International Price Indexes
Items, item specifications, and initial prices are
collected by the field economist during the interview.
Most subsequent pricing is conducted by the BLS national
office on a monthly basis for goods and a quarterly basis
for services. The reporters can choose from different
reporting mechanisms including surface mail, fax, or
telephone. If data clarification is required or the form
is not returned by the deadline, the firm may be
contacted by phone.
Most of the prices that are used to calculate price
indexes for the International Price Program are actual
transaction prices in the foreign trade market.
Respondents are asked to provide prices for actual
transactions that occur as close as possible to the first
day of the month. Other types of prices such as estimated
or list prices may be accepted for calculation in the
indexes, but prices for actual transactions that occur at
any time during the month are preferable to
non-transaction prices. Estimated prices are estimates of
the price that would have been charged for a transaction
as close to the beginning of the month as possible.
Whenever discounts apply to the actual, estimated, or
list price, they are deducted from the reported price to
calculate a net price. The major types of discounts are
cash, distributor, and quantity.
Generally, IPP accepts prices associated with
intra-company transfers and production sharing.
Intra-company transfers are typically items that are
traded between affiliates or entities of the same
company. IPP, however, only uses intra-company transfer
prices that are market-based or market-influenced.
Production sharing occurs when the responsibility for
producing a product is shared between either two (or
more) independent companies or various affiliated units
of the same company that are located in different
Average prices are not generally accepted in the IPP
survey, with the exception of selected commodities that
are priced using secondary source data. Petroleum, ocean
tanker freight, and grains data are examples of secondary
source indexes that use weighted average prices in index
Import and export prices can be quoted in many
different price bases. For imports, the preferred price
basis is f.o.b. (free on board) foreign port. The f.o.b.
foreign port price is the price free on board at the
foreign port of exportation before insurance, freight, or
duty are added. For exports, the preferred price basis is
f.a.s. (free alongside ship), the price of the item at
the U.S. port of embarkation. This includes insurance
charges plus the cost of transporting the good from the
place of manufacture to the exit port. In some product
areas such as finished manufactures, firms frequently
provide prices only on an f.o.b. factory basis. Although
the f.o.b. foreign port and f.a.s. price bases are
preferred, IPP will use other price bases such as cif for
imports as long as the firms can provide consistent price
The goal of the International Price Program is to
produce valid price indexes that track the price trends
for consistent items over time. To do this, IPP sends
respondents a pricing form that contains all the current
information about the item, including a detailed item
description and the trade factors. Item descriptions
indicate the physical characteristics of an item and can
change over time. The trade factors associated with each
item include the units priced, the country of
origin/destination, the discount structure, the class of
buyer or seller, and for imports, the duty amount when
appropriate. Like the item description, the trade factors
can vary and significantly affect the price. Any change
in an item's description or the trade factors is reviewed
to determine their significance.
If the changes are substantive item substitution is
made by linking. This insures that the index reflects
only actual or "pure" price changes and is not
moved by unadjusted quality changes. The linking
principle is to calculate what the "old" item
would trade for in the new time period. To do this,
reporters are asked for the dollar amount attributed to
the change. This value is then subtracted from the
"new" item in the current time period.
When a completely new item series is added to a
classification grouping, linking is not feasible.
Instead, the relative importance of each item in the
classification group is redistributed to include the new
item, and the historical movement of the index is used to
begin the series for the item. A change in the relative
importance of an item also occurs when other items are
dropped from an index without replacement.
An item may be replaced if the composition of the old
item differs from the newly available item to the degree
that the comparison of the prices is not feasible. Each
replacement item must be as closely related to the
original item as possible and must fall into the same
detailed item category.
When an item should be replaced but a new item is not
available or the expected discontinuation date of the
item being replaced is within the next 18 months, the
International Price Program discontinues the item. Data
on the deterioration of coverage is used to refine future
sampling allocations to publishable strata.