8th OECD International Trade Statistics Expert Meeting17-19 September 2007

Changes in the 1993 SNA Rev. 1Goods for processing

MerchantingCharles Aspden, OECD

Goods sent abroad for processing

• In the 1993 SNA the principle of recording transactions on a change of ownership basis is breached in some cases, but not others.

• When goods are sent from a unit in country A to a unit in country B for processing and returned to the same unit in A then a change of ownership is imputed, unless the unit in B is an unincorporated subsidiary of A or a direct investment enterprise of A.

Goods sent domestically for processing

• In general, there is no imputation of a change of ownership when goods are sent for processing to another unit in the same economy, but if the two units belong to the same enterprise then a change of ownership is imputed.

• Hence, the domestic and international conventions are the exact opposites of each other.

Goods for processing

• AEG members felt that it was best to have a consistent application of the change of ownership principle.

• Majority of countries expressed agreement on UNSD website.

Merchanting

• Merchanting is defined as the purchase of goods by a resident (of the compiling economy) from a non-resident combined with the subsequent resale of the goods to another non-resident without the goods being present in the compiling economy. In such cases a change of ownership is not recognised in the 1993 SNA and BPM5.

Merchanting

• But there are inconsistencies, e.g. if a merchant in country A (in the compiling economy) sells goods to another merchant in A without the goods entering country A then an import of goods is recorded.

• AEG agreed on strict application of change of ownership principle.

• Majority of countries agree.

Merchanting – an example

A merchant in Singapore purchases goods from Thailand (producer) for 80 and resells them to the United States (consumer) for 100. The goods are shipped directly from Thailand to the United States. Singapore reports the gross figures and the net of 20 under exports of goods as merchanting. Thailand and the United States report exports of 80 and imports of 100 respectively.

Current recording Proposed recording Credit Debit Credit Debit

Singapore Services (merchanting) 20 Goods (merchanting) -80 (exports)

100 (exports) 20 (net)

Thailand Goods 80 Goods 80

United States Goods 100 Goods 100

Global balance Services (merchanting) 20 Goods 100 100

Goods 80 100

Merchanting

• The output of merchanting is recorded in exactly the same way as domestic wholesaling or retailing.– If goods are acquired in one period and sold in

another, they are recorded as changes in inventories of the merchant.

– While the figures recorded in the BoP include holding gains and losses, the output of the merchant does not.