1. PRODCOM WORKING GROUP
TF proposal on sub-contracted operations and a better coverage of services
Prodcom Working Group
18th -19th September 2014
Item 03.3

2. Proposal in a nutshell
'What'=Sub-contracted operations (SO) & ‘industrial services’ (IS)
Define ‘How’ to better cover the additional information:
For sub-contracted operations: Add new variable
For industrial services: Extend the number of codes
Balance the administrative burden through additional simplification measures
Prodcom Working Group
18th -19th September 2014

3. Stock-taking on sub-contracted operations (1)
Previous consultations:
Inclusion of the variable fee received (FR)
Problems to estimate the market price
PRODCOM Methodology seminar 2000/General notes 2002
Sub-contractor must report
Only domestic production, where it actually takes place
Only if different "undertakings"
Materials owned by the principle
Links to other domains?
SBS: different sub-contracting definition
Item 03.3
Prodcom Working Group
18th -19th September 2014

4. Stock-taking on sub-contracted operations (2)
SO are included in Prodcom data and most countries can distinguish (18)
Six countries (DK, FI, IE, LV, NL, UK) cannot distinguish
Very different reporting rules across countries
Main declarant: Only Principal (3)/Only Sub-contractor (9)/Both(10)
Localisation of the parties involved in SO
Output of the sub-contracted operations (Good/service)
SO within the same enterprise or enterprise group
Item 03.3
Prodcom Working Group
18th -19th September 2014

5. S and P domestic
Output=good
P: SV, SQ
S: -
Output=service/partial product etc
P: -
S: FR
P abroad and S domestic
S:-
Output=service/
partial product
P:-
S:FR
P domestic and S abroad
Output=service/partial product
P:SV,SQ
SUB-CONTRACTED OPERATIONS (national perspective- P as main declarant :e.g. UK)
If S IS COMING FROM NL WE HAVE DOUBLE COUNTING
IF P IS COMING FROM NL WE LOSE INFORMATION AT EU LEVEL UNLESS WE CAN IDENTIFY IN NL THAT THE S IS COMING FROM UK
CRITERIA
Who?What?
Prodcom Working Group
18th -19th September 2014

6. Methodological issues
Several risks have been identified from the consultation on the current situation:
double counting between principals and subcontractors located both on a particular national territory;
double counting/inclusion of non-domestic production which can inflate results at EU level.
undercoverage when Principal abroad AND Sub-contractor doesn't declare
derive from the implementation of a specific scenario at national level, while others are cross-scenarios risks- related to the use of different methodologies across Member States.
For example, there can be risks of:
double counting between principals and subcontractors located both on a particular national territory (scenario 2);
double counting/inclusion of non-domestic production for specific outputs (partial products) which can inflate results at EU level. There could be partial products or very heterogeneous production chains reported by the sub-contractor at national level. The principal also declares the sold value and volume of finished products. Therefore, in these countries in specific conditions we include production subcontracted outside their domestic territory. More general in scenario 3/4 the production sub-contracted abroad is counted in, as the principal includes the sold value and volume for products manufactured outside the domestic territory;
double counting inside a single firm that may have plants inside and outside the country so that another European country may send the data too.
Prodcom Working Group
18th -19th September 2014

7. 'How' to better cover services and SO ? (1)
Sub-contracted operations (SO) as defined in CPA:
Data should be already included in PRODCOM due to the 90% representativeness rule
Most countries collect separate data for SO
=> Proposal TF:
Provide two separate variables: value and volume of sub-contacted operations for each 8 digits code
These data should be mandatory only for a short list of codes
Consultation results:
18/24 countries agree with the proposal,
6 MSs expressed significant concerns
Item 03.3
Prodcom Working Group
18th -19th September 2014

8. Further recommendations of the TF
the distinction should be done at the most detailed level (8 digits) to avoid a loss of information
the variables to be recorded are the quantity produced and the fee received (value).
sub-contracted operations must be reported only by the sub-contractor in the country concerned, i.e. where production actually takes place.
some exceptions need to be specified: e.g. a service type I, In these exceptions cases an output harmonization approach it is recommended.
the principal and the contractor must be different enterprises.
enterprises should exclude from reported figures the production done outside the national territory.

9. Main pending issue
Define the selection methodology for a short list of codes for which would be mandatory to collect sub-contracted operations
Which data to use to define ex-ante for which codes to collect:
Existing SO data in PRODCOM for a limited number of MSs? Or use of SBS data for all EU ( at 4 digits level)?
Which method/criteria of selection?
double threshold: EU and national level?
Several methods/criteria of selection tested (PRODCOM and SBS data on SO)
If the national level is considered it is difficult to define a common denominator
Output oriented? e.g. we want to cover 75% of the total value for sub-contracted operations for the MS.
Overall list valid for all countries or the short list will vary across different countries?

10. Possible criteria for selection (SBS data)
I. the proportion of the Sold Production for the MS in the total SP at EU level for each product
A) at 4 digits level (e.g. the 1% rule);
B) at 8 digits level (e.g. the 1% rule);
II.a. the proportion of SO for the MS in the total SO at EU level for each product (4 digits)
II.b. the preponderance of sub-contracted operations (SO) in the total Sold Production (SP) at Member State level for each product (e.g. SO/SP>10%);
Prodcom Working Group
18th -19th September 2014

11. Simulation for not-collecting countries (SBS data for SO)
Prodcom Working Group
18th -19th September 2014

12. 'How' to better cover services and SO ? (2)
2. Industrial services as defined in PRODCOM explanatory notes
Already comprehensive coverage
=> Proposal TF:
addition of 20 type I codes;
type I service codes merged at 6 digits level. This would reduce the number of codes from 157 to 73.
Merge other 29 codes
=> Consultation results:
just 7 codes were actually supported for addition
Most countries support the proposal for merging. Some concerns about the easiness of interpretation

13. Further steps TF mandate was prolonged
Refine the selection methods, criteria at national/EU level
Need to involve countries concerned (which currently don't correct separate SO data)
Requirements for the collection of data on sub-contracted operations- which to be included in regulation/implementation guidelines?
Methodological guidelines in order to ensure output harmonization at EU level
Consider in the future the input from the Task Force that elaborated the CPA Ver. 2.1 on detailed explanatory notes for 99 codes
Consider potential confidentiality issues
Estimate the additional burden
Prodcom Working Group
18th -19th September 2014