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

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

3. 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“.
5. Oct 2010
The German CIF/FOB Adjustment in Practice

4. Short review of the CIF/FOB Theory
Country A
Country B
Country C
100
FOB:108
CIF:128
131 8 20 3
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.
5. Oct 2010
The German CIF/FOB Adjustment in Practice

5. The German CIF/FOB Adjustment in Practice
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Shares became more and more out of date and did not reflect developments in the transportation sector =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.
5. Oct 2010
The German CIF/FOB Adjustment in Practice

6. The German CIF/FOB Adjustment in Practice
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!)
5. Oct 2010
The German CIF/FOB Adjustment in Practice

7. New German CIF/FOB Adjustment Information needed
Transportation Costs = Weight x Unit costs (subject to mode of transport, product characteristics (sea), distance)
Information:
Weight
Product characteristic
Distance
Unit costs
Nationality
Sea Cargo X
(X)
Air Cargo
Inland Waterways Cargo
Road Cargo
Rail Cargo
Pipelines
calculation of transportation costs
geographical allocation for transport account
5. Oct 2010
The German CIF/FOB Adjustment in Practice

8. New German CIF/FOB Adjustment Data Sources
Item
Data Source
Weight
Foreign Trade Statistics
Product characteristics
(bulk goods/container) for sea
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
5. Oct 2010
The German CIF/FOB Adjustment in Practice

9. Excel tool presentation
5. Oct 2010
The German CIF/FOB Adjustment in Practice

10. Impact of the change in the estimation procedure
5. Oct 2010
The German CIF/FOB Adjustment in Practice

11. The German CIF/FOB Adjustment in Practice
Geographical Breakdown of Transportation Services 2007
5. Oct 2010
The German CIF/FOB Adjustment in Practice

12. Share of Adjustment of the Imports
5. Oct 2010
The German CIF/FOB Adjustment in Practice

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

14. The German CIF/FOB Adjustment in Practice
THANK YOU FOR YOUR ATTENTION!
Contact information:
Lohner Simon
Deutsche Bundesbank
Balance of Payments Statistic and International Investment Position
Group Service and Transfers
Phone:
5. Oct 2010
The German CIF/FOB Adjustment in Practice