NAVIGATION AND USE OF THE TOOL
TRADE IN SERVICES
What are mirror statistics?
In Trade Map, yearly data are available not only for countries that report their own trade data, but also for the over 50 primarily low-income countries that do not report national trade statistics to UN COMTRADE. The trade of these countries has been reconstructed on the basis of data reported by partner countries. The statistics obtained are called mirror statistics.
While mirror statistics are a second-best solution, they are better than having no data at all. However, they have a number of shortcomings in comparison to nationally reported data:
- They do not cover trade with non-reporting countries. As a result, mirror statistics do not adequately cover intra-Africa trade.
- There is the problem of transshipments, which may hide the actual source of supply.
- Mirror statistics invert the reporting standards by valuating exports in Cost Insurance Freight terms (CIF, i.e. inclusive of transport and insurance) and imports in Free On Board terms (FOB, exclusive of these items). You can read more about CIF and FOB in FAQ 2.c.
- The number of reporting countries is different from one year to another. Hence comparisons over time using mirror statistics need to be interpreted with caution.
To conclude, the mirror statistics are indicative of the trade but usually do not reflect the whole picture. Consequently, one needs to be very careful in one’s analysis when comparing mirror data with direct data.
Trade data in Trade Map are published by default as reported by countries but it is always interesting to complement your analysis of direct data by checking mirror data. For example, if you look at Chile's reported exports, Netherlands is one of Chile's main trading partners. If you look at the same table based on partners data (mirror statistics) you will see that Germany is a more important partner for Chile than Netherlands. It means that for a large part of Chile's exports, the final destination is not Netherlands but Germany. This phenomenum is known as "the Rotterdam effect" and Trade Map will help you to identify this kind of effect.
What is the Harmonized System?
The Harmonized System (HS) is an international nomenclature defined by the World Customs Organisation (WCO) for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes. At the international level, the Harmonized System for classifying goods is a six-digit code system.
The HS comprises approximately 5,000 article/product descriptions that appear as headings and subheadings, arranged in 96 chapters (plus three special chapters), grouped in 21 sections (not used in Trade Map). The six digits of a product code can be interpreted by groups of two digits. The first two digits (HS-2) identify the chapter the good is classified in, e.g. 09 = Coffee, Tea, Maté and Spices. The next two digits (HS-4) identify groupings within that chapter, e.g. 09.02 = Tea, whether or not flavoured. The next two digits (HS-6) are even more specific, e.g. 09.02.10 = Green tea (not fermented)... Up to the HS-6 digit level, all countries using the Harmonized System classify products in the same way.
The Harmonized System was introduced in 1988 and has been adopted by almost all countries worldwide. It has undergone several changes in the classification of products. These changes are called revisions and happened in 1996, 2002, 2007 et 2012. You can read more about the use of the HS revision in Trade Map in FAQ 2.i.
Here is the count of affected products at the six-digit level by revision:
|Year of the revision
||Number of unchanged products
||Number of new products
||Number of reused products
||Number of deleted products
What is a Tariff Line?
The "tariff line" is the most detailed product code used at the national level, beyond the 6 digits of the Harmonized System. Tariff line codes and the corresponding product descriptions can differ from one country to another. It refers to the most detailed description of a product in the country. Tariffs are applied to these positions.
What are re-exports?
Re-exports are foreign goods that are re-exported in the same state as previously imported. They are included in the country exports. It is recommended that Customs Offices record them separately for analytical purposes, however this is rarely done in practice. Recording them separately may require the use of supplementary sources of information in order to determine the origin of re-exports, that is, to determine that the goods in question are indeed re-exports rather than the export of goods that have acquired domestic origin through processing. It is not possible to determine through Trade Map which export data are actually re-export data as most customs offices do not currently record re-exports separately.
What are re-imports?
Re-imports refer to imports of goods in the same state as previously exported. The country of origin of the goods is in this case the compiling country itself, which is reflected as a country’s trade with itself. The official definitions and descriptions in the Revised Kyoto Convention (Specific Annex B, Chapter 2) are set out below:
"Re-importation in the same state [is defined as] the customs procedure under which goods that were exported may be taken into home use free of import duties and taxes, provided that they have not undergone any manufacturing, processing or repairs abroad [...].
Re-importation in the same state shall be allowed even if only a part of the exported goods is re-imported.[...]
Re-importation in the same state shall not be refused on the grounds that the goods have been used or damaged or have deteriorated during their stay abroad.[...]
Re-importation in the same state shall not be refused on the grounds that, during their stay abroad, the goods have undergone operations necessary for their preservation or maintenance provided, however, that their value at the time of exportation has not been enhanced by such operations."
Re-imports are included in the country imports. It is recommended that Customs Offices record them separately for analytical purposes; however this is rarely done in practice. Recording them separately may require the use of supplementary sources of information in order to determine the origin of re-imports, i.e. to determine that the goods in question are indeed re-imports rather than the import of goods that have acquired foreign origin through processing. It is not possible to determine through Trade Map which import data are indeed re-import data as most customs offices do not record re-imports separately.
There are several reasons why an exported good might return to the country of origin. The exported good might be defective or not in accordance with the contract, the importer might have defaulted on payments or cancelled the order, the authorities might have imposed an import barrier or a demand. The good could have been sent abroad for a trade fair only.
China’s imports from China are a specific case of re-imports.You can read more on this subject in FAQ 2.j.
What is a tariff?
A tariff is a customs duty or tax levied on imports of merchandise goods. Most of the time a tariff is an ad valorem tariff (percentage of value) or a specific tariff (e.g. $100 per ton). Less often, it can be a compound tariff made up of both of these elements applies. Tariffs are mostly levied on imports, but there are cases of tariffs on exports. Tariffs raise revenue for the government and increase the prices of imported products, thus giving domestically produced products a price advantage.
