## Annex 5. Selected Issues on Cross-Border Trade

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---

### A. Introduction
- Purpose:
  - Address cross-cutting issues associated with trade in goods and services that fall outside standard balance of payments components.
  - Provide additional dimensions for compilers and users to enhance clarity and usability of external sector statistics.
- Structure:
  - Section B: Classification systems for trade in goods and services.
  - Section C: Implications of currency choice in international trade (trade classified by currency).
  - Section D: Price and volume measures.
  - Section E: Digital trade.
- Related Manual topics:
  - Trade by enterprise characteristics (chapter 15).
  - Digital goods and services and digital intermediation platforms (chapter 16).
  - Informal trade (chapter 18).
  - Insurance services (annex 8).
  - Trade by partner economy (Annex 11).

### B. Classification
- Role and definition:
  - A statistical classification is a structured, hierarchical framework of mutually exclusive categories that standardizes concepts and facilitates compilation, enhancing reliability and comparability.
  - The Manual’s standard presentation (Annex 14) decomposes goods and services accounts into components, subcomponents and supplementary items; Section B supplements that with other classification systems.
- Trade in goods: recommendations and key systems
  - Countries are recommended to use the Harmonized Commodity Description and Coding System (Harmonized System or HS) for compilation of IMTS.
  - Countries can use the Standard International Trade Classification (SITC) for dissemination and analysis according to user requirements.
  - Harmonized System (HS):
    - Developed by the World Customs Organization (WCO).
    - Introduced in 1988.
    - Updated every five to six years.
    - Used by over 200 countries.
    - Assigns specific six-digit codes to more than 5,000 commodities.
    - Countries may extend codes beyond six digits (e.g., Combined Nomenclature used in the EU).
    - Latest version: HS Nomenclature 2022.
    - Next version scheduled for release in 2028.
  - Standard International Trade Classification (SITC):
    - Developed by the UN in 1950.
    - Revision 4 published in 2006.
    - Contains 2,970 basic headings.
    - Provides correspondences to HS (fourth edition HS 2007).
    - Designed for economic analysis (whereas HS serves customs and statistical needs).
- Mode of transport (for goods):
  - Freight transport modes include sea, road, rail, air; pipelines/cables and postal consignments are included in "not elsewhere classified".
  - IMTS mode-of-transport classification main categories: transport by air, water, land, and not elsewhere classified.
  - Where goods use multiple means, IMTS recommends using the mode utilized when goods cross the border; compilers may also provide predominant-mode information.
  - Distinction: annex mode classification is for delivery methods of goods; Chapter 11 uses mode of transport in the context of transport services (three main modes: sea, air, other) and further breakdown by passenger/freight/other.
- Trade in services: EBOPS and GATS modes
  - EBOPS (Extended Balance of Payments Services Classification):
    - Fully consistent with and an extension of balance of payments standard services components and subcomponents.
    - Described in the Manual on Statistics of International Trade in Services (MSITS).
    - Compilers may adopt EBOPS detail based on economic significance.
    - Meets user needs related to GATS and other trade agreements; consistent with CPC to facilitate integration with national accounts at product level.
  - GATS modes of supply (four modes):
    - Mode 1 (cross-border supply): supplier and consumer remain in respective territories; only the service crosses the border (examples: postal service, internet).
    - Mode 2 (consumption abroad): consumers consume services outside home economy (example: tourists).
    - Mode 3 (commercial presence): non-resident establishes local presence to provide services (sales are resident-to-resident; generally not part of services account; typically measured through Foreign Affiliate Trade Statistics (FATS)).
      - For Mode 3, seller must be controlled through majority ownership by a non-resident; direct investors with greater than 50 percent ownership may supply services via their direct investment enterprise.
      - MSITS uses the term affiliate to mean a direct investment enterprise controlled by its direct investor.
    - Mode 4 (presence of natural persons): individuals travel temporarily to provide services (example: computer specialist sent abroad).
  - Relationship to balance of payments:
    - Modes 1, 2 and 4 generally subset the services account.
    - Mode 3 is not part of the services account.
    - Recording services by modes 1, 2 and 4 enhances understanding of delivery mechanisms, including digital delivery.
- Other classification systems and correspondences
  - Central Product Classification (CPC): covers goods and services; used in national accounts; correspondence tables between CPC and HS are published by UNSD.
  - Trade by Broad Economic Category (BEC):
    - Developed by UN to classify products by main end-use.
    - BEC Rev. 5 endorsed by the United Nations Statistical Commission in 2016.
    - Introduced broad economic categories for services and goods; for goods, BEC is an aggregation of HS and CPC.
    - BEC breaks goods and services by six hierarchical dimensions; third dimension based on SNA end-use (intermediate consumption, fixed capital formation, final consumption).
  - International Standard Industrial Classification (ISIC):
    - Global reference classification for productive activities; initially adopted in 1948.
    - ISIC Rev. 5 was approved by the United Nations Statistical Commission in 2025.
    - Establishments sharing principal activity are categorized into industries under ISIC.
    - Regional variants include NACE, NAICS, ANZSIC.
  - ISIC–product relationship:
    - Product classifications generally combine goods or services normally produced in a single ISIC-defined industry.
- Table summary:
  - Table A5.1 highlights main classification systems, their main functions, categories and main users (HS, SITC, CPC, Mode of transport, BOP standard components, EBOPS, Modes of supply [GATS], BEC, ISIC, Currency composition).

