DASA Defence Statistics

Bulletin No. 8

Recent Developments relating to

the improvement of Defence
related Export Statistics

N J Bennett

December 2007 defence analytical services agency

 TABLE OF CONTENTS

PAGE
NO.
List of Tables and Figures iv

Acknowledgements v

Abstract 1

Introduction 2

Background 3

Current Methodology and Assumptions 4

Recent Developments - Investigating the impact of changes to the 5

internationally agreed tariff codes used for recording goods exports

Recent Developments - Determining the nature of a large increase 9

in aerospace sales reported by the Society of British Aerospace
Companies (SBAC)

Recent Developments - Continuing to assess the feasibility of 11

collecting export data via existing departmental surveys.

Recent Developments - Simplifying the EU Intrastat System 12

Conclusions 13

References 15

Annex A: Tables 1.13 & 1.14 UK Defence Statistics 2007 16

Annex B: Summary of HM Revenue & Customs Combined 18

Nomenclature (CN) Codes as published in the Annual Report on
Strategic Export Controls

Annex C: Total Defence Export Deliveries: 2005 Vs 2006 Pre 19

Adjusted

Annex D: Table showing revisions to 2006 ARSEC country 20

breakdowns plus differences from original dataset.

iii
 LIST OF TABLES AND FIGURES

Table 1: Total Export deliveries for 2006: Original vs. Adjusted 8

dataset

Table 2: Extract from Table 1.12 of UKDS 2006 9

Table 3: Extract from Table 1.14 of UKDS 2007 11

Graph 1: Relationship between HMRC deliveries (plus SBAC 10

additions) and the DESO orders data

iv
ACKNOWLEDGEMENTS

The author would like to recognise the assistance provided by Linden Holder
Simon Lott, Nick Sibery and Laura Gadsby of DASA (Economic Statistics)
with the supporting analysis contained within the Annexes, the preparation of
many of the diagrams and for peer reviewing the main document.

I am also grateful for the comments made on an earlier draft of this note by
Neil Davies and Tony Turner, Director and Principal Consultant respectively,
within the DASA Directorate for Economic Statistics and Advice.

v
ABSTRACT

There have been significant problems with the definition, consistency and
coverage of defence related exports data over recent years. DASA has
endeavoured to ensure that defence exports statistics are tackled on a cross-
governmental basis. The Defence Trade Statistics Working Group (DTSWG)
with representatives from across the relevant Government departments was
convened in order to review the quality of the data, the issue of trade
suppressions and to ensure presentational consistency across Government.

Recently a number of key developments have emerged which have had (or
have the potential to have) a significant impact on the quality of these
statistics. These are:

a. Changes to the internationally agreed tariff codes used for recording

goods exports

b. Large increases in aerospace sales reported by the Society for British

Aerospace Companies (SBAC)

c. The feasibility of collecting export data via existing departmental

surveys

d. Simplification of the EU Intrastat System used to capture intra EU trade

flows

Following investigations and corrective action there have been relatively

successful outcomes with regards to (a) and (b). Work continues however, to
assess the feasibility of alternative methods for data collection and validation.
Significant issues remain though, including those relating to the legal and
presentational implications of data sharing between government departments.

Recent announcements concerning the transfer of most of the DESO to UKTI1

which is sponsored by the Department for Business Enterprise and
Regulatory Reform (BERR)2 are likely to have a further impact on any firm
plans to take forward this assessment. Indeed arrangements should be put in
place to transfer the responsibilities for the production of defence trade
statistics to BERR. At the EU level, plans to simplify the system used to
collect intra EU trade are likely to present further difficulties for the collection
of consistent and accurate trade data.

In this bulletin we first set out some of the history behind the methodology
used to construct the defence exports statistics published in UKDS. We then
examine the potential to improve the quality of the export data and provide an
update of progress on recent developments in this area. Some conclusions
regarding the future production of defence export statistics are aired.
1
UK Trade & Investment is the Government organisation that supports companies in the UK
doing business internationally and overseas enterprises seeking to set up or expand in the
UK. It is part of BERR.
2
BERR was formerly known as the Department for Trade and Industry (DTI)

1
Recent Developments relating to the improvement of Defence
related Exports Statistics

Introduction

1. The Defence Analytical Services Agency (DASA) publishes statistics

on defence exports annually in the MODs statistical compendium, UK
Defence Statistics (UKDS) (tables 1.13 & 1.14 in 2007 see Annex A).
Data are obtained from three sources: Her Majestys Revenue &
Customs (HMRC), the Society of British Aerospace Companies
(SBAC), and the Defence Exports Services Organisation (DESO).

2. There have been significant problems with the definition, consistency

and coverage of defence related exports data over recent years.
DASA has endeavoured to ensure that defence exports statistics are
tackled on a cross-governmental basis. The Defence Trade Statistics
Working Group (DTSWG) with representatives from across the relevant
Government departments was convened in order to review the quality
of the data, the issue of trade suppressions and to ensure
presentational consistency across Government.

3. Recently a number of key developments have emerged which have

had (or have the potential to have) a significant impact on the quality of
these statistics. These are:

a. Changes to the internationally agreed tariff codes used for

recording goods exports. Following these there was an apparent
increase in the advised HMRC deliveries of military goods between
2005 and 2006. Although there have been minor changes over the
years to these customs codes, further amalgamation at this time
resulted in a major discontinuity in the code set used. This has been
investigated. It was not clear how far the increase reported reflected a
true increase in the value of military goods exported as opposed to the
inclusion of civil goods previously excluded. Further investigation of the
company level data contained within the HMRC dataset revealed a
large element of the reported increase in 2006 (recorded against a dual
use codes) as being probably civil in nature. Extensive investigations
took place to determine the nature of this increase. These included the
validation of identified deliveries data with defence export orders data
surveyed by MOD and reviewing the content of the HMRC data capture
system to seek additional information on the nature of the export
deliveries. As a result of the investigations, the 2006 figure has been
revised downwards.