Generally, it is the importer that pays the tariff. The importer declares the dutiable value of merchandise to the Customs Authority in the importing country and the final appraisal of the goods value is done by customs. Most often it is the transaction value (the price actually paid by the buyer to the seller) that serves as the basis for the value appraisal.
Tariffs presented in Trade Map are averages of ad valorem equivalent import tariffs.
To learn more about tariffs please visit Market Access Map.
What should users take into consideration when they use foreign trade statistics as a basis for strategic market research?
Foreign trade statistics are comprehensive in terms of product coverage (more than 5,000 products under the Harmonized System), geographical coverage (around 220 countries and territories; reported and mirror data cover 97% of world trade) and time series (data under the Harmonized System are available since 1988). Moreover, they are readily available at moderate costs. This makes them an attractive source for market research and the assessment of trade performance.
Against this background, ITC has developed a number of tools for international marketing and trade promotion based on trade statistics. Trade Competitiveness Map (formerly known as Country Map), Trade Map, Market Access Map and Investment Map are all cases in point. All of these tools strive to present trade statistics in an analytical and user-friendly format.
Notwithstanding the attractiveness of this comprehensive source of information, users should factor in the following weak points of foreign trade statistics:
- Trade data are never complete: Smuggling and non-reporting represent a serious problem in a number of countries. In addition, trade statistics, like any source of information, are not free of mistakes and omissions.
- Most countries include re-imports in their import statistics and re-exports in their export statistics. A low-income country may show up as an exporter of airplanes simply because its national airline has sold second-hand planes.
- The export value refers to the total or contract value. According to international conventions for reporting trade statistics, the export value refers to the total or contract value, which may of course, be very different from local value-added. For many processing activities the local value added remains below 20% of the export value.
- Different products are categorized differently. Even at the most detailed level of product classification, product groups in the trade nomenclatures do not necessarily reflect trade names and often contain a wide range of different products. For example no country has tariff line product codes for organically produced produce. Moreover, the product nomenclature is sometimes misleading. The labels of aggregated product groups are often very general and provide at times only limited guidance on the leading items within the group of products concerned.
- Exchange rate fluctuations are not always recorded. Exchange rate fluctuations are not always properly recorded in international trade statistics. Values are normally aggregated over the period of one year in local currency and converted into US dollars. In Trade Map, monthly trade data will help you to better analyze exchange rate fluctuations.
- Mirror statistics are sometimes used. For countries that do not report trade data to the United Nations, ITC uses partner country data, an approach referred to as mirror statistics. You can read more about mirror statistics in FAQ 1.a.
What does "Areas NES" mean?
The partner "Areas NES (not elsewhere specified)" is used (a) for low value trade and (b) if the partner designation was unknown to the reporting country or if an error was made in the partner assignment. The reporting country does not send ITC the details of the trading partner in these specific cases. Sometimes reporters do this to protect company information.
So, one could say that "Area nes" is a group of partner countries, but the components of the group vary by reporter, by trade flow, by year and by commodity.
What does "Special Categories" mean?
The partner "Special Categories" is used by a reporting country if it does not want the partner breakdown to be disclosed. The use of this partner depends on the combination of reporting country, trade flow, year and commodity.
What is a "Free Zone"?
"Free Zones" belong to the geographical and economic territory of a country but not to its customs territory. For the purpose of trade statistics the transactions between the customs territory and the free zones are recorded. Free zones can be commercial free zones (duty free shops) or industrial free zones.
A Free Zone is not a Free Trade Area.
Both "Free Zone" and "Bunkers" are trading partner entities.
For a definition of free zones in the EU, see:
For a list of free zones in the EU, see:
For the list of the world free trade zones, see:
What is a "Free Trade Area"?
A free trade area is a group of two or more countries or economies (or customs territories in technical language) that have eliminated tariffs and all or most non-tariff measures affecting trade amongst themselves. Participating countries usually continue to apply their existing tariffs on imports of goods external to the free trade area. Free trade areas are called reciprocal when all partners eliminate their tariffs and other barriers towards each other. There are cases where developing countries are exempt from making equivalent reductions, even though they get free access to developed-country markets. These are called non-reciprocal free trade areas.
What are "Bunkers"?
"Bunkers" are stores in ships and aircrafts, which consist mostly of fuels and food.
Both "Free Zone" and "Bunkers" are trading partner entities.
What is a "Neutral Zone"?
"Neutral Zone" is a zone defined by a treaty, such as the one between Saudi Arabia and Kuwait (www.un.org/Depts/los/LEGISLATIONANDTREATIES/PDFFILES/TREATIES/SAU-KWT2000SA.PDF)
Where can I find other trade statistics databases?
Other trade statistics data are available in the following websites:
UN Comtrade: comtrade.un.org/
World Trade Atlas: www.gtis.com
United States International Trade Commission: www.usitc.gov
What are the sources of the data for Trade Map?
The yearly data in Trade Map for products at 2, 4, and 6 digit level of the Harmonized System are based on UN COMTRADE, the world's largest database of trade statistics, maintained by the United Nations Statistics Division (UNSD). The quarterly and monthly data come from national and regional sources.
Data are available also for countries that do not report their national trade statistics to UN COMTRADE. The trade of these countries has been reconstructed on the basis of data reported by partner countries. These data are called mirror statistics (see also the FAQ 1.a on mirror statistics).
When is the Trade Map database updated?
|Type of Data
|Annual data at 6 digit level of the HS
||All year round, as we receive the data
|Annual data at the tariff line level
||All year round, as we receive the data
|Monthly and Quarterly data
||All year round, as we receive the data
||Twice a year (May-June / November)
|Trade in services
||Twice a year (May-June / November)
||Three times a year
Why is there a difference between reported export value and the corresponding mirror data of the partner country?
Export statistics rarely line up exactly with the import statistics of partner countries.
More than 30 reasons have been identified. The main reasons include:
Trade systems: some countries use the special trade system (which excludes trade made in free zones), some others use the general trade system (which includes free zones).
Quantity measurement: some countries report gross weights and some others report net weights.
