The Role of Electronic Customs Systems in Ensuring Transparency and Efficiency of Cross-Border Trade Operations

Abstract

On the background of unstable worldwide trade and rising significance of digital technologies in public administration, customs procedures modernization gains a strategic importance for many economies. As a geographically relevant crossroads of Western and Eastern markets, adoption of electronic customs systems for Ukraine is essential for realization of openness, efficiency and transparency in cross border trade operations. This article looks into the influence of the electronic customs system implementation for Ukraine in respect to the trade openness and customs efficiency during the time period of 2020-2024. The objective of the study is to assess the degree to which the digital customs transformation adds to the improvement of the country's trade performance in eliminating bureaucratic barriers and enhancing faster and reliable customs processes. Methodology of this research is used to quantify the direct and indirect effects of electronic customs penetration on the most important trade related outcomes: a simultaneous equations model is designed and several dynamic panel estimation techniques are employed in order to improve treatment of unobserved heterogeneity and to estimate with more precision the effects of interest. The model consists of macroeconomic controls (GDP growth rate, exchange rate volatility, inflation and FDI inflows) and structural variables (digital infrastructure, institutional readiness and government policy incentives). The results indicate statistically significant positive relationship of an increase in the proportion of electronically processed customs declarations on trade openness while reducing customs clearance times. Also, digital readiness of infrastructure and quality of policy implementation are proven to be vital mediating variables which contribute to the effect of electronic customs systems. The empirical results are compared with the previous international research and show that Ukraine’s digital customs reforms are state-of-the art in comparison with the global best practices and theoretical expectations. These results are explained in frameworks of institutional and transaction cost economics in order to explain how digital tools can reduce inefficiency, increase compliance, and increase operational transparency. The statistical tests relevant to endogeneity and model specification are shown to provide support for the robustness of the findings. Finally, this article shows that the adoption of the electronic customs systems has greatly increased openness and efficiency in Ukraine’s cross border trade during the studied period. These findings stress the need to keep investing in customs digitalization, institution capacity building, and international cooperation. Further research prospects include the examination of regional differences in the adoption of the system, the embedding of new technologies such as blockchain and the economic effects of the digital customs reforms.