2
 b. Large increases in the aerospace sales reported by the Society of
British Aerospace Companies (SBAC). In collating the 2005 survey
SBAC discovered that their turnover and new orders data had been
overstated in 2005. Changes in the survey format resulted in some new
order and sales data from outside the UK being incorrectly attributed to
the UK. SBAC has amended their results and conducted a thorough
review of the 2006 data. They are confident that the aerospace survey
provides the most accurate and robust picture of the UK aerospace
industry.

c. The feasibility of collecting export data via existing departmental

surveys. We are exploring the option to expand the scope of questions
contained in the current survey of defence suppliers administered by
the Defence Export Services Organisation (DESO). Recent
announcements concerning the transfer of the DESO to UKTI,
however, are likely to have a further impact on any firm plans to take
this option forward.

d. Simplification of the EU Intrastat System used to capture intra EU

trade flows. At the EU level, plans to simplify the system used to
collect intra EU trade are likely to have a further impact on the potential
to collect consistent and accurate trade data.

4. In this bulletin we first set out some of the history behind the
methodology used to construct the defence exports statistics published
in UKDS. We then examine the potential to improve the quality of the
export data and provide an update of progress on recent development
in this area. Some conclusions regarding the future production of
defence export statistics are aired.

Background

5. The Defence Analytical Services Agency (DASA) publishes statistics

on defence exports annually in UK Defence Statistics (UKDS) (tables
1.13 & 1.14 in 2007 see Annex A). Data are obtained from three
sources:

a. HMRC Her Majestys Revenue & Customs. HMRC gather data from
the Single Administrative Document (SAD) which is completed by
exporters for exports of goods outside the EU (European Union), and
from returns from (VAT registered) traders for dispatches of goods (via
the Intrastat survey) within the EU. The level of HMRC data capture
has changed with time. With the introduction of Intrastat and new EU
commodity codes in the early 1990s (see DASA Defence Statistics
Bulletin No.4, dated July 1994) the level of detail available for capture
has diminished. This has continued recently with the creation of six
new dual use aerospace codes (from 2006) and the amalgamation of a

3
 further three. The largest change in terms of the value of deliveries has
occurred to the new 88033000 code (more on this later).

b. Society of British Aerospace Companies. SBAC carry out an annual

survey of aerospace contractors. This extends beyond their
membership. Data are gathered on turnover of civil and military
products and services.

c. Defence Exports Services Organisation (DESO). DESO survey a

number of known producers of military equipment and services to
gather data on defence export orders.

Within this document, for ease of exposition we shall use the term
exports to indicate the aggregation of true exports and dispatches.

6. The DASA figures form part of a larger body of published information

from across government departments. This includes the Annual
Report on Strategic Export Controls (ARSEC), which focuses primarily
on strategic export licensing, but also includes statistics on goods
exports, split by country of destination. The ARSEC report, first
produced in 1999 is published by the Department for Business
Enterprise and Regulatory Reform (who operate the licence scheme),
the Ministry Of Defence, the Department for International Development,
and the Foreign and Commonwealth Office.

Current Methodology and Assumptions

7. Accurate data on defence exports are elusive. There are various

reasons for this:

a. The HMRC data are complex. They employ a detailed codification

system (see, for examples, Annex B which lists the codes used in
ARSEC) which is based on the internationally agreed Harmonised
System (HS). The EU implementation uses what are called Combined
Nomenclature Codes (CNs). These are 6 digits from the Harmonised
Codes extended by the addition of 2 further characters to make an 8
digit code. Neither the HS nor the CN system is designed for the
specific purpose of collecting defence data, hence the identification of
military products is often not straightforward. Items (e.g. fighter aircraft
and tanks) may be single use, i.e. they will be used normally only by
the military, but many products, (e.g. rifles and helicopters) may be
dual use, i.e. they can be used by the civil authorities for law and order
purposes or by the military. For some aircraft categories, the EU
coding utilises a civil/ other than civil division. Because of reasons
connected with the treatment of duties payable, this does not always
mean that the other than civil items are definitely for military use.

4
 Radios, electronic items and vehicles also may be dual use: military
exports of these are difficult to identify.

b. HMRC have to operate their trade statistics in an international arena

and within EU legislation. Burden on business is a key issue, with data
suppliers often seeking a reduction in the regulation and form filling
required.

c. The returns rely to a large extent on the accuracy of the data that are
entered. HMRC perform quality assurance checks to improve the
quality of the data.

8. More information detailing the DASA and HMRC methodology used to

calculate the defence exports statistics can be found in the National
Statistics Quality Review report on trade statistics and DASA Defence
Statistics Bulletin No.4, both published online on the DASA website3:

Recent Developments

Investigating the impact of changes to the internationally agreed tariff

codes used for recording goods exports

9. HMRC reported a large increase in defence goods exports from 2005

to 2006. These occurred following changes to the internationally
agreed tariff codes used for recording goods exports (see Annex B):
some military codes had been further amalgamated with civil codes.

10. Extensive investigations took place to determine the cause of the

increase. These included (i) validating the identified deliveries data with
defence export orders data from the DESO survey and (ii) reviewing
the content of the HMRC data system to confirm their figures. It was
concluded that a large element of this reported increase in 2006
(recorded against one of the dual use codes) was probably civil in
nature. Corrections were made accordingly to the 2006 dataset.