### C. International Trade Classified by Currency
- Rationale and audiences:
  - Currency of denomination is an important factor in external sector statistics though it does not necessarily reflect exporter’s or importer’s currency.
  - Useful for policymakers, researchers, analysts, and foreign exchange market participants for assessing external vulnerabilities, analyzing foreign exchange market trends, and determining adequacy of reserves.
  - Plays a significant role in IMF research evaluating usability of currencies for international transactions.
- Compilation and presentation recommendations:
  - Develop disaggregation of international trade by currency of denomination.
  - Totals in trade-by-currency composition should equal totals in the goods and services accounts.
  - Presentation can allow further breakdowns (e.g., by product type or partner country).
- Definitions and data sources:
  - Currency of denomination: currency in which price and value of goods and services is fixed and known at or near the time of change of ownership or when service is rendered; refers to currency indicated on the invoice documenting the transaction.
  - Data sources: combination of surveys, settlements data from an International Transactions Reporting System, or other administrative data; currency of settlement could be acceptable if denomination data are not available or of sufficient quality.
  - For model-estimated transactions (e.g., parts of the unobserved and informal economy or implicit services such as implicit financial services on loans and deposits), additional assumptions are needed to estimate currency composition.
- Publication practice:
  - Publish currency composition for gross totals of imports and exports of both goods and services annually.
  - First-level breakdown should distinguish domestic from foreign currency.
  - Beyond first level, specify most used currencies worldwide (such as the SDR basket of currencies) and currencies important to the compiling country.
  - Currency composition should include an unallocated item.
- Recommended reporting template (structure from Table A5.2):
  - Columns: Year; Goods (Credits/Revenues, Debits/Expenditures); Services (Credits/Revenues, Debits/Expenditures).
  - Rows and items:
    - Total
    - Domestic Currency
    - Foreign currency
    - SDR basket
    - US dollar
    - Euro
    - Chinese renminbi
    - Japanese yen
    - British pound sterling
    - Other currencies, of which: Currency A; Currency B; Currency C
    - Unallocated
  - Note: Totals should equal total goods and total services in the goods and services accounts; report other currencies if a non-SDR currency is important for the compiling country.

### D. Price and Volume Measures
- Rationale:
  - Services have price and volume dimensions; having volume and price data alongside current price values is useful for analysis and data validation.
  - Changes in values of flows of goods and services can be decomposed into price changes and volume changes between periods.
- Reference manuals and relation to Manual:
  - 2025 SNA Chapter 18, Measuring prices, volumes and productivity.
  - Export and Import Price Index Manual: Theory and Practice (2009).
  - Consumer Price Index Manual: Concepts and methods (2020).
  - Chapters 10 and 11 of the Manual describe compilation of the goods account and services account, where price and volume measurement issues are relevant.