Time lag: discrepancies may result if exports are registered in one year and the corresponding imports in the following year.
Misallocation of a partner country or a product can occur for a reporting country. This only affects bilateral trade or respectively detailed product levels, not the overall trade.
Country confidentiality (recorded as "Area NES", see FAQ 1.h) may have a direct impact on the overall discrepancies if the value of that flow is published in the total trade but not broken down by partner. Product confidentiality affects the results at detailed levels of the commodity nomenclature but have no impact, however, on the overall mutual trade statistics.
Re-exports (see FAQ 1.d) or transit may be taken into account by some countries. The United Nations recommandations state, among other things, that:
- import statistics should be compiled by country of origin (recommandation 8.02),
- export statistics should be compiled by last known destination (recommandation 8.09),
- goods in transit should be excluded from trade statistics (recommandation 13.04). However the exporting country does not always know the final destination of the product. Furthermore the country of origin is neither the country that have re-exported the product nor the country where the product has transited;
Transportation and insurance costs are included in the reported import value (CIF: Cost Insurance Freight) but are excluded from the reported export value (FOB: Free On Board).
FOB: A trade term (Incoterm) meaning Free on Board (port of shipment). See www.iccwbo.org/incoterms/id3038/index.html for more details.
CIF: A trade term (Incoterm) meaning Cost, Insurance and Freight (port of destination). See www.iccwbo.org/incoterms/id3038/index.html for more details.
According to international standards, exports are valued FOB and imports are valued CIF. Some countries, however, do not follow this system. You may want to check on the COMTRADE website comtrade.un.org/db/mr/daExpNoteDetail.aspx?nom=-30.
In addition, as far as we know, there is no modeling for converting FOB values in CIF and vice-versa.
All these reasons refer to each country's methodology of data compilation. The United Nations have made recommandations in "
International Merchandise Trade Statistics: Concepts and Definitions" and the "
Compilers Manual". To know to which extend a particular country comply with UN recommandation, please visit the International Merchandise Trade Statistics National Compilation and Reporting Practices page of the UNSD website.
How are the 5-year growth trend indicators calculated in Trade Map?
The 5-year growth trend indicators in Trade Map are calculated using the logarithmic least-squares trend method on series valued in current US$. They are updated twice a year: the first update with data of the previous year is done in September-October and the second update is done in February-March of the following year, when almost all reporting countries have transmitted their data to UN COMTRADE (the United Nations Statistics Division database).
If a country does not report trade data for the last year, the trend calculation is based on mirror statistics.
No trend is calculated if the reporting country data is not available for at least a four-year period.
The least-squares trend is a commonly used growth indicator. It has the following advantages:
- It takes into account each of the observations under consideration, unlike geometric (or compound) growth rates, which only consider the first and last observations.
- It measures the stability of observed growth (not provided in Trade Map).
On the negative side, the least-squares growth trend is very sensitive to extreme (or outlying) values. Such values may distort the results significantly.
What is the difference between the Trade Indicators and the Time Series data?
Trade indicators are available for the latest year when reporting countries cover at least 80% of the world trade. They are pre-calculated and therefore, it is possible to have in the same table indicators on country performance, on partner countries and on world trend (e.g. growth trends in values and quantities over 5 years and over the last 2 years, trade balance for a country, market share of the country in global exports or imports, share of a partner country in the exports or imports of the country under consideration).
Trade indicators are based on products classified according to the Harmonized System (HS) revision 3 of 2007. Some product codes have been re-created, removed or reallocated in the HS revision 3. Therefore the analysis of such products codes should be approached with caution. A correspondence table for products that changed during HS revisions is available in Trade Map, under "Reference Material".
Time Series show data over several years (to see how many years, go to the Data Availability page). The table can be displayed in values and quantities. It is also possible to calculate on line growth rates in value or in quantity, shares, unit values, growth rates in unit values and indexes in values, quantities or unit values. Data are provided by year, by quarter or by month. The selection can be done from the navigation menu above the table.
The latest HS revision reported by the country for a given year is used for time series. You can read more about this in FAQ 2.i.
Time series data allow one to refine the analysis conducted after looking at the trade indicators. The fluctuations in the data from one year to another can be large and not necessarily be reflected in the annual growth trend displayed in the table with trade indicators.
Monthly data will help the user to identify seasonal patterns and the impact on trade flows of national or international events like currency devaluation or an economic / financial crisis.
I entered a 6-digit product code in the selection menu and I could only select Time Series data. Why?
This is because the product code you selected does not exist in 2007 revision of the Harmonized System (HS). The product code in question might have been created after 2007 or might have been created before and then removed in the 2007 HS revision.
How can I find data over several years when the product code has changed because of a revision of the Harmonized System?
You need to find the corresponding codes in the other revisions of the Harmonized System (HS). To do so please go to the Correspondence table for product codes.
For instance, if you select the imports of the product 010594 (live fowls of the species Gallus domesticus, weighing > 185), the table you arrive at indicates that the product code selected has been created in the 2007 HS revision. So the countries that are displayed are the ones that reported their trade for this product in the 2007 revision.
By going to the "Reference Material" section in the "Correspondence table for product codes", you will see that in the 1996 HS revision, you had two codes corresponding to the 010594: the 010592 (live fowls (Gallus domesticus) weighing 0.185-2 kg) and the 010593 (Live fowl (gallus domesticus) >2kg).
You can see this as well by staying in the table of the imports of 010594 in time series and switching in the navigation bar to "by product" (instead of "by country") and switching to "Corresponding code with different revisions". The two product codes 010592 and 010593 will appear. By clicking on each respective product code, you will have the list of importing countries in time series.
What exchange rates are applied?
The yearly data we receive from UN COMTRADE are in US$. In general, quarterly and monthly data are collected in local currencies. The exchange rate used to convert the local currencies into US$ is a simple arithmetic mean of the daily intrabank rates, provided by www.oanda.com.
