Foreign trade statistics: a basic market research tool.

• Author: Kirchbach, Friedrich von

Foreign trade statistics at the detailed product level play a fundamental role in any market research exercise, whether it is carried out by an individual export firm or a trade promotion organization. Although trade statistics are one of the basic tools for a market researcher, they are not always easy to use, as they are produced in many different forms, have varying coverage and require specific skills for interpretation. The rapid development of new computerized techniques and other means for storing and accessing trade statistics further complicates the choice of the most suitable source. Using such data effectively therefore requires an understanding of how the statistics are prepared, the information that they contain, the sources from which they are available and the forms in which they can be obtained.

How compiled

Trade statistics are a byproduct of customs procedures. They are prepared from customs declarations filled in by exporters and importers and verified by customs authorities. The customs department transfers the data to the statistics department, which sorts the information according to product, country and time period.

In many countries the ministry of trade has established a direct link to the customs. Trade officials therefore obtain the raw data at the same time as the statistics office. This has considerably reduced the time lag in the availability of the statistics. Furthermore, it has enabled the government to monitor trade at a more detailed ("disaggregated") level.

Standard format

The types of information covered by foreign trade statistics reflect the data collected through the customs forms. Many countries use a standard format for customs declarations, the UN Layout Key for Trade Documents. Standardization reduces the costs of processing the information and is essential for electronic data interchange (see article on page 10).

The following seven types of information are generally obtained from each customs declaration, which then are used to prepare the trade statistics broken down by product and country:

* Date of the transaction.

* Type of transaction (export or import).

* Commodity code.

* Country code.

* Value.

* Unit of measurement.

* Quantity.

When the customs department is computerized other types of data may also be available in the database with the primary foreign trade data:

* Local exporting or importing company and the person making the declaration.

* Foreign importer or exporter.

* Mode of transport.

* Gross and net weight of the goods.

* Number and kind of packages.

* Customs office.

* Currency of transaction.

* Customs regime.

* Terms of delivery and payment.

Many of these details can be useful for market researchers involved in their country's trade promotion activities. Although this additional information is not in general contained in the published versions of the national trade statistics, it can in some cases be obtained from the customs, statistics or trade departments.

Product nomenclatures

The more detailed the breakdown in product nomenclatures, the more useful the statistics are for market research. Detailed figures are especially important for analyzing changes in demand patterns and in average export and import values.

The tariff nomenclature most frequently used by governments to record their foreign trade transactions is the Harmonized Commodity Description and Coding System, or Harmonized System (HS), which has replaced the Brussels Tariff Nomenclature (BTN) and the Customs Cooperation Council Nomenclature (CCCN). The Harmonized System was developed by the Customs Cooperation Council (CCC) in Brussels in line with the requirements of customs procedures. To a large extent it classifies products by the materials used to produce them.

For economic analysis, however, the stage of processing of the products and their economic use are as important as the type of material that goes into them. This led to a parallel product nomenclature, developed by the UN, called the Standard International Trade Classification (SITC). The SITC categorizes products primarily by the degree of processing and the end-use.

In the HS, for instance, both wood charcoal and wooden statuettes are classified in the same general category, whereas under the SITC wood charcoal falls under one category and wooden statuettes under another.

While many national statistics departments present their trade figures according to a tariff-oriented nomenclature (CCCN or HS), international trade statistics produced by the UN and various other international institutions use the SITC.

Harmonized System:

Since 1988 more than 60 countries have adopted the Harmonized System. The HS is a numerical six-digit code. It has 21 sections (in Roman numerals), 97 two-digit chapters, 1,241 four-digit headings and 5,019 six-digit subheadings.

Most countries have added one or two more digits to the HS to highlight products of particular national interest. The European Community (EC), for instance, adds two digits to arrive at the eight-digit Combined Nomenclature for intra-Community trade (which may be modified from year to year). A ninth digit is added for national trade statistics, and imports from non-EC countries have to be reported in the EC's 11-digit Integrated Tariff (TARIC), of which only the first six digits are the standard HS codes. Because of its detailed breakdown, the Combined Nomeclature is particularly useful for market research.

SITC:

For a broader analysis of exports and imports into a given country, SITC classifications are suitable. The SITC (Rev. 3) has ten sections, each subdivided into 67 two-digit divisions, 261 three-digit groups, 1,033 four-digit subgroups, and 3,118 five-digit basic headings. Because the SITC has significantly less categories than the HS, the HS can be converted into the SITC (from six-digit HS into five-digit SITC codes), but not vice versa.

Some institutions group the SITC categories into four types of products, namely:

* Food, live animals, beverages and tobacco (SITC sections 0 + 1).

* Nonfood primary commodities (SITC sections 2 + 4).

* Fuels (SITC section 3).

* Manufactures (SITC sections 5, 6, 7 and 8).

Alternatively, the first three groups can be classified into agricultural products (SITC sections 0, 1, 2 and 4 minus division 27) and mining products (SITC sections 3 and divisions 27, 28 and 68).

When trade statistics on industrial products are required, SITC sections 5 to 8 are sometimes further refined by subtracting iron and steel and...