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Feature Article - Bilateral merchandise trade statistics reconciliation: Australia and Japan, 1994
The most significant coverage difference affecting southbound trade relates to differing treatment of low value records.
In Australia, import entries lodged on informal clearance documents for values not exceeding $250 are excluded. In addition, imported parcel post items valued under $1,000 are excluded. In Japan, merchandise trade statistics exclude export shipments valued under $2,694 (¥200,000) regardless of mode of transport.
To adjust for this difference, the value of all Australian records less than $2,694 (¥200,000) in value was determined, resulting in a low value trade adjustment of -$256 million being applied.
Australia values its imports on a 'Customs value' basis. Customs value is the FOB transactions value adjusted for any transaction where the Australian Customs Service considers the FOB transactions value to be not a true market value.
An adjustment for the difference between Australia's import value on an FOB basis and on a Customs value basis was made in the reconciliation study. The FOB value was higher than the Customs value, and an adjustment of +$8 million was made.
In accordance with international recommendations, Japan classifies its exports by country of final destination and Australia classifies its imports by country of origin. Classification of exports by country of final destination can be a difficult task as the exporter is sometimes not in a position to know whether the goods are to be further manufactured or otherwise consumed in the country to which they are consigned, or whether they will be traded with yet another country. When the country of final destination is not known at the time of exportation, the exporter declares the country of last shipment (country of consignment) in place of the country of final destination.
In concept at least, exports and imports statistics will only be symmetrical between trading partners when exports are shipped directly from the country of origin to the country of final destination. Discrepancies occur when third countries are involved, as with re-exports of merchandise and goods traded through intermediate countries.
In the case of southbound trade, the following adjustments were applied to adjust for differences in country attribution principles.
The timing adjustment accounts for merchandise which is likely to have been recorded in different years in the statistics of the exporting and importing countries. It is made up of an adjustment based on the amount of time it takes a shipment to reach Australia (shipping adjustment) and an adjustment for the time taken by the Australian Customs Service to process the import entry (processing adjustment). Adjustments are made for either end of the reference period.
When calculating the shipping adjustment it was assumed that it took, on average, 23 days to ship goods by sea from Japan to Australia. No adjustment is made for air freight. Australia's January 1994 statistics included $536 million of imports which arrived by sea between 1 January and 23 January, while Australia's January 1995 statistics included $879 million of imports which arrived by sea between 1 January and 23 January. It is assumed that these imports would have been included in Japan's 1993 and 1994 exports respectively. Using these figures, the overall shipping adjustment for the reference period was calculated as +$343 million.
The second component of the timing adjustment, the processing adjustment, is made to account for goods arriving in Australia outside the year in which they were recorded in Australia's import statistics. This adjustment applies to both sea and air freight and is necessary because Australia's imports are recorded statistically in the calendar month in which the import entries are finalised by Customs, rather than the month of arrival. $50 million of Australia's imports from Japan recorded in January 1994 actually arrived in December 1993 or earlier and were out of scope of the reconciliation. $73 million of Australia's imports from Japan recorded in January 1995 actually arrived in Australia in 1994 and should have been included in the reconciliation. Therefore, the overall processing adjustment was +$23 million.
The total southbound timing adjustment was +$366 million.
The adjustments shown in Table B represent the changes needed to transform Australia's published exports to the same basis as Japan's published imports. They do not reflect revisions to either country's official statistics.
After comparing the goods excluded from each country's statistics, the following adjustments were applied to account for known differences in coverage between the two sets of statistics.
Investigations have indicated that the discrepancy due to any other coverage differences would be minimal.
Australia values its exports on an FOB transactions value basis, while Japan values its imports on a 'cost, insurance and freight' (CIF) basis. Japan does not compile separate information on the freight and insurance component of the CIF value, so it was necessary to estimate this for the purposes of the reconciliation study.
The freight and insurance component was estimated for each commodity at the 6-digit level of the Harmonised System classification. For each commodity one of the following methods was used:
The resulting adjustment of +$2,622 million represented the largest adjustment made to northbound trade.
Australia classifies its exports by country of final destination and Japan classifies its imports by country of origin. As noted above, the exporter is not always aware of the country of final destination and in this case the country of last shipment (country of consignment) is reported.