To display the data in different currencies in Trade Map, the exchange rate applied is a simple arithmetic mean of the daily intrabank rates, provided by www.oanda.com.
In which Harmonized System revision is the data from Trade Map provided?
The Harmonized System (HS) revision of 2007 is used for the trade indicators.
For all time series data, the revision used is the latest revision reported by the country for a given year (this information is available from the UN COMTRADE database on comtrade.un.org/db. Go to "Metadata and Reference", then "Country list". Next to each country, click on the link "Data availability"; the years in grey are the data reported, the years in blue are the data converted.
Why is China an importing partner of China?
China's imports from China are partially explained by normal re-import. Please see FAQ 1.3 on re-import. The most important part is related to processing trade. More than 90% of China's imports from China are produced in China, exported to Hong Kong and then re-imported in China. 73% of products re-imported are used as inward processing materials and 70% are imported by the province of Guangdong. The main reasons that explain this trade are the geographic and logistic convenience of Guangdong with Hong Kong. Goods entering for processing trade are exempted from import duties.
The business management of multinational enterprises and their distribution centers are often based in Hong Kong.
NAVIGATION AND USE OF THE TOOL
How can I find the trade data at the tariff line level?
When you select a product without having selected any country and submit the request (either with Trade Indicators or Time Series), you get a list of countries importing or exporting this product. You then need to click on the '+' sign to access data at a more disaggregated level. If the product code selected in the selection menu was at the 4 digit level, by clicking on the '+' sign, you will go to the 6 digit level and by clicking again on the '+' sign, you will reach the tariff line level. You can also click on the pull-down menu available in the navigation bar and select "product cluster at 10-digit"
An alternative way to get tariff line level data is to click on the product code in the navigation bar.
Additionally, you can click on the link 'Advanced search' in the selection menu: you then need to put one or more keywords, select ‘tariff line level’ and submit your query by clicking on 'Search'.
How can I get an account to access Trade Map?
You can either register on ITC’s web site www.intracen.org/marketanalysis or at mas-admintools.intracen.org/accounts/Registration.aspx
Users located in developing countries can have a free access to ITC’s Market Analysis Tools Trade Map, Market Access Map, Investment Map and Standards Map. Users located developed countries may be interested in purchasing a subscription. Subscription options and fees are available at www.intracen.org/marketanalysis
I cannot access Trade Map.
The reasons can be the following:
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If you still cannot access Trade Map, please send us the following information at firstname.lastname@example.org:
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How can I learn more on using Trade Map?
Some videos about the navigation in Trade Map and the interpretation of figures are available on the Distance Learning Support page accessible from the Market analysis tools portal: www.intracen.org/marketanalysis/DistanceLearning.aspx.
A user guide is also available: www.intracen.org/marketanalysis/UserGuide.aspx.
TRADE IN SERVICES
Which trade in services statistics are covered by Trade Map?
International trade in services in Trade Map refers solely to services transactions between residents and non-residents, as collected according to the IMF's Balance of Payments Manual (BPM, see FAQ 4.b).
Services transactions in the balance of payments broadly correspond to cross-border trade (Mode 1, as defined in the General Agreement on Trade in Services - GATS), one of the four different modes through which services are supplied worldwide (see FAQ 4.e). However, and contrary to trade in goods, services often ask for "proximity" between the consumer and the supplier.
Therefore, the balance of payments, and consequently Trade Map, presents also trade in services data referring to consumption abroad (Mode2), commercial presence (Mode 3) and the delivery of services by foreign workers (known as movement of natural persons, Mode 4) as long as the resident to non-resident rule is applied.
In the particular case of commercial presence, only the construction sector is covered by the Balance of Payment, while services provided by foreign workers are only recorded as part of a transaction involving other modes of supply.
A benchmark definition of the term "residence" is provided by the Manual on Statistics of International Trade in Services (MSITS, see FAQ 4.f), based on the concept of "economic territory" (MSITS 2002, para. 3.4) and "centre of economic interest" (MSITS 2002, para. 3.5).
In general, a period of one-year in a foreign country is suggested as the minimum duration to determine residence, but this rule may be flexible.
Which nomenclature is used for the classification of trade in services statistics on Trade Map?
Trade in services statistics on Trade Map are classified according to the framework set by the 5th edition of the Balance of Payment Manual (BPM5) and the Extended Balance of Payment on Services classification released in 2002 (EBOPS 2002).
All definitions adopted by Trade Map for main sector categories and sub-categories derive from the BPM5 and the 2002 edition of Manual on International Trade Statistics (MSITS 2002).
The Balance of Payments Manual (BPM)
Historically the IMF has been in charge of standardizing on methods of accountancy for the BOP. Most countries recorded services data according to the 5h edition of the Balance of Payments Manual (BPM5) released in 1993. BPM5 groups services into 11 main categories.
To date, Trade Map data refers exclusively to this edition of the Manual. The 6th edition of the Balance of Payments Manual (BPM6) has been published in 2009. In 2011, only Australia has officially released data according to this edition of the Manual. Therein, services are aggregated into 12 main categories: 2 new categories have been introduced ('Manufacturing services on physical inputs owned by others' and 'Maintenance and repair services') while 'Communication services' and 'Computer and information services' have been merged into 1 category ('Telecommunications, computer and information services'). Other changes have also occurred in the allocation of detailed components in other sectors as well as different nomenclatures for services sectors have been applied (for more information see FAQ 4.j).
The Extended Balance of Payments for Services (EBOPS)
The Extended Balance of Payment for Services (EBOPS) represents a detailed segmentation, provided by the MSITS 2002, of the broad service categories identified within the BMP5 framework, defined as EBOPS 2002.
To date, Trade Map data for services detailed categories refers exclusively to the 2002 edition of the EBOPS classification.
A new EBOPS 2010 classification has been built on the BPM6 framework. The definitions of its components are provided by the MSITS 2010.
