5. Oct 2010 The German CIF/FOB Adjustment in Practice 1

The German CIF/FOB Adjustment in Practice

Simon Lohner

5. Oct 2010 The German CIF/FOB Adjustment in Practice 2

Content

❙Short review of the CIF/FOB Theory

❙The German CIF/FOB Adjustment in Theory

❙The German CIF/FOB Adjustment in Practice

❙Some results

❙Conclusion

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Short review of the CIF/FOB Theory

❙BPM requires compilation of imports with the value of goods at the border of the exporting country (FOB).

❙FTS records the value of goods at the border of the importing country (CIF).

❙Therefore, reported data are not directly useable, an adjustment has to be made.

❙The adjustment comprises the transportation (and insurance) costs from the border of the exporting country to the border of the importing country.

❙Depending on the nationality of the transporter (only non-resident transporters are relevant for the BoP) the costs have to be booked as „transportation service“.

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Short review of the CIF/FOB Theory

Country A Country B Country C

100

8 20 3

FOB:108 CIF:128 131

❙Trade Statistic of Country C record value of import at border of Country C (CIF:128).❙BOP of Country C records Trade in Goods at the border of Country A (FOB:108).❙=> adjustments in the goods account has to be made for the transportation costs thru country B (20).❙20 and 3 have to be (partly) transferred to the service account.

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German CIF/FOB Adjustment in Theory Old CIF/FOB Adjustment (before 2008)

❙Until 1992 the German CIF/FOB adjustment used partly data available from the costumer reports.

❙After 1992 (establishment of European single market) these data were no longer available.

❙In 1992 calculation of the share of CIF/FOB adjustments of trade in goods for each country and mode of transport.

❙Using these shares for the upcoming CIF/FOB adjustment.

❙Shares became more and more out of date and did not reflect developments in the transportation sector => Therefore a new estimation procedure is needed.

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German CIF/FOB Adjustment in Theory New CIF/FOB Adjustment (after 2008)

❙The new system of CIF/FOB adjustment is a pure model (no reports needed).

❙General Idea: Calculating directly the costs for transportation depending on weight and prices. (How much does it actually cost to bring a container from USA to Germany by ship/plane?).

❙ =>Calculation of individual transportation costs for each country and mode of transport.

❙Same procedure for the adjustment of trade and the compilation of the transport account.

❙(As this is a pure model and no reports are taken the transport costs for exports also have to be estimated in order to get a complete transport account!)

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New German CIF/FOB Adjustment Information needed

Transportation Costs = Weight x Unit costs (subject to mode of transport, product characteristics (sea), distance)

❙Information:

WeightProduct

characteristicDistance Unit costs Nationality

Sea Cargo X X (X) X X

Air Cargo X (X) X X

Inland Waterways Cargo X X X

Road Cargo X X X X

Rail Cargo X X X X

Pipelines X X X X

calculation of transportation costs

geographical allocation for transport account

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New German CIF/FOB Adjustment Data Sources

Item Data Source

Weight Foreign Trade Statistics

Product characteristics(bulk goods/container) for sea

Foreign Trade Statistics

Mode of Transport Foreign Trade Statistics (extra), Transport Statistics (intra)

Unit Costs Internet research of major Transport Companies

Nationality of Transporter

Institute of Shipping Economics and Logistics (Shares of world fleet ships), IATA (cargo airlines); Transport Statistic inland waterways; toll data road Federal Office for Goods Transport

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Excel tool presentation

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Impact of the change in the estimation procedure

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Geographical Breakdown of Transportation Services 2007

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Share of Adjustment of the Imports

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

3,50%

Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10

World EU

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Conclusion

❙+ CIF/FOB estimation with a very close link to the transport sector.❙+ low costs for reporter and compiler.❙+ new information can be adopted easily.❙+ usually available in t+2 months.❙+ same general system for country of origin and country of consignment.

❙- restrictive assumptions needed for simplification and availability of data.

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❙THANK YOU FOR YOUR ATTENTION!

❙Contact information:

Lohner Simon

Deutsche BundesbankBalance of Payments Statistic and International Investment PositionGroup Service and Transferssimon.lohner@bundesbank.dePhone: ++49-6131-377-8343