5368.0 - International Trade in Goods and Services, Australia, Aug 2013 Quality Declaration 
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 02/10/2013   
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TECHNICAL NOTE LOW VALUE THRESHOLD


INTRODUCTION

1 In the August 2013 issues of International Merchandise Imports, Australia (cat. no. 5439.0) and International Trade in Goods and Services, Australia (cat. no. 5368.0) a new coverage adjustment has been introduced. Imports of all goods under the low value threshold (LVT), are included in Balance of Payments goods debits estimates. These estimates will also be included in the September quarter issue of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) and other relevant ABS macroeconomic publications. This technical note provides details of the new methodology and its impact on the goods debits series.


BACKGROUND

2 There are three channels through which goods can be imported into Australia:

  • Full import declaration (FID) – This refers to goods that are imported with a full Australian Customs and Border Protection Service (Customs) declaration. Imports with a FID valued over $1000 are included in International Merchandise Trade and Balance of Payments statistics. Imports with a FID valued under $1,000 are excluded from International Merchandise Trade statistics, but are included in Balance of Payments statistics via a coverage adjustment.
  • Self assessed clearance (SAC) – This refers to goods that are imported either as air or sea cargo where a SAC declaration is completed rather than a full imports declaration. SAC's are only available for imports less than $1,000 and as such imports with a SAC are not included in International Merchandise Trade statistics. On a Balance of Payments basis imports with a SAC were not previously included in estimates but are from August 2013.
  • Parcel post – Imports via the international postal network valued over $1,000 require a FID to be lodged, and are included in International Merchandise Trade and Balance of Payments statistics. Imports valued under $1,000 are currently exempt from having to submit a FID or SAC and consequently imports via this channel are not included in International Merchandise Trade statistics. Previously these imports were also excluded on a Balance of Payments basis. A new adjustment introduced from the August 2013 issues of Balance of Payments publications include these imports in Balance of Payments.

3 Prior to November 2005 the LVT was set at $250 for sea and air cargo and $1,000 for postal items. In November 2005 the LVT for sea and air cargo was raised to $1,000.

4 Imports and exports of goods under the LVT are within the scope of Balance of Payments statistics. However, until recently there have been no sources of information to allow reliable estimates to be made for more than the component reported on Full Import Declarations and Export Declarations. The Productivity Commission released a report on the Economic Structure and Performance of the Australian Retail Industry on 9 December 2011. Data produced by Customs, and data collected about international postal movements, for that report now allow estimates to be made for the remaining goods imports under the LVT.


METHODOLOGY

5 With the LVT (for SAC and FID imports) increasing in December quarter 2005 from $250 to $1000 two methodologies have been established for the new LVT adjustment. The first is for the period from September quarter 1998 to December quarter 2005 when the under–coverage is expected to be smaller (due to a lower threshold for FID and SAC imports). The second methodology covers the period from March quarter 2006 onwards when the threshold rose.

Adjustment from March quarter 2006

6 For the period from March quarter 2006 the low value adjustment comprises two components that account for under–coverage:
  • An estimate for the value of imports with a SAC declaration
  • An estimate for the value of imports via the postal system under the LVT.

7 The methodology for the estimation of each of these components is covered in more detail below.

Imports with a self assessed clearance declaration estimate
  • To calculate an estimate for the value of imports lodged with a SAC declaration, a quarterly volumes series obtained from Customs is multiplied by a quarterly average value series.
      • Average values of air cargo imports lodged with a SAC were available for 2008–09, 2009–10 and 2010–11 from Customs. It should be noted that although the values were only based on air cargo imports lodged with a SAC and excluded sea cargo imports, sea cargo comprises less than 1% of imports with values under the LVT.
      • Average values for LVT FIDs are available from December quarter 2006 to June quarter 2011. This series is used to estimate quarterly average value changes, using the SAC average values from 2008–09, 2009–10 and 2010–11 as a base. Between March quarter and September quarter 2006, and from September quarter 2011 the average value is estimated using the quarterly movement in headline Consumer Price Index.

