Methodology
This page will elaborate detailed methodology of the Trade Analysis Report.
Trade Data Source
It is crucial to note that there is limited additional external data utilized in the data analysis for this report, except the means of transportation utilizing the most economical options to fulfill the missing data. SVTradeInsights utilizes primarily commodity trade data published by UN Comtrade through its proprietary data transformation process to transform data utilized in this report enable for achieving commodity trade balances and for more reliable decision makings.
Beginning in 2018, UN Comtrade has upgraded its trade data processing system, which resulted in improved features and functionality of the UN Comtrade database. The new system, named UN Comtrade Processing System, allows for processing and disseminating several new data items as recommended in the International Merchandise Trade Statistics: Concepts and Definitions 2010 (IMTS2010) [1]
IMTS 2010 recommends for partner attribution that (a) in the case of imports, the country of origin should be recorded; and (b) in the case of exports, the country of last known destination should be recorded.
Given the trade data characteristics, including bilateral trade data of reporter and partner countries, SVTradeInsights scrutinizes the bilateral trade data from both ends and in consecutive years to understand the bilateral trade patterns before balance the world trade data.
Data Transformation Process
The methodology for analyzing trade data involves several key steps to ensure accuracy and reliability in decision-making. This structured approach can be broken down as follows:
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Data Discovery
The process begins with gathering and identifying commodity trade data characterized by the 6-digit HS Code. This original data includes both bilateral trade volumes, trade values and means of transportation between reporter and partner countries providing a comprehensive view of trade activities.
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Data Mapping and Quality Check
Collected data undergoes a data mapping process for further transformation processes. This step is crucial for identifying the locations and formats of the necessary data. Bilateral trade volumes are initiators for the trade balance. Trade values together with the trade volumes will be further calculated to weighted average transaction prices and transportation costs. Bilateral means of transportation supplemented by most economical means of transportation options for the missing data will be utilized for the means of transportation identification.
The data quality check utilizes algorithms and codes to verify the quality of the source data to identify any corrupt or missing values that might affect the outcome. The qualified data will be then evaluated, selected, adjusted.
Trade Balance:
The results include the global and bilateral trade balances, weighted average transaction prices, and costs and means of transaction.
The global balance means “total imports = total exports” or “net import/export = 0”, while the bilateral balance means “Country A export to B = Country B import from A” and vice versa.
Global and Bilateral Trade Balance:
Trade volumes were standardized by converting all reported quantities to a metric ton basis using appropriate concentration values and conversion factors. Missing records—particularly those from recent years and certain reporting countries—were supplemented with corresponding data from partner countries. Discrepancies were systematically identified and resolved through a rigorous data validation process.
To ensure data quality and relevance, noise in the dataset—such as minor import entries reported by partner countries when the corresponding reporter countries did not register any official record—was excluded from the analysis. However, when both import and export volumes for such small quantities were reported by both sides, these figures were included, as they may represent recycled products in the same physical form as virgin products, thereby justifying their classification under the same HS Code.
For the calculation of bilateral trade balances, the trade volume for each country was adjusted—maintained, increased, decreased, or cleared—according to established bilateral trade adjustment rules. Each entry was mirrored in the corresponding counterparty’s trade balance with an equal value of opposite sign, ensuring consistency in the bilateral records.
In cases where abnormal trade volumes were detected, these entries were either deleted or retained with an accompanying note indicating a suspected registration error in the analysis, where possible. This approach helps to maintain the accuracy and reliability of the trade data.
Price Data:
It is crucial to note that the original price data includes nominal values from all means of transportation, including air, railway, road, sea and others, and in all cargo sizes and packaging types. Hence, certain price outliers could include those small cargo sizes and expensive means, air in particular and routes were removed from this analysis by means of the Interquartile Range (IQR) for a clearer understanding of the general trend, focusing on large-scale transportation. This step also ensures that any anomalies or inconsistencies are addressed.
Due to the source data provides trade values in terms of CIF and FOB values, FOB and CIF prices are calculated by the following formula “FOB/CIF prices = “ Total Value/Total Volume"
Regional prices are based on weighted average country prices in each region. Free On Board (FOB) price generally refers to the cost of goods at the point of shipment, covering expenses production costs, transportation to the port of departure, loading charges, and export documentation. It does not include costs incurred after the goods are loaded onto the vessel, such as international freight or insurance. FOB price is typically reported by sellers/exporters.
