Identifying Foreign Suppliers in U.S. Import Data

K.7 Identifying Foreign Suppliers in U.S. Import Data Kamal, Fariha and Ryan Monarch Please cite paper as: Kamal, Fariha and Ryan Monarch (2017). Identifying Foreign Suppliers in U.S. Import Data. International Finance Discussion Papers 1142r. https://doi.org/10.17016/IFDP.2017.1142r International Finance Discussion Papers Board of Governors of the Federal Reserve System Number 1142r October 2017

Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 1142r October 2017 Identifying Foreign Suppliers in U.S. Import Data Fariha Kamal and Ryan Monarch NOTE: International Finance Discussion Papers are preliminary materials circulated to stimulate discussion and critical comment. References in publications to International Finance Discussion Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors. Recent IFDPs are available on the Web at https://www.federalreserve.gov/econres/ifdp/. This paper can be downloaded without charge from Social Science Research Network electronic library at http://www.sssrn.com.

Identifying Foreign Suppliers in U.S. Import Data Fariha Kamal* Ryan Monarch** Relationships between firms and their foreign suppliers are the foundation of international trade, but data limitations and reliability concerns make studying such relationships challenging. We evaluate and enhance supplier information in U.S. import data and present new facts about importer–exporter relationships. Count of foreign exporters from U.S. import data tends to exceed those from source country data, especially from China. The pattern of U.S. imports from origin countries changes substantially by tracing trade back to the supplier's location instead. Related-party relationships trade more, while larger countries have more relationships. Keywords: International Trade, Transactional Relationships JEL classifications: F1, L14; *Center for Economic Studies, U.S. Census Bureau. Contact: fariha.kamal@census.gov **The author is a staff economist in the Division of International Finance, Board of Governors of the Federal Reserve System, Washington, D.C. 20551 U.S.A. The views in this paper are solely the responsibility of the author(s) and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. Contact: ryan.p.monarch@frb.gov Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau, the Board of Governors of the Federal Reserve System, or of any other person associated with the Federal Reserve System. All results have been reviewed to ensure that no confidential information is disclosed. We thank Kyle Handley, C.J. Krizan, Javier Miranda, Tim Schmidt- Eisenlohr, Christian Volpe, and two anonymous referees for valuable comments. We have benefitted immensely from conversations with David Dickerson and Glenn Barresse of the U.S. Census Bureau Economic Statistical Methods Division, Kristen Nespoli of the U.S. Census Bureau International Trade Management Division, and Diana Wyman from Statistics Canada. Clint Carter and William Wisniewski were extremely helpful with data requests and disclosure processes. All errors are ours.

1 Introduction Every international trade transaction is an agreement between two firms, an importer (buyer) and an exporter (supplier), located in two different countries. For this reason, the recent availability of datasets that provide the identity of both importers and exporters for individual transactionshasfundamentalappealforthefieldofinternationaltrade. Indeed, theexistenceof such “two-sided” data has the potential to establish novel facts about traders that can augment the heterogeneous firm framework widely used throughout the literature (Melitz (2003)). To the best of our knowledge, two-sided trade transactions data has been analyzed for Colombia (Benguria(2014)), ChileandColombia(Blumetal.(2013)), CostaRica, Ecuador, andUruguay (Carballo et al. (2013)), Norway (Bernard et al. (2014)), and the United States (Pierce and Schott (2012); Dragusanu (2014); Eaton et al. (2014); Monarch (2014); Kamal and Sundaram (2016), (2017); Heise (2016); Monarch and Schmidt-Eisenlohr (2016) ). One of the primary concerns about two-sided trade transactions data is reliability: in order to have individual transactions that include both importing and exporting entities, one data source must identify individual traders in both countries. While it may be in the best interest of governments to collect reliable information about firms located in their jurisdiction for taxation purposes, it is not obvious that the same governments would have the incentive, or even the authority, to maintain accurate statistics on firms located outside their national borders. Subsequently, two-sidedtradedatawillbydefinitionbemoresusceptibletoissuesrelatedtothe identification of “foreign” buyers or suppliers. This paper describes data representing foreign suppliers to the U.S., discusses potential concerns about the quality of the data as well as some suggested refinements, and presents new findings about relationships between U.S. buyers and their foreign suppliers. We first describe the method for identifying foreign suppliers in U.S. merchandise import transactions.1 U.S. importing firms with shipments above $2,000 are required to complete U.S. Customs and Border Protection (CBP) Form 7501, part of which entails constructing and reporting a code- known as the Manufacturer ID or MID- for the foreign supplier in the transaction. The MID is widely used by both the U.S. and Canadian governments for official purposes. We explore the potential for errors that may arise in completing the MID, and note 1We use the Linked Firm Trade Transaction Database (LFTTD) is maintained by the U.S. Census Bureau. See http://www.census.gov/ces/dataproducts/datasets/imp.html for further description. 4

that 13% of U.S. import value is associated with transactions with no MID. Additionally, we show using external data that following the rules of MID creation, as outlined by CBP, tends to generate unique identifiers for suppliers within sectors. After this investigation, we describe our efforts to update the MID in U.S. merchandise importtransactions. Wecorrectforpossibleclericalerrorsthatmayariseasimportersconstruct this variable. Then, we collapse very similar MIDs into a single MID using string similarity scores. Following this, we perform various “stress tests” of our changes, showing both that our foreign supplier identifier improves the reliability of related-party relationships, and that MIDs we group together share very similar characteristics, such as sectors or buyers. In the last part of the paper, we present five empirical patterns derived from our refined data on foreign suppliers selling to U.S. importers. First, U.S. import data tends to identify moreexporterstotheU.S.thanforeignexportdata(especiallyinthecaseofChina)onaverage. However, exporter counts match well within broad sectors. Second, there is significant churning in the population of suppliers to the U.S., with rampant exit each year. Third, there are sizable discrepancies between the “exporting country” recorded on a customs form and a supplier’s location, and we show that the pattern of U.S. imports would change significantly were exports assignedtotheoriginallocationofproduction. Fourth,related-partyrelationshipsexhibithigher trade volumes and higher prices. Finally, we find that larger countries, as well as countries in a trade agreement with the U.S., tend to have more relationships with U.S. importers and higher value per relationship. The paper proceeds as follows. Section 2 describes the MID in greater detail, including the institutional reasons it is included on customs forms and assessing uniqueness. Section 3 presents our grouping methodology and related stress tests. Section 4 uses the updated data to establish our core set of stylized facts, and the last section concludes. 2 Background and History 2.1 MID Creation U.S. importers are required to fill out CBP Form 7501 (see Figure 1) in order to complete importation of goods into the United States. Importing firms must record information about the value, quantity, and 10-digit HTSUS product category of the imported merchandise, as well 5

as,inBox13,the“ManufacturerID”(MID)foreachproduct. Thisfieldwillcontaininformation about the identity of the plant that produced the exported good. In general, CBP requires that the Manufacturer ID constitute the supplier, not trading companies or other trading agents:2 “For the purposes of this code, the manufacturer should be construed to refer to the invoicing party or parties (manufacturers or other direct suppliers). The name and address of the invoicing party, whose invoice accompanies the CBP entry, should be used to construct the MID.” (U.S. Department of Homeland Security (2012)). Customs Directive No. 3550-055 lays out the current method for deriving the MID for manufacturers and shippers.3 The MID consists of an alphanumeric code that is constructed according to a pre-specified algorithm, using information on the seller’s name and address from the importer’s official invoice. The derivation (known as “keylining”) is as follows: the first two characters of the MID must contain the two-digit ISO country code of the supplier, the next three characters the start of the first word of the exporter’s name, the next three characters the start of the second word, the next four characters the beginning of the largest number of the street address of the foreign exporter, and the last three characters the start of the foreign exporter’s city (see Table 1 for stylized examples).4 The MID has a maximum length of fifteen characters. The multi-step process for constructing the MID described above may raise concerns about potential for erroneous data entry. There are some mitigating factors, though. First, 96% of all entries are filed electronically through the CBP’s Automated Broker Interface, which reduces the probability of misspellings, illegibility or incorrectly filed MIDs. Second, it is very common to either employ in-house licensed customs brokers to facilitate the import process or use outside customs brokerage service providers to handle the shipment clearance process. Customs Broker License Examinations administered by CBP (passage of which is required if transacting customs business on behalf of others) typically include questions about MID construction.5 Third,customsbrokersutilizespecializedsoftwarethatincludesvalidationchecks 2Due to strict rules-of-origin requirements, the MID for textile shipments represents “the entity performing theorigin-conferringoperations”,basedonTitle19CodeofFederalRegulations(CFR).Seehttp://www.gpo.gov/ fdsys/pkg/CFR-2011-title19-vol1/pdf/CFR-2011-title19-vol1-sec102-23.pdf. Textile products include both textile orapparelproductsasdefinedunderSection102.21,Title19,CFR. 3Seehttp://www.cbp.gov/document/directives/3550-055-instructions-deriving-manufacturershipper-identification-code. 4See page 7 at http://forms.cbp.gov/pdf/7501_instructions.pdf for a description of the MID and Appendix 2 at the same link for more detailed instructions on constructing MIDs. 5See http://www.cbp.gov/trade/broker/exam/announcement for details about the exam. http://www.cbp. 6

