Trade Statistics

Glossary of Harmonized Agri-food 
International Trade Groupings

The Harmonized System of Tariff Codes

The Harmonized System (HS) is an international commodity classification of export and import statistics developed under the auspices of the Customs Cooperation Council. The HS is maintained by the World Customs Organization (WCO), an independent intergovernmental organization with over 160 member countries based in Brussels, Belgium. The WCO's Harmonized System Committee (HSC) is the international authority on classification. It resolves classification disputes between member administrations, issues classification decisions for goods presented by member administrations, works to ensure the uniform interpretation of the HS (e.g., the explanatory notes to the HS), and updates the HS to include changes in technology and patterns of international trade.

The HS is a six-digit nomenclature. Almost 200 countries, representing about 98% of world trade, use the HS as a basis for trade negotiations, collecting international trade statistics, quota controls, rules of origin, and statistical and economic research and analysis. In 1988, Canada adopted this system to replace the Customs Tariff Schedule. The HS is based on the principle that traded goods are classified by what they are and not according to their stage of fabrication, use, national status, or any other such criteria. The HS nomenclature is structured by economic activity or component material. For example, animals and animal products are found in one section; machinery and mechanical appliances which are grouped by function are found in another.(1)

The HS classification is a numeric system that assigns an internationally agreed upon 6 digit code to all products/traded goods. In addition, there are more finely defined 8 digit export and 10 digit import codes. These codes are aggregated into 99 Chapters; the first 24 chapters and parts of some others, are agricultural based and form the basis of Agriculture and Agri-Food Canada’s (AAFC) definition of "agri-food" trade.

Each month new export and import data is received from Statistics Canada, and total figures for the agri-food trade of Canada are identified. Two digit Chapter headings provide a quick picture of monthly trade. For reporting purposes and analysis, AAFC’s trade data is aggregated using a number of methods which are identified below.

In 2004, Canada’s agri-food exports equalled $26.4 billion and its agri-food imports equalled $20.4 billion.

Bulk - Intermediate – Consumer Oriented (BICO) Groupings

Introduction

Agricultural products moving into world markets can be classified as bulk, intermediate, or consumer-oriented products. The Bulk - Intermediate - Consumer-Oriented classification system (BICO) was developed by the USDA to group agri-food trade into three macro categories identifying the product's intended use. The degree to which a product receives further processing helps define whether a product is value-added or high-value. Also considered is the extent to which a product has arrived at the point of final consumption at either the food retail or food service sector.

The BICO definitions are made up of products as defined by the HS at the 6 digit level. Each grouping of these products is based on the stage of production and does not reflect the origin of the product(2). AAFC's BICO definition differs somewhat from the definition used in the USDA to reflect Canadian export-import reality.(3)

Bulk agri-food products

"Bulk" agricultural products include those commodities which have received little or no processing, such as wheat, corn, tobacco and soybeans. Tropical products, such as green coffee, cocoa, raw sugar, and natural rubber, are also included in this category.

Intermediate agri-food products

"Intermediate" agricultural products consist mostly of semi-transformed products (such as wheat flour, vegetable oils, and hides and skins) which have received some processing, but are generally not yet ready for final consumption. Slaughter animals are classified as intermediate products because they are range fed then finished with mixed feeds, corn and oilseed meal before they are processed further into meat cuts. All live animals are included in "intermediate" since another stage is required to make them ready for consumption.

Consumer-oriented agri-food products

This category contains products which are ready for final consumption. They have either undergone substantial transformation or have been prepared in a way that makes them fit for consumption. Wheat flour has been further processed into noodles and bakery products, while vegetable oils have become salad dressings.

High-value "consumer-oriented" agricultural products require little or no additional processing and are generally ready for final consumption at either the food retail or food service level. In some cases however, products classified as consumer foods may also be used by food processors as ingredients in other foods. These products, some of which are not ready for final consumption, can include spices, dairy and egg products, tree nuts, and dried fruits. While most consumer-oriented products have undergone various degrees of processing, the category also includes unprocessed items that have relatively high per unit values as a result of high transportation or storage costs. Good examples include fresh fruit and vegetables and nursery products.

Processed Food and Beverage

Introduction

This category consists of agriculture and agri-food products which come from the domestic food and beverage processing industry. The Standard Industrial Classification (SIC) is a sectoral approach that groups domestic production output by producing sector and sub-sector (e.g. cattle farm, meat processing) rather than by product. The SIC system consists of a series of numeric codes from 2 to 4 digits. Each 2 digit code represents an industry (e.g. Food Processing) and the 3 and 4 digit codes, its related sectors (e.g. Processed Fruits & Vegetables) and sub-sectors (e.g. Frozen Fruits & Vegetables). The SIC includes industry codes for both the farm, the food and beverage processing sectors (including fish products), on to machinery, bicycles and planes.

Statistics Canada has developed a concordance table that maps (matches) each 8 and 10 digit HS code into a 4 digit SIC category. The SIC approach makes it possible to link international trade performance to domestic production with other performance indicators such as employment, investment, value of shipments, and contribution to GDP, since Statistic Canada publishes these data on an SIC basis. Also, these statistics being available for all manufacturing industry, the SIC approach allows for Team Canada multi-industry comparisons.(4)

The HS codes that are linked to the Food and Beverage Manufacturing Industries make up the largest part of agri-food exports and imports. In addition, there are the Primary sector SICs (almost as large in dollar terms) and two small SIC groupings: Non-Food and Services to Agriculture.

The Concept of Value-Added

The term "value-added" refers to a concept or a theoretical idea rather than a product or a product grouping. However, as a committee at AAFC, we are not going to be able to wean people away from using "value added" to refer to the value that has been added by the processing sector to corn as it has been transformed into frozen niblets. There is no set of HS codes or SIC groupings that exist for this concept. The concept should not be used in reference to CAMC goals or to represent the processed food sector of Canada's agri-food exports. However, we will continue to hear the concept used this way.

1. Industry Canada, Strategis, Trade Data on Line

2. As does the SIC

3. USDA includes cotton.

4. The SIC will be replaced with the NAICS being developed jointly by Canada, the US and Mexico