Annex 9.C. Data reconciliation: reasons for differences and further guidance

9.C.1.           Coverage. Specific goods or types of transactions may be defined differently by trading partners, and may be included in the trade statistics by one partner but excluded by the other (e.g., leased goods, military goods, goods imported or exported for or after repair). Further, countries usually have different provisions for the treatment of low-value shipments, which may be excluded from statistics, reported in less detail, or estimated instead of being compiled. 

9.C.2.           Trade systems. If one partner uses the special system of trade and the other uses the general system, goods moving between premises for customs warehousing and customs free zones of those countries will not be accounted for by the country using the special system. Where both countries use the special system of trade, goods moving between customs free zones will not be recorded by either country and will not affect their export and import totals. To facilitate reconciliation, countries should clearly define their statistical territories, specifying any particular inclusions and exclusions. For example, Puerto Rico and the United States Virgin Islands are part of the statistical territory of theUnited States; therefore, exports to/imports from those territories should be recorded as trade with theUnited States in any reconciliation study involving theUnited States.

9.C.3.           Timing of recording. Many factors contribute to timing differences, including the time needed for the transportation from the exporting to the importing country, the time needed for the completion of the customs procedures and warehousing operations. Further, the filing and recording of various documents at different stages and their statistical recording might follow different practices. For example, in one country, a trade flow may be attributed to the time period in which the invoice is received in the importing country, while another country may attribute the transaction to the time period in which the amounts owed to the customs administration are paid. Also, the deadline for reporting statistical information, the use of summary reporting, the definition of the reporting period and the procedures for handling late or incorrect records might be different in countries and therefore affect the time of recording. Such timing differences can be significant, particularly in the case of monthly data or where the level of trade in a given commodity has changed extensively (so that effects of timing differences between the study period and the preceding and succeeding periods are not equivalent).

9.C.4.           Interpretation and application of the commodity classification. All trading countries have adopted the Harmonized System (HS) for commodity classification. Despite that significant achievement, there are differences in interpreting and applying the HS, both within the same country and among different countries. In order to reconcile trade in particular commodities, an analysis of uniformity of the HS application might be required. Differences and errors in classification normally affect only the distribution of the goods among different classes; however, they may sometimes lead to differences in total trade, which would be the case, for example, if different recording thresholds were applied to different commodities.

9.C.5.           Valuation. IMTS 2010 (para 4.4) recommends that countries adopt the World Trade Organization Agreement on Customs Valuationa as the basis for valuation of their international merchandise trade for statistical purposes (whether the country is a World Trade Organization member or not) for both imports and exports. Further, it is recommended that imports be recorded on a CIF-type basis and exports on a FOB-type basis. Therefore, CIF imports would exceed the counterpart export value by the value of international insurance and freight charges even if there were no other sources of difference. Where such charges have been included, a negative adjustment is made to remove them, for comparison with FOB export values. If the actual freight charges are not known, estimates may be derived from unit value differences or through other approaches, such as the application of general CIF/FOB ratios. The determination of the customs value of imported goods is regulated by the WTO Agreement on Customs Valuation.

9.C.6.           However, there can be a multiplicity of other reasons for valuation differences, including undetected under and over-declaration of values, different value estimates for transactions without valuation such as charitable/relief shipments, barter trade or related party transactions and different views on the exclusion or inclusions of services. In all of these cases, compensating adjustments are needed if the differences are significant.

9.C.7.           Currency conversion. Currency conversion practices for goods invoiced in foreign currencies may also cause discrepancies between one country’s import value and the counterpart export value, particularly when the exchange rate between the partners fluctuates rapidly. Further, the procedures used in the reconciliation for expressing both sets of statistics in the same currency for comparison purposes can also create discrepancies.

9.C.8.           Partner-country attribution. It is recommended that imports be attributed to the country of origin and exports to the country of last known destination (see IMTS 2010, para. 6.25). This partner-country attribution can explain many differences between the statistics of trading partners in cases when goods move from the country of origin to the country of destination through third countries. For example, in the case where goods are produced in country A, sold and shipped to country B and afterwards resold and dispatched to country C, the trade statistics of country B will show exports to country C, but the statistics of country C will not attribute its imports to country B: they will indicate that goods were imported from country A.

9.C.9.           Different application of rules of origin. If countries have different rules of origin, the trade flows will also be recorded differently. Consider the following example. Goods are produced in country C, imported by country A, undergo certain processing and are exported to country B. If countries A and B have different rules of origin, the processed goods dispatched from country A to country B may be considered (in country A) as a domestic export to country B but as an import from country C in country B (if the rules of origin adopted by country B do not recognize the processing in country A as origin-conferring). This example illustrates the necessity of developing harmonized rules of origin. 