on entry data to prepare and transmit invoices electronically to CBP, such as SmartBorder.6 In particular, SmartBorder software can store customer information that auto-populates, thereby further reducing errors due to manual data entry. 2.2 Official Uses of the MID Why does the MID exist? We have found that the MID field was included on U.S. CBP forms pursuant to the program of exchanging trade data for statistical purposes between the U.S. and Canadian governments: Canada uses the MID to augment its domestic data on establishment activity with export information. The Government of Canada does not independently collect export filings to the United States. Instead, they substitute U.S. import statistics for Canadian exports to the U.S. in accordance with a 1987 Memorandum of Understanding, signed by the U.S.CensusBureau,U.S.CBP,CanadianCustoms,andStatisticsCanada.7 Basedonextensive discussions with employees at the U.S. Census Bureau and Statistics Canada, we believe that the data exchange provided the main impetus for the generation of the MID. Filling out the MID was made a requirement for U.S. imports from all countries soon after. What does the U.S. government use the MID for, and why would it have the incentive to ensureU.S.firmsarewritingdowntheidentityoftheirforeignpartnerscorrectly? Accordingto U.S.law,therearetwoapparentreasons. First,theMIDisutilizedinnationalsecurityprograms suchastheCustoms-TradePartnershipAgainstTerrorism(C-TPAT).AnactiveMIDisrequired to be qualified for the program. Companies that join C-TPAT “sign an agreement to work with CBP to protect the supply chain, identify security gaps, and implement specific security measures and best practices.8 C-TPAT members are less likely to be subject to examinations at the port since they are considered “low-risk”. The CBP reports that the program covers about 10,000 companies, accounting for over 50 percent of U.S. import value. Second, the United States enforces trade-related regulatory requirements that rely on the identity of foreign suppliers to the U.S. For instance, anti-dumping measures are foreign-firm specific in nature. Furthermore, it is clear from U.S. regulations that the MID is used to track compliance with U.S. restrictions for textile shipments. MID criteria for textiles are the most gov/document/publications/past-customs-broker-license-examinations-answer-keysincludessampleexamquestions andanswerkeys. Questions5and12ontheApril2014examinationsaskaboutMIDconstruction. 6See http://www.smartborder.com/newsb2/ProductsSmartBorderABI.aspx. 7This is a reciprocal data exchange, designed to reduce respondent burden, where Canada provides U.S. Canadian merchandise import shipments from the U.S. that the U.S. substitutes for exports to Canada. 8http://www.cbp.gov/border-security/ports-entry/cargo-security/c-tpat-customs-trade-partnership-against-terrorism 7

stringent, since non-textile products typically do not have the rule-of-origin restrictions that exist for textile and apparel products. If an entry filed for textile shipments fails to include the MID properly constructed from the name and address of the manufacturer, the port director may reject the entry or take other appropriate action. The preceding discussion highlights the regulatory imperatives to provide an accurate MID and the incentives for U.S. importers to accurately identify the foreign manufacturers from whom they are importing. 2.3 Missing MIDs The previous sections described the construction of the MID on the part of the U.S. importing firm as mandatory, thus providing a window into the universe of suppliers exporting to the United States. The field is not always populated, however: MIDs are missing in 1.9 percent of the 59 million import transactions in 2011. On a value-weighted basis, 13 percent are missing an MID, indicating that transactions without MIDs tend to be large. Why might an MID be missing? We report coefficients from regressing a dummy variable equal to one for a missing MID on a host of covariates and report the results in Table 2. The firstcolumn-basedonimportersizebins-showsthatbiggerbuyersaremorelikelytobemissing MIDs. One possible explanation for this is that 98.8 percent of missing MIDs (and thus, some big importers) are associated with foreign-trade zone transactions. A foreign-trade zone is a designated location in the United States where companies are allowed to delay or reduce duty payments on foreign merchandise and have access to streamlined customs procedures.9 Since firms that import in high volumes at a regular frequency are the main participants in FTZs, they tend to be larger firms. Table 2 also shows that related party transactions are less likely to be missing an MID, while broad sectors such as “footwear/headgear”, “hides/skins/furs/leather”, and “machinery/electrical” are more likely to be found without an MID.10 Transactions with European source countries tend to have a higher likelihood of missing MIDs on average, while the Americas tend to have a lower likelihood. Our takeaway is that transactions without MIDs tend to be conducted by larger importers, but do not vary systematically across sectors or countries.11 9Thereareabout250foreign-tradezonesintheUnitedStates. Seehttp://enforcement.trade.gov/ftzpage/ info/ftzstart.html. 10“Related parties” refer to transactions with shared ownership or interest (see Section 3.2). The “broad sector” classification contains 15sectoral groupingsderivedfrom groupingsimilar HS2categories (seeAppendix B). 11ThesepatternssuggestanareaforfurtherresearchonusingprobabilisticmatchingtoassignaMIDtosuch 8

2.4 Checking Exporter Identification under MID Rules Even if U.S. importers are completing the MID correctly, there remains the possibility that the information collected is too limited to uniquely identify distinct suppliers.12 Foreign production data can be used to construct “MID”s according to the rules laid out above, allowing determination of how often this identifier uniquely identifies the foreign country’s suppliers.13 WecarryoutthisexerciseusingChineseproductiondata,translatingtheuniverseofexporter names and addresses from the Chinese Annual Survey of Industrial Firms (ASIF) in 2005 and constructing “MID”s following the algorithms set forth by CBP. This allows us to assess (indirectly): How common is it for an MID to uniquely identify an exporter, both overall and within a sector? Are different cities combined into a single city when only identified with three letters? Thefirm-leveldataiscollectedbytheChineseNationalBureauofStatistics(NBS),and we romanize Chinese characters according to the Hanyu Pinyin system.14 We use the 4-digit China Industrial Classification (CIC) to report sectoral results. This is not an attempt to link Chinese exporter information in the ASIF to the actual MIDs reported in U.S. import data; rather, the results below are only a general test of MID rules. We highlight three caveats that our findings are premised on. One, observations of Chinese productiondataareatthefirmlevel,whiletheMIDismeanttocapturemanufacturers. Second, it is possible that a single supplier appears multiple times by different filers in the U.S. import data, while the information on the manufacturing census is a year-end snapshot, presenting additional opportunity for discrepancies. Finally, we note the possibility that our concordance between Chinese characters and English may differ from what reporting firms use, or that Chinese firms may not use a direct translation of their name on their invoices. We begin with results on uniqueness. Overall, the ASIF reports approximately 75,000 exporters in 2005. The “MID” is unique for 63.4 percent of the reported exporters. This raises a non-negligible possibility of MID duplication when used in a vacuum without any other transactions. Large importers have more transactions. If an importer in a FTZ imports a similar product from thesamecountryfromanon-FTZlocationandreportstheMIDinthenon-FTZtransaction,itmaybepossible to assign a likely MID to the missing transactions. 12UsingtheMIDtostudysupplierswitchingacrossorwithincitiesmayalsoposechallengesascountriesmay have multiple cities that begin with the same three letters. City codes have been used to study buyer-supplier relationships within and across countries in conjuction with country-specific knowledge (Kamal and Sundaram (2016); Kamal and Sundaram (2017); Monarch (2014)) 13NotethisexercisesimplycheckshowcapabletheMIDcodingprocedureisforuniquelyidentifyingsuppliers and does not require linking directly to U.S. import data. 14In general, we take two to three Chinese characters to be one word of the company name. More detail is provided in Appendix C. 9

