ESTP COURSE ON ECONOMIC AND SOCIAL CLASSIFICATIONS Introductory course Day 2 – first afternoon session Custom classifications CPC and CPA Marie-Madeleine Fuger INSEE – France Hans Van Hooff CBS - Netherlands

Foreign trade classification Harmonized System (HS) Since 1988, revision every 5 years Classification built and managed by the WCO (World Customs Organization) Only commodities (transportable goods) A little more than 5 000 products grouped into 21 sections and 97 chapters 4 levels The sections are coded in roman numerals The chapters in 2-digits numbers (01 – 97) Headings and subheading, respectively in 4 and 6-digits numbers Very precise rules to classify imports and exports: Customs taxes 2000 pages of explanatory notes

Foreign trade classification Harmonized System (HS): Focus at the rules Rule 1 :titles of sections, Chapters and sub‑Chapters are provided for ease of reference only Rule 2: Incomplete or unfinished articles; Articles presented unassembled or disassembled Rule 3: classification of goods classifiable under two or more headings Rule 4: classification of goods when rules 1 to 3 are useless Rule 5: packing materials and packing containers Rule 6: classification of goods within the subheading

Foreign trade classification Harmonized System (HS): Amendments of HS 2012 220 amendments divised into: agricultural sector 98; chemical sector 27; paper sector 9; textile sector 14; base metal sector 5; machinery sector 30; other sectors 37

Foreign trade classification Combined nomenclature (CN) Strictly linked to HS + details About 14,400 headings (of which about 9,300 CN subheadings) organized in five hierarchical levels Same rules as HS + some specific notes Updated each year Used for Foreign trade statistics Custom duty purposes Classification rules the General Rules for the Interpretation of the Harmonized System the Section and Chapter explanatory notes The relevant criteria for HS and CN are : The material (substance) The degree of transformation The function

CPC: Central Product Classification History UN Expert Group in 1974 then Statistical Commission in 1976 Based on the Harmonized System (HS) concerning the “good” part Implication of Voorburg Group and City Group for services statistics to improve “Services” part 1987: first draft; 1989: final version (even if named “provisional”)… 2008: completion of CPC Ver.2 2013: revision process started, is about to be completed

CPC: Central Product Classification Purpose Provide a framework for international comparisons of statistics about goods, services and assets: Production, intermediate and final consumption, investment Foreign trade Flux, stocks and balances Concerning input-output and supply-demand tables, balance of payments or any other analytical work CPC must be a central classification in which all statistics in any classification can be reclassified CPC provides definitions of services (reference classification)

CPC: Central Product Classification Scope and boundary CPC covers “products”, i.e. the output of economic activities By-products and waste of economic activities Produced assets as output of a production process also included.

CPC Ver. 2 Scope and boundary SNA refers to products as “goods and services” Includes all products being transacted or stocked, produced or not Includes non-produced assets (contracts, patents, trademarks, copyrights (intangible assets); lands, constructions Covers transportable or not-transportable goods Commodities: based on HS items used as “elementary bricks” : a CPC item groups one or more HS items, never part of a HS item Services: no existing external reference  so details and structure created ex-nihilo Activity of origin criterion: not alone Structure voluntarily different than the ISIC one However: there are outputs of economic activities, i.e. “products”, that do not fit the SNA definition of goods or services

CPC Ver. 2 Scope and boundary (cont.) Other outcomes from economic activities which are neither “goods” nor “services” : Original manuscripts, sound and video recordings Results from research activities Results from geological surveying activities Product design specifications Trademarks and franchises Still considered products, and covered in CPC Ver.2 These are intellectual property (IP) products and similar products

CPC Ver. 2 Structure Options for overall structure of the CPC: Group products based on industry of origin e.g. ISIC based Group products based on demand e.g. COICOP based Group products by their characteristics used currently in CPC CPC Ver.2 uses the last approach Products grouped according to characteristics Groupings often follow industries, but not as a rule Product groups often consider analytical use