11. Comparisons between the 2005 and 2006 datasets revealed a very
large increase in the aggregate export deliveries total of some 670M
(1391M in 2005 to 2059M in 2006 See Annex C). Allowing for the
compensating yearly fluctuations recorded against the other tariff
codes in the dataset, by far the largest increase was recorded in a
single tariff code - the newly amalgamated code 88033000. This
code is one of several used to construct the Military Aircraft & Parts
category in UKDS Table 1.13. Export deliveries in this dual use code
alone had increased by some 750M between 2005 and 2006 (509M
3
http://www.dasa.mod.uk/natstats/quality/NSQR_Series_Report_32_Report_Part_3.pdf

5
 under the old 88033090 code to 1260M against the new 88033000
code. The effect of the increase in trade reported against 88033000 is
clear when comparing the aggregate numbers under the Military
Aircraft & Parts category at Annex C.

12. By conducting a variety of statistical tests (standard deviation and t-

tests) to assess the variability of the data within this code, it was
concluded that the value of trade against 88033000 was not typical.
The probability that this was a reflection of the past time series
(recorded against 88033090 and the estimated military element of
88033010) was very low (under 4 %). The large increase in the value
of exports recorded against this code looked likely to be either a one-
off peak in military export activity in that year or it contained a
significant element which was in fact civil in nature and which would
have been previously recorded under the old civil code 88033010.

13. The challenge then was to determine how much of the 750M increase
recorded under the single tariff code (88033000) constituted a real
increase in military trade and how much was in fact civil and was being
erroneously included under the new code.

14. Following the statistical tests briefly outlined at para 12, the following
validation exercises took place:

a. DASA identified 26 countries where differences in the value of export

deliveries between 2005 and 2006 were 5M or more. These
differences totalled some 715M. From this investigation 14
companies were identified, accounting for 691M of the difference
between the 2005 and 2006 data. This 691M represents some 97% of
the 715M identified against these 26 countries. From the initial
findings against these 14 companies, more detailed information against
8 of them was sought.

b. Comparisons were made at country and company level of the nature of

export deliveries recorded under the new 88033000 code. The value of
exports recorded over the past 6 years of time series data under the
codes (i.e. 88033010 and 88033090) which had now been
amalgamated into the new code were then considered. The aim here
was to gain a feel for the relative mix of civil/military trade in the past.
This comparison encompassed those countries where the difference
between 2005 and 2006 was 5M or more.

c. Where it was clearly evident from the time series data that most of the
trade had historically been recorded as civil, the values now recorded
under that company and/or country were abated by that element which
was previously recorded to be civil. In addition if a company was
deemed to be a wholly civil exporter, the value of export trade was
removed completely.

6
 d. Further validation was then carried out by comparing the level of
defence orders (surveyed and collected by the DESO) over time with
that recorded as a delivery in 2006 under 88033000. Some simplifying
assumptions had to be made concerning the lag between orders and
deliveries, the corporate ownership of the companies concerned, and
in the coverage of the datasets. For instance, the services and
government to government sales (e.g. defence export orders relating to
Al Yamamah4) elements of the orders data were removed in order to
improve the comparability between the two datasets. In practice
though, a direct comparison between orders and deliveries is extremely
difficult, particularly given the differing methods of product classification
employed by the DESO and HMRC.

e. DASA also sought to determine from the HMRC data capture systems
if there were any other fields/variables which we could employ to
further distinguish the military/civil nature of the export (e.g. such as
product type, end user or license indicator). HMRC confirmed that this
was not the case and that although licence data were collected for
exports, it would be very resource intensive to reconcile the deliveries
data with licenses as both were collected and analysed on two
separate systems5. Also, the application of a BERR export licence
does not necessarily mean that the goods in question are for military
use. Therefore the quality of employing licences as an indicator of
military trade is not certain.

15. The main findings were:

a. Of the 750M increase in export deliveries reported between 2005 and

2006 under the newly amalgamated dual use code 880303000,
715M of the difference was accounted for by 26 countries. Total
export trade recorded under those countries was 1128M in 2006 and
represented nearly 90% of all trade (1260M) recorded under
88033000 in 2006.

b. Of the 715M increase accounted for by these 26 countries, 14

companies were identified as having the largest recorded increase in
export activity between 2005 and 2006. The difference at company
level accounted for 97% of that increase identified at country level.
Aggregate trade recorded against these 14 companies in 2006 was
some 1005M compared to just 314M in 2005.

c. Country level abatement rates (based on the relative mix of civil/military

trade identified by the (previous six years of) time series data) were
calculated and applied for the 8 companies spread across those 26
countries showing the largest increases and where complete data were

4
Al Yamamah (Arabic for The Dove) is a major government to government arms deal,
signed in 1985, for the supply of aircraft, support services, equipment, weapons and
electronic warfare systems by Britain to the Saudi Royal Air force.
5
The feasibility of using export license data is currently being explored following recent
advice from HMRC.

7
 available. For the remaining 6 companies, either the value of export
trade was removed completely due to civil nature of the exporter (e.g. a
commercial airline or holiday company) or was not adjusted due to the
inconclusive nature of the supporting data. The companies where the
data were inconclusive were small in value.

d. Of the total export trade of 1128M recorded under those 26 countries

in 2006, 902M had been identified against 8 companies (where data
were available). By applying the country level abatement rates for
these 8 companies, 508M was identified as relating to civil exports
with 394M as defence.

e. The remaining 226M recorded across those 26 countries but not

identified at company level was then adjusted by the aggregate
civil/military abatement rates for all 26 countries. These were 44%
Defence and 56% Civil. This identified a further 99M as defence and
126M as civil.

f. For all other countries recording export deliveries under 88033000 tariff
codes, the aggregate civil/military abatement ratio (44:56) was applied
across the total value recorded under each country.