identifying information. The first line of Table 3 Panel (a) shows that out of 515 total CIC-4 sectors, the average sector has 95.7 percent of its exporters uniquely identified by an “MID”, a major improvement. Limiting to sectors with large numbers of exporters still shows greater uniqueness- among sectors with over 1000 exporters, 84.7 percent of exporters are uniquely identified by an “MID”. Even adding 2-digit sectors significantly improves the identification, as shown in the bottom half of Panel (a). Thus a supplier identifier combined with industry information greatly increases the likelihood of generating unique identification.15 That said, there is a large discrepancy between the number of Chinese exporters according to the Chinese data and that calculated according to the U.S. data- there were about 173,000 MIDs from China in 2005, over twice as many as in the NBS data.16 As we will show in Section 4.1, this is large compared to other country sources, so where necessary, we present our empirical results excluding China in order to establish robustness of our findings. Table 3 Panel (b) uses the same augmented Chinese production data, but illustrates how common it is for a sector to have multiple cities with the same three-letter city code. With 145 cities of over 1 million people in 2010, China represents a difficult country for trying to identify cities uniquely with only three letters. The table shows that the more cities that export a particular CIC-4 category, the smaller the share of unique city identification within that CIC-4 category. Even so, in the average CIC-4 sector, cities are uniquely identified by their code 86.8 percent of the time. 3 Cleaning Methodology and Summary Statistics For the reasons laid out above, we believe that even in its raw form, the MID is likely to provide a useful foundation for identifying foreign suppliers to the U.S. Nonetheless, we undertake both probabilistic matching methods and basic checks in order to increase the reliability of the data. In this section, we describe our methodology for cleaning the MID and offer some summary measuresoftheresultingsupplierdata. Weusethe2011LFTTDinourmainempiricalanalyses. The first stage of our cleaning implements a number of common sense adjustments to the MID. We exclude MIDs that do not conform to the algorithm outlined in the CBP Form 7501 15Although the CIC classification system also comes from non-U.S. data, it is similar to the U.S. SIC classification (Brandt et al. (2012)). This is why SIC/NIACS industry classifications (or the even more detailed HS classification) are likely to strengthen identification of foreign suppliers in U.S. data. 16We discuss reasons why counts from U.S. data often exceed those of source country data in Section 4.1. 10

Instructions, including MIDs that are a series of numbers, MIDs that do not have three letters for the city code (one common mistake is for suppliers from New Territories, Hong Kong to have their city code written NT, resulting in a misspecified city code), and the like. We also exclude MIDs that have a country code corresponding to no known ISO2 code. 3.1 Bigram Matching We use a character matching protocol known as bigram matching to combine very similar MIDs into a single MID. A bigram is an approximate string comparator, computed from the ratio of the number of common two-letter combinations within the two different strings and the average string length minus one. We use the STATA-based bigram matching algorithm developed by Wasi and Flaaen (2015). All possible MID pairs within a country are assigned a field similarity score in order to set a standard for determining if any MID is “similar enough” to another MID.17 Appendix A provides examples of pairs and their associated field-similarity score. How similar should two MIDs be in order to consider them the same supplier? We identify a few rules of thumb for field-similarity (where 1 means a 100 percent match): a score of 0.98 or higher tends to match MIDs with a few characters being different, while scores between 0.97 and 0.98 tend to match MIDs that are identical in all aspects, other than one has a numeric address field and the other does not. A score of 0.99 or higher typically has only a single character being different. For our main results, we adopted a field-similarity score of 0.98, such that we are likely to combine MIDs that differ due to simple typographical errors (for instance, one character differences or one MID only using the first name of a company), but we will consider similar MIDs with different addresses as different suppliers. We believe this standard is sufficiently conservative, so as to allow for the possibility of simple coding errors, while still being stringent enough to not combine two distinct suppliers.18 The implementation procedure is as follows: within a country, we match each MID to every other MID, and generate a field similarity score. If the field similarity score for a match is 0.98 or above, then we will consider those MIDs to be the same. If multiple MIDs are found to be similar to the same MID, then all of those MIDs will be considered to be the same supplier.19 17Other papers that use bigram matching include Anderson et al. (2015), Ernstberger and Gru¨ning (2013), Flaaen (2014), Green and Jame (2013),Chodorow-Reich (2014), and Braun and Raddatz (2010). 18We also implement a match score of 0.99 for some of the analysis in the web appendix. 19For example, if supplier A and supplier B are both similar to supplier C, then we consider supplier A, B, and C to be the same supplier, even if A and B are not found to be similar to each other (a situation that is 11

Retaining one MID per group leaves a “best MID” (or BMID) variant for each MID in the underlying data, which enables us to generate relationships and other supplier-specific variables (suchassize)attheBMIDlevel.20 Alltold, thesechangestogetherwiththeabovemethodology endupreducingthetotalnumberofsuppliersin2011from1,287,630to911,765,a29%decrease. 3.2 Cross-validation Tests of the BMID In this section, we offer two tests in order to assess how well the bigram matching procedure is capable of grouping together similar MIDs and hence the extent to which the BMID can be viewed as a valid identifier of foreign suppliers to the United States. First, we examine related party trade relationships. U.S. firms are required to write down (in Column 32C, Form 7501) whether the transaction took place between “related parties” according to Section 105.102(g), Title 19 CFR, meaning one party has a 5% controlling interest in the other, or the parties have an employer/employee relationship, share offices or directors, or are family members or partners. In theory (excluding within-year ownership changes), a U.S. firm and its supplier should either have all of their transactions classified as related, or none. This implies that when examining the raw MID in relation to the BMID, we would expect a smaller fraction of total relationships that are marked as being related in one transaction while having a missing or unrelated indicator in another. Consistent with our hypothesis, when using the BMID, we find a decrease, from 5.8 to 5.5 percent, in the share of relationships that mix the related and non-related indicators across transactions. Second, we examine if the changes are consistent with other information in the U.S. import data, including sector, product and buyer information.21 The exercise is as follows: Suppose the bigram matching method designates Supplier A to be the same as Supplier B in 2011, and thus Supplier A’s MID is replaced with Supplier B’s. How often do Supplier A and Supplier B share all the same sectors, products, or buyers? How often do they share any sector, product, or buyer?22 Table 4 presents the results. At our preferred score of 0.98, 64 percent of changed MIDshaveany“broadsector”incommonwiththeMIDtheyarebeingchangedto,40.1percent exceedingly rare). In this work, we are agnostic about which variant of the MID (in this example, A,B, or C) should be retained, choosing randomly. 20The related party status of a BMID relationship with both related and non-related party transactions will be random. 21We thank two anonymous referees for this suggestion. 22We examine these categories in 2010 for matches made in 2011. 12