### Chapter 18 — Application of index number theory to the derivation of volume measures
- Purpose and scope:
  - Short introduction to concepts and considerations for applying price indices to imports and exports; further information referenced to the Export and Import Price Index Manual and 2025 SNA Chapter 18.
  - Focus: deriving time series of exports and imports of goods and services expressed in prices of a certain reference period (volume measures), adjusted for changes in prices using export and import price indices (XMPI).
- Fundamental concepts and ideal index construction (A5.30–A5.33):
  - Volume measures are derived using export and import price indices (XMPI) or approximations thereof to reflect real changes in volume rather than price fluctuations.
  - Export price index: measures changes in prices of goods and services sold by residents to nonresident buyers over time; computes an average price change across export items using weighted averages where each item’s contribution is based on its share of total export value and comparisons are made to a reference period price (price relative).
  - Import price index: measures rate of change in prices of goods and services purchased by residents from nonresident sellers.
  - Ideal computation steps:
    - Establish a representative basket of goods and services reflecting the economic territory’s trade patterns.
    - Collect specified constant-quality transactions systematically over time, ideally through establishment surveys.
    - Calculate product-level indices from transaction price changes.
    - Aggregate product-level indices using a weighted formula with product weights derived from trade in goods and services data in a reference year.
- Quality, quantity, and index accuracy (A5.32):
  - Both quantity and quality must be considered when evaluating product volume.
  - Examples illustrating quality adjustments:
    - Constant nominal price with increased detergent concentration (more washes per kilogram) is effectively a price decrease from the consumer perspective.
    - Improvements in internet service speed or inclusion of a warranty with a dishwasher are effective price decreases.
    - Reductions in quality (e.g., less legroom in economy flights) at the same price are effectively price increases.
  - Implication: quality adjustments are necessary to distinguish pure price change from changes in consumer value.
- Unit values: strengths, limitations, and blended approach (A5.34–A5.37)
  - Unit value definition: total value of shipments for a specific commodity class divided by the corresponding total quantity of that class during a given period; unit values represent average prices for that commodity class.
  - Advantages of customs unit values:
    - Relatively easy to obtain.
    - Provide broad coverage of trade.
    - Cost-effective source of information.
    - Efficient for aggregating price changes for homogeneous items.
  - Disadvantages and biases:
    - Potential bias from compositional changes in quantities and in the quality of goods traded.
    - Unreliability for heterogeneous items — unit value indices may reflect changes in types of goods transacted each period rather than pure price changes.
    - Customs data may be incomplete or may lack quantity reporting or contain less reliable quantity measures.
  - Recommended hybrid approach:
    - Combine unit values for homogeneous goods with price indices based on survey data for heterogeneous goods to leverage coverage and quality adjustment while mitigating biases.
  - Valuation consideration:
    - Current recommendation: valuation of goods based on the FOB valuation method; for imports, adjustments may be needed to convert customs-based unit values to FOB valuation.
- Price measurement for services (A5.38–A5.41):
  - Services pose unique challenges due to intangibility and difficulty in observing quantity and quality changes; some services’ values (e.g., insurance and some financial services) are not directly observable and must be derived from other observable transactions.
  - Data collection emphasis: use surveys of enterprises to obtain accurate transaction prices for services.
  - Construction methods:
    - Exports and import price indices for B2C service categories should follow Consumer Price Index Manual methods (e.g., travel credit items and air passenger fares).
    - Export price indices for services can build upon producer price index methods or be a subset thereof; selection restricted to exporting firms and services being exported.
    - Import price indices for B2B services: track price changes of specific services utilized by importing enterprises over time.
  - Practical constraints: collecting price-change data from exporting and importing enterprises is challenging, leading to frequent application of second-best solutions in practice.
- Digitalization and price indices (A5.41):
  - Digitalization challenges:
    - Rapid changes in product characteristics, product disruptions, and significant quality improvements complicate distinguishing genuine price changes from quality or feature improvements.
    - Maintaining consistent price comparisons over time becomes increasingly complex and requires innovative approaches.
  - Further digitalization discussion is in Chapter 16 (A5.41).