16. The investigations concluded that :

a. After (i) excluding certain companies from the methodology of using

trade by Known Military Traders and (ii) assessing the civil export
content of the remaining entries, some 701M has been removed from
the aggregate figure that was reported in ARSEC and UKDS (Table 1
below)

Table 1: Total Export deliveries for 2006: Original vs Adjusted dataset

Millions at current prices
2006 Adjusted 2006 Original

Identified Exports 1 358 2 059

Split by Commodity:

Armoured Fighting Vehicles & Parts 76 76

Military Aircraft & Parts 866 1 567
Warships 0 0
Guns, Small Arms & Parts 77 77
Guided Weapons, Missiles & Parts 250 250
Ammunition 3 3
Optical Equipment & Training Simulators 86 86

Split by destination:

NATO Countries and Other Europe 914 1 450

Asia & Far East 254 373
Latin America & Caribbean 6 10
Middle East & North Africa 172 203
Other Africa 12 23
Source: HM Revenue & Customs & DASA

8
 b. The country level breakdowns which were published as Table 4.4 in
ARSEC 2006 should be revised to the numbers shown in Annex D.

c. The current set of adjustments draws heavily on time series data which
ceased after 2005. This approach is, therefore, not sustainable for
more than a couple of years. The development of alternative methods
for positively identifying defence export trade needs to be faced
quickly.

Determining the nature of a large increase in aerospace sales reported

by the Society of British Aerospace Companies (SBAC)

17. SBAC carry out an annual survey of aerospace contractors. This

extends beyond their membership. Data are gathered on turnover of
civil and military products and services. DASA use these data to
supplement the HMRC deliveries data to compensate for data
deficiencies in the aerospace and electronics exports. These estimates
of additional aerospace equipment and services appear as a separate
line in UKDS Table 1.14 and form a considerable component of the
estimate of the total value of export activity. The full methodology is
detailed in the National Statistics Quality Review on Trade Statistics.

18. In their 2005 annual report, SBAC initially reported an increase of

approximately 1.9Bn in defence aerospace export sales reported by
its members between 2004 and 2005 (See Table 2 which illustrates the
initial impact on the 2005 totals in Table 1.12 of UKDS).

Table 2: Estimates of Total Export Deliveries and Orders: Defence Equipment and Services

Millions at Current Prices

2000 2001 2002 2003 2004 2005
Estimated Total Export Deliveries: 4 406 4 216 4 120 4 545 5 162 7 142
Equipment and Services
Of which:
Identified Defence Equipment Exports 1 721 1 533 942 992 1 391 1 391
Estimates of Additional Aerospace 2 685 2 683 3 178 3 553 3 771 5 751
Equipment and Services
Sources: HM Revenue & Customs, Society of British Aerospace Companies

19. We would expect this increase in sales to be mirrored by an increase in

the orders data collected by the DESO in previous years (2002-2004)
in fact, aerospace orders data from their survey shows a downwards
trend. This has had a marked effect on the time series data see
Table 2 above.

20. Furthermore, if we examine the relationship between aggregate

defence export orders and deliveries data (Graph 1), the two sets of
data align and the relationship holds strong. It is only in the last year

9
 (2005) that we see a spike and the HMRC plus SBAC additions figures
(driven by the surge in sales data) diverge from the orders data which
ultimately led to a breakdown in this loose relationship.

Relationship between Defence Export Orders and Defence

Export Deliveries

8000

7000

6000

5000
M

4000

3000

2000

1000

0
2000 2001 2002 2003 2004 2005
Year

Orders Export deliveries plus SBAC additions

Graph 1: Relationship between HMRC deliveries (plus SBAC additions) and the DESO
orders data

21. DASA and DESO staffs met to discuss the apparent disparity between
the exports orders and sales data. DESO had identified a similar surge
in SBAC orders data when compared to the data they collect in their
survey of industry. In collating the 2005 survey SBAC discovered that
their turnover and new orders data had been overstated. Changes to
the survey format resulted in some new orders and sales data from
outside the UK being incorrectly attributed to the UK. This had
occurred where sales/orders won by the overseas subsidiaries of
certain defence suppliers had been counted as a UK export by the UK
based head offices of these suppliers. SBAC has now amended the
2005 results and conducted a thorough review of 2006 data. They are
confident that the aerospace survey provides the most accurate and
robust picture of the UK aerospace industry. Table 3 details how the
revised sales figures have resulted in a major adjustment to the 2005
estimates of total export activity contained with Table 1.14 of UKDS
2007.

10
Table 3: Estimates of Total Export Deliveries and Orders: Defence Equipment and Services

Millions at Current Prices

r
2000 2001 2002 2003 2004 2005 2006
Estimated Total Export Deliveries: 4 406 4 216 4 120 4 545 5 162 4 527r II 4 697
Equipment and Services
Of which:
Identified Defence Equipment Exports 1 721 1 533 942 992 1 391 1 391r II 1 358
Estimates of Additional Aerospace 2 685 2 683 3 178 3 553 3 771 3 136r 3 339
Equipment and Services
Sources: HM Revenue & Customs, Society of British Aerospace Companies

Continuing to assess the feasibility of collecting export data via existing

departmental surveys.

22. HMRC advised the DTSWG, early in 2004, that they were to undertake
a mini review of defence trade statistics (to validate the data they
provide). Pending the outcome of this review, the exports and imports
figures reported in UKDS were de-badged as National Statistics as it
was considered that their quality could not be endorsed whilst the
ongoing data quality problems persisted.

23. HMRC, at the request of the DTSWG, embarked on a 1 month

voluntary pilot survey of defence traders. The study examined lines of
trade over the 1M (0.5M on a smaller selected sample) threshold for
EU and non EU imports and exports for the problematic 5 dual use
ARSEC codes and the 22 new dual use codes. The purpose of this
exercise was to increase confidence in the results and to make
rebadging more likely if the activity is successful. The pilot survey took
the form of semi-structured telephone interviews with known military
traders identified by HMRC and via listings provided by DASA and the
DESO. HMRC experienced problems related to respondent burden
placed on business though. The lack of cooperation meant that over
50% of the sample size by value could not be validated.

