Export Undercoverage Presentation to the Working Party on International Trade in Goods & Services Statistics (WPTGS) September 22, 2008.

Export Undercoverage

Presentation to the Working Party on International Trade in Goods & Services Statistics (WPTGS)

September 22, 2008

Canadian exports – 2001 to 2006Canadian exports – 2001 to 2006

Canada’s merchandise exports have grown 8.9% Canada’s merchandise exports have grown 8.9% over the last six years, increasing from $404 over the last six years, increasing from $404 billion in 2001 to $440 billion in 2006.billion in 2001 to $440 billion in 2006.

During this period, our exports to non-US During this period, our exports to non-US destinations jumped to $81 billion in 2006, an destinations jumped to $81 billion in 2006, an increase of 55% from 2001.increase of 55% from 2001.

Canada’s merchandise exports to non-US Canada’s merchandise exports to non-US destinations, 2001 to 2006destinations, 2001 to 2006

0

20

40

60

80

100

$ b

illi

on

s

QuestionsQuestions

Changes to reporting methods and Changes to reporting methods and Customs reporting regulations raised two Customs reporting regulations raised two basic questions:basic questions:

Real growth or better reporting?Real growth or better reporting?

Is export undercoverage still significant?Is export undercoverage still significant?

Canadian Export FlowsCanadian Export Flows

Direct to U.S.Direct to U.S. Indirect to U.S.Indirect to U.S. Direct Non-U.S.Direct Non-U.S. Indirect Non-U.S. – Through U.S. In Indirect Non-U.S. – Through U.S. In

BondBond Indirect Non-U.S. – Entered into U.S.Indirect Non-U.S. – Entered into U.S.

Export UndercoverageExport Undercoverage

Export non-reporting can occur when Export non-reporting can occur when • exporters fail to file the appropriate exporters fail to file the appropriate

Canadian export documentation or Canadian export documentation or • do not correctly report the informationdo not correctly report the information..

There are two types of export undercoverage:There are two types of export undercoverage: DirectDirect IndirectIndirect

Export UndercoverageExport Undercoverage

• Direct exportsDirect exports: Canadian exports shipped : Canadian exports shipped directly to the country of final destination. directly to the country of final destination. Undercoverage occurs when exporters fail to Undercoverage occurs when exporters fail to declare exports or do not submit the required declare exports or do not submit the required Customs documents.Customs documents.

• Indirect exports: Indirect exports: goods exported from Canada goods exported from Canada that travel in-transit through the U.S. to a third that travel in-transit through the U.S. to a third country. These goods are not included in U.S. country. These goods are not included in U.S. import statistics. Undercoverage occurs when import statistics. Undercoverage occurs when exporters fail to report these goods to Canada exporters fail to report these goods to Canada Customs. Customs.

Canadian exports to non-US destinationsCanadian exports to non-US destinations by mode of transport by mode of transport

MODEMODE 20012001 20022002 20032003 20042004 20052005 20062006

% of export value% of export value

RailRail 1.71.7 1.91.9 1.71.7 1.71.7 2.12.1 2.22.2

RoadRoad 6.46.4 5.55.5 5.55.5 5.25.2 5.65.6 5.05.0

AirAir 24.024.0 24.524.5 27.127.1 29.329.3 30.630.6 30.930.9

WaterWater 67.967.9 68.168.1 65.865.8 63.863.8 61.761.7 61.961.9

Exports value in $ billionsExports value in $ billions

ExportsExports 52.352.3 51.051.0 54.454.4 64.264.2 70.470.4 80.180.1

MOT represents the method by which Canada’s international boundary is crossed.MOT represents the method by which Canada’s international boundary is crossed.

Marine Export Undercoverage StudiesMarine Export Undercoverage Studies

Since the late 1990s, a series of studies have Since the late 1990s, a series of studies have been conducted.been conducted.

The results of the 2003/2004 sample survey The results of the 2003/2004 sample survey concluded that 30% of the value of Canadian concluded that 30% of the value of Canadian exports to countries other that the United States exports to countries other that the United States was not reported in the ports of Halifax, Montreal was not reported in the ports of Halifax, Montreal and Vancouver.and Vancouver.

In the fall of 2005, a small sample survey was In the fall of 2005, a small sample survey was conducted to conducted to obtain an understanding of the obtain an understanding of the various changes at the port level since the last various changes at the port level since the last undercoverage study was undertaken;undercoverage study was undertaken;

Results indicated that the rate had decreased Results indicated that the rate had decreased substantially;substantially;

Assumed decrease mainly as a result of the Assumed decrease mainly as a result of the various initiatives implemented by CBSA in the various initiatives implemented by CBSA in the past few years.past few years.