For Cost, Insurance and Freight (CIF) price, the seller/exporter is generally responsible for covering all costs associated with transporting goods to the buyer's (importer’s) destination port. This includes not only the cost of the goods but also freight charges (transportation costs) and insurance to protect against loss or damage during transit.
Outler Exclusion:
Outliers such as prices exceeding and below targeted Interquartile Range (IQR) will be identified and excluded before going through the data transformation process.
Upper IQR = Quartile 3 + [(Quartile 3 – Quartile 1) x IQR factor 1]
Lower IQR = Quartile 1 – [(Quartile 3 – Quartile 1) x IQR factor 2]
Interquartile Range:
The IQR factors may vary for various products depending on the nature of the statistical data dispersion. SVTradeInsights reserves the rights not to disclose the IQR factor values.
Mean of Transportation Data Fulfillment
IMTS 2010 recommends that the mode of transport (MoT) should be recorded as the means of transport used when goods enter or leave the economic territory of a country. It further recommends that countries compile MoT at the most detailed commodity level. Not every country is reporting MoT to UN Comtrade.
For those countries that are reporting MoT, the standardized international classification used for dissemination on UN Comtrade is as presented in IMTS2010:
All modes of transport
1. Air
2. Water
a. Sea
b. Inland waterway
3. Land
a. Railway
b. Road
4. Not elsewhere classified
a. Pipelines and cables
i. Pipelines
ii. Cables
b. Postal consignments, mail or courier shipments
c. Self-propelled goods
d. Other
If no MoT data are reported for a particular record, the MoT value is marked as “not specified” in UN Comtrade, but that record will be included in the aggregated “All Modes of Transport” [1].
SVTradeInsights has rearranged the means of transportation focusing on major items and group insignificant data, including inland waterway, pipelines and cables group and not elsewhere classified group, as “Others” as follows:
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Air
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Sea
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Inland waterway
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Railway
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Road
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Others
As aforementioned that not all countries specify the means of transportation, SVTradeInsights has further identified the most economical means of transportation between reporter and partner countries utilizing external desk research to fulfill the missing gaps. In the case of there are multiple means of transportation between two countries, “Sea” (in case of sea transportation is part of the shipping route) or the means having the longest distance among other means along the shipping route.
Cost of Transportation
There are cases that reporters (exporters and importers) report both FOB and CIF values at the same time. This information is the key part to estimate transportation cost by utilizing the difference between the calculated weighted CIF price and the FOB price (CIF price – FOB price).
The difference between CIF and FOB prices essentially represents the costs incurred during the transportation of goods from the exporting country’s port to the importing country’s port. These costs include several components:
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Freight Charges: This is the primary cost covering the physical transportation of goods by sea, air, or land from the port of origin to the port of destination. Freight charges vary depending on the mode of transport, distance, and shipping service level.
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Insurance Costs: CIF prices include insurance premiums that cover the risk of loss or damage to goods during transit. The insurance cost depends on the value of the goods, the nature of the cargo, and the risk profile of the shipping route.
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Port Handling Charges: These include fees for loading and unloading cargo, storage, terminal handling, and other port services at both the origin and destination ports. Under CIF terms, the seller typically covers these charges at both ports, whereas under FOB, the buyer usually pays for handling at the destination port.
Other Ancillary Charges: These may include customs clearance fees, documentation fees, security charges, and surcharges related to fuel price fluctuations or congestion.
Additionally, several factors influence the overall transportation cost embedded in the CIF-FOB difference:
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Cargo Size and Weight: Larger or heavier shipments generally incur higher freight and handling costs.
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Container Type: The choice between standard containers, refrigerated containers (reefers), or specialized containers affects cost due to different handling and equipment requirements.
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Shipping Routes and Traffic: The selected shipping route impacts transit time and cost. Routes with heavy maritime traffic or geopolitical risks may lead to higher insurance premiums and freight charges.
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Seasonality and Demand Fluctuations: Peak seasons or periods of high demand can increase freight rates and port congestion fees.
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Fuel Prices and Environmental Regulations: Variations in fuel costs and compliance with environmental standards (e.g., low-sulfur fuel requirements) influence shipping costs.
Understanding these components and factors is crucial for accurate estimation of transportation costs from the CIF-FOB price differential, enabling better cost management and pricing strategies in international trade.
Moreover, similar to the transaction price evaluation, outliers of the cost of transaction data are eliminated by utilizing the IQR approach.
References
[1]
U. Comtrade, "Methodology Guide for UN Comtrade User on UN Comtrade Upgrade 2019," UN Comtrade, 2019.