24. Given that the HMRC pilot survey had limited success, the remaining
options open to us narrowed. We have also explored the option to
expand the scope of questions contained in the current survey of
defence suppliers administered by the Defence Export Services
Organisation (DESO). Recent announcements concerning the transfer
of the DESO to the UKTI in the Department for Business Enterprise
and Regulatory Reform (BERR) are likely to have a further impact on
any firm plans to take this option forward though. Indeed, at a recent
meeting of the DTSWG (November 2007) it was agreed that
arrangements should be put in place to transfer the responsibilities for
producing defence trade statistics to BERR.

25. We, however, continue to strive to improve the quality and coverage of
the export statistics. Most recently, and with agreement from the

11
 DTSWG, DASA have tasked HMRC with examining the potential for
analysing the value of export licenses alongside current methods used
for the data extraction. Where possible, we will continue to build on the
validation checks introduced during this years exercise.

Simplifying the EU Intrastat System

26. At the EU level plans to simplify the system used to collect intra EU
trade are likely to have a further impact on the potential to collect
consistent and accurate trade data.

27. Intrastat is the system for collecting detailed trade in goods statistics
within the EU. It is a monthly survey, which in the UK covers around
35,000 VAT registered businesses and accounts for nearly half of the
statistical burdens placed on businesses. Previous attempts to reduce
the scale of the survey and the burdens on data providers have not
generated any radical reductions, with member states often supporting
their own requirements for detailed data rather than Commission
proposals for simplification. With the current focus on reprioritisation of
the European Statistical System, endorsed by the UK in its EU
presidency, there is renewed commitment and opportunity to deliver
changes.

28. There have been 4 options proposed by Eurostat6 to bring about

radical reduction in the scale of the Intrastat survey:

a. Single Flow Each Member States collects only dispatch (export

data) and computes arrival (import) data from other Member States
dispatch data.
b. Reduce the number of businesses involved in Intrastat by lowering
the current 97% coverage by value requirement, or by adopting a
statistically based sample
c. Reduce the data businesses have to provide reductions through
earlier simplifications leave the product classification as the main focus
for this option.
d. Reduce the frequency of data collection indications from users such
as the European Central Bank are that quarterly data is not a viable
option; any combination of aggregate data monthly and detailed data
quarterly is unlikely have a significant impact on the burdens on data
providers. Therefore this option is not considered viable.

29. Each has its advantages and disadvantages, which have been covered
extensively in recent studies7 and are not repeated here. Whereas

6
The Statistical Office of the European Communities (Eurostat) is the statistical arm of the
European Commission, producing data for the European Union and promoting harmonisation
of statistical methods across the member states of the European Union.

12
 previously the disadvantages have prevented implementation, the
current climate requires a reform of Intrastat to be achieved and
recognises that some negative consequences will be inevitable. The
ECOFIN8 Council have recently agreed the Commissions proposal to
reduce the coverage threshold in the short term whilst seeking to move
to single flow in the longer-term.

Conclusions

30. In this bulletin we have explored some of the history behind the
methodology used to construct the defence exports statistics published
in UK Defence Statistics. We then examined the potential to improve
the quality of the current export data and provided an update of
progress on recent developments in this area.

31. Recently a number of key developments have emerged which have

had (or have the potential to have) a significant impact on the quality of
these statistics. These are:

a. Changes to the internationally agreed tariff codes used for recording

goods exports

b. Large increases in aerospace sales reported by the Society of British

Aerospace Companies (SBAC)

c. The feasibility of collecting export data via existing departmental

surveys

d. Simplification of the EU Intrastat System used to capture intra EU trade

flows

32. Following investigations and corrective action there have been

relatively successful outcomes with regards to (a) and (b). Work
continues however, to assess the feasibility of alternative methods for
data collection and validation. Significant challenges remain though,
including issues relating to the legal and presentational implications of
data sharing between government departments. Recent
announcements concerning the transfer of most of the DESO into the
UKTI sector of the Department for Business Enterprise and Regulatory
Reform (BERR) are likely to have a further impact on any firm plans to
take forward this assessment. Consideration is being given to
7
HMRC (2007), Intrastat: Report on Potential Changes , available online at
www.uktradeinfo.com/index.cfm?task=news&targetnewsid=542
8
The Economic and Financial Affairs Council (ECOFIN) covers a number of EU policy areas,
such as economic policy coordination, economic surveillance, monitoring of Member States'
budgetary policy and public finances, the euro (legal, practical and international aspects),
financial markets and capital movements and economic relations with third countries. It also
prepares and adopts every year, together with the European Parliament, the budget of the
European Union.

13
transferring the responsibilities for producing defence trade statistics to
BERR. At the EU level, plans to simplify the system used to collect
intra EU trade flows are likely to present further difficulties for the
collection of consistent and accurate trade data.

