# **3.1 Measures of customs performance**

The outcome variables of interest in this study are three measures of customs performance. The central focus of our analysis is data from the World Bank’s _Doing Business - Trading Across Borders_ database. These indicators are often used as benchmarks for trade facilitation activities, by aid agencies such as the World Bank and by international aid donors.<sup>10</sup> The TAB database includes sub-indicators that measure the time and cost of moving goods through import and export customs, respectively. Our data set includes 182 countries with data for both the time needed to clear customs and the associated cost.<sup>11</sup> TAB data are collected every two years. Because the OECD procedural data that we use on the right hand side offer no variation over time, in our estimation procedures we use only the 2012 data from TAB. The TAB sub-indicators are the result of surveys of private sector professionals working in the area of trade logistics. Respondents are asked to report the amount of time (in days) and the cost (in US dollars) of moving goods through various stages of the trading process: document preparation, inland transport, customs (and other border agencies), and ports and terminal handling. We focus on the implications of the TFA for customs, because the policies enumerated in the TFA are more likely to affect this component of the time-to-trade indicators than to affect the other subcomponents.<sup>12</sup> The respondents to the TAB survey are asked to consider an import (export) shipment with the following characteristics:<sup>13</sup> It is a dry-cargo 20-ft full container load shipment weighing ten tons, and is valued at US$20,000. The product is one of the country’s leading import/export products and, is not hazardous, does not include military items, does not require refrigeration or other special treatment, and is not subject to phytosanitary or environmental safety standards. 10One goal of this study is to inform these discussions, in terms of the relative roles of specific policies and/or other factors such as levels of development. There is controversy about the ability of TAB data to summarize border environments. Our estimation strategy is designed to exploit the heterogeneity in reported performance, while at the same time addressing some of the criticisms of detractors.

> 11Some of the observations represent overseas territories, rather than independent countries. Puerto Rico is an example.

> 12The TAB data also include estimates of the time and cost required for three additional trading activities: _inland transit_ , _assembling documentation_ , and moving through _terminal and ports_ . Of these other components the TFA reforms might also be expected to affect the cost and time of document assembly, but the impact of such changes is difficult to evaluate in our framework. The OECD’s measure of documents policy includes TAB data so very similar variables would enter on both the right and left hand sides of the econometric model. Moreover there are not good estimates of the value of time for activities such as document assembly (as opposed to valuations of time while goods are in transit). We therefore limit our investigation to the variables that measure customs policy. It is likely that there are additional gains that would arise through reductions in the time required to assemble documents but we are not able to credibly quantify these.

> 13The methodology used to produce the TAB data is described briefly in Djankov et al. (2010). Further information was provided to the authors by the Trading-across-borders team of Doing Business.

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