Related links & documents
BPM5 - Balance of Payments Manual, fifth edition (Washington, D.C: IMF, 1993). The text can be found on the IMF's website: www.imf.org/external/pubs/ft/bopman/bopman.pdf
EBOPS 2002 (link to MSITS 2002, Annex II):
BPM6 - Balance of Payments and International Investment Position Manual, sixth edition (Washington, D.C: IMF, 2008). www.imf.org/external/pubs/ft/bop/2007/pdf/BPM6.pdf
EBOPS 2010 (link to MSITS 2010, Annex I):
MSITS 2002 & MSITS 2010:
What is the data-collection system for services transactions included in the balance of payments?
Trade Map provides data collected within the balance of payments and, specifically, statistics referring to residents to non-residents transactions (see FAQ 4.a).
This data can be retrieved by domestic banks and/or national statistic offices from one or more of the following sources:
- International Transaction Reporting System (ITRS). In this case, international payments channelled through domestic banks are collected, generally, under the responsibility of the national central bank. Payments are used as a proxy of transactions.
- Enterprise surveys. Generally, under the responsibility of the national statistic office.
- Other complementary sources. It could be necessary to draw on supplementary data from migration, tourism, multinational companies (MNC) and labour market statistics, in order to provide detailed figures for Travel and Government services n.i.e. A typical area of interest for international trade in services relates to the data that may be maintained by governments on education and health services provided to or by non-residents (travel; personal, cultural and recreational services). Information obtained from partner countries is useful in order to validate and improve statistics of the compiling economy. Data from international organizations can be useful for aid recipient countries to compile data on technical assistance services.
Related links & documents
WTO (2010), Measuring Trade in Services- A training module (Chapter V): www.wto.org/english/res_e/statis_e/services_training_module_e.htm
What are the conventions applied to separate the value of goods from the cost of freights included in Transportation services?
The cost for freight represents a controversial item that stands on the edge between Goods and Services trade. As many merchandised products include in their prices the value of freight services, it is worthwhile to clarify when freights expenses have to be considered as services in the BOP and when they do not.
The following examples refer to the 6th edition of the IMF Balance of Payments Manual (BPM6, chapter 10, p. 165).
A piece of equipment costs 10,000 units at the factory at which it was produced in Economy A. It costs 200 to transport it to the customs frontier of Economy A, 300 to transport it from the customs frontier of Economy A to the customs frontier of Economy B, where a customs duty of 50 is levied, and it costs 100 to deliver it from the customs frontier to the customer. (For simplicity, insurance of the equipment during transport is not covered in the example.)
Under all contractual arrangements between the parties, the FOB value is 10,200 and the CIF value is 10,500. However, how the services are recorded depends on the arrangements for paying the transport costs and the residence of the transport provider. A few of the possible arrangements are discussed below:
The parties contract on an FOB basis (i.e., the invoice price is 10,200; the exporter is responsible for costs up to the frontier of A and the importer is responsible for subsequent costs). In this case, no rerouting needed. All freight is shown as being provided by the actual provider and payable by the actual invoiced party.
The parties contract on an “ex works” basis (i.e., the invoice price is 10,000; the buyer pays for transport from the seller’s premises).
- The freight from the factory to the customs frontier of Economy A is provided by a resident of Economy A. The 200 payable, which is actually a service provided by a resident of Economy A and payable by a resident of Economy B, must be rerouted to be shown as a resident-to-resident transaction within A, as all costs up to the frontier of the exporting economy are treated as being payable by the exporter and included in the price of the goods.
- The freight from the factory to the customs frontier of Economy A is provided by a resident of Economy B. The 200 payable, which is actually a domestic service transaction within Economy B, must be rerouted as being a service provided from B to A, as all costs up to the frontier of the exporting economy are treated as being payable by the exporter.
The parties contract on a CIF basis (i.e., the invoice price is 10,500). The 300 payable for freight from the customs frontier of Economy A to that of Economy B is rerouted, because the contract makes it payable by the exporter, but it is treated as payable by the importer in balance of payments statistics (i.e., following FOB valuation).As a result, if the freight provider is a resident of A, a domestic transaction within A is treated as being a balance of payments transaction. Conversely, if the freight provider is a resident of B, an international transaction is treated as being a domestic transaction within B.
It is not normally possible to study every contract, so general patterns of freight cost arrangements need to be identified. When contract terms other than FOB are used, actual payment arrangements for freight may need adjustments to meet the FOB valuation convention.
In all cases where apparently domestic transactions are rerouted to be recorded as international transactions, or vice versa, goods trade must be recorded on a consistent basis, so that the financial payment from B to A equals the sum of its goods and services imports, both before and after re-routing adjustments. (If the goods are recorded at FOB values, the adjustments to freight bring them into consistency with goods; if the goods are recorded at transaction values, the goods values need corresponding adjustments.) Rentals, charters, or operating leases of vessels, aircraft, freight cars, or other commercial vehicles with crews for the carriage of freight are included in freight services. Also included are towing and services related to the transport of oil platforms, floating cranes, and dredges. Financial leases of transport equipment are excluded from transport services (see paragraphs 5.56–5.59 and 10.17(f)).
What are the different Modes of supply included in Trade Map services statistics?
Since services are not storable and have to be instantaneously consumed by the purchaser, the location of the supplier (consumer) in respect to the consumer (supplier) is a crucial feature of services trade. This led to the division of services flows by modes of supply. In particular, the General Agreement on Trade in Services (GATS), entered into force in 1995, identifies four modes of supply for the delivery of services:
Mode 1: Cross-border
A user in country A receives services from abroad through its telecommunications or postal infrastructure. Such supplies may include consultancy or market research reports, tele-medical advice, distance training, or architectural drawings.
Trade Map covers Mode 1 through the balance of payments collection: transportation (most of), communications services, insurance services, financial services, royalties and license fees. Part of: computer and information services, other business services, and personal, cultural, and recreational services
Mode 2: Consumption abroad
Nationals of country A have moved abroad as tourists, students, or patients to consume the respective services.