14
REFERENCES

1. DASA (1994), Statistics on Exports and Imports of Defence

Equipment and of Defence Balance of Payments Invisible
Transactions. Defence Statistical Bulletin 4, DASA, July 1994

2. DASA (2004), NSQR Series Report No.32: Review of Ministry of

Defence Finance and Economic Statistics Released 7 April 2004 -
Published by Defence Analytical Services Agency (DASA)

3. HMRC (2007), Intrastat: Report on Potential Changes. HM

Revenue & Customs: London

4. MOD, BERR, DFID & FCO (2006), United Kingdom Strategic

Export Controls (ARSEC) Annual Report 2006: The Stationery
Office: London

5. Society of British Aerospace Companies (2006), UK Aerospace

Industry Survey 2005. SBAC: London

6. UKDS 2006, UK Defence Statistics 2006. The Stationery Office:

London

7. UKDS 2007, UK Defence Statistics 2007. The Stationery Office:

London

15
ANNEX A - Tables 1.13 & 1.14 UK Defence Statistics 2007

Table 1.13 Estimated Imports & Exports of Defence Equipment (Goods)

This table presents data on the value of defence equipment imports and exports. This information is broken down by commodity
grouping and broad geographic region. Data are based on HM Revenue & Customs information relating to defence equipment
reported to UK Customs. Defence equipment is identified by an agreed set of tariff codes intended to capture movements of
military equipment. Over the period covered by the table, changes have been made to the list of identified defence equipment by,
for example, the removal of two HM Customs codes for aerospace from 1997. Further details are given in Defence Statistics
Bulletin No. 4 and in the National Statistics Quality Review on Trade Statistics. For progress relating to improvements to the quality
of defence trade statistics, please refer to the notes at the start of this section on Trade. [These notes are on the UKDS website]

The data in this table are outside the scope of National Statistics because they do not meet all of the high professional quality
assurance standards set out in the National Statistics Code of Practice.

Million at Current Prices

1997 2000 2001 2002 2003 2004 2005 2006
Identified Imports 1 288 1 658 1 804 1 645 II 712 700 652 II 1 098
Split by Commodity: II II
Armoured fighting Vehicles and Parts 42 24 21 22 II 19 40 52 II 87
Military Aircraft and Parts 1 038 1 362 1 609 1 292 II 440 403 280 II 677
Warships 1 - - - II - 2 - II -
Guns, Small Arms and Parts 46 28 22 52 II 55 51 62 II 96
Guided Weapons, Missiles and Parts 113 142 138 217 II 163 160 231 II 188
Ammunition 9 12 1 9 II 17 20 12 II 15
Optical Equipment and Training Simulators 38 90 13 53 II 19 24 15 II 34
II II
Split by Origin: II II
NATO Countries and Other Europe 1 087 1 383 1 718 1 371 II 566 576 581 II 904
Asia and Far East 93 108 1 104 II 53 42 35 II 120
Latin America and North Africa 6 6 2 20 II 2 4 1 II 2
Middle East and North Africa 93 139 80 136 II 84 70 28 II 59
Other Africa 9 22 3 15 II 7 7 7 II 13
II
Identified Exports1 3 359 1 721 1 533 942 952 1 391 1 391 II 1 358
Split by Commodity: II
Armoured fighting Vehicles and Parts 201 80 54 77 63 62 60 II 76
Military Aircraft and Parts 2 296 1 183 1 207 584 734 957 740 II 866
Warships 256 - 1 - - 58 58 II -
Guns, Small Arms and Parts 95 36 75 53 48 72 199 II 77
Guided Weapons, Missiles and Parts 427 394 175 193 121 219 291 II 250
Ammunition 20 26 9 19 5 5 6 II 3
Optical Equipment and Training Simulators 64 2 12 16 21 18 36 II 86
II
Split by Origin: II
NATO Countries and Other Europe 1 034 593 969 609 467 801 832 II 914
Asia and Far East 204 593 196 136 273 235 317 II 254
Latin America and North Africa 132 26 19 5 6 15 5 II 6
Middle East and North Africa 1 985 504 320 185 221 250 207 II 172
Other Africa 3 6 28 8 26 90 29 II 12
Source: HM Revenue & Customs
1
Changes to the internationally agreed tariff codes used for recording goods exports (see Annex C of the Annual Report on
Strategic Export Controls) had originally contributed to an apparent increase in the deliveries figures from 2005 to 2006. The
further amalgamation of military and civil codes which has resulted in a discontinuity in the code set used to compile these data has
been investigated. It was not clear how far the increase reported reflected a true increase in the value of military goods exported as
opposed to the inclusion of civil goods previously excluded. Further investigation of the HMRC dataset revealed a large element of
this reported increase in 2006 (recorded against one of the dual use codes) as being probably civil in nature. The 2006 figure has
therefore been revised downwards accordingly.

16
Table 1.14 Estimates of Total Export Deliveries and Orders: Defence Equipment and
Services
This table provides an estimate of total defence export activity relating to the UK. It uses data on additional aerospace equipment
and services from a survey undertaken by the Society of British Aerospace Companies. Aerospace services include training,
consultancy and project support related to the export activity. The second part of the table provides data on identified export orders
of defence equipment and services. This illustrates the relationship between export orders and actual export deliveries.

The data in this table are outside the scope of National Statistics because they do not meet all of the high professional quality
assurance standards set out in the National Statistics Code of Practice.

Millions at Current Prices

1
1995 1997 2000 2001 2002 2003 2004 2005 2006
r
Estimated Total Export Deliveries: Equipment and 4 723 6 684 4 406 4 216 4 120 4 545 5 162 4 527 II 4 697
Services
Of which:
Identified Defence Equipment Exports 2 076 3 359 1 721 1 533 942 992 1 391 1 391 II 1 358
Estimates of Additional Aerospace Equipment2 2 647 3 325 2 685 2 683 3 178 3 553 3 771 3 136r 3 339
and Services