Exports and imports statistics can be expected to be symmetrical between trading partners only when exports are shipped directly from the country of origin to the country of final destination. Discrepancies occur when third countries are involved, as with re-exports of merchandise and goods traded through intermediate countries.
In the case of northbound trade, the following adjustments were applied to adjust for differences in country attribution principles.
The timing adjustment accounts for merchandise which is likely to have been recorded in different years in the statistics of the exporting and importing countries. It is made up of an adjustment based on the amount of time it takes a shipment to reach Japan (shipping adjustment) and an adjustment for the time between arrival in Japanese ports and Customs clearance of the import entry (processing adjustment). Adjustments are made for either end of the reference period.
When calculating the shipping adjustment it was assumed that it took, on average, 17 days to ship goods by sea from Australia to Japan. Northbound journeys have a shorter duration on average that southbound journeys because many northbound vessels travel directly from Australian ports to Japan, while southbound vessels often call at several ports. Based on a journey length of 17 days, the value of goods that left Australia by sea after 14 December was determined (as these goods were likely to have arrived in Japan in January of the following year).
The second component of the timing adjustment, the processing adjustment, is made to account for goods arriving in Japan outside the year in which they were recorded in Japanese import statistics. In calculating this adjustment it was assumed that the processing delays on average amounted to 4 days.
Using these assumptions, the value of goods in Australia's 1993 exports that are assumed to be in Japanese 1994 imports was calculated as $797 million, and the value of goods in Australia's 1994 exports that are assumed to be in Japan's 1995 imports was $803 million. The overall northbound timing adjustment is therefore -$6 million.
Comparison of data at the commodity level identified a discrepancy in tobacco. Subsequent investigation determined that some tobacco that was imported by Australia from Japan for further processing and subsequent re-export to Japan was treated differently in the two sets of statistics. An adjustment of +$19 million has been included in the reconciliation to account for this.
The residual discrepancy of +$77 million, shown in Table A, represents the difference remaining after the application of the adjustments to southbound trade described above. The residual discrepancy is positive, indicating that the adjusted Australian merchandise imports figure is lower than the published Japanese merchandise exports figure. The residual discrepancy is 0.6 per cent of Australia's imports, compared with an initial discrepancy of 0.9 per cent.
Possible reasons for the residual discrepancy include: problems associated with correct country attribution; valuation differences; additional timing differences; minor coverage differences; and currency conversion practices.
The application of the adjustments to northbound trade described above have reduced the discrepancy to almost zero. The residual discrepancy of -$9 million, shown in Table B, represents less than 0.1 per cent of Australia's exports. This compares with an initial discrepancy of 17.5 per cent.
This reconciliation study has demonstrated that a significant part of the 'asymmetry' in Japan-Australia bilateral merchandise trade data results from the conceptual factors underlying the compilation of the data. As previously indicated, the adjustments presented in the reconciliation do not represent revisions to the official published statistics of either country, nor do they imply, in general, errors in either country's published statistics.
For southbound trade the initial discrepancy was 0.9 per cent of Australia's imports, and the residual discrepancy 0.6 per cent. The greatest contributors to the narrowing of the gap were the adjustment for Australia's imports of Japanese origin goods via third countries, and differences in the treatment of low value transactions.
For northbound trade the initial discrepancy was 17.5 per cent of Australia's imports, and the residual discrepancy 0.1 per cent. The greatest contributor to the narrowing of the gap was the adjustment relating to insurance and freight, which are included in published Japanese imports, but not in Australian exports.
Japan is Australia's largest trading partner, accounting for 21.1 per cent of Australia's trade in 1994. The small magnitude of the residual discrepancies encourages a reasonable degree of confidence in the accuracy of Australia's import and export data, at least at the aggregate level.
Further reconciliation studies with Japan are not planned at this stage. However, work on a reconciliation study with New Zealand is nearing completion and the results of this study will be published in a later issue of International Merchandise Trade, Australia (Cat. No. 5422.0).
ABS, International Trade database
Customs and Tariff Bureau, Ministry of Finance, Japan, unpublished data
United Nations, International Trade Statistics, Concepts and Definitions, Statistical Papers, Series M, No. 52 Rev. 1
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