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June 04, 2018COMPARING CUSTOMS AND BALANCE OF PAYMENTS BASED EXPORTS Custom VS Balance of Payments Basis
Trade data published by Statistics Canada is often measured on a customs basis, or a balance of trade basis. Customs basis valuation measures the value of “free on board” goods, that is excluding the cost of shipping and insurance, as they cross an international boundary. Balance of payments (BOP) is an ownership valuation, as opposed to country of origin. Some countries have significant manufacturing/processing facilities, but foreign companies coordinate production and are responsible for the final sale of production.
While the Customs data from which most of the goods trade statistics are derived are timely and very detailed, by product class and by country of origin or destination, they do not conform to all of the conceptual requirements of the balance of international payments so a number of adjustments are made. These account for differences in coverage, timing, valuation and classification. Most of these adjustments are applied to specific product categories for specific reasons. Some, such as certain coverage adjustments, are applied at the global level[1].
Ownership adjustment that results in the largest value changes for most countries relative to their customs-based trade values[2]. As the United States is a distribution hub for the world, and Canada imports a large portion of its import needs from the US, a significant adjustment is required regarding ownership to meet BOP rules.
Another large adjustment to reconcile customs and balance of payment data involves re-exports. Some goods exported from Canada are classified as re-exports – goods imported from another country and re-exported with no significant changes to the product to another. Goods produced in Canada for export are categorized as domestic exports. Domestic exports values are typically used in trade reports. However, for BOP reconciliation use customs basis total exports (domestic exports plus re-exports).
SOURCES
Statistics Canada Table: 12-10-0011-01 (formerly CANSIM 228-0069)
Industry Canada Trade On-line (Strategis)
FOOTNOTES
[1] Valuation of goods trade, Chapter 8 International accounts, User Guide: Canadian System of Macroeconomic Accounts, Statistics Canada Cat. No. 13-606-g
[2] Balance of Payments trade in goods at Statistics Canada, 4.2 Ownership change adjustment, Statistics Canada Cat. No. 13-605-x. change in
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