Identified Export Orders for Defence Equipment 4 970 5 540 4 737 4 160 5 041 4 882 4 546 3 989 5 527
and Services3
Split by Equipment Type:
Air Sector 3 456 3 193 3 501 3 245 3 553 3 526 3 119 2 491 4 133
Land Sector 535 656 616 341 509 303 475 584 670
Sea Sector 71 368 475 50 464 252 209 369 280
Not Specified 908 1 323 145 524 515 801 663 546 444
Sources: HM Revenue & Customs, Society of British Aerospace Companies, MOD Defence Export Services Organisation (DESO)
1
Changes to the internationally agreed tariff codes used for recording goods exports (see Annex C of the Annual Report on
Strategic Export Controls) had originally contributed to an apparent increase in the deliveries figures from 2005 to 2006. The
further amalgamation of military and civil codes which has resulted in a discontinuity in the code set used to compile these data has
been investigated. It was not clear how far the increase reported reflected a true increase in the value of military goods exported as
opposed to the inclusion of civil goods previously excluded. Further investigation of the HMRC dataset revealed a large element of
this reported increase in 2006 (recorded against one of the dual use codes) as being probably civil in nature. The 2006 figure has
therefore been revised downwards accordingly.
2
In collating this years survey SBAC discovered that their turnover and new orders data had been overstated in 2005. SBAC has
amended 2005 results and conducted a thorough review of 2006 data. They are confident that the aerospace survey provides the
most accurate and robust picture of the UK aerospace industry. Changes in the 2006 survey format resulted in some new order
and sales data from outside the UK being incorrectly attributed to the UK.
3
Figures for export orders are taken from the Defence Export Services Organisations survey of known Defence Contractors.

17
ANNEX B - Summary of HM Revenue and Customs Combined
Nomenclature (CN) Codes as published in ARSEC

Part 1 - Tariff codes used to compile data on the number of small arms and light
weapons

Code Description1
93011100 Artillery weapons (for example, guns howitzers and mortars): self propelled
93011900 Artillery weapons (for example guns howitzers and mortars): other
93012000 Rocket launchers; flame throwers; grenade launchers; torpedo tubes and
similar projectors
93019000 Military weapons, other than revolvers, pistols and the arms of heading 9307:
other etc
930200002 Revolvers and pistols, other than those of heading 9303 or 9304

Part 2 - Additional tariff codes used to compile data on the value of defence
exports

Code Description1
87100000 Tanks and other armoured fighting vehicles, motorised, whether or not fitted
with weapons, and parts of such vehicles
88021100 Helicopters: of an unladen weight not exceeding 2000kg
88021200 Helicopters: of an unladen weight exceeding 2000kg
88022000 Aeroplanes and other aircraft, of an unladen weight not exceeding 2000kg
88023000 Aeroplanes and other aircraft, of an unladen weight exceeding 2000kg but not
exceeding 15000kg
88024000 Aeroplanes and other aircraft, of an unladen weight exceeding 15000kg
880310003 Propellers and rotors and parts thereof
880320003 Under-carriages and parts thereof
880330003 Other parts of aeroplanes or helicopters
880510103 Aircraft launching gear and parts thereof: deck-arrestor or similar gear and
parts thereof: aircraft launching gear and parts thereof
880510903 Aircraft launching gear and parts thereof: deck-arrestor or similar gear and
parts thereof: other
88052100 Ground flying trainers and parts thereof: air combat simulators and parts
thereof
88052900 Ground flying trainers and parts thereof
89061000 Warships
93051000 Parts and accessories of articles of headings 9301 to 9304: of revolvers or
pistols
93059100 Parts and accessories of articles of headings 9301 to 9304: other: of military
weapons of heading 9301
93063010 Other cartridges and parts thereof: for revolvers and pistols of heading 9302
and for submachine guns of heading 9301
93063030 Other cartridges and parts thereof: for military weapons
93069010 Other [munitions and ammunition] for military purposes
93070000 Swords, cutlasses, bayonets, lances and similar arms and parts thereof and
scabbards and sheaths therefore.

Further information on classification is available in the Integrated Tariff and the ICN (available
free online at www.uktradeinfo.com).
Details on the compilation of overseas trade in goods statistics are available in GSS
(Government Statistical Service) Series No. 10: Statistics on the Trade in Goods, available
online from the ONS (Office for National Statistics) website.

1
Descriptions taken from IntraStat Classification Nomenclature
2
Information available for non-EU destinations only.
3
Dual use (military/civilian) codes. Information from Customs Procedure Code and
knowledge of trader used to apportion military trade element.

18
ANNEX C - Total Defence Export Deliveries: 2005 Vs 2006 Pre
Adjusted

2005 2006 Difference

Original

Identified Exports 1 391 2 059 +668

Split by Commodity:

Armoured Fighting Vehicles & Parts 60 76 +16

Military Aircraft & Parts 740 1 567 +827
Warships 58 0 -58
Guns, Small Arms & Parts 199 77 -122
Guided Weapons, Missiles & Parts 291 250 -41
Ammunition 6 3 -3
Optical Equipment & Training Simulators 36 86 +50

19
 ANNEX D - Table showing revisions to 2006 ARSEC country breakdowns
plus differences from original dataset.
Table 4.4: Value of exports of military equipment from 1 January 2006 to 31 December 2006.