Trade Map covers Mode 2 through the balance of payments collection: travel (excluding goods bought by travellers); repairs to carriers in foreign ports (goods); part of transportation (supporting and auxiliary services to carriers in foreign ports)
Mode 3: Commercial presence
The service is provided within country A by a locally-established affiliate, subsidiary, or representative office of a foreign-owned and — controlled company (e.g.: bank, hotel group, construction company, etc.).
- Trade Map covers Mode 3 through the balance of payments collection for part of construction services
- Trade Map does not cover Foreign Affiliates Trade in Services Statistics (FATS) for any sector, see FAQ 4.h.
Mode 4: Movement of natural persons
A foreign national provides a service within country A as an independent supplier (e.g.: consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, construction company). For more information, see FAQ 4.i.
You will find additional information concerning the statistical coverage of Mode 4 in the Manual on Statistics of International Trade in Services (MSITS 2002, Annex I; MSITS 2010, Chapter II, E, 4).
- Trade Map covers Mode 4 through the balance of payments collection for part of computer and information services; other business services; personal, cultural and recreational services; and construction services.
- Trade Map does not cover labour-related flows.
- Trade Map does not cover Mode 4 through FATS (information related to foreign employment in foreign affiliates)
Trade in services statistics showed in Trade Map, and recorded in the balance of payments (see FAQ 4.b), capture all or part of the transactions involving these four modes of supply (as long as the resident to non-resident rule is applied, see FAQ 4.a).
However, it is not possible to allocate these services transactions to a specific mode of supply, because within a single services transaction different Modes are often involved.
A doctor, providing advice on-line to a foreign patient (Mode 1), may request his client to travel for an appointment with him (Mode 2), or may simply decide to travel there temporarily to treat the patient (Mode 4).
A lawyer working in a law enterprise travelling abroad, establishes a business link with a client (Mode 4 movement, but initially no economic transaction), which may lead to the future provision of advisory work online to the client (Mode 1), and the attraction of new clients who travel to consult the law enterprise (Mode 2).
Related links & documents
WTO visual presentation to modes of supply: www.wto.org/english/tratop_e/serv_e/cbt_course_e/popup_animation_e.htm
WTO. Measuring Trade in Services- A training module (Annex V): www.wto.org/english/res_e/statis_e/services_training_module_e.htm
MSITS 2002 (Chapter II, D, 4):
MSITS 2010 (Chapter V , C, pp. 119-131): unstats.un.org/unsd/tradeserv/TFSITS/msits2010/M86%20rev1-white%20cover.pdf
Which other manuals can help me to understand the universe of trade in services statistics?
The Manual on Statistics of International Trade in Services (MSITS):
This manual aims at building a coherent international framework for the creation of services trade statistics garnered from the BOP (see FAQ 4.b) and other sources (e.g.: Foreign Affilitaes Trade in Services Statistics (FATS), Movement of Natural Persons Statistics, see FAQ 4.h and FAQ 4.i). The manual provides correspondence tables among different international classifications in order to improve the state of services statistics and coordinate the efforts of statisticians and trade negotiators. Aggregations through mode of supply are also suggested in the Manual.
The MSITS 2002 has been recently succeeded by the MSITS 2010. The new manual refers to the latest updates occurred within the System of National Accounts and the IMF Balance of Payment framework (see FAQ 4.j).
The System of National Accounts (SNA):
The SNA is the internationally agreed standard set of recommendations on how to compile measures of economic activity. The SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.
Related links & documents
UNSD National Accounts:
Are there any auxiliary classifications that can help me to interpret trade in services statistics?
The Central Product Classification (CPC) constitutes a comprehensive classification of all goods and services. Sections from 5 to 9 are mainly related to services. The CPC provide descriptions (explanatory notes) and rules of interpretation for services that are included in each subclass and those that are excluded, for reference purposes. Version 1.0 was used to define more precisely the balance of payments services components recommended in EBOPS 2002. Since EBOPS operates at a higher aggregation than CPC, its categories are typically aggregations of CPC subclasses. Two categories in the balance of payments classification of services, namely, travel and government services n.i.e., do not have analogues in the CPC.
The International Standard Industrial Classification (ISIC) is a UN economic classification that categorizes goods and services data according to the specific economic activity involved. For services, a possible reference is the ICFA classification (ISIC Categories for Foreign Affiliates).
Sectoral grouping according to the General Agreement on Trade in Services (GATS):
In 1991, the GATT secretariat produced a note setting out a classification of service sectors, known as the GNS/W/120 Services Sectoral Classification list, resulting from consultations with member countries. GNS/W/120 should be considered as a negotiating list rather than a statistical classification.
Related links & documents
UN Classification Systems: unstats.un.org/unsd/cr/registry/regct.asp
WTO Services sectoral classification list (and more information): www.wto.org/english/tratop_e/serv_e/serv_sectors_e.htm
Where can I find more information not provided by Trade Map on services supplied through commercial presence (Mode 3)?
Through the identification of commercial presence as a mode of supply, the GATS have generated a need for information about foreign affiliates operating in the services sector. This data is provided in the balance of payment, and consequently on Trade Map, only for construction services as long as the foreign enterprise providing the services has not resident status in the compiling economy (see FAQ 4.a). In general, services supplied through Mode 3 do not involve transactions between resident and non-resident transactions. Foreign Affiliates Trade in Services Statistics (FATS) represent the only available source for most of Mode 3 statistics but they are provided just by some of the most industrialized countries. The implementation of this statistics is extremely useful to capture the values and extent of trade in services embedded under Mode 3 (and Mode 4 for what concerns the salaries of intra-corporate transferees working in the services sector see FAQ 4.i).
