A simulation approach to reconciling customs and trade risk associated with cross-border freight movements

Abstract

Southern Africa critically depends on increased exports to enable economic growth and job creation. Logistical inefficiencies, however, are hampering exports, with cross-border freight delays a key contributor that adds cost and unpredictability to the supply chain, making South Africa an unattractive participant in global just-in-time value chains. The detention of cargo consignments at border posts is intended to reduce the risk of customs duties not being paid and to prevent the smuggling of illegal contraband. These risks must be weighed against the risk to trade caused by unpredictable time delays, and the resulting harmful impact on the economy. The increased use of ICT technologies has been proposed to enable a more attractive compromise between customs and trade risks. This study investigates the impact of the proposed new measures, including the use of technology, on the efficiency of cross-border freight movements. The research approach will combine the analysis of historical electronic transaction data exchanged between customs and consignors, with the simulation of different scenarios for the ICT support of customs processes. The expected impact of the proposed measures on exports within and from the SADC region, and the direct impact on corridor users, are estimated and compared against the estimated cost of the proposed measures. It is shown that implementing the proposed improvements should represent an attractive investment for the regional economy.

Keywords

• customs
• trade risks
• SADC region
• cross-border freight