Imports under the low value threshold via parcel post estimate
  • To calculate an estimate of parcel post imports under the LVT a quarterly volume series is multiplied by a quarterly average value series.
      • To estimate the volume series, the volume of parcel post imports under the LVT for 2010–11 is obtained from the Productivity Commission report. An index is created from the total quarterly international mail (including letters) received by Australia using the Productivity Commission volume for 2010–11 as a base.
      • To estimate the average value series, parcel post import volumes stratified in $100 increments obtained from the Productivity Commission report for 2010–11 were multiplied by an average value per stratum estimated from data available for imports with a SAC declaration for the same year. Using this estimate for the value of imports under the LVT for each stratum an average value for imports via parcel post valued under the LVT is obtained. To extrapolate this average value series, the quarterly index used in the SAC estimate was used. This series equals the average value estimated for parcel post imports in June quarter 2011.

Pro–ration of quarterly series to monthly
  • SAC volumes are available on a monthly basis. Quarterly LVT estimates for combined SAC and parcel post import values are pro–rated to the months of a quarter using the monthly SAC volumes.

Adjustment from September quarter 1998 to December quarter 2005

8 For the period from September quarter 1998 to December quarter 2005, with limited data available, a number of assumptions have been made in back–casting the estimates. These assumptions are:
  • In September quarter 1998 under–coverage was $50m (0.2% of total imports)
  • Growth over the period September quarter 1998 – December quarter 2005 was at a constant exponential rate
  • A doubling in the under–coverage occurred between December quarter 2005 and March quarter 2006 when the LVT threshold for imports lodged with a SAC or FID increased from $250 to $1000, according to ABS analysis of Customs data at the time
  • The seasonal pattern over the period September quarter 1998 – December quarter 2005, is consistent with the seasonal pattern for the period March quarter 2006 onwards.

Allocation to commodity categories

9 Allocation of estimates to individual Balance of Payments Broad Economic Category (BoPBEC) components are derived from analysis of a sample of records from June quarter 2012 imported as air freight with a SAC declaration and LVT imports lodged with a FID for the same time period. Weights for each BoPBEC component have been derived on a financial year basis. These weights have been back–cast to previous financial years using changes in spending between BoPBEC components obtained from household final consumption expenditure measures in the National Accounts. Weights are static within each financial year.


ANALYSIS

10 In the period 1998–99 to 2004–05 the estimates of the new adjustment are smaller with annual adjustments less than $1b. This is consistent with a lower SAC LVT of $250. From the period 2005–06 onwards the adjustment rapidly increases with the rise disrupted by a decrease in 2008–09. In 2012–13, the total value of the adjustments is $7,609m (Figure 1).

Figure 1 – Low value Adjustment by financial year
Graph: Figure 1 shows Low Value Adjustment by Financial Year, 1998-99 to 2012-13


11 The allocation of the new adjustment has primarily resulted in an increase to consumption goods with between 88 – 95% allocated to this component. Intermediate and other merchandise goods has been allocated between 5 – 10%, whilst capital goods has been allocated 0 – 2% (Figure 1).

12 When the adjustment as a percentage of total goods debits is examined, similar behaviour is observed (Figure 2). The decrease in the adjustment in 2008–09 is stronger when expressed as a percentage of goods debits, with total goods debits rising 8% between 2007–08 and 2008–09.

Figure 2 – adjustment as a percentage of goods debits
Graph: Figure 2 shows Adjustment as a Percentage of Goods Debits, 1998-99 to 2012-13



OTHER INFORMATION

13 The estimates presented here are made using a range of assumptions. More reliable sources of data may become available in future to replace these assumptions and improve the quality of the estimation process.

14 There is a comparable low value threshold for the reporting of exports to Customs, which is currently $2,000. There are no reliable sources of information to enable estimation of this trade not recorded on an Export Declaration, and it is expected to be much less significant.

15 The ABS is also investigating methods to estimate the value of intangible products consumed by households. These are services that are delivered online by non–residents, such as e–books, films, music, software, online newspaper and magazine subscriptions, and gambling services.

16 Estimates of the value of goods imported under the LVT are also being incorporated into the supply–use tables which underpin the National Accounts. As a result, they will be included in the accounts for the first time with the release of the 2012–13 issue of Australian System of National Accounts (cat. no. 5204.0) and the September quarter 2013 issue of Australian National Accounts: Income, Expenditure and Product (cat. no. 5206.0).

17 The Information Paper: Measurement of Online Retail Trade in Macroeconomic Statistics, 2013 (cat. no. 8501.0.55.007) was released on 19 August 2013 and explains where online retail trade is currently included in ABS macroeconomic statistics and describes enhancements to improve measurement and coverage of online retail trade activity in both retail trade statistics and the wider macroeconomic accounts.