Hello Charles, I understand your concern. In the guide it is specifying that the {loc_physical_ms} will be providing the ID of the geographical location of the click. So, looks like it is tracking at the least granular level to track the click and pin point the location. So, we can't expect it to provide only the locations at the level at which you targeted. Since, the concern is related to the product level, I recommend you to post your concern on the advertisers community forum where the product specials will be able to address this from the product level.
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