Guidance

Reasons for trade in goods asymmetries

Published 23 May 2023

Who should read this?

This report is aimed at users of UK Overseas Trade in Goods Statistics and related Asymmetries in international Trade in Goods Statistics, who want a better understanding of the international comparability of the UK’s trade in goods data.

What are trade in goods asymmetries?

Trade asymmetries are the differences between the published trade statistics of a given country and its partner countries’ equivalent ‘mirror flows’. Each country collects their own data on international trade in goods. Theoretically, each reporting country’s exports to a given partner country should match said partner country’s imports from the reporting country, and vice versa. For instance, UK-reported imports from France should match France-reported exports to the UK. In reality, it is often the case that figures do not match exactly; we refer to these differences as trade asymmetries.

The Trade Statistics Branch of UN Statistics Division is responsible for the development and maintenance of the methodological guidelines on International Merchandise Trade Statistics (IMTS) although methodological decisions are left to individual countries.

For more information on the methodology underpinning the United Nations International Trade Statistics, also known as UN Comtrade data, please refer to the methodology notes for Asymmetries in international Trade in Goods Statistics, which analyses asymmetries in UN Comtrade data from a UK perspective.

For more information on the methodology that supports the UK Trade in Goods statistics, please refer to the Overseas Trade in Goods Statistics methodology paper.

UK trade data sources and methodology changes since 2021

In the UK, non-EU trade in goods data is collected from the Customs Handling of Import and Export Freight (CHIEF) system and the Customs Declaration Service (CDS), which collects UK customs entries made by businesses.

Before the UK left the European Union (EU), UK trade with the EU were sourced from the Intrastat survey, and controlled by EU legislation on Statistics aiming to harmonise statistical methodology.

Following the UK’s exit from the EU on 1st January 2021, Great Britain (GB) exports to the EU are collected via customs declarations instead of the Intrastat survey, as reported by CHIEF and CDS, in line with non-EU trade. However, GB imports from the EU continued using the Intrastat survey, due to unknown take up of Staged Customs Controls (SCC). Trade between Northern Ireland (NI) and the EU is still collected via the Intrastat Survey.

Similarly, from January 2022 the UK switched to using CHIEF and CDS as its data source for GB imports from the EU, but still maintained the Intrastat Survey for NI imports and NI exports with the EU. Staged Customs Control remained in place for GB imports from Ireland.

Change in ‘country of-origin’ information

Prior to the UK’s exit from the EU, HM Revenue & Customs (HMRC) only collected data on UK imports from the EU on a ‘country of dispatch’ basis through the Intrastat Survey; ‘country of origin’ was not collected.

From 2022 onwards, GB imports from the EU are collected via customs declarations which includes information on both the ‘country of origin’ and ‘country of dispatch’. The former is now available on the UN Comtrade database and both are available at UK Trade Info.

Individual countries can choose whether to include ‘country of origin’, ‘country of dispatch’, or both, in their published trade in goods imports statistics, which can lead to asymmetries.

For example, the UK publishes all movements of goods from the UK to Germany as UK exports, regardless of their ‘country of origin’. However, UK exports to Germany originating from Italy, for instance, will be recorded on a ‘country of origin’ basis by Germany as imports coming from Italy. This illustrates why there may be an asymmetry when comparing UK-reported exports to Germany with German-reported imports from the UK.

Staged Customs Controls (SCC)

In 2021, the use of Staged Customs Controls (SCC) for GB imports of non-controlled goods from the EU allowed customs declarations to be reported up to 175 days after the date of import. Full customs controls were introduced in January 2022.

As such, July 2022 marked the first full month of data where delayed customs declarations submitted under SCC could not be included. However, SCC can continue to be used for GB imports from Ireland. The extent of SCC could introduce a discrepancy when comparing asymmetries of GB-reported imports from the EU and EU-reported exports to the UK.

What are the main reasons why trade in goods asymmetries occur?

Although the international guidelines and legislation are intended to minimise differences in the coverage of trade data, there are still several reasons why differences exist.

These can be classified into four main groups:

• methodological discrepancies
• valuation discrepancies
• partner country discrepancies
• other differences

Methodological discrepancies

Specific movements of goods

The movement of some goods is particularly difficult to measure by applying UN concepts and a pragmatic solution is required instead; we refer to these as specific movements. Guidelines on their treatment are provided by the IMTS and further governed by EU legislation on Statistics within the EU. The characteristics creating complication may relate to the movement itself, the nature of the goods or the transaction which gives rise to the movement, from either the exporter’s or importer’s point of view. Examples of specific movements include: ships and aircraft; sea products; domestic and goods belonging to foreign armed forces; industrial plant; staggered consignments; ship’s stores and bunker supplies; installations at sea; and energy supplies such as gas and electricity.

