Cross-Border Supply Chain Questions: Where to Look for “Hidden” Costs

Supply chain barriers to trade are both complex and widespread. A more comprehensive approach to foreign investment decisions means recognizing costs in four important categories of the supply chain. Executive teams can begin by asking some key questions relating to each category:

Market access

• Do you know how many regulatory agencies you have to deal with as you move goods into or out of your chosen market?
• Do you have a list of the licensing regulations that apply to your product or service?
• Are there preferential rules or regulations that give local companies a leg up in the market? Will that affect your costs or competitiveness?

Border administration

• What percentage of shipments will be inspected at the border, on average? How does that compare with other markets?
• What is the typical delay time at a particular border or port, and what will that cost in terms of spoilage, theft or the need to stockpile additional inventories?
• How often do border officials demand “facilitation payments” to move goods efficiently? Are you prepared for the repercussions of not paying (i.e., potentially severe delays)?

Telecom and transport infrastructure

• Does the country have an electronic system at the border allowing shippers to declare goods in advance, speeding up processing? Are those systems reliable and used consistently?
• How fast on average are trucks or rail shipments able to move to and from key ports? What are the common delays and how costly are they?
• What special fees, licenses or other special regulations do local authorities impose on truckers that add costs or slow the movement of goods?

Business environment

• What are the political and administrative realities in your chosen market, and how will that affect the ease and security of doing business there?
• Do businesses enjoy the support and encouragement of government officials, or is there a history of random taxation, excessive fees or other attempts to extract value from the private sector?
• Are the rules and regulations that pertain to your business clear and consistent? Are there established procedures for working through them?

All of these costs can be estimated to gauge the effect on potential investment returns. But if your team can’t provide definitive answers to questions like these, moving forward can have real repercussions.

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