parts.
Doing Business concludes that economies that are less efficient importers also tend to be less efficient exporters.
A comparison of a high-income Organisation for Economic Co-Operation and Development (OECD) economy with an African economy
According to Doing Business data, importing takes much less time on average in OECD high-income economies than in other economies, and so does exporting.
For example, Canada’s border compliance time is much less than Cameroon’s.
Traders benefit from a well-functioning electronic system which links Canadian and US customs. The entire border compliance process between Canada and the United States can be completed in two hours. Completing border compliance procedures costs about the same for a Canadian importer (£134) as it does for a Canadian exporter (£130).
In Africa, border compliance takes 160 hours on average for an importer and 108 hours for an exporter. For example, in Cameroon exporting a shipment of cocoa takes 202 hours and costs £763. This is partly due to the requirement that cocoa has a phytosanitary inspection. Importing auto parts, which requires a pre-shipment inspection, takes 271 hours and costs £1,092.
Businesses can assess the efficiency of a potential new importer or exporter by using the Doing Business 2016 indicator. It is good to know any potential problems before committing to trading with a new country, as the type of product exported can impact the time and cost of trade, as can the country involved.