Wednesday, February 8, 2012

Re-Exports? Now There’s an Oddity!

Here is a strange fact I’d never noticed before. It is quietly reported but not publicized. Indeed, having spent much of my adult life with economic data, I didn’t consciously note it until this morning. Daughter Monique stumbled across it today in one of our current projects. She discovered an industry which has exports way greater than its actual domestic manufacturing. What?!?!! Yes, indeed. This sort of thing stops you dead in your tracks. How can an industry export something that it doesn’t make? Here is what we discovered.

Within aggregate reports on U.S. exports, the U.S. Bureau of the Census has a category called Re-export. So what does that word mean. Here is the official definition:

Foreign Exports (Re-exports)
Exports of foreign merchandise (re-exports), consist of commodities of foreign origin which have entered the United States for consumption or into Customs bonded warehouses or U.S. Foreign Trade Zones, and which, at the time of exportation, are in substantially the same condition as when imported.

Sure enough, the word is a designation for goods manufactured elsewhere but exported from here. While there is nothing wrong with that, per se, when such re-exports are counted as part of U.S. exports, they somehow fail to meet the conventional definition of “export.”

So how big a proportion of Total Exports is this odd category. I’ve assembled the data from 1998 through 2010, and here it is in graphic format:



In 1998 re-exports were 6.7 percent of total exports, in 2010 12.2 percent. Thus they have become a rather sizeable portion of our total exports. The main problem with this category is that it causes confusion. In effect “re-exports” are really “imports” that don’t stay in the country. Thus they should be deducted from both categories. Suppose a ship approaches one of our ports fully loaded with goodies. But at the last moment in turns back to sea and goes somewhere else. We wouldn’t count that ship’s contents. Would we? But if it lands here, disgorges its wares, reloads them again, or someone else does, and the goodies depart again, why then we do.

The confusion arises because the Bureau does not differentiate real exports from re-exports in its detailed reporting on industries—only in the aggregate. Therefore it appears as if an industry is exporting what it hasn’t produced.  In the case of one industry, for instance, Audio and Video Equipment Manufacturing, the data tell us that the industry’s domestic shipments were  $2.9 million in 2010 but that it’s exports were $9.7 billion. Who can make sense of that? And there is more. This pattern has been in place in that industry since 2007. Confusion!

In its 2010 report, the Bureau also provides a further interesting insight. That year manufacturing exports were $795.4 billion, re-exports $136.7 billion. Thus the ratio for manufacturing was 17.2 percent, much higher than for all exports (which also include agricultural and mineral products) of 12.2 percent.

If we discover more details about this strange pattern, I’ll be sure to note them here.

8 comments:

  1. Thank you very, very much for this clear and cogent explanation of what was going on with this. I wasn't nearly as vexed as Monique last night, but I sure as heck didn't have a good explanation for how we were "exporting" more than three times as much of that stuff as we manufactured.

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  2. Weird problems arise from specialization--thus when people only handle "foreign trade" and never look at all the numbers that relate and make a whole picture. Analysts must look at wholes--and sometimes get these surprises...

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  3. A very nice explanation, indeed. Thanks.

    Of course, it does not entirely explain things for the industry data that brought this to our attention. I still do not understand how there is not a larger disparity between "General Imports" of audio and video equipment and "Consumption Imports." One would think that the general imports are the whole and the consumption imports are a subset of the whole, slated for sale to end users in the United States. But, if that were the case, then the $6 billion plus that this industry exports but does not actually make should show up in the difference between General Imports and Consumption Imports... but it does not.

    Ah... I've gotten a little too deep into the forest here so I won't go on. Clearly, I have much yet to learn...

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  4. We're not there yet, Monique. I agree. I wonder if those "re-exports" are first counted as imports. Maybe they're not. The precise treatment of these oddities is not clear to me. "General Imports" seems to me to be imports before they clear customs, "Imports for Consumption" everything that has cleared customs. So to what category do imports that are re-exported belong?

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  5. Indeed! And then, to complicated an already complicated scenario, we have the worrisome phrase "... or U.S. Free Trade Zones.." in that definition of Foreign Exports (Re-exports). This makes me wonder whether imports coming through one of our NAFTA partners are treated somehow differently... Sheesh... Much to learn.

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  6. Could these be products that are being "portaged" across the US because the Panama Canal cannot be used by the largest ships?

    Are they products that land in the US then get sent North or South because of lack of port facilities?

    It is just a thought, in an attempt to make sense of what seems a very strange practice.

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  7. Something of that sort might well play a role, russell. The quantities are growing. Why? They seem very high in audio visual...

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  8. Poking around the web, it seems that this tactic is used to avoid tariffs or trade restrictions.

    I don't know which ones might be in play, but the US has some of the lowest barriers.

    So it might happen to avoid Tariffs through NAFTA.

    BTW, Dubai seems to be a major hub for this exact practice in the middle east.

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