EU legislation allows “specific movements” of goods to be recorded in different ways by Member States, which inevitably leads to asymmetries.

For example, consider the case of an aircraft owned by an Ireland-based company filling up its tank at a UK airport. From a UK point of view, the fuel used is reported as a UK export to Ireland. However, from an Ireland point of view, the fuel is used in the flight and is not reported as an import of fuel from the UK. This is a cause of asymmetry in jet fuels.

For more details on “specific movements”, refer to annex 2.1 of the Overseas Trade in Goods Statistics methodology.

Differences in recording leased goods and repairs

Goods sent to an EU or non-EU country to be processed and returned should be included in the UK overseas trade statistics. However, goods sent for repair, hire or under operational leasing arrangements covering periods of less than 2 years should be excluded. If the UK correctly excludes the movement of such goods but a partner country incorrectly includes them, this will lead to an asymmetry.

Data disclosure control

The UK’s official Trade Statistics operates under ‘passive confidentiality’, which means the trade data is only suppressed if a request for suppression is granted. A request for a suppression can be made by an importer or exporter or Government Department. If the request is justified then a suppression will be made to the trade data at the detailed level below chapter (2-digit commodity classification).

Decisions on suppression are left to individual countries, which can lead to asymmetries, particularly when comparing at the most detailed level.

For more details refer to IMTS: Concepts and Definitions 2010.

Different trade systems

Depending on what parts of the economic territory are included in the statistical territory, a country’s trade system may be referred to as general or special.

The general trade system is in use when the statistical territory coincides with the economic territory.

The special trade system is in use when the statistical territory comprises only a particular part of the economic territory. This means that certain flows of goods (which are in the scope of IMTS 2010) are not included in either import or export statistics of the compiling country.

The UK and EU concept related to trade with Non-EU and EU countries recorded via customs declarations, follows the relaxed definition of the special trade system, whereas trade recorded via the Intrastat Survey is closer to the general trade system.

For more details refer to IMTS: Concepts and Definitions 2010. For more details on EU trade statistics refer to European business statistics user manual on EU international trade in goods statistics - 2022 edition

Valuation discrepancies

National Thresholds

Before January 2021, all the UK’s movements with the EU were recorded via the Intrastat Survey. Since January 2022, only Northern Ireland’s movements with the EU have been recorded via Intrastat.

There are various declaration thresholds which may be used within Intrastat, but the actual value of the thresholds will vary from country to country. The main threshold is the Exemption Threshold, below which traders do not need to submit any Intrastat Survey information for a given flow.

EU legislation on statistics requires EU Member States to collect 95% of Intra-EU trade by value for dispatches. The UK aims to collect at least 90% for arrivals from the EU. The intra-EU coverage rate for arrivals varies between EU Member States.

Member States set their Exemption Thresholds to enable these targets to be met. If the Exemption Threshold is exceeded just once for a given flow, the trader should submit Intrastat declarations for that flow for the rest of the calendar year and the whole of the next one. Therefore, discrepancies may arise between countries’ ‘mirror flows’ for a particular movement of goods due to threshold differences and/or differences in historical trade patterns between the traders exporting and receiving the goods.

For example, if a large multinational firm exports goods to a small firm in the importing country, the former is almost certain to be above the threshold in the relevant country, yet the latter may be below the threshold, so the trade will only be reported on one side. Therefore, even if the thresholds are of a similar size, an asymmetry can still arise. The treatment of some low-valued shipments varies from country to country. They may be excluded from statistics, reported in less detail, or estimated instead of compiled from trader submissions.

Additionally, low value trade can lead to differences in classification of goods between countries. Intrastat trade below the threshold can be aggregated and classified into a single ‘pseudo’ commodity code (99500000). However, this is optional. As such, some traders will instead opt for the regular commodity code used for their specific goods. This inconsistent classification of below threshold trade leads to asymmetries at Combined Nomenclature (CN) 8 digit level.

Under customs declarations, low-value trade, which is defined to be transactions under £873 and under 1,000 kilogrammes, is aggregated into a single commodity code.

The majority of Member States calculate their total EU trade based on VAT-registered traders only. This means that differences in VAT thresholds can also contribute to asymmetries between Member States.

Exchange Rate Variations

Fluctuation in exchange rates may be a source of differences. Individual items of trade are valued using daily exchange rates at the time of the movement of the goods.

Determining Statistical Value

When submitting customs declarations, businesses declare the “statistical value” using specific methods of valuation recommended in the UN’s methodological guidelines on IMTS.

