Implementation in Pakistan of the US Integrated Cargo Containers Control program: Trade-facilitating or not?

Using novel firm-level data, we examine the trade effect of the changed security arrangements for Pakistan's exports to the US following 9/11. The pre-shipment scanning facility introduced by the Integrated Cargo Container Control (IC3) program, following the 100% scanning requirement, affected the beyond-the-border and behind-the-border costs of exporting. We exploit the exogenous nature of this shock and its specificity to one export market in the identification strategy. The estimates show Pakistan's exports dropped by between 8% and 11% because of IC3 but that the effect was heterogeneous across firms depending upon their pre-IC3 port of departure and whether they switched following IC3. We also show that the export fall would have been even greater if 100% scanning had been introduced without a pre-shipment scanning facility.