CPC Ver. 2: High-level structure At the most detailled level, it includes 2738 subclasses

CPC Ver. 2: revision Recommendation by the Expert Group at UNSD to undertake an update to CPC for 2012 (known as CPC Ver.2.1) Creation of a technical subgroup (UNSD, Canada, Eurostat, France, USA) to: consider the proposed inputs into CPC discuss technical and procedural elements of the update

CPC Ver. 2 update Changes in the CPC were based on: • 2012 amendments to the Harmonized System (HS); • Improve links between CPC and the Standard International Energy Product Classification (SIEC) • Proposals form the Food and Agriculture Organization of the United Nations (FAO) to adapt the detail of CPC • Proposals from the Voorburg Group • CPC issues received in the Statistics Division Classifications Hotline.

CPA: Classification of Products by Activity Targets European version of CPC Same principles, concepts, obligations, etc. Plus : legal obligations (European regulation) about uses and links with other EU product classifications CPA revised like CPC Principles Major principles: All products classified depending on the activity of origin as defined in NACE class  some necessary conventions: all CPA objects being no products: wastes, second-hand goods, by-products. A CPA item = a full or split CPC item (so CPA more detailed); CPA Rev. 2 has 3142 subcategories

CPA Rev. 2 Coding system Sections, divisions: like NACE Less groups and classes Products not always linked to NACE classes but to Divisions: more than one possible origin activity In such a case codes: xx.00.xx 6-digit codes: NACE code + two digits (xx.xx.xx) Fifth digit of industrial services = always 9 Fifth digit of CPA code NEVER equals 0 Categories Sub-categories

CPA Rev. 2 Particular characteristics Interpretation Wastes and by-products: if produced Second-hand goods: out Production on a fee and contract basis Mixed farming (NACE 01.50) Fish and sea-food Seats Retail sale trade services Non-specialized trade Constructions (buildings and civil engineering works) and construction services Interpretation Commodities: HS rules and explanatory notes Non-transportable goods and services: explanatory notes Based on CPC ones then developed and more precise

CPA Rev. 2 Main uses Revision policy Same as for CPC (PPI, SNA, EBoPS, tourism products) Short term statistics: PRODCOM Non-statistical uses Public procurements : Community Procurement Vocabulary (CPV) Revision policy Like CPC

Revision in progress Context: revision of CPC ver 2 Need to keep international consistency Consequences: creation of a TF Austria, Bulgaria, France, the Netherlands, Poland Principles Update not revision Relevance of breakdowns Consistency with NACE, Prodcom Consistency with CPC

CPA revision: the process TF prepared around 100 proposals of change Analyses of these proposals in june 2013 Extra information to be collected in summer Result: a draft updated CPA submitted to the WG in November 2013 14th May on the agenda of the European Statistical System Committee

CPA revision INPUT for the update process Draft updated CPC "Task force on the critical classes" Input from the CPA (and also NACE) forum Inconsistencies with NACE Rev. 2 Mistakes and inconsistencies between NACE and CPA Inconsistencies between title and content of headings Inconsistencies with CPC Ver. 2 and ISIC Rev. 4 Inconsistencies between PRODCOM and CPA Better consistency with CN Need for more or less details Integration of the Classification of Types of Constructions in CPA This exercise was also considered an opportunity to review the classification not only having in mind an alignment with the revised CPC but also profiting to correct errors previously detected and to analyse specific European Union emerging needs. Therefore, the Task Force decided to use as input for the proposals of change the following items: - Draft updated CPC - Discussions carried out when we have conducted the "Task force on the critical classes" and decisions taken by the Working Group at its April 2010 meeting - Input from the CPA (and also NACE) forum - Inconsistencies with NACE Rev. 2 detected in manufacturing (in divisions 26, 27 and 28) - Mistakes and inconsistencies between NACE and CPA - Inconsistencies between title and content of headings - Inconsistencies with CPC Ver. 2 and ISIC Rev. 4 - Inconsistencies between PRODCOM and CPA - Better consistency with CN - Change in the content of headings (due to late change in the content of related ISIC/NACE classes in Rev. 2) - Need for more details - Need for less details - Integration of the Classification of Types of Constructions in CPA