share the same HS2 code, 26.5 percent share the same HS10 code, and 30.4 percent share the same buyer (U.S. importer). In comparison, if an MID is randomly matched to some other MID within its country, the probability the two MIDs share any broad sector is 4.1 percent, any HS2 category is 2.3 percent, any HS10 category is 0.3 percent, and any buyer is 0.6 percent.23 This comparisonhighlightsthatthebigrammatchingmethodgroupsMIDsthatsharecharacteristics otherthantheidentifieritself,eventhoughtheroutinedoesnotrequirematcheswithinproducts or buyers. We thus believe that our probabilistic matching routine, resulting in the BMID, is capable of identifying “similar ” MIDs, providing an improved identifier of foreign suppliers. 3.3 Describing the MID Sample We next illustrate some of the properties of our sample, using the BMID. The minimum length of any BMID in the data is 11 characters, and the maximum is 15 characters. Table 5 shows that BMIDs are almost evenly split between 11,12,13,14 and 15 characters. 19 percent of these codes are the maximum length allowable- 15 characters. Table 6a shows how often the address component of the BMID is populated: the vast majority of BMIDs (89 percent) have at least some address information included.24 A potential issue concerning the address component of the MID is the presence of nonnumeric address conventions in Latin America. For example, according to a 2007 Los Angeles Times article, “most Costa Rican address are expressed in relation to the closest community landmark”.25 Theoretically, this could result in fewer fully-populated address codes.26 Table 6b shows that BMIDs from South America and “Mexico and Central America” do not actually exhibit lower rates of numeric address components compared to other regions. Europe, Asia, andAfricaallhavelargerfractionswithnoaddressinformation. However,CostaRica(Table6c) isanexception,asabout18percentofCostaRicanMIDshavenoaddressinformation. Table6b also shows that North American MIDs (predominantly Canada) have full address information for almost half of all MIDs, not surprising given that Statistics Canada successfully matches 23These probabilities are calculated by repeating the following procedure 50,000 times: select a random MID in 2011, assign it another random MID in the same country, and calculate the frequency that they share the same broad sector, HS2, HS10 or buyer. 24Leading zeroes are not allowed in the address component- since the preceding and following fields can only be based on letters, we can isolate how many numbers (if any) the address field of the MID contains. 25“WithCostaRica’smail,it’saddressunknown”,byMarlaDickerson. November5,2007http://articles. latimes.com/2007/nov/05/business/fi-crmail5. 26Some of the examples from the article- such as “125 meters west of the Pizza Hut” or “200 meters south of thecemetery,crossthetraintracks,whitetwo-storyhouse”-dohavenumericcharacters,thoughitisimpossible to tell if suppliers actually include this information on their invoice. 13

MIDs to their domestic establishments. An additional concern may be that the direct supplier of the good is not being used to generate the MID, with the U.S. importing firm instead simply writing down an MID corresponding to its intermediary or trading firm. Even though CBP expressly warns against doing so, we know that intermediaries play an integral role in facilitating international trade, so there is certainly some possibility of it occurring. One way to assess this is to examine the number of product or industry categories an MID-identified supplier is shipping. Intermediaries are more likely to export products spanning different industries (Ahn et al. (2011)), while manufacturers are more likely to possess a core competency- there may be few benefits from producing apples, socks, andvacuumcleanersatthesamefacility. Table7showsthat96percentofBMIDsexport 5 or fewer HS2 codes, and 97 percent of BMIDs export 10 or fewer HS10 codes. In subsequent analysis, we exclude BMIDs with more than 10 HS2 codes from our sample. 4 Findings from Relationship-Level Trade Data In this section, we present a set of empirical regularities, relying on our BMID variable and the 1,579,983 importer-exporter relationships formed by the combination of a BMID and a U.S.firm identifier. 4.1 Comparisons with Foreign Export Data We use foreign data on the number of exporters exporting to the U.S. in 2011, and compare the total to the number of exporters calculated using U.S. data, stratifying by both country and sector. We use the World Bank’s public-use Exporter Dynamics Database (EDD) that contains destination-specific information on exporting firms for 70 countries between 1997 through 2014 (Cebeci et al. (2012)). The source of the underlying micro data, which is not publicly available, varies from national government statistics (such as in Peru) to figures collected by private companies (such as in Chile) and are thus wholly different sources than the U.S. customs data. The idea is to compare statistics from the two distinct sources and analyze how closely they align, keeping in mind that the definition of what exactly constitutes a foreign exporter is specific to the U.S., and need not match across different countries. The country comparison is presented in Table 8. The table contains 41 countries, a num- 14

ber determined by both the availability of destination specific data and official Census Bureau disclosure rules. The total number of exporters calculated from the EDD is 73% of the total using U.S. data.27 For some countries, such as Mexico and Spain, the exporter counts match particularly well, while others, such as Germany and Portugal, show much less agreement. Why might using the Manufacturer ID to generate counts of firms exporting to the U.S. result in too many exporters relative to source country data? One answer rests on one of CBPs requirements in constructing the Manufacturer ID: trading companies, sellers other than manufacturers, and similar trading agents cannot be used to create MIDs. Since source countries may count intermediaries (who purchased from multiple manufacturers) as exporters in their customs data, origin-country data compared to the U.S. data is likely to yield lower counts of exporters. AnotherreasonfordifferencesisthatMIDsarepotentiallywrittendownmultipletimesbydifferent importing firms throughout a year, while firm-level export data is collected only a single time. Thus if firm names change over time, or importing firms construct the MID differently, U.S. data will report a greater number of foreign exporters. Next, we show a comparison of different exporter counts by “broad sector”.28 The EDD contains the number of exporters to the U.S. in a HS2 category for each country in Table 8. We sum these counts across countries by HS2 sector, aggregate to the “broad sector” level, then compare it to the same object in the U.S. data.29 Table 9 shows that counts within sector groupings match fairly well on average, with a few exceptions- the number of “Chemical and Allied Industries” exporters in the U.S. data exceeds the number in the EDD data by a factor of 4, and “Wood & Wood Products” by a factor of 3. The EDD/LFTTD count ratio for textiles- which we had described earlier as being a likely candidate for well-constructed MIDsis extremely close to one, as are sectors such as Plastics, Footwear/Headgear, and others. 4.2 Dynamic Behavior of Suppliers One key feature of the import data is that importer-exporter relationships are extremely shortlived. Monarch and Schmidt-Eisenlohr (2016) find that close to half of all U.S.-foreign supplier relationships in 2011 are newly created. We use BMIDs to demonstrate that exporter exit is, 27Section 2.4 showed that exporter counts from Chinese data (not in the EDD) are also substantially smaller than the same count from U.S. data. 28We thank two anonymous referees for suggesting this analysis. 29This exercise uses the number of exporter-HS2 combinations (not the number of unique exporters) within each“broadsector”, sincewecannoteliminateexporterswhoexportmorethanoneHS2sectorwithina“broad sector” in the EDD. Thus the results of this exercise are not directly comparable to Table 8. 15

in fact, extremely high. Table 10 shows that of all BMIDs found in 2011, only 54 percent are found in the U.S. data in 2010, while only 56 percent are found in 2012. The similarity to the relationship numbers in previous work shows that exporter exit accounts for a large share of relationship dissolution over time, as fewer and fewer exporters manage to survive into later years. Importantly, as the second row of the table demonstrates, this stylized fact is unchanged when considering simply the raw MID variable in place of our BMID variable, meaning that collapsing similar MIDs does not alter dynamic features of the supplier data. One other salient fact about suppliers over time is they do occasionally change their exported product: about 68 percent of MIDs have the same HS2 category or set of categories in 2011 that they had in 2010. 4.3 Exporting Country can differ from Producer Country Returning again to the Form 7501 shown in Figure 1, note that in addition to the Manufacturer ID (Box 13), importers also have to complete a field for the exporting country of a product (Box 14). We find that in 17 percent of relationships (accounting for 29 percent of total U.S. imports), the exporting country does not match the supplier’s “country of origin” as denoted by the first two characters of the MID. Why might the exporting country differ from the origin country? CBP Instructions state that “[t]he country of exportation is the country of which the merchandise was last part of the commerce and from which the merchandise was shipped to the U.S. without contingency of diversion.” (U.S. Department of Homeland Security (2012)). In practice, based on discussions with U.S. Census Bureau staff, such a discrepancy likely means that the “exporting country” is re-exporting the goods. In other words, if already-produced goods were not substantially transformed, but instead repackaged or re-sold from a second country, then the second country would be listed as the official exporting country. Given that aggregate trade statistics for the U.S. are calculatedusing the exporting country, rather than the “country of origin” derived from the MID, one can see how different U.S. trade patterns may look if goods were traced all the way back to their actual production location. Table 11 presents the top 10 exporters to the U.S. in 2011 by both origin and production countries. Interestingly, although China is the top source by either measure, its share of total U.S. imports drops when measured by the country of origin. This fits with the general intuition laid out above, as China is a major re-exporter with a comparatively low value-added to export 16