Related links & documents:
Eurostat manual on the production of FATS: unstats.un.org/unsd/EconStatKB/Attachment223.aspx
MSITS 2002 (Chapter IV): unstats.un.org/unsd/publication/Seriesm/Seriesm_86e.pdf
MSITS 2010 (Chapter IV): unstats.un.org/unsd/tradeserv/TFSITS/msits2010/M86%20rev1-white%20cover.pdf
Eurostat Data on Foreign controlled Affiliates: epp.eurostat.ec.europa.eu/portal/page/portal/european_business/data/database
OECD Statistics on Activity of Multinationals and FDIs (under the section 'Globalisation'): stats.oecd.org/Index.aspx?DatasetCode=MIG
Where can I find more information not provided by Trade Map on services supplied through the movement of natural persons (Mode 4)?
Mode 4 statistics refer to the supply of services toward the movement (flow) and presence (stock) of natural persons in an economy, as defined by the WTO General Agreement on Trade in Services (GATS). Statistics on the value of services traded under Mode 4 are provided by the Balance of Payment but their separate estimation within given services transactions is extremely challenging, if not unfeasible (see FAQ 4.e). Foreign Affiliates Trade in Services (FATS, see FAQ 4.h) statistics, when available, can provide more information on this mode of supply. Statistics on the number of foreign persons moving (flows) and present (stocks) in a host country are an important complement measure of international transactions related to Mode 4 and they can be gathered from migration and touristic sources.
Supply of services through presence of natural persons (Mode 4) and labour mobility may be distinguished by the type of contracts underpinning the transactions. While Mode 4 is associated with a service contract between the supplier in one economy and the consumer of another economy, labour mobility is characterized by employment contracts. Consequently, Mode 4 does not concern service providers seeking access to the employment market in the host country, nor permanent migration as the GATS does not apply to measures affecting residence, citizenship or employment on a permanent basis. However, the absence within the WTO General Agreement on Trade in Services (GATS) of a precise recommendation regarding the time length for the service supplier to work within the foreign country (e.g.: length of stay can range between three month for service sellers aiming to set up commercial presence abroad up to five years for intra-corporate transferees) stands as a further obstacle for analysis purposes.
Services suppliers classified under Mode 4 trade are conventionally divided into four subcategories:
- Business visitors and salespersons (BVs). Their purpose is to facilitate the agreement for future transaction and business opportunities in a foreign country.
- Intracorporate transferees (ICTs). These are employees of a foreign enterprise that established its commercial presence abroad.
- Independent professionals (IPs). Self employed individuals that supply a service in a foreign country.
- Contractual services suppliers (CSSs). Employees of a foreign provider of services that does not have a local presence or commercial presence in the host country.
Related links & documents
MSITS 2002 (Annex 1): unstats.un.org/unsd/publication/Seriesm/Seriesm_86e.pdf
MSITS 2010 (Chapter II, E, 4): unstats.un.org/unsd/tradeserv/TFSITS/msits2010/M86%20rev1-white%20cover.pdf
WTO-More info and literature on the Movement of Natural Persons: www.wto.org/english/tratop_e/serv_e/mouvement_persons_e/mouvement_persons_e.htm
UNSD- Technical Subgroup on the Movement of Persons: unstats.un.org/unsd/tradeserv/TFSITS/subgroup.htm
What are the differences between the BPM5/EBOPS 2002 and the new BPM6/EBOPS 2010 systems?
Trade in Services data on Trade Map follow the framework set by the 5th edition of the Balance of Payment Manual (BPM5) and the Extended Balance of Payment on Services classification released in 2002 (EBOPS 2002).
The differences between BPM5/EBOPS 2002 and BPM6/EBOPS 2010 concern the enhancement of the "change of ownership" principle. This implies revisions of the concepts of goods for processing and merchanting transations.
In an attempt to capture the issues involved by globalisation and its statistical implications, the new framework for trade in services statistics implies a stricter application of the "change of ownership" principle enshrined in the System of National Accounts (SNA) and Balance Of Payments (BOP) manuals.
This will notably emphasise a fundamental difference to how goods undergoing processing abroad are regarded within the International Merchandise Trade Statistics: Concepts and Definitions, Revision 2 (IMTS, Rev. 2) on the one hand, and the BPM/SNA on the other. While the IMTS statistical system is based on the concepts of "physical movements of goods and country of origin", the BPM/SNA is founded on the principles of "change of ownership" and "residence of owners". The criteria of "substantial transformation" (IMTS, Rev. 2, para. 71) acted as a bridge between the two systems.
Therefore, in the SNA 1993 and the BPM5 a change in ownership was imputed in case of "substantial processing" and the flows were then recorded as goods trade. This allocating rationale however, constituted an exception to the "change of ownership" rule (BPM5, para. 203; SNA 1993, para. 14.55).
The external merchandise trade statistics record all movements of goods at the time they cross the border of the compiling economies, but not at the time of change of ownership.
According to the previous statistical device, "goods for processing" are thus included in the merchandise trade statistics, and are recorded at the time they are exported to the processing economy or returned to the original economy for local use or re-export. This implies that a change in ownership is always imputed for "goods for processing" whenever they move into or out of the compiling country, and are recorded on gross terms under the goods account. The new statistical system introduced by the BPM6/SNA 2008 will instead capture these goods for processing that have not undergone a certified change in ownership under the service category Manufacturing services on physical inputs owned by others.
It is worthwhile noticing that the value of manufacturing services on physical inputs owned by others is not necessarily the same as the difference between the value of goods sent for processing and the value of goods after processing. Cost of overheads (i.e.: intermediate goods, financing, know how) should be taken into account.
Merchanting activities also represented a controversial issue in respect to the "change of ownership" principle. BPM5 defines "merchanting" as the purchase of goods by a resident (of the compiling economy) from a non-resident and the subsequent resale of the goods to another non-resident without the goods ever entering or leaving the compiling economy (BPM5, para. 262). The difference between the value of goods when acquired and the value when sold is recorded as the value of "merchanting" services provided. BPM5 recommends recording such net amount of transactions under services rather than goods, though the commodity has changed ownership. On the contrary, the BPM 6 allocates those merchanting transactions under the goods account (BPM6, paras. 10.41-10.49).