CPA revision: nature of the changes Improvement of explanatory notes Introduction of further breakdown Separate identification of specific products Reorganisation of items Move from one item to another Standardize terminology

Main features of changes Agriculture: Expand detail on cereals, leguminous crops, on forest products Move “cotton seeds” from 01.11 to 01.16 Move all shelled nuts from 01.11 and 01.25.3 to 10.39.25 Move stemmed and redried tobacco from 01.15 to 12.00 Separate horses and other equines Reorganize eggs

Main features of changes Reorganization of fish and other fish products: Introduce biological species, Distinguish between aquaculture and fishery, Distinguish between freshwater and marine It effects Fish, Crustaceans Molluscs and other aquatic invertebrates Seaweeds and algae These changes effect both division 03 and division 10

Examples of changes in manufacturing Lignite Renumbering of 10.39.25 into 10.39.29 Less detail for vegetable oils (10.41.2) Change of title for 10.85.19 New sub-category under 10.89.1 Deletion of 13.30.14 Pellets and briquettes Change of title for 17.22.12

Examples of changes DIVISIONS 19 and 20 Reorganization of 19.20.2 fuel oil and gas;lubricating oils Separate identification for ethylene, propylene, butylene, butadiene in 19.20.3 Transfer of not chemically defined products from various CPA to 20.13.52 New CPA 20.15.36 for urea and nitrate ammonium solutions New CPA 20.20.16 for hazardous pesticides New CPA 20.59.58 for biodiesel

Examples of changes DIVISION 26 Creation of new CPA 26.11.50 for bare printed circuit boards Services connected with manufacturing of electronic integrated circuits (26.11.91 and 26.12.91) Change in title for radio broadcast receivers (26.40.11 and 26.40.12) Create new CPA 26.70.24 optical measuring and checking devices and instruments Merge CPA 26.52.21 to 26.52.25 into one single CPA 26.52.21 watch and clock movements Delete CPA codes 26.70.17 and 26.70.18 and move their content to residual CPA 26.70.19

Examples of changes DIVISION 27 Consistency with NACE for: Solid state inverters, rectifying apparatus Surge suppressors Appliance cords, extension cords and other Creation of new CPA in 27.90.4 Photographic flashbulbs, flashcubes: move the content of 27.40.31 to 26.70.19 and renumber 27.40.3

Examples of changes DIVISION 28 Creation of new CPA 28.21.15 for household-type heating appliances Merge of several small CPA into one single CPA Typewriters and word processing machines Office machines Parts and accessories Change in title 28.41.11 Creation of new CPA 28.41.13 for stationary rotary or rotary percussion drills, filing machines, riveters, sheet metal cutters Merge of 28.92.22 and 28.92.23 and renumbering of CPA 28.92.2 Renumbering of CPA 28.93.19 into 28.93.18 Change in title for 32.99.21

Examples of changes Improve description in division 38 to include used automobiles, computers, televisions and other equipment Reshuffle of 41.00 (consistency with CPC and CC) Creation of new CPA for sale of advertising space in directories and mailing lists (58.12.40) and in Internet (63.12.20) Move streamed video and audio content from 63 to 59 Reorganization of 60.2 Television programming and broadcasting Deletion of CPA 70.22.40 and move content to 77.40.14 (new CPA) Align categories for R&D in CPA with frascati Manual categories Introduction of new subcategories to exhaustively home assistance service; it will effect divisions 81, 85 96 and 97

Revision in progress Now the Members of WG are invited to: Analyse the proposed changes Comment on its relevance and feasibility In order to finalize the updated CPA

Revision process Members of WG have: Analysed the proposed changes Commented on revision’ relevance and feasibility Eurostat is finalizing the updated CPA New structure, correspondence tables Explanatory notes Translation Legal process

Thank you!