ratio (Johnson and Noguera (2012)). It is also apparent that more exports to the U.S. originate in Mexico than indicated by aggregate data, while the reverse is true for Canada. 4.4 Related Party Relationships According to official Census Bureau trade statistics, trade within related parties typically accounts for about 40 percent of all U.S. annual merchandise imports. Since we can use the BMID to identify related-party relationships in the data, we can contrast them to arm’s-length relationships. We find that related-party relationships occupy a very small share of total relationships, only 6.6 percent. In order for such a small share of total relationships to account for a much larger share of trade, it must be the case that these relationships are associated with high-value transactions. Indeed, a simple regression with product and source country fixed effects shows that related party relationships- at the buyer-supplier-product level- trade more than non-related parties (Table 12 Column 1). We also find that related party relationships tend to have higher unit values (Table 12 Column 2). This effect is precisely estimated, as we use trade and unit values at the relationship-level, rather than at the firm level only. As we documented in Section 2.4, there is a substantial difference in the number of Chinese exporters to the U.S. across datasets. Therefore, as a robustness check, we run the same specificationasabove, excludingChina. Theresultsremainqualitativelysimilar-relatedparties have higher trade values and higher prices compared to non-related party trade relationships. 4.5 Relationships and Country Characteristics Using our BMID measure, Table 13 shows which countries have the most supplier relationships with the U.S. in 2011. Over a quarter of all importer-exporter relationships in 2011 were between U.S. buyers and mainland Chinese suppliers, a share that bumps up to one-third of all relationships if we include Hong Kong. The rankings are not significantly altered by restricting only to MIDs found in both 2010 and 2011, or by using 2010 data alone, as shown in Panels (b) and (c). We next examine why some source countries have more U.S. relationships than others. We estimate a gravity-like specification, regressing a host of country attributes on the (log) number of supplier relationships and the average trade value per relationship. Table 14 shows that larger countries (measured by log GDP) tend to have more relationships, and also have more 17

valueperrelationship. Fartherawaylocationsandsourcecountrieswithoutacommonlanguage with the U.S. have fewer relationships, while being in a regional trade agreement with the U.S. strongly predicts both more relationships and higher trade per relationship. As described above, the textile industry is one where we believe MIDs are particularly likely torepresentthemanufacturer,giventheimportanceinU.S.lawofestablishingapropercountry of origin for textile products. For this reason, we also conduct our gravity specification using only products that are classified as textiles in the HS system- HS2 50 through 63. As can be seen in the right side of Table 14, the key results of a positive effect of GDP on the number of supplier relationships with the U.S. holds, as does the effect of being in a regional trade agreement. 5 Summary ThispaperinvestigatesthepropertiesoftheManufacturerIDvariablethatidentifiestheforeign supplier in a U.S. merchandise import transaction, and uses it to study U.S. importer- foreign exporter relationships. We document the rules and laws that govern the generation of the MID, thenproposeasetofcleaningalgorithmsandproceduresmeanttoaugmentthereliabilityofthe MID as a measure of unique foreign suppliers. This includes collapsing very similar MIDs into one, as well as common-sense checks for erroneous entries. Finally, we illustrate new findings about foreign buyers and their relationships with U.S. buyers. Inanynationaldatasetattemptingtomeasureinformationonforeignfirms, therearebound to be questions about the underlying reliability. The results of our study indicate that when used appropriately, the Manufacturer ID can be an important part of deeper investigations of buyer and supplier relationships in international trade. Our findings offer the first set of systematic evidence in identifying potential issues with using the MID and methods to modify the MID in order to address pertinent concerns. One aspect we have not addressed in this paper is the dynamic nature of buyer-supplier relationships: combining similar MIDs into one is relatively straightforward in a single year, but becomes extremely computationally intensive when trying to implement the procedure over time. We see this as the next step in continuing to refine and improve foreign supplier identification in U.S. merchandise import data. 18

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Ernstberger, Ju¨rgen and Michael Gru¨ning, “How do firm-and country-level governance mechanisms affect firms disclosure?,” Journal of Accounting and Public Policy, 2013, 32 (3), 50–67. Flaaen, Aaron, “Multinational Firms in Context,” Working Paper, University of Michigan 2014. Green, T. Clifton and Russell Jame, “Company name fluency, investor recognition, and firm value,” Journal of Financial Economics, 2013, 109 (3), 813–834. Heise, Sebastian, “Firm-to-Firm Relationships and Price Rigidity: Theory and Evidence,” 2016. SSRN Working Paper 2898148. Johnson, Robert and Guillermo Noguera, “Accounting for intermediates: Production sharing and trade in value added,” Journal of International Economics, 2012, 86, 224–236. Kamal, Fariha and Asha Sundaram, “Buyer-Seller Relationships in International Trade: Do Your Neighbors Matter?,” Journal of International Economics, 2016, 102, 128–140. and ,“SpatialConcentrationofSourcinginInternationalTrade: TheRoleofInstitutions,” 2017. Mimeo. Melitz, Marc, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica, 2003, 71 (6), 1695–1725. Monarch, Ryan, “It’sNotYou, It’sMe: BreakupsinU.S.-ChinaTradeRelationships,” Working Paper 14-08, U.S. Census Center for Economic Studies 2014. and Tim Schmidt-Eisenlohr, “Learning and the Value of Trade Relationships,” 2016. Pierce, Justin R. and Peter K. Schott, “The Surprisingly Swift Decline of U.S. Manufacturing Employment,” Working Paper 18655, National Bureau of Economic Research 2012. U.S. Department of Homeland Security, “CBP Form 7501 Instructions,” 2012. Wasi, Nada and Aaron Flaaen, “Record Linkage using STATA: Preprocessing, Linking and Reviewing Utilities,” The Stata Journal, 2015, 15 (3), 672–697. 20

Figures and Tables Figure 1: CBP Form 7501 Form Approved OMB No. 1651-0022 EXP. 10-31-2017 DEPARTMENT OF HOMELAND SECURITY 1.Filer Code/Entry No. 2.Entry Type 3.Summary Date U.S. Customs and Border Protection 4.Surety No. 5.Bond Type 6.Port Code 7.Entry Date ENTRY SUMMARY 8.Importing Carrier 9.Mode of Transport 10.Country of Origin 11.Import Date 12.B/L or AWB No. 13.Manufacturer ID 14.Exporting Country 15.Export Date 16.I.T. No. 17.I.T. Date 18.Missing Docs 19.Foreign Port of Lading 20.U.S. Port of Unlading 21.Location of Goods/G.O. No. 22.Consignee No. 23.Importer No. 24.Reference No. 25.Ultimate Consignee Name and Address 26.Importer of Record Name and Address City State Zip City State Zip 32. 33. 34. 27. 28.Description of Merchandise A. HTSUS Rate Duty and I.R. Tax 29. 30. 31. A. Entered Value B. ADA/CVD Rate Line A. HTSUS No. A. Grossweight Net Quantity in B. CHGS C. IRC Rate Dollars Cents No. B. ADA/CVD No. B. Manifest Qty. HTSUS Units C. Relationship D. Visa No. Other Fee Summary for Block 39 35.Total Entered Value CBP USE ONLY TOTALS A. LIQ CODE B. Ascertained Duty 37.Duty $ Total Other Fees REASON CODE C. Ascertained Tax 38.Tax $ 36.DECLARATION OF IMPORTER OF RECORD (OWNER D. Ascertained Other 39.Other OR PURCHASER) OR AUTHORIZED AGENT I declare that I am the Importer of record and that the actual owner, E. Ascertained Total 40.Total purchaser, or consignee for CBP purposes is as shown above, OR owner or purchaser or agent thereof. I further declare that the merchandise was obtained pursuant to a purchase or agreement to purchase and that the prices set forth in the invoices are true, OR was not obtained pursuant to a purchase or agreement to purchase and the statements in the invoices as to value or price are true to the best of my knowledge and belief. I also declare that the statements in the documents herein filed fully disclose to the best of my knowledge and belief the true prices, values, quantities, rebates, drawbacks, fees, commissions, and royalties and are true and correct, and that all goods or services provided to the seller of the merchandise either free or at reduced cost are fully disclosed. I will immediately furnish to the appropriate CBP officer any information showing a different statement of facts. 41.DECLARANT NAME TITLE SIGNATURE DATE 42.Broker/Filer Information (Name, address, phone number) 43.Broker/Importer File No. CBP Form 7501 (06/09) 21