Some examples: revision of services trade balance in China and Hong Kong (China)
The new treatment of goods for processing and merchanting services is deemed to entail important changes in the trade balances of some countries. In the case of China, and Hong-Kong (China), the estimated effect will entail a redistribution of value between goods and services accounts, leaving the current account balance unmodified.
According to 2007 estimates, the new accounting principle for "good for Processing" will imply a remarkable reduction of the goods trade balance. In contrast, the country turns to be a net exporter of services.
Assuming that processing services can be measured from the difference between debits and credits of goods for processing, obtained from published country merchandise trade data, the calculation will imply that:
- Goods credit (BPM6) = Goods credits (BPM5) - Goods for processing credits (BPM5)
- Goods debit (BPM6) = Goods debit (BPM5) - Goods for processing debit (BPM5)
- Services credits (BPM6) = Services credit (BPM5) + Net goods for processing (if positive)
- Services debits (BPM6) = Services debits (BPM5) + Net goods for processing (if negative)
Effects on China trade performance (US$ billions)
Source: IMF, BOPCOM-08/11
||Adjusted for "goods for processing"
|Exports of goods
|Imports of goods
|Balance of trade in goods
|Exports of services
|Imports of services
|Balance of trade in services
|Balance of trade in goods and services
Hong Kong (China)
Over the past years, trading activities relating to "goods for processing" and "merchanting" played a vital role in the external trade front of Hong Kong. In 2006, about 30% of imported goods into Hong Kong, and 17% of goods exported from Hong Kong were related to goods for outward processing in the Mainland, whereas about 26% of exports of services of Hong Kong were related to "merchanting" activities.
The balance of trade in goods in 2006 would be revised from a deficit of US$ 14 billion to a surplus of US$ 51 billion, and the balance of trade in services from a surplus of US$ 36 billion to a deficit of US$ 29 billion.
The impact of the new statistical framework, as shown in the following table, will be extremely relevant for trade analysis.
Effects on Hong Kong trade performance (US$ billions)
Source: IMF, BOPCOM-07/20
||Adjusted for "goods for processing" only
||Adjusted for "merchanting" only
||Adjusted for both "goods for processing" and "merchanting"
|Exports of goods
|Imports of goods
|Balance of trade in goods
|Exports of services
|Imports of services
|Balance of trade in services
|Balance of trade in goods and services
Related links & documents
IMF (2008). Impact on BOP Data of Changes in International Standards for Processing and Merchanting, BOPCOM-08/11. Available at: www.imf.org/external/pubs/ft/bop/2008/08-11.pdf
IMF (2007). Strategy for Implementing Recommendations on Goods for Processing and Merchanting in BPM6 - The Case for Hong Kong, BOPCOM-07/20. Available at: www.imf.org/external/pubs/ft/bop/2007/07-20.pdf
Who else provides data and metadata on trade in services?
International Monetary Fund (IMF)
General Data Dissemination System
The General Data Dissemination System (GDDS) provides recommendations on good practice for the production and dissemination of country statistics. The methodology and the sources used for services and trade in services data for adhering countries can be unveiled through an analysis of the following topics: National Accounts and Balance of Payments: dsbb.imf.org/Pages/GDDS/CountryList.aspx
Special Data Dissemination Standard
The Special Data Dissemination Standard (SDDS) was established by the IMF to guide members that have, or that might seek, access to international capital markets in the provision of their economic and financial data to the public. Both the GDDS and the SDDS are expected to enhance the availability of timely and comprehensive statistics and therefore contribute to the pursuit of sound macroeconomic policies; the SDDS is also expected to contribute to the improved functioning of financial markets: dsbb.imf.org/Pages/SDDS/CtgCtyList.aspx?catcode=BOP00&catname=Balance%20of%20payments
Balance of Payments – International trade in services: epp.eurostat.ec.europa.eu/portal/page/portal/balance_of_payments/data/database
World Trade Organization (WTO)
WTO provides summary statistics on Transportation, Telecommunication, Financial and Insurance services: stat.wto.org/ServiceProfile/WSDBServicePFHome.aspx?Language=E
Metadata on WTO Trade in Services statistics are available at: stat.wto.org/ServiceProfile/WSDBServicePFTechNotes.aspx?Language=E
United Nation Conference on Trade and Development (UNCTAD)
Data are presented for groups of countries with an increasing level of detail (Trade in services trends) or by sector (Trade in services by category).
UNCTAD secretariat calculation are based on: IMF (Balance of Payments Statistics, World Economic Outlook), Economist Intelligence Unit (Country Data), OECD (OECD.Stat Extracts), WTO (Statistics Database) and national sources.
Organization for Economic Co-operation and Development (OECD)
The types of services are presented according to the services classification of both BPM5/EBOPS 2002 and BPM6/EBOPS 2010 devices (see FAQ 4.j).
Data is submitted directly to the OECD by the non-EU OECD member countries and is published without any further changes. Data for the European Union (EU) countries are transmitted to the OECD by Eurostat. In some cases, data for EU countries has been adjusted or estimated by Eurostat in order to enable the calculation of EU totals, and these data is supplied to OECD. The work-sharing procedure ensures that data published by both organisations are the same. This feature should better satisfy users' requirements. To the same effect, comparable zone totals for the EU, G7, NAFTA, OECD-Asia and Pacific, OECD-Europe and total OECD are calculated.
The database is the result of joint work between the OECD and Eurostat.
The OECD also provides information on the International Development Work and Coordination process that involves Services statistics.
United Nation Statistic Division (UNSD)
The UN Service Trade statistics database is an extensive resource for trade in services data and metadata: unstats.un.org/unsd/servicetrade/default.aspx
Summary of BOP trade in services data dissemination by international organizations
Source: WTO (2010), Measuring trade in services- A training module
More information are available on the UNSD website: unstats.un.org/unsd/tradeserv/TFSITS/databases.htm