Customs brokers as intermediaries in international trade
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Customs brokers as intermediaries in international trade Hege Medin1
© The Author(s) 2020
Abstract Recent studies suggest that intermediaries like merchants facilitate international trade by reducing fixed trade costs for producers that trade through them instead of exporting or importing directly. This study argues that customs brokers–a type of intermediary rarely studied in economics before–play a similar role by reducing fixed costs of clearing goods through customs for firms that use them instead of selfdeclaring. Using panel data of Norwegian trade transactions, the paper shows that the majority of manufacturing producers participating in international trade use such brokers, and that the brokers typically handle large trade values on behalf of several different produces. In an econometric analysis, the author finds that the share of a producer’s market specific trade that is self-declared rather than handled by brokers increases with the traded value. This is in line with predictions from theoretical models on trade intermediaries and holds after controlling for observed as well as unobserved factors at the producer, country and product level. Results are similar for exporting and importing, indicating that brokers facilitate both modes of trade. Keywords International trade · Trade costs · Intermediaries · Customs brokers · Customs clearing JEL Classification F12 · F14
1 Introduction A recent strand in economic research concerns how intermediaries like merchants facilitate international trade by making it possible for firms unable to handle all trade-related issues by themselves to participate in international markets. This, in turn, can boost aggregated trade flows. I argue that another type of intermediary–customs brokers–can play a similar role. In Norway, all exported or imported * Hege Medin [email protected] 1
Norwegian Institute of International Affairs (NUPI), St. Olavs Plass, P. O. Box 7024, 0130 OSLO, Norway
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goods must pass through customs and be declared, and a producer can choose between handling the customs declaration by itself (henceforth: self-declare) or engaging the services of a broker to do this. I use an exhaustive panel of Norwegian manufacturing producers’ trade transactions containing information on usage of customs brokers. The data reveal that outsourcing of customs brokerage is very common. To my knowledge, customs brokers have rarely been studied in economics before, and this is the first article to document the use of such brokers in a whole population or even representative sample of firms. Building on the seminal Melitz (2003) model of international trade, Ahn et al. (2011) proposed a model in which exporting firms avoid paying high fixed costs of reaching foreign customers by using a merchant (referred to as a trading company) to sell their goods in foreign markets. This comes at the expense of lower operating profits, however, as the exporter has to pay a de facto fee to the merchant (which is proportional to the traded value).
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