### Digital trade — definitions, classification, and measurement (E; A5.42–A5.52)
- Reference:
  - IMF/OECD/UNCTAD/WTO, Handbook on Measuring Digital Trade, Second edition (2023).
- Effects of digital technologies (A5.42):
  - Enable online ordering of goods and services, improved market access for producers, efficient input sourcing (especially for micro, small, and medium-sized enterprises), greater consumer access, variety, and lower prices.
  - Platforms transform wholesale, retail, transport, accommodation, food services, and more by matching supply and demand and facilitating transactions.
- Definitional framework (A5.43–A5.44):
  - Digital trade: exchange of goods and services facilitated by digital technologies and platforms; defined by the nature of the transaction (digitally ordered and/or digitally delivered) rather than the nature of the product.
  - Digital trade is a subset of all international trade in goods and services; accounting principles (scope, time of recording, valuation) from goods and services accounts apply.
  - Goods can be digitally ordered but cannot be digitally delivered; all services can be digitally ordered and many can be digitally delivered.
- Digitally ordered trade (A5.45):
  - International sale or purchase conducted over computer networks by methods specifically designed to receive or place orders (e.g., websites, mobile apps, EDI).
  - Orders via telephone, fax, or manually typed email are excluded.
  - Definition aligns with the 2011 OECD definition of e-commerce; digitally ordered trade is synonymous with international e-commerce.
- Digitally delivered trade (A5.46–A5.47):
  - Delivered remotely over computer networks: electronically delivered products (software downloads, e‑books, streaming) and outputs such as documents, designs, blueprints delivered as digital files.
  - Only services can be digitally delivered; some services (transport, construction, travel) cannot be digitally delivered.
  - Services deliverable remotely are “digitally deliverable services” (examples: software and cloud computing, online banking, e‑learning, tele‑health, architectural services delivered as attachments).
- Modes of supply link (A5.48):
  - Digitally delivered services relate to modes of supply classification; digitally deliverable services delivered via cross‑border mode of supply (mode 1) would generally be digitally delivered services; a very small proportion via consumption abroad (mode 2) could also be digitally delivered.
- Overlap, platforms, and accounting (A5.49–A5.51):
  - Total digital trade = digitally ordered trade + digitally delivered trade − trade that is both digitally ordered and digitally delivered.
  - Nonfinancial digital intermediation Platforms (DIPs): online interfaces facilitating direct interaction between multiple buyers and multiple sellers without taking economic ownership or rendering the intermediated goods/services (examples include e‑commerce marketplaces, social media platforms with shopping features, gig economy platforms).
  - DIPs are remunerated via fees from buyer, seller, or both; transactions typically involve a buyer, a seller, and a DIP; when actors are resident in different economies, relevant transactions must be recorded in the international accounts.
- Handbook utility and measurement guidance (A5.52):
  - The Handbook provides concepts (digitally ordered, digitally delivered, and DIP‑facilitated trade), a reporting template for measuring digital trade (Figure A5.1), and extensive measurement guidance.

*Source: IMF draft BPM7, Annex 5. Selected Issues on Cross-Border Trade.*

### Annex 5. Selected Issues on Cross-Border Trade

### Annex 5. Selected Issues on Cross-Border Trade

### A. Introduction
- Purpose:
  - Address cross-cutting issues associated with trade in goods and services that fall outside standard balance of payments components.
  - Provide additional dimensions for compilers and users to enhance clarity and usability of external sector statistics.
- Structure:
  - Section B: Classification systems for trade in goods and services.
  - Section C: Implications of currency choice in international trade (trade classified by currency).
  - Section D: Price and volume measures.
  - Section E: Digital trade (highlighted as increasing in significance).
- Related topics addressed elsewhere in the Manual:
  - Trade by enterprise characteristics (chapter 15).
  - Digital goods and services and digital intermediation platforms (chapter 16).
  - Informal trade (chapter 18).
  - Insurance services (annex 8).
  - Trade by partner economy (Annex 11).

