Better Borders for Trade, Traceability and Enforcement

Executive Summary

Trade increasingly depends on detailed supply chain information. Governments are placing greater emphasis on managing supply chain risks, diversifying sourcing strategies, enhancing economic security, addressing risks linked to transshipment and trade circumvention, and strengthening coherence between trade-related measures and broader social and environmental objectives. These developments are increasing demand for information about how goods are produced, sourced and moved across supply chains. As a result, border processes are no longer expected only to facilitate the efficient movement of goods. They are progressively called upon to support more information-intensive regulatory requirements while preserving the speed, predictability and efficiency of cross-border trade.

Systems modernisation and traceability must advance hand-in-hand. The first is the continued modernisation of trade facilitation systems to simplify border procedures and reduce trade costs. The second is the growing importance of traceability across global supply chains, driven by the need to generate, verify and transmit ever more complex information. This report examines how these developments are interconnected and how greater operational integration between trade facilitation and traceability can strengthen regulatory compliance, supply chain resilience and economic security while minimising unnecessary costs for businesses.

Traceability is a critical component of supply chain resilience. Traceability is the ability to track and verify product and supply chain attributes relevant in a given policy or commercial context. Diversification strategies often privilege partners pursuing similar environmental and social standards to support a level playing field. In key sectors such as critical minerals, medical goods, advanced technology products and agri-food, the ability to generate, verify and transmit this information is therefore growing in importance for both compliance and resilient supply chains.

Supply chain traceability is operationalised to a growing extent at the border when supply chains operate internationally. This creates new demands for governments and businesses alike. Customs and other border authorities must process more complex information, co-ordinate across a wider range of agencies and integrate new forms of verification into border procedures. Firms, in turn, face growing requirements to collect, manage and report supply chain information across multiple jurisdictions. Digitalisation and trade facilitation are therefore becoming more and more vital for managing these demands while limiting costs and delays.

Against this backdrop, this report assesses the preparedness of OECD economies in using trade facilitation systems to support evolving traceability requirements while minimising costs and complexity for businesses.

Key findings

Trade facilitation is a key enabler of supply chain diversification and resilience. Since the entry into force of the WTO Trade Facilitation Agreement (TFA), reforms have improved the efficiency of border procedures. Building on this, recent efforts have centred on digitalisation and greater co-ordination across border agencies. Since 2022, 23% of economies covered by the OECD Trade Facilitation Indicators (TFIs) have improved elements of border automation, while 68% and 21% have enhanced domestic and cross-border agency co-operation, respectively. These reforms help make diversification strategies operational by enabling firms to connect with a broader range of suppliers and markets while maintaining efficient cross-border flows. Analysis based on the OECD TFIs shows that a 10% improvement in trade facilitation performance is associated, on average, with more than a 6% increase in the number of export markets served and, in some regions, with nearly a 15% increase in the number of sectors reached.

Fewer than 20% of new environmental and social-related requirements reviewed are designed with comprehensive border implementation in mind. While trade facilitation can help economies manage supply chain diversification and complex compliance requirements, many recently introduced measures provide limited guidance on how they should be operationalised at the border. The number of such requirements is increasing rapidly: for instance, notifications of environment-related technical requirements have grown by more than 60% over the past decade, while around 86% of identified social and environmental due diligence measures have been introduced since 2015. Yet many measures linked to social or environmental performance and production methods, including carbon-intensity requirements, often treat compliance at the border as a downstream implementation issue rather than a core design consideration. Guidance is weakest on data platforms and border agency co-operation (included only in 19% and 17% of measures reviewed, respectively) and appears particularly limited for carbon-intensity requirements. Overall, less than 40% of the measures reviewed provide clear guidance on one or more key border implementation dimensions, including new documentation requirements, border procedures, data sharing mechanisms and platforms, and border agency co-operation, creating risks of frictions and, in some cases, de facto barriers to trade.

Only 55% of environmental lifecycle requirements are addressed by OECD economies. Trade facilitation systems are beginning to adapt to requirements that depend on information generated across product lifecycles and complex supply chains, but gaps remain. The OECD environment-related TFIs assess how documents, procedures, agencies and data related to environmental requirements are integrated into border management systems and ultimately support environmental objectives. TFI analysis in this report indicates that OECD economies currently address just over half (55%) of the border-related challenges associated with environmental lifecycle requirements, reflecting meaningful progress but also substantial room for improvement. This remaining gap partly highlights the fact that border processes do not yet fully account for the complexity of the supply chains through which compliance information is generated, transmitted and verified.

Operational readiness lags behind regulatory ambition, putting trade facilitation gains at risk. The environment-related TFIs reveal a 25 percentage-point gap between the existence of regulatory frameworks and their effective implementation across border systems and institutions. This matters because trade facilitation reforms have already helped reduce trade costs by up to 5% over the past decade, while further ambitious reforms could deliver additional reductions of up to 12 percentage points in some regions. As traceability-related requirements expand, preserving these gains will depend on integrating new compliance obligations into streamlined, digital and risk-based border processes that lower costs for businesses.

Risk is increased by uneven whole-of-government co-ordination and digitalisation. Traceability-related requirements frequently involve customs authorities, environmental agencies, market surveillance bodies, conformity assessment institutions and sector regulators, yet responsibilities, procedures and information flows are not always clearly aligned across them. A deep dive into carbon-intensity measures points to persistent gaps in inter-agency co-ordination, verification arrangements, data sharing mechanisms and the integration of environmental traceability-related information into risk management processes.

USD 4.8 trillion of global trade can benefit from trusted compliance mechanisms. Analysis of International Regulatory Cooperation (IRC) tools points to a gap between the existence of formal regulatory frameworks and their practical integration with border processes. This matters because such instruments are potentially relevant to key sectors and around one-fifth of global trade, representing approximately USD 4.8 trillion in value. However, operational challenges, limited awareness, fragmented institutional implementation and difficulties integrating recognised information into border systems can constrain their practical use. As strategic sectors such as critical minerals, medical goods and advanced tech goods face growing traceability and compliance demands, better use of trusted compliance tools and reliable information represents one such opportunity to reduce duplication and costs, facilitate trade with trusted partners, strengthen economic security, and support more resilient and diversified supply chains.

Key considerations

A key lesson is that the design of new requirements cannot be separated from the systems that will implement them. Requirements that pursue legitimate policy objectives can nevertheless create implementation challenges if they are not translated into clear procedures, usable data requirements and operational processes at the border.

The report identifies three priorities for strengthening the relationship between trade facilitation and traceability.

• Border agency digitalisation. Making greater use of existing trade facilitation tools can help avoid duplicative reporting requirements and can enable information to be reused across agency systems, where appropriate arrangements are in place to support trust, data protection and information security.

• Strategic use of traceability can strengthen risk management. This would require better integration of traceability-related data into automated border processes, Single Windows, other data platforms and Artificial Intelligence tools, supported by effective inter-agency co-operation. These systems could help relevant authorities identify, assess and target compliance, supply chain and economic security risks more effectively, including risks of trade circumvention.

• Investments in domestic and international co-operation. Because traceability-related requirements span multiple agencies and supply chains extend across multiple economies, closer co-operation on standards, reliable data sources and regulatory practices could be important in supporting effective compliance and efficient cross-border trade.