Data quality, concepts and methodology: Technical notes

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The Canadian international merchandise trade statistical program

Introduction

The objective of this text is to provide a general overview of the Canadian International Merchandise Trade Statistical Program, with special reference to concepts and definitions. The text is intended for the general user and simplicity is emphasized. More technical details can be obtained from the International Trade Division, Statistics Canada upon request.

Conceptual framework

1. Objectives and coverage: The primary objective of the Canadian International Merchandise Trade Statistical Program is to measure the change in the stock of material resources of Canada resulting from the movement of merchandise into or out of the country. Information on imports and exports are inputs into the System of National Accounts, particularly in the balance of payments and gross domestic product, and are used in the formulation of trade and budgetary policies. Governments, importers, exporters, manufacturers and shipping companies use international merchandise trade statistics to:

1. monitor import penetration and export performance,
2. monitor commodity price and volume changes,
3. examine transport implications.

2. Trade statistics (customs basis / balance of payments basis): Merchandise trade statistics are reported and presented on two different bases: customs basis and balance of payment basis.

When goods are imported into or exported from Canada, declarations must be filed with customs, giving such information as description and value of the goods, origin and port of clearance of commodities and mode of transport. Most of this information is required for the purposes of customs administration. Statistics developed from administrative records of customs are commonly referred to as customs-based trade statistics.

Customs-based trade statistics are more accurate at measuring imports than they are at measuring exports. This is the case because customs are typically more vigilant with respect to goods entering the country than they are with goods leaving the country.

Customs-based export statistics may understate or incorrectly portray the destination of exports. Export statistics are understated when the proper documentation is not filed with Customs. Exports are incorrectly portrayed when the country of final destination is inaccurately reported on the customs documentation. This occurs most frequently when goods are routed through an intermediary country before continuing on to their final destination.

Statistics Canada does not have a measure of undercoverage but periodically conducts reconciliation exercises with its major trading partners, excluding the United States.

On January 1, 1990, Canada entered into a memorandum of understanding with the United States concerning the exchange of import data. As a consequence, each administration is using the other's import data to replace its own export data. Canada's international merchandise trade statistics are, therefore, no longer derived exclusively from the administrative records of the Canada Border Services Agency, but from United States Customs records as well.

Customs-based information is adjusted to conform with the National Accounts concepts and definitions. The adjustments to derive balance of payments-based trade data include adjustments related to trade definition, valuation and timing. The principal difference between the two trade concepts is that customs-based merchandise trade statistics cover the physical movement of goods as they are reflected in customs documents while balance of payments-adjusted data are intended to cover all economic transactions that involve merchandise trade between residents and non-residents. The present document describes the concepts and processes pertaining to the customs-based trade statistics only. (For further information on balance of payments-adjusted data, see the publication Canada's Balance of International Payments, Statistics Canada (Catalogue no. 67-001-X).

3. System of trade: Canadian trade statistics are compiled according to the general system of trade, as defined by the United Nations Statistical Office. Under this system, imports include all goods that have crossed Canada's territorial boundary, whether for immediate consumption in Canada or for storage in bonded customs warehouses. Domestic exports include goods grown, extracted or manufactured in Canada, including goods of foreign origin that have been materially transformed in Canada. Re-exports are exports of goods of foreign origin that have not been materially transformed in Canada, including foreign goods withdrawn for export from bonded customs warehouses. Total exports are the sum of domestic exports and re-exports. Thus the general trade system, in principal, presents all goods entering the country (imports) and all goods leaving the country (exports). It differs from the special system of trade in the treatment of imported goods into bonded customs warehouses. Under the 'special' system, these goods are counted only if and when they are withdrawn from customs warehouses for home consumption. They are not counted in export statistics unless they have first cleared customs.

Conceptually, under the general system, the statistical frontier coincides with the geographical boundary, while under the 'special' system, it coincides with the customs boundary.

4. Valuation: For customs purposes, imports are recorded at values established according to the provisions of the Customs Act, which, since January 1, 1985, reflects valuation methods based on the General Agreement on Tariffs and Trade (GATT) Valuation Code System. In general, the value for duty of imported goods must be equivalent to the transaction value or the price actually paid.

To determine the transaction value of imported goods, all transportation and associated costs arising in respect of the goods being appraised prior to and at the place of direct shipment to Canada, are to be added to the price of the goods. Therefore, Canadian imports are valued Free on Board (FOB), place of direct shipment to Canada. It excludes freight and insurance costs in bringing the goods to Canada from the point of direct shipment.

Countries other than the United States, exports are, in principal, valued or recorded at the values declared on export documents, which usually reflect the transaction value, i.e., actual selling price or, in the case of a non-arm's length transaction, the transfer price used for company accounting purposes. Canadian exports to overseas countries are valued at F.O.B. port of exit, including domestic freight charges to that point but net of discounts and allowances. As of January, 1990, Canadian exports to the U.S. are valued F.O.B. point of exit from Canada. Prior to 1990, they were valued F.O.B. place of lading net of freight charges, discounts and allowances.

5. Statistical period: The reference period is the calendar month and the calendar year. The closing of the statistical month for imports and Canadian exports to the United States is defined as the last calendar day of the month, based as closely as practicable on the date of clearance from customs.

The closing of the statistical month for exports, to countries other than the United States, is also defined as the last calendar day of the month. Those export documents that are received too late for incorporation in the current month are assigned to the month the transaction took place. If a monthly summary report from a high volume exporter is not received on time, the data are imputed for the current month and revised with the trade value in the following statistical month.

6. Trading partner attribution (country of origin/destination): Exports are attributed to the country, which is the last known destination of the goods at the time of export. Exports to the United States are attributed to the state of destination.

Imports are attributed to their country of origin, that is, the country in which the goods were grown, extracted or manufactured in accordance to the rules of origin administered by the Canada Border Services Agency. Imports from the United States are attributed to the state of origin. Prior to 1988, most imports were attributed to the country of export/consignment, with the exception of imports from Central and South America.

7. Principal trading areas: The 'principal trading areas' are country groupings defined as follows:

1. United States: includes trade with Puerto Rico and the U.S. Virgin Islands
2. Japan
3. European Union (EU): Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and United Kingdom
4. Other Organisation for Economic Co-operation and Development (OECD): Australia, Canada, Iceland, Mexico, New Zealand, Norway, South Korea, Switzerland, and Turkey. (The EU countries, United States, and Japan are also members of OECD)
5. Other countries: all countries and territories other than the United States, Japan, EU and other OECD

8. Legal framework: Import and export statistics with countries other than the United States are derived from information contained in administrative records collected by the Canada Border Services Agency under the Customs Act. Copies of these documents (or information therefrom) are sent to Statistics Canada in accordance with Section 25 of the Statistics Act. It follows that the disclosure of trade statistics is governed by both the Customs Act and the Statistics Act and is subject to the provisions of Section 17(2)(a) of the latter. Disclosure of export statistics to the United States is now governed by a memorandum of understanding that provides for the exchange of detailed import statistics between Canada and the United States.

Contact information

Questions concerning details of methods not covered by these notes should be addressed to the Marketing and Client Services Section, International Trade Division, Statistics Canada, 170 Tunney's Pasture Driveway, Ottawa, Ontario, K1A 0T6.

Telephone: 1-800-294-5583 or 613-951-9647 
Facsimile: 1-800-664-0055 613-951-0117
Internet:trade@statcan.gc.ca