### B. Classification
- Definition and role:
  - A statistical classification is a structured, hierarchical framework of mutually exclusive categories that standardizes concepts and facilitates compilation, enhancing reliability and comparability.
  - The Manual’s standard presentation (Annex 14) decomposes goods and services accounts into components, subcomponents and supplementary items; this section supplements that with other classification systems.
- Classification systems for trade in goods:
  - Recommendations:
    - Countries are recommended to use the Harmonized Commodity Description and Coding System (Harmonized System or HS) for compilation of IMTS.
    - In addition to HS, countries can use the Standard International Trade Classification (SITC) for dissemination and analysis according to user requirements.
  - Harmonized System (HS):
    - Developed by the World Customs Organization (WCO).
    - Introduced in 1988.
    - Updated every five to six years.
    - Used by over 200 countries.
    - Assigns specific six-digit codes to more than 5,000 commodities.
    - Countries may extend codes beyond six digits (e.g., Combined Nomenclature used in the EU).
    - Latest version: HS Nomenclature 2022.
    - Next version scheduled for release in 2028.
  - Standard International Trade Classification (SITC):
    - Developed by the UN in 1950.
    - Revision 4 published in 2006.
    - Contains 2,970 basic headings.
    - Provides correspondences to HS (fourth edition HS 2007).
    - Designed for economic analysis (whereas HS serves customs and statistical needs).
- Mode of transport (for goods):
  - Freight transport modes: sea, road, rail, air; includes pipelines/cables and postal consignments in "not elsewhere classified".
  - IMTS mode-of-transport classification main categories: transport by air, water, land, and not elsewhere classified.
  - Where goods use multiple means, IMTS recommends using the mode utilized when goods cross the border (compilers may also provide predominant-mode information).
  - Distinction noted: Chapter 11 uses mode of transport in context of transport services (three main modes: sea, air, other) and further breakdown by passenger/freight/other; annex mode classification is for delivery methods of goods.
- Classification systems for trade in services:
  - EBOPS (Extended Balance of Payments Services Classification):
    - Fully consistent with and an extension of balance of payments standard services components and subcomponents.
    - Described in the Manual on Statistics of International Trade in Services (MSITS).
    - Compilers may adopt EBOPS detail based on economic significance.
    - Meets user needs related to GATS and other trade agreements; consistent with CPC to facilitate integration with national accounts at product level.
  - GATS modes of supply (four modes):
    - Mode 1 (cross-border supply): supplier and consumer remain in respective territories; only the service crosses the border (examples: postal service, internet).
    - Mode 2 (consumption abroad): consumers consume services outside home economy (example: tourists).
    - Mode 3 (commercial presence): non-resident establishes local presence to provide services (sales are resident-to-resident; generally not part of services account; typically measured through Foreign Affiliate Trade Statistics (FATS)).
      - For Mode 3, seller must be controlled through majority ownership by a non-resident; direct investors with greater than 50 percent ownership may supply services via their direct investment enterprise.
      - MSITS uses the term affiliate to mean a direct investment enterprise controlled by its direct investor.
    - Mode 4 (presence of natural persons): individuals travel temporarily to provide services (example: computer specialist sent abroad).
  - Relationship of GATS modes to BOP services:
    - Modes 1, 2 and 4 generally subset the services account.
    - Mode 3 is not part of the services account.
    - Recording services by modes 1, 2 and 4 enhances understanding of delivery mechanisms, including digital delivery.
- Other classifications and crosswalks:
  - Central Product Classification (CPC): covers goods and services; used in national accounts; correspondence tables between CPC and HS are published by UNSD.
  - Trade by Broad Economic Category (BEC):
    - Developed by UN to classify products by main end-use.
    - BEC Rev. 5 endorsed by the United Nations Statistical Commission in 2016.
    - Introduced broad economic categories for services and goods; for goods, BEC is an aggregation of HS and CPC.
    - BEC breaks goods and services by six hierarchical dimensions; third dimension based on SNA end-use (intermediate consumption, fixed capital formation, final consumption).
  - International Standard Industrial Classification (ISIC):
    - Global reference classification for productive activities; initially adopted in 1948.
    - ISIC Rev. 5 was approved by the United Nations Statistical Commission in 2025.
    - Establishments sharing principal activity are categorized into industries under ISIC.
    - Regional variants include NACE, NAICS, ANZSIC.
  - ISIC–product classification relationship:
    - Product classifications generally combine goods or services normally produced in a single ISIC-defined industry.

- Table A5.1 highlights main classification systems, their main functions, categories and main users (HS, SITC, CPC, Mode of transport, BOP standard components, EBOPS, Modes of supply [GATS], BEC, ISIC, Currency composition).

### C. International Trade Classified by Currency
- Rationale and uses:
  - Currency of denomination does not necessarily reflect exporter’s or importer’s currency; it is an important factor in external sector statistics (ESS).
  - Useful for policymakers, researchers, analysts, and foreign exchange market participants for assessing external vulnerabilities, analyzing foreign exchange market trends, and determining adequacy of reserves.
  - Plays a significant role in IMF research evaluating usability of currencies for international transactions.
- Recommendations for compilation and