Table 1: Stylized Examples of Manufacturer ID Country ExporterName Address City MID Bangladesh RedFabrics 1234CurryRoad Dhaka BDREDFAB1234DHA France GreenChemicals 555BaguetteLane,#1111 Paris FRGRECHE1111PAR RepublicofKorea BlueUmbrellas 88KimchiStreet Seoul KRBLUUMB88SEO Note: The above examples are based on fictitious names and addresses. Table 2: Determinants of Missing MIDs (1) (2) (3) (4) (5) Size SizeQ2 0.017*** 0.027*** (0.000) (0.000) SizeQ3 0.023*** 0.037*** (0.000) (0.000) SizeQ4 0.035*** 0.045*** (0.000) (0.000) Related Party Status RelatedParty -0.035*** -0.046*** (0.000) (0.000) Sector MineralProducts 0.023*** 0.039*** (0.000) (0.000) ChemicalProducts 0.013*** 0.017*** (0.000) (0.000) PlasticsandRubber 0.022*** 0.022*** (0.000) (0.000) Hides/Skins/Leather/Fur 0.026*** 0.013*** (0.000) (0.000) Textiles 0.009*** -0.001*** (0.000) (0.000) Footwear/Headgear 0.042*** 0.023*** (0.000) (0.000) BaseMetals 0.016*** 0.013*** (0.000) (0.000) Machinery/Electrical 0.025*** 0.022*** (0.000) (0.000) Vehicles 0.022*** 0.028*** (0.000) (0.000) OpticalandArms 0.017*** 0.011*** (0.000) (0.000) Source NorthAmerica -0.018*** -0.027*** (0.006) (0.006) CentralAmerica -0.014*** -0.008 (0.006) (0.006) SouthAmerica -0.013*** -0.004 (0.006) (0.006) Europe 0.022*** 0.026** (0.000) (0.000) Asia 0.004 -0.002 (0.006) (0.006) AustralasiaandOceania -0.016*** -0.012** (0.006) (0.006) Africa -0.001 0.005 (0.006) (0.006) Constant 0.001*** 0.035*** 0.001*** 0.019*** -0.002 (0.000) (0.000) (0.000) (0.006) (0.006) 𝑅2 0.01 0.02 0.01 0.01 0.05 Note: The dependent variable is 1 if a transaction’s MID is missing. Omitted catgeories are Q1, arm’s length, live animals, and Puerto Rico & U.S. posessions. There are 46,000,000 observations.

Table 3: Analysis of MIDs as Constructed from China Industrial Production Data (a) Uniqueness of the “MID”, 2005 # of CIC4s % of Unique “MID”s per CIC4 Average CIC4 515 95.7 Average CIC4 among CIC4s with > 100 Exporters 185 92.1 Average CIC4 among CIC4s with > 500 Exporters 24 83.8 Average CIC4 among CIC4s with > 1000 Exporters 7 84.7 # of CIC2s % of Unique “MID”s per CIC2 Average CIC2 39 87.5 Average CIC2 among CIC2s with > 100 Exporters 32 85.2 Average CIC2 among CIC2s with > 500 Exporters 27 84.6 Average CIC2 among CIC2s with > 1000 Exporters 22 84.9 Note: This panel uses name, address, and city information from China NBS data to construct an “MID” for eachexporter,followingrulesfromU.S.CBPForm7501. CIC4isthe4-digitChinaIndustryCode,andCIC2is its2-digitcounterpart. FortheEnglishnameofthefirm, theHanyuPinyinromanizationofChinesecharacters, with two to three characters per word, is used. An “MID” is unique if it corresponds to one faren daima firm identifier. (b) Uniqueness of the City Code # of CIC4s % of Unique City Codes per CIC4 Average CIC4 515 86.8 Average CIC4 among CIC4s with > 10 Cities 417 84.0 Average CIC4 among CIC4s with > 50 Cities 97 72.6 Average CIC4 among CIC4s with > 100 Cities 11 64.4 Note: This panel uses city codes from the “MID”s constructed above. A city code- the first three letters of a city- is unique if there is only one city with that code in a CIC4 industry. Table 4: Validity Checks for Bigram Matching Results Broad Sector HS2 HS10 Buyer % of Changed MIDs that match any: 64.0% 40.1% 26.5% 30.4% % of Random MID pairs that match any: 4.1% 2.3% 0.3% 0.6% % of Changed MIDs that match all: 47.4% 23.9% 9.4% 16.4% % of Random MID pairs that match all: 1.3% 0.5% 0.0% 0.2% Note: This table shows how similar information from changed MIDs is to information from the original MID. Table 5: Distribution of BMID Lengths 11 12 13 14 15 14% 18% 26% 23% 19% Note: The maximum MID length is 15 characters. Cleaned sample BMIDs have a minimum of 11 characters.

Table 6: BMID Address Field (a) All Countries None 1 2 3 4 11% 15% 27% 24% 23% (b) By Region None 1 2 3 4 North America (ex. Mexico) 1% 3% 13% 34% 49% Central America and Mexico 10% 10% 21% 34% 24% South America 9% 6% 16% 37% 33% Europe 13% 22% 37% 14% 14% Asia 12% 13% 24% 27% 24% Oceania 6% 13% 33% 28% 20% Africa 16% 14% 27% 20% 22% (c) Costa Rica None 1 2 3 4 18% 12% 16% 34% 19% Note: MIDs can have 0-4 numeric characters in the address field, taken from the supplier’s invoice. Table 7: Distribution of BMIDs, by Number of Exported Products/Industries (a) HS10 Products 1-5 6-10 11-20 21-50 More than 50 84% 13% 3% 0.6% 0.1% (b) HS2 Industries 1-2 3-5 6-9 10-20 More than 20 84% 12% 3% 0.9% 0.1% Note: ThistableshowsthedistributionofBMIDstotheU.S.bythenumberofproductsorindustriesexported. 24

Table 8: Number of Exporters to the U.S., 2011 Country World Bank EDD BMIDs Share Albania 50 63 0.79 Bangladesh 2,051 2,667 0.77 Belgium 4,589 6,823 0.67 Bolivia 268 476 0.56 Brazil 5,772 9,080 0.64 Cameroon 94 107 0.88 Chile 2,072 2,959 0.70 Colombia 2,663 4,045 0.66 Costa Rica 1,599 1,476 1.08 Cote d’Ivoire 139 123 1.13 Croatia 421 295 1.43 Denmark 3,139 4,783 0.66 Dominican Republic 1,613 1,477 1.09 Ecuador 1,466 1,915 0.77 Egypt 851 1,200 0.71 Estonia 302 265 1.14 Ethiopia 240 220 1.09 Georgia 102 63 1.62 Germany 28,229 48,398 0.58 Guatemala 1,370 1,699 0.81 Jordan 574 346 1.66 Kenya 413 377 1.10 Lebanon 318 398 0.80 Madagascar 174 173 1.01 Mauritius 156 184 0.85 Mexico 24,802 27,523 0.90 Morocco 429 863 0.50 Nepal 573 759 0.75 Nicaragua 382 621 0.62 Norway 1,940 2,512 0.77 Paraguay 68 144 0.47 Peru 2,396 3,271 0.73 Portugal 2,413 3,809 0.63 Romania 854 1,420 0.60 South Africa 3,257 3,416 0.95 Spain 13,888 13,115 1.06 Turkey 4,316 8,275 0.52 Uruguay 379 517 0.73 Total 114,362 155,857 0.73 Note: Thistablecomparesthenumberofexportersfromtwodifferentdatasets. Thelastcolumnistheexporter count from the World Bank EDD as a fraction of the exporter count from the U.S. import data.