CBSA InitiativesCBSA Initiatives

New RegulationsNew Regulations Updates to the D20 Customs D MemorandumUpdates to the D20 Customs D Memorandum Revisions to the B13A export declaration formRevisions to the B13A export declaration form Memorandum of Understanding (MOU) Memorandum of Understanding (MOU)

agreements with carriersagreements with carriers No report - no load policyNo report - no load policy Promotion of electronic reportingPromotion of electronic reporting Implementation of the Administrative Monetary Implementation of the Administrative Monetary

Penalty System (AMPS)Penalty System (AMPS)

2006 Marine Export Undercoverage Study2006 Marine Export Undercoverage Study

In the fall of 2006, a census was carried out on all In the fall of 2006, a census was carried out on all direct exports to non-U.S. destinations via marine direct exports to non-U.S. destinations via marine mode for the reference period of September to mode for the reference period of September to December 2006.December 2006.

The estimated undercoverage rate in 2006 has The estimated undercoverage rate in 2006 has fallen dramatically to fallen dramatically to 1.24%,1.24%, from an earlier 2004 from an earlier 2004 rate estimated at rate estimated at 30%30%..

These results indicate that the compliance efforts These results indicate that the compliance efforts of CBSA have been influential in the reduction of of CBSA have been influential in the reduction of export non-reporting.export non-reporting.

Marine export undercoverage estimatesMarine export undercoverage estimatesSeptember to December 2006September to December 2006

MarineMarine

PortPortUndercoverage Undercoverage

Estimate*Estimate*

$ millions$ millions

TotalTotal

Exports**Exports**

$ millions$ millions

UndercoverageUndercoverage

Rate***Rate***

%%

HalifaxHalifax 20.820.8 1,253.61,253.6 1.661.66

MontrealMontreal 70.770.7 3,330.03,330.0 2.122.12

VancouverVancouver 71.671.6 8,575.28,575.2 0.830.83

TotalTotal 163.1163.1 13,158.613,158.6 1.241.24

* Based on the weight and commodity reported

** Total value from CBSA records plus the estimated undercoverage value

***The undercoverage estimate divided by the total exports

Marine export undercoverage by commodityMarine export undercoverage by commodityValue by leading HS ChapterValue by leading HS Chapter

RankRank HS ChapterHS Chapter ValueValue

$ millions$ millions% of total% of total

11 Ch 84 Machinery andCh 84 Machinery and

partsparts 33.133.1 20.320.3

22 Ch 12 Grains, seeds…Ch 12 Grains, seeds… 17.917.9 11.011.0

33 Ch 44 WoodCh 44 Wood 16.516.5 10.110.1

44 Ch 72 Iron and SteelCh 72 Iron and Steel 10.310.3 6.36.3

55 Ch 25 Salt, sulphurCh 25 Salt, sulphur 10.110.1 6.26.2

Sub-totalSub-total 87.887.8 53.853.8

TotalTotal 163.1163.1

Marine export undercoverage by commodityMarine export undercoverage by commodityValue by leading HS 8-digit codeValue by leading HS 8-digit code

RankRank HS 8 descriptionHS 8 description ValueValue

$ millions$ millions% of total% of total

11 Soya beansSoya beans 17.717.7 10.810.8

22 Data processing machines, Data processing machines, parts and accessoriesparts and accessories 11.711.7 7.27.2

33 Iron, steel waste or scrapIron, steel waste or scrap 9.59.5 5.85.8

44 Men’s or boys’ coatsMen’s or boys’ coats 5.85.8 3.53.5

55 Other gas turbinesOther gas turbines 5.75.7 3.53.5

Sub-totalSub-total 50.350.3 30.830.8

TotalTotal 163.1163.1

Balance of Payments AdjustmentsBalance of Payments Adjustments

BOP adjustment for BOP adjustment for underreporting reached 24% underreporting reached 24% of total non-US exports in of total non-US exports in 2000 based on results of ITD’s 2000 based on results of ITD’s undercoverage studies.undercoverage studies.

Outcome of 2006 preliminary Outcome of 2006 preliminary undercoverage study resulted undercoverage study resulted in a reduction in the BOP in a reduction in the BOP adjustment by $500 million in adjustment by $500 million in 2004, by $1.5 billion in 2005 2004, by $1.5 billion in 2005 and by $2.5 billion in 2006. and by $2.5 billion in 2006.

The 2006 & 2007 estimates The 2006 & 2007 estimates for underreporting are 12% of for underreporting are 12% of total exports to non-US total exports to non-US destinations.destinations.

YearYear % non-U.S. % non-U.S. ExportsExports

20042004 18%18%

20052005 14%14%

20062006 12%12%

20072007 12%12%

Alan TorranceAlan Torrance

Chief, Concepts & LiaisonChief, Concepts & Liaison

International Trade DivisionInternational Trade Division

Statistics CanadaStatistics Canada

(613) 951-4805(613) 951-4805

[email protected]@statcan.gc.ca

Questions?Questions?