The statistical value of exports is calculated on a free on board (FOB) basis, meaning it includes: the cost of goods to the purchaser abroad, including packaging; inland and coastal transport in the reporting country; dock dues; loading charges and all other costs such as profits, charges and expenses (e.g. insurance) accruing up to the point where the goods are deposited on board the exporting vessel or aircraft or at the land boundary.

The “statistical value” of imports is calculated on a cost, insurance and freight (CIF) basis, meaning it includes: the cost of the goods; charges for freight & insurance; and all other related expenses in moving the goods to the point of entry into the reporting country.

The “statistical value” may differ from the amount specified on the sales agreement (the “invoice value”) as a result of the delivery terms used in the transaction. The delivery terms define who is responsible for the delivery of the goods and the proportion of those costs that will be part of the final declared cost of the goods on the customs declaration.

Consequently, the “statistical value” for the same goods will differ between the exporter and the importer, not only because they are based upon a different delivery term valuation, but also because different countries calculate statistical value by different mechanisms.

Some countries collect “statistical value” direct from the trader; whereas others use a process of estimation. These differences in calculation of ‘statistical value’ can lead to asymmetries.

Prior to exiting the EU, the UK applied a process to invoice values collected from Intrastat in order to estimate the “statistical value” for trade with the EU. The estimation process used delivery terms information, which is collected for larger traders, and data collected from the Ancillary Costs Survey (ACS).

In 2021, UK imports from the EU were still collected via the Intrastat Survey, therefore the estimation process was still in place. For 2021 only, Northern Ireland exports to the EU continued to use the Intrastat Survey and would follow the estimation process. GB exports to the EU moved to customs declarations therefore no estimation was needed, due to the statistical value of the goods being collected.

From 2022 onwards only Northern Ireland imports continued to use the Intrastat Survey and the estimation process. GB imports from the EU moved to customs declarations so there was no need for the estimation of statistical value.

For non-EU trade, “statistical value” has always been collected directly from traders via customs declarations.

Partner country discrepancies

Transit trade

Goods may be allocated to the wrong partner country. For example, they may be declared in error by an intermediate country’s trader while they are in transit. Alternatively, the exporting or importing trader may incorrectly declare the intermediate country as their partner country. There are several different kinds of transit trade, and the way goods are allocated to the partner country is dependent on the flow and whether the country of transit is EU or non-EU.

The three main kinds of transit trade are:

• simple transit, where the goods pass through a country and are not declared as imports or exports in the country of transit
• indirect trade, where goods are cleared as imports and then subsequently exported again, but always remain in foreign ownership
• re-exports, similar to indirect trade, but where the goods become the property of the state of transit on import and are then resold on export

Although all the routes are legitimate, each country involved may record the trade differently, which can cause asymmetries.

Triangular trade

Triangulation is the term used to describe a supply chain of goods involving three parties where, instead of the goods physically passing from one party to the next, they are delivered directly from the first party to the last in the chain.

For example, a UK company receives an order from a French company, the UK company sources the goods from a Germany company who then sends the goods from Germany to France. In this example, the physical movement occurs between Germany and France. However, an error could be made by the French company who declares the goods as being received from the UK as they follow the invoicing of the good which was UK to France.

Since 2016, within the European Union, the development of centralised clearance can increase the likelihood of triangular trade occurring in the trade statistics. Centralised clearance relates to provisions within the Customs environment, where traders (once registered) can centralise all of their EU import/export declarations in one supervising Member State. The payment of customs duties are collected in that Member State with reciprocal arrangements agreed between the supervising Member State and the Member State where the goods are actually imported (the ‘Participating Member State’).

Other differences

Misclassification of commodity codes

Although all countries use the standard Combined Nomenclature (CN) based on the Harmonised System (HS) for classification of goods, there can be differences in interpreting and applying codes. For example, the exporting trader in one country may assign a different commodity code to the importing trader in the partner country. This does not affect the total value of trade but can cause differences at chapter level and below between partner countries.

Fraud

Fraud which affects asymmetries includes acquisition fraud, carousel fraud, diversion fraud and trade-based money laundering.

The UK historically adjusted for the largest type of fraud that affects EU trade statistics: Missing Trader Intra-Community (MTIC) fraud.

Before 2009, an estimate of the MTIC fraud was added to chapter 99 in the arrivals trade, but no partner country was allocated. From January 2009, the MTIC fraud estimate was broken down at chapter level and included in the relevant chapter totals rather than chapter 99. From January 2022 the MTIC fraud adjustment was no longer calculated.

Further information on MTIC fraud can be found in the HMRC Overseas trade in goods statistics methodology and quality report’.

Reporting time-lags

Differences in the timing of reporting, in particular due to movement of goods across year or month ends, can result in trade being reported in different time periods by the exporting and importing countries.