Table 9: Number of Exporter-Sector Combinations to the U.S., 2011 Broad HS Category EDD/LFTTD Share Plastics & Rubber 0.92 Raw Hides, Skins, Leather, & Furs 0.94 Footwear & Headgear 0.96 Textiles 1.03 Vegetable Products 1.16 Transportation 1.23 Prepared Foodstuffs 1.24 Machinery & Electrical 1.43 Miscellaneous 1.54 Animal & Animal Products 1.58 Stone & Glass 1.58 Mineral products 2.01 Metals 2.57 Wood & Wood Products 3.27 Chemical & Allied Industries 4.29 Note: ThistablecomparesthenumberofexporterstotheU.S.inanHS2sectorfromtwodifferentdatasets,for the countries listed in Table 8. The counts are aggregated to the “broad sector” classification. The last column is the count from the World Bank EDD as a fraction of the count from the U.S. import data. Table 10: Share of 2011 Suppliers found in Other Years 2010 2012 2013 2014 BMID 54% 56% 45% 40% Raw MID 54% 56% 46% 40% Note: This table displays the percent of MIDs in 2011 that were also found in 2010, 2012, 2013, or 2014, as a share of all MIDs in 2011. BMIDs are those that were combined via the bigram matching procedure., while ”Raw” refers to the MID as it appears in the trade trasnactions data. 26

Table 11: Top Export Sources to the U.S., 2011 (a) By “Exporting Country” (b) By BMID “Country of Origin” Country Share of Total Value Country Share of Total Value China 18% China 15% Canada 14% Mexico 13% Mexico 12% Canada 12% Japan 6% Japan 9% Germany 5% Germany 5% South Korea 3% Taiwan 4% United Kingdom 2% South Korea 3% Saudi Arabia 2% United Kingdom 3% Venezuela 2% Hong Kong 3% Taiwan 2% Switzerland 3% Note: The “exporting country” can differ from the ”country of origin” of a trade transaction, and typically the “exporting country” is the last stop without significant origin-conferring operations. The left panel utilizes publicly available import data from the U.S. Census Bureau. Table 12: Related Party Relationships (a) All Relationships (b) Excluding China Log Trade Log Price Log Trade Log Price Related 0.149*** 0.107*** Related 0.262*** 0.044*** (0.002) (0.003) (0.002) (0.003) Country FE Yes Yes Country FE Yes Yes Product FE Yes Yes Product FE Yes Yes Adj. 𝑅2 0.22 0.66 Adj. 𝑅2 0.25 0.66 N 4,440,000 3,110,000 N 3,394,000 2,341,000 Note: In the U.S. import data, two parties are considered to be related by ownership if one owns 5% or more of the other. Other possibilities for related party affiliation are family ties, an employer/employee relationships, or shared leadership. Log Trade refers to the logged total value of trade within the relationship (importer-exporter-product combination) in 2011, while the Log Price is the total value in the relationship divided by the total quantity. Observations are at the buyer-supplier-product level. Observation counts are rounded for disclosure purposes. Coefficients are significant at the 1% level.

Table 13: Share of Total Relationships, by Export Source to the U.S. (a) 2011 Cleaned Sample (b) Sample in 2010 & 2011 (c) 2010 Raw Sample Country Share Country Share Country Share China 27% China 20% China 27% Canada 7% Canada 6% Canada 9% Hong Kong 6% Hong Kong 4% Hong Kong 6% Italy 6% Italy 4% Italy 5% Taiwan 5% Taiwan 4% Taiwan 5% Germany 5% Germany 4% Germany 5% United Kingdom 4% United Kingdom 3% United Kingdom 4% India 4% India 2% India 3% Japan 3% Japan 2% Japan 3% South Korea 3% South Korea 2% South Korea 3% Note: This table ranks U.S. export partners by the total number of importer-exporter relationships. Panel (a) uses BMIDs from our cleaned data for 2011. Panel (b) uses only MIDs that were found in both 2010 and 2011 U.S. import data. Panel (c) uses only raw 2010 U.S. import data. Table 14: Country Characteristics and Relationships All Sectors Textiles Only # Relationships Value/Relationship # Relationships Value/Relationship Log GDP 0.97*** 0.27*** 0.82*** 0.14 (0.05) (0.05) (0.05) (0.09) Distance -0.00*** -0.00 0.00 0.00* (0.00) (0.00) (0.00) (0.00) Contiguity -0.34 -0.49 0.25 0.42* (0.34) (0.65) (0.89) (0.64) Common Language 0.94*** 0.32 0.163 -0.26 (0.24) (0.24) (0.34) (0.43) Former Colony 0.11 -0.64 0.36 0.05 (0.88) (0.41) (0.88) (0.53) RTA 1.20*** 0.66*** 1.42*** 2.58*** (0.22) (0.27) (0.44) (0.61) Common Currency 0.44 1.30* 0.21 -0.90 (0.38) (0.70) (0.31) (0.67) Observations 177 177 153 153 Adj.𝑅2 0.72 0.20 0.52 0.17 Note: This is a regression of the number of relationships and value per relationship on source country characteristics. Covariates come from the CEPII gravity database.

A Examples of the Bigram Matching Program In Section 3.1, we describe the procedure whereby we collapse “similar” Manufacturer IDs into a single Manufacturer ID, where “similar” is defined as a score, calculated according to the number of matching bigrams within the Manufacturing ID. The procedure follows Wasi and Flaaen (2015) in order to calculate such a score. We have described rules of thumb to choose bigram matching scores in order to “clean” the MIDs. Here, we provide detailed examples of matches between MIDs and the associated scored, using hypothetical MIDs. Consider the following hypothetical firm name and address: Quan Kao Company 1234 Beijing Lane Beijing, China Following the rules described in Section 2, the Manufacturing ID for this firm would be: CNQUAKAO1234BEI. Below we present seven permutations of this Manufacturer ID, along with their accompanying bigram matching score. As can be seen from the table, the closer the two strings are, the higher is the associated match score. Furthermore, our criterion of consolidating similar firms if the two codes have similarity indices of over 0.98 seems reasonable according to the above standards: while some simple coding errors (such as missing one character in the name) might be reasonable to assume as potentially occurring in the data, errors on the scale of wholly different addresses or firm names are certainly likely to be much less common. Table A1: Hypothetical MIDs and Bigram Matching Scores Raw MID to be Matched Possible Matches Difference Score CNQUAKAO1234BEI CNQUAKAO123BEI One Character Missing 0.9951 CNQUAKAO1234BEI CNQUAKAU1234BEI One Character Different 0.9917 CNQUAKAO1234BEI CNQUA1234BEI Second Word Missing 0.9830 CNQUAKAO1234BEI CNQUAKAO1234SHA Different City 0.9802 CNQUAKAO1234BEI CNQUAKAOBEI No Number 0.9723 CNQUAKAO1234BEI CNQUAKAO5555BEI Different Number 0.9381 CNQUAKAO1234BEI CNJIACHA1234BEI Different Name 0.5321 29

Online Appendix for “Identifying Foreign Suppliers in U.S. Import Data”1 Fariha Kamal2, Ryan Monarch 3 1Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau, the Board of Governors of the Federal Reserve System, or any other personassociatedwiththeFederalReserveSystem. Allresultshavebeenreviewedtoensurethatnoconfidential information is disclosed. 2U.S. Census Bureau, fariha.kamal@census.gov 3Board of Governors of the Federal Reserve, ryan.p.monarch@frb.gov 30