9.C.10.       Partner attribution in the case of re-exports and re-imports. Consider the case of goods originating in country A, exported, and returning to country A from country B without having been substantially transformed while abroad. Some countries record such goods as re-imports from country B, while others treat them as imports from themselves, following the recording of country of origin. In the latter case, there would be a discrepancy between exports of country B to country A, which would include those goods, and imports of country A from country B, which would not.

9.C.11.       “Through trade” operations. With the lowering of tariffs, “through trade” operations are increasingly taking place. Consider the following example. Goods are exported from country A to country B but are shipped through country C. Instead of being declared in transit, they are declared for home use in country C and then re-exported to country B. If the exporter in country A has properly reported the country of final destination (country B), such a practice will create a discrepancy between the export data of country A and the import data of country C, as well as between the export data of country C and the import data of country B. As more and more tariffs are reduced or eliminated, this reason for discrepancy in trade statistics is likely to increase.

9.C.12.       Unknown final destination. In some cases, the country of destination may not be known at the time of export. For some products shipped by vessel, such as petroleum and some chemicals, the ship may sail before the goods are sold and be directed to the final destination en route. In reconciliation, those kinds of transactions should be identified and attributed to the appropriate partner country.

9.C.13.       Confidentiality. The application of confidentiality on partner or commodity level automatically generates reporting asymmetries, which should be taken into account during reconciliation studies.

9.C.14.       Other sources of discrepancy. A considerable discrepancy between import and export statistics may arise if the information on imports is more complete than the information on exports. Differences in data-collection procedures may also contribute noticeably to data divergences (e.g., export statistics compiled using sampling techniques might be quite different from imports data derived from customs records). Reporting errors may in some instances seriously affect the comparability of data sets as well. Another source of discrepancies can be simplified reporting, under which not all data items are provided.

9.C.15.       Adjustments to data to achieve mutually agreed sets of trade figures. The preparation of analytical tabulations comparing import and export data for various groupings and at various levels of details helps to identify and assess the disparities. Once the analytical tables are completed, a series of adjustments may be applied (usually either based on supplementary information or derived by a series of estimates) to align data as closely as possible.b Depending on the reconciliation methodology and the procedures agreed upon, adjustments are applied at either the high-level aggregates or detailed product level. Adjustments at the high-level aggregates level include adjustments for differences in commodity coverage and trade system definition, varying procedures of valuation, insurance and freight, and timing; and under-reporting, country definition, indirect trade, re-exports and re-imports. In some cases, it may be necessary to investigate discrepancies in transaction-level data and make use of information supplied by declarants, trade associations and other government agencies or obtained by means of special investigations. Classification adjustments may also be applicable, especially if items shown in chapters 98 and 99 of the HS are not included in the total trade. In such cases, they should be distributed at least to the chapter level and investigated for possible reclassification and inclusion. There may be cases where discrepancies are identified but remain unresolved because of the difficulty of establishing which data are more reliable for adjustment purposes without expending unreasonable amounts of time and resources. Depending upon the information available, it may or may not be possible to estimate the effect of every identified difference and agree on an appropriate adjustment. Difficulties in the preparation of adjustments may lead to further reconciliation activities, such as analysis of the differences at a more detailed commodity level and calculation of the residual adjustment (referred to as “other”) by subtracting the adjusted export value from the agreed upon adjusted import value.

9.C.16.       Conclusions of the reconciliation study. The trading partners must decide at what point to consider the study completed. They must also decide on how to present the results: whether to compute a “reconciled” value for each direction of trade or simply to present an explanation of why the two data sets differ. The reconciliation study may conclude with a summary statement of its major results and a set of annexes detailing specific findings. It is unlikely that all significant discrepancies can be resolved. Although reconciliations between partner countries are usually unique for each set of countries, common kinds of major adjustments have typically been applied to arrive at reconciled trade flows.



a See Legal Instruments Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, done at Marrakesh on 15 April 1994 (GATT secretariat publication, Sales No. GATT/1994-7).

b There are three broad categories of adjustment: (a) systematic adjustments affecting all products in a detectable way, e.g., inclusion of the cost of freight and insurance, and differences in timing; (b) known adjustments, which may affect only selected commodities in cases where countries record imports of special commodities separately and do not include them in regular official statistics (e.g., for trade in military aircraft); and (c) irregular adjustments, that is, adjustments that may change over time (e.g., coding and processing errors).