Globalisation, Trade

Recent developments in international transport and insurance costs: insights from the OECD-ITIC Database

by oecdstatistics
5 minute read

by Andrés Fiallos (andres.fiallos@oecd.org), Antonella Liberatore (antonella.liberatore@oecd.org), and Steven Cassimon (steven.cassimon@oecd.org), OECD Statistics and Data Directorate

To understand international trade and set policy direction it is vital to understand the costs associated with transporting and insuring goods across borders. International transport and insurance costs, which correspond to the value of the transport and insurance services performed to deliver the goods from the border of the exporting country to the border of the importing country, have a direct and material impact on trade patterns and on a country’s competitiveness. Despite their importance, accessing quantitative information on these costs has long been a challenge for statisticians and policymakers alike. This article presents the OECD International Transport and Insurance Costs of merchandise trade (ITIC) database (Fiallos, Liberatore, & Cassimon, 2024), which helps to deepen our understanding of these aspects of global trade by providing both reported data and estimates on international transport and insurance costs on over 200 economies by partner and product.

How are international transport and insurance costs measured?

Limited data availability presents a key challenge when attempting to quantify international transport and insurance costs in merchandise trade. Transaction-level data on these costs are typically not accessible to statistical offices, and the fact that international merchandise trade is carried out through different delivery terms makes aggregation efforts virtually impossible. However, a viable approach to measuring these costs does exist: evaluating them in relative terms through CIF/FOB margins, which reflect the difference between the Cost, Insurance, and Freight (CIF) and the Free-On-Board (FOB) valuations for the same import flow (Figure 1).

Figure 1. The definitions of the FOB and CIF values allow to determine the international transport and insurance costs

Source: Authors’ own elaboration based on IMTS (2010).

While the FOB value comprises components (a) and (b), the CIF value comprises the sum of (a), (b) and (c) (IMTS, 2010). When both FOB and CIF are available for the same transaction, the difference between the values will correspond to the component (c), which is the international transport and insurance costs.

The OECD-ITIC database and its evolution

Observed data on merchandise imports with both CIF and FOB valuations remains limited. As of today, only around 30 economies make this information available with the required level of product and partner detail. The OECD has been working to fill this data gap since 2016, when the first edition of the International Transport and Insurance Costs of merchandise trade (ITIC) database was released (Miao & Fortanier, 2017). The ITIC database provides detailed information on CIF/FOB margins, interpreted as the proportion of the CIF value of imports that corresponds to international transport and insurance costs.

To build ITIC, all available official statistics on imports with both CIF and FOB prices are gathered, broken down by partner country and by commodity; later, a gravity model is estimated and used to predict the CIF/FOB margins for countries lacking explicit data, providing global coverage. The final dataset encompasses over 200 economies and partners and more than 1,200 products according to the Harmonized System (HS 2017).

The 2024 release of ITIC, spanning 27 years (1995-2022), features several enhancements in the methodology, notably to account for the effects of the COVID-19 pandemic on international transport and insurance costs and to ensure a complete dataset with no gaps.

All regions experienced an increase in CIF/FOB margins after 2020

All regions experienced an increase in CIF/FOB margins after 2020, with the Pacific rising most significantly. Within just three years, the estimated CIF/FOB margins for this continent soared from 3.7% in 2019 to 6.2% in 2022. Africa exhibits the highest CIF/FOB margins over 1995-2022, whereas Europe consistently shows the lowest international transport and insurance costs.

Notably, 2022 marks the year with the highest international transport and insurance costs for Africa, Europe, and the Pacific, while both Asia and America registered their peak in 2008 (Figure 2). Globally, CIF/FOB margins increased to 4.9% in 2022, up from average of 4.3% between 2015 and 2019.

Intra-continental trade presented lower CIF/FOB margins during the COVID-19 pandemic

The results indicate that international trade costs vary depending on whether both trade partners are within the same continent (intra-continental) or located in different continents (inter-continental). Historically, intra-continental trade has exhibited lower margins than inter-continental trade, likely due to the prevalence of road transport over sea transport, which is typically more cost-effective. While intra-continental trade maintained its margins during and after the COVID-19 pandemic, inter-continental trade margins increased significantly over that period.

The product dimension: the impact of international transport and insurance costs on rice, copper, and cars

The OECD-ITIC database contains information for over 1200 products at the HS 4-digit level. The CIF/FOB margins for rice, copper, and cars show varying trends from 1995 to 2022. Rice exhibits relatively high margins, generally fluctuating around 8-9%, peaking at 9.2% in 2005, and showing a slight decline in recent years. Copper, on the other hand, maintains lower margins, averaging around 4-5%, with a peak of 5.1% in 2003 and a notable dip to 3.9% in 2019 before rising again. Cars have the lowest margins among the three, ranging between 2.8% and 3.8%. Margins on cars increased gradually until 2008, peaking at 3.8%, then saw minor fluctuations, with a peak in 2021 before a slight decline to 3.5% in 2022. These trends indicate that while transport and insurance costs have a significant impact on all three commodities, rice tends to have higher associated costs, likely due to its bulk and lower unit value compared to copper and cars.

Check the OECD-ITIC Dashboard for more insights

The OECD-ITIC Dashboard allows users to visualise trends on international transport and insurance costs and is available here. The different panels in the dashboard allow users to explore dynamics by importing country and by product.

Future work

It is worth stressing that ITIC is an analytical dataset, and as such it combines official information with estimations for non-reported data. With more countries reporting their imports according to both CIF and FOB, the quality of ITIC will gradually improve. As ITIC continues to evolve, opportunities for further research and improvement emerge:

  • Distinguishing between different modes of transport (namely, sea, air, road, other).
  • Considering the actual trade route taken, notably for maritime trade, rather than an exogenous distance variable. This could be done by leveraging emerging data sources such as AIS signals to monitor port activity and track trade routes.
  • Finally, national statistical offices produce CIF/FOB margins to adjust merchandise trade data for Balance of Payment standards, typically at a less detailed level. As this information becomes more available, it can validate or benchmark estimated margins, further improving the alignment of ITIC to officially reported statistics.

References and future reading