B Broad Sector Classification Weuse“broadsector”classificationsthroughoutdifferentpartsofouranalysis,whicharegroups of very similar HS2 sectors. This classification comes from Foreign Trade Online (http://www. foreign-trade.com/reference/hscode.htm), and is organized as follows: Table 1: Broad HS2 Groupings HS2 Description 01-05 Animal & Animal Products 06-15 Vegetable Products 16-24 Foodstuffs 25-27 Mineral Products 28-38 Chemicals & Allied Industries 39-40 Plastics / Rubbers 41-43 Raw Hides, Skins, Leather, & Furs 44-49 Wood & Wood Products 50-63 Textiles 64-67 Footwear / Headgear 68-71 Stone / Glass 72-83 Metals 84-85 Machinery / Electrical 86-89 Transportation 90-97 Miscellaneous C Details about Translation of Chinese Firm Names As detailed in Section 2.4, we translate approximately 75,000 exporter names and addresses from the China NBS ASIF database into “MID”s. We use a Chinese character-Hanyu Pinyin translation webpage (www.chineseconverter.com) to do so. Pronunciation marks/ numbers are eliminated. If there are two or more spellings for a particular character, we use the first translation alphabetically. We generally take the first word of a firm name to be the first two characters of its name. The exception is if a “(” is found following the third character, as this is typically indicative of a city or geographic designation in the firm name (such as ABCXYZ (China) Company), in which case we make the first word the first three characters of the name. We generally take the second word of a firm name to be the third and fourth characters of its name. If a firm has a geographic identifier such as city (“SHI”) or county (“XIAN”) following its first word, then we use the fourth and fifth characters of the name. We make the same exception for left parenthesis discussed above. We drop any non-alphabetic characters found in these words (including numbers, parentheses, brackets, question marks, etc.). We use the first three letters of each of these words. Forcitynames,wecombinecitymunicipalareas(i.e. Shunyi,Beijing)intoonecity(Beijing). For the numeric address, we take the first four available numbers from a firm’s reported address. This section can be blank. 31

D Additional Tables This section includes robustness checks for the empirical regularities established in Section 4 across different cuts of our data. “2011 Raw” refers to the MIDs as filed in the 2011 import data, showing whether bigram matching changes any results. “2010 Raw” refers to MIDs as filed in the 2010 U.S. import data, and is intended to highlight the robustness of the results to using data in a different calendar year. “2010 and 2011” refers to the set of MIDs found both in 2010 and 2011, and is intended to highlight the robustness of the results to using a sample where MIDs all have flows in multiple years. Table D1: Validity Checks for Bigram Matching Results, Match Score ≥ 0.99 Broad Sector HS2 HS4 HS6 HS10 Buyer % of Changed MIDs that match any: 68 44 36 33 29 32 % of Changed MIDs that match exactly: 49 25 15 12 9 16 Note: This table replicates Table 4 for a higher field similarity match score. 32

Table D2: Top 10 Exporters to the U.S., 2011 (a) 2011 Raw Rank Country of Origin Share MID Country Share 1 China 0.18 Canada 0.14 2 Canada 0.14 China 0.12 3 Mexico 0.12 Mexico 0.11 4 Japan 0.06 Japan 0.06 5 Germany 0.03 Germany 0.04 6 South Korea 0.02 Taiwan 0.03 7 United Kingdom 0.02 United Kingdom 0.03 8 Saudi Arabia 0.02 South Korea 0.02 9 Venezuela 0.02 Hong Kong 0.02 10 Taiwan 0.02 Switzerland 0.02 (b) 2010 Raw Rank Country of Origin Share MID Country Share 1 China 0.19 Canada 0.14 2 Canada 0.14 China 0.12 3 Mexico 0.12 Mexico 0.11 4 Japan 0.06 Japan 0.07 5 Germany 0.04 Germany 0.04 6 United Kingdom 0.03 Taiwan 0.03 7 South Korea 0.03 United Kingdom 0.03 8 France 0.02 South Korea 0.02 9 Taiwan 0.02 Hong Kong 0.02 10 Ireland 0.02 Singapore 0.02 (c) 2010 and 2011 Rank Country of Origin Share MID Country Share 1 China 0.20 Canada 0.17 2 Canada 0.17 China 0.14 3 Mexico 0.13 Mexico 0.13 4 Japan 0.07 Japan 0.08 5 Germany 0.05 Germany 0.05 6 United Kingdom 0.03 Taiwan 0.04 7 South Korea 0.02 United Kingdom 0.03 8 Taiwan 0.02 South Korea 0.02 9 Ireland 0.02 Switzerland 0.02 10 France 0.02 Hong Kong 0.02 Note: This table replicates Table 11 for different samples.

Table D3: Related Party Relationships Log Trade Log Price Log Trade Log Price Log Trade Log Price Related 0.174*** 0.145*** 0.185*** 0.146*** 0.137*** 0.155*** (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) Observations 5,831,000 4,089,000 5,575,000 3,924,000 4,594,000 3,263,000 Country FE Yes Yes Yes Yes Yes Yes Product FE Yes Yes Yes Yes Yes Yes Adjust 𝑅2 0.21 0.67 0.21 0.67 0.21 0.67 Sample 2011 Raw 2011 Raw 2011 Raw 2011 Raw 2010 and 2011 2010 and 2011 Note: This table replicates Table 12 for different samples. Table D4: Top Exporting Countries to the U.S., by Total Relationship Share, 2011 Raw Country Share China 0.29 Canada 0.09 Hong Kong 0.06 Italy 0.06 Taiwan 0.05 Germany 0.05 United Kingdom 0.04 India 0.03 Japan 0.03 South Korea 0.03 Note: This table replicates Table 13 for an additional sample. 34

Table D5: Country Characteristics and Relationships (a) 2011 Raw Log (Number of Relationships) Log (Value/Relationship) Log GDP (Current USD) 0.927*** 0.253*** (0.053) (0.050) Distance (weighted) -0.00001*** -0.00004 (0.000) (0.000) Contiguity -5.8043 -1.126 (4.142) (1.106) Common Official Language 0.736*** 0.192 (0.268) (0.246) Former Colony 0.261 -0.47 (0.840) (0.485) Regional Trade Agreeements 1.217*** 0.602** (0.205) (0.253) Common Currency 0.45 1.220* (0.371) (0.672) Observations 177 177 Adj. R-squared 0.67 0.18 (b) 2010 Raw Log (Number of Relationships) Log (Value/Relationship) Log GDP (Current USD) 0.912*** 0.306*** (0.048) (0.060) Distance (weighted) -0.0001 -0.00002 (0.000) (0.000) Contiguity -5.351 -1.510 (3.951) (1.396) Common Official Language 0.640** 0.460* (0.262) (0.245) Former Colony 0.276 -0.792* (0.834) (0.414) Regional Trade Agreeements 1.310*** 0.663** (0.242) (0.285) Common Currency 0.539 1.521** (0.460) (0.697) Observations 178 178 Adj. R-squared 0.67 0.25 (c) 2010 and 2011 Log (Number of Relationships) Log (Value/Relationship) Log GDP (Current USD) 0.955*** 0.274*** (0.059) (0.056) Distance (weighted) -0.0001** -0.00004 (0.000) (0.000) Contiguity -5.675 -1.386 (4.039) (1.304) Common Official Language 0.826** 0.373 (0.291) (0.264) Former Colony 0.197 -0.713 (0.996) (0.506) Regional Trade Agreeements 1.404*** 0.561** (0.239) (0.265) Common Currency 0.07 1.731** (0.510) (0.857) Observations 175 175 Adj. R-squared 0.63 0.17 Note: This table replicates Table 14 for different samples.

Table D6: Top 10 Export Cities to the U.S. (a) By Number of Relationships Location City Code Total Relationships Likely City/Cities Taiwan TAI 50,196 Taipei Hong Kong HON 46,187 Hong Kong China SHA 45,385 Shanghai, Shantou China GUA 42,285 Guangzhou China SHE 38,064 Shenzhen, Shenyang China DON 29,602 Dongguan China JIA 24,177 Jiangmen, Ji’an China ZHE 20,815 Zhengzhou, Zhenyang Hong Kong KOW 20,491 Kowloon China NIN 16,221 Ningbo (b) By Value Location City Code Total Trade (in billions of USD) Likely City/Cities Canada CAL 43.0 Calgary China SHA 29.0 Shanghai, Shantou Singapore SIN 28.6 Singapore Taiwan TAI 24.3 Taipei China SHE 22.3 Shenzhen, Shenyang Mexico MEX 21.6 Mexico City Hong Kong HON 17.6 Hong Kong China JIA 15.0 Jiangmen, Ji’an Mexico CDJ 14.9 Ciudad Juarez China GUA 14.3 Guangzhou Note: It is possible to use the three-character city code from the MID to rank the top exporting cities to the U.S. A relationship is a U.S. importer-foreign supplier combination. We have a total of 1,579,983 relationships in the data. Likely cities are assigned based on population. This table is subject to the important caveat that in some instances, three letters may not be enough to uniquely identify a city. 36