Stat Value ( Millions) France 143.95 89.00 -54.95

Country of destination Original Revised Difference French Polynesia 0.16 0.07 -0.09
Afghanistan 0.81 0.71 -0.10
Gabon 0.00 0.00 Nil
Algeria 0.01 0.01 -0.00
Germany 115.09 75.77 -39.32
Angola 0.35 0.16 -0.19
Ghana 0.02 0.02 Nil
Antigua & Barbuda 0.23 0.10 -0.13
Gibraltar 0.00 0.00 Nil
Argentina 0.04 0.02 -0.02
Greece 6.13 0.34 -5.80
Aruba 0.01 0.01 Nil
Greenland (Denmark) 0.37 0.35 -0.02
Australia 27.19 17.55 -9.64
Guam 0.03 0.01 -0.01
Austria 11.09 10.89 -0.20
Haiti 0.08 0.04 -0.03
Bahamas 0.54 0.24 -0.30
Hong Kong 8.33 2.96 -5.37
Bahrain 93.90 93.19 -0.71
Hungary 6.55 0.41 -6.14
Bangladesh 0.21 0.21 -0.00
Iceland 1.55 0.72 -0.83
Barbados 0.03 0.03 Nil
India 91.55 89.02 -2.53
Belgium 6.36 3.94 -2.42
Indonesia 6.82 6.06 -0.76
Belize 0.00 0.00 -0.00
Iraq 0.88 0.56 -0.32
Bermuda 0.10 0.04 -0.05
Irish Republic 12.29 1.51 -10.78
Bhutan 0.00 0.00 -0.00
Israel 3.57 1.82 -1.75
Bosnia & Herzegovina 0.00 0.00 -0.00
Italy 88.19 70.08 -18.11
Botswana 0.03 0.03 Nil
Jamaica 0.06 0.04 -0.02
Brazil 6.43 3.67 -2.75
Japan 69.72 47.09 -22.63
Brunei 1.61 1.52 -0.09
Jordan 2.22 1.22 -1.00
Bulgaria 0.08 0.04 -0.04
Kazakhstan 0.18 0.16 -0.02
Cambodia 0.02 0.01 -0.01
Kenya 10.91 5.66 -5.25
Canada 101.90 64.96 -36.94
Kosovo 0.01 0.01 -0.00
Cape Verde 0.03 0.01 -0.02
Kuwait 5.39 4.67 -0.72
Cayman Islands 0.04 0.04 Nil
Kyrgyz Republic 0.84 0.43 -0.41
Chile 0.01 0.01 Nil
Latvia 0.03 0.01 -0.02
China 9.10 3.66 -5.44
Lebanon 0.50 0.23 -0.28
Colombia 0.01 0.01 -0.01
Lesotho 0.02 0.02 Nil
Cuba 0.00 0.00 -0.00 -0.01
Liberia 0.03 0.01
Curacao 1.13 0.51 -0.62
Libya 0.01 0.01 -0.01
Cyprus 0.54 0.25 -0.29
Lithuania 0.01 0.00 -0.00
Czech Republic 0.51 0.32 -0.19
Luxembourg 7.41 5.79 -1.62
Denmark 67.16 65.33 -1.83
Macao 0.42 0.31 -0.11
Djibouti 0.14 0.06 -0.08
Malawi 0.02 0.02 Nil
Egypt 8.41 3.96 -4.46
Malaysia 25.85 23.56 -2.30
Estonia 0.06 0.03 -0.03
Maldives 0.01 0.00 -0.00
Ethiopia 0.24 0.16 -0.07
Malta 11.86 0.01 -11.85
Falkland Islands 0.01 0.01 Nil
Marshall Islands 0.09 0.04 -0.05
Faroe Islands 0.06 0.03 -0.03
Mauritania 0.00 0.00 -0.00
Fiji 0.00 0.00 -0.00
Mauritius 0.02 0.01 -0.01
Finland 13.65 13.50 -0.15

20
Mexico 0.48 0.40 -0.08 South Korea 17.10 9.21 -7.89
Moldova 0.01 0.01 -0.01 Spain 41.91 11.56 -30.35
Mongolia 0.20 0.15 -0.05 Sri Lanka 0.82 0.38 -0.44
Morocco 0.11 0.09 -0.02 Swaziland 0.00 0.00 -0.00
Mozambique 0.01 0.01 Nil Sweden 24.44 20.20 -4.24
Nepal 0.08 0.06 -0.03 Switzerland 79.72 67.43 -12.29
Netherlands 11.74 8.08 -3.66 Syria 0.09 0.07 -0.02
New Zealand 6.44 6.35 -0.09 Taiwan 1.37 0.84 -0.53
Nigeria 0.27 0.25 -0.02 Thailand 8.13 7.24 -0.89
Norway 37.28 26.02 -11.27 Togo 0.00 0.00 Nil
Oman 20.59 12.92 -7.68 Tokelau Islands 0.02 0.01 -0.01
Pakistan 27.58 27.25 -0.33 Tonga 0.00 0.00 Nil
Papua New Guinea 0.00 0.00 Nil Trinidad & Tobago 0.03 0.02 -0.01
Philippines 0.34 0.19 -0.15 Tunisia 0.34 0.25 -0.09
Poland 2.62 1.86 -0.76 Turkey 35.22 33.93 -1.29
Portugal 9.01 6.44 -2.57 Turkmenistan 0.04 0.02 -0.02
Puerto Rico 0.15 0.07 -0.08 Uganda 0.03 0.01 -0.01
Qatar 2.37 1.37 -1.00 Ukraine 0.15 0.11 -0.04
Romania 1.37 0.84 -0.53 United Arab Emirates 19.41 8.46 -10.94
Russia 0.21 0.16 -0.06 United States 610.77 333.61 -277.16
San Marino 0.00 0.00 Nil Uruguay 0.11 0.09 -0.01
Saudi Arabia 44.81 43.26 -1.55 Venezuela 0.18 0.18 Nil
Senegal 0.22 0.10 -0.12 Vietnam 0.02 0.01 -0.01
Serbia & Montenegro 0.02 0.01 -0.01 Yemen 0.13 0.08 -0.05
Seychelles 0.02 0.01 -0.01 Zambia 0.03 0.03 Nil
Singapore 68.22 9.40 -58.82 2,058.70 1,357.89 -700.81
Slovakia 0.22 0.21 -0.00 Nil indicates a nil value.
0.00 in Difference column indicates a difference of less
Slovenia 0.12 0.09 -0.03 than 5,000.
South Africa 10.92 5.25 -5.67

21