Outline International recommendations Methods used in the EU Conclusion
International recommendations … • BPM6 (10.30) : The principle for valuation of general merchandise is the market value of goods at the point of uniform valuation. The point of uniform valuation is at the customs frontier of the economy from which the goods are first exported, that is, free on board (FOB); • (ii) IMTS 2010 : it is recommended that: • - The statistical value of exported goods be an FOB-type value; • - The statistical value of imported goods be a CIF-type value; however, countries are • encouraged to compile FOB-type value of imported goods as supplementary information .Countries which compile only CIF-type values for imported goods are encouraged to compile separately data for freight and insurance, at the most detailed commodity and partner level possible • (iii) BPM6 (10.34):Ideally, CIF to FOB adjustment for imports should be obtained for each goods transaction, or at a detailed level. The relationship of FOB to CIF prices varies according to factors such as the type of good, weight, scale (bulk or not), special needs (such as refrigeration or careful handling), mode of transport, and the distance traveled. • CIF to FOB ratios change over time, due to factors such as fuel prices, competition and technology in the transport industry, change in the proportion of different types of goods, and changes in source economies. For goods when the customs points of the • exporting and importing territory are contiguous, the CIF and FOB values would be the same.
International recommendations • Some remarks about the CIF/FOB estimation: • IMTS imports are in many countries recorded according to CIF value only (in accordance with IMTS recommendation) • Application of a CIF/FOB adjustment ratio for imports is needed in most countries to compile the item “goods” for BOP compilers. • Errors in the estimation of the CIF/FOB ratio may lead to significant bias on the trade in goods balance. • Various methods are used to estimate the CIF/FOB adjustment ratio • Little guidance provided by international organisations about practical methods to produce FOB imports • Some lack of harmonization has been identified in the EU
Methods used in the EU • A specific EU Task Force (BOP/FTS TF) has recently examined the transition from Trade Statistics to BOP data in EU Countries, including the CIF/FOB adjustment. • Several methods for CIF/FOB adjustment have been identified: • Method 1 : Fixed ratio • Some countries use a fixed ratio based on historical data • The ratio is often unique for : all partners, mode of transport, product groups… • Pros: • Very simple and no cost… • Cons • Disconnected from real transport/insurance costs Poor accuracy
Methods used in the EU • Method 2 : Difference between statistical value (CIF) and invoice value (FOB) • In the EU, Customs record the CIF value for imports (statistical value), and the “invoice value” which depends on the “terms of delivery” of the contract • If the contract is FOB, the difference between the statistical value and the invoice value should in theory represent the cost of international transport and insurance • Pros: • Very limited cost (use of Customs data) • Results linked to real price of transport/insurance • Cons • All needed information not always available (terms of delivery, mode of transport, invoice/statistical value,…) • Difference between values may be explained by other factors: leasing, processing, … need to exclude all irrelevant customs procedures • The use of “FOB” contracts may introduce serious frame errors and bias • Quality of some basic data may be poor (ex: invoice value=statistical value)
Methods used in the EU • Method 2 bis: Use of Customs data on freight and insurance • In some countries, Customs record separately the FOB value for imports, the cost of freight and insurance, and the CIF value • Pros: • Very limited cost (use of Customs data) • Results linked to real price of transport/insurance • Cons • The information on freight and insurance is known by importers only when terms of delivery are FOB… • All needed information not always available (terms of delivery, mode of transport, invoice/statistical value,…) • The use of “FOB” contracts may introduce serious frame errors and bias • Quality of some basic data may be poor
Methods used in the EU • Method 3: Estimations based on freight rates • Transport and Insurance are estimated by : • Transport cost = (weight or volume) X (distance) X (unit cost) • Insurance cost = (value) X (premium) • It is important to treat separately the various modes of transport and possibly broad categories of products • Unit costs can be provided by: • Transport statistics • Specific surveys of carriers • The information on weights or volume (possibly by partner or by distance) is provided by IMTS data • Pros: • Good accuracy • Results in principal linked to real price of transport/insurance • the collection of unit cost from carriers can be combined with the collection of other data needed to estimate transport services • Cons • Information on Unit costs not always available • Cost of survey of carriers • “Official” prices declared by carriers? • Quantities (net mass of products) not always available in the EU
Methods used in the EU • Method 4: Survey of importers on transport and insurance costs • Transport and Insurance are estimated on the basis of a survey of importers: • A representative sample of declarations is extracted from the Customs declaration files • Information on the real cost of transport and insurance is collected on a specific questionnaire • Pros: • Good accuracy • The survey (sample size and definition) can be adapted to the target: freight rates by mode of transport, partner regions, categories of products,… • Results linked to real price of transport/insurance • The survey can be combined with the collection of additional data (nationality of transporters, currencies, intra-firm trade…) • Cons • Cost can be significant • Procedure to get a compulsory survey
Methods used in the EU • Method 4: Survey of importers on transport and insurance costs • EXAMPLE OF THE FRENCH SURVEY : • Survey of 15 000 basic transactions (8000 companies) declared to Customs • (intra-EU and extra-EU, Imports and Exports) • - Compulsory survey, carried out by the Customs administration • Sample is stratified by: • Flow (Imports, Exports) • Size of companies (limitation to 20 items for big companies) • Mode of transport • Partner Area • Broad categories of Products • Response ratio : 72% • - Internet ratio : 40% • - Problem : The survey is not carried out every year (last surveys : 2005, 2009)
Methods used in the EU EXAMPLE: FRENCH SURVEY : Survey of 15000 basic transactions QUESTIONNAIRE FOR EXTRA-EU IMPORTS * voir notice
Methods used in the EU • Method 4: Survey of importers on transport and insurance costs • Results of the French survey • By geographical area (2009): • By mode of transport :
Methods used in the EU • Comparison of methods by EU country (2008 information): A significant number of EU member states (BG, CZ, CY, DE, DK, FI, GR, HU, PL, PT, RO, SE, UK) declared they are planning to change their current CIF/FOB method
Methods used in the EU • Comparison of methods by EU country (2008 information): • “Self assessment” related to the quality of CIF/FOB methods currently used :
Methods used in the EU • Comparison of methods by EU country (2008 information): • CIF/FOB ratios…
Methods used in the EU • Comparison of methods by EU country (2008 information): • Evolution of CIF/FOB ratio in Italy…
Conclusion/Recommendations • Conclusions of the EU Task Force: • There is no uniform ideal best method available • The method for adjusting the CIF data to FOB values should be chosen in each country after a careful analysis of the information available from national Trade Statistics and Transport data • The TF finally agreed on a set of minimum standards that should characterize the CIF/FOB method (by order of priority): • Consider different partners: at least intra/extra-EU, intra/extra-EA, main geographical areas in extra-EU; • Be updated at least every five years; • Consider the different modes of transport (air, road, rail, sea, pipeline); • Consider different product groups or product characteristics; • Be consistent with the ratios used by neighboring countries (if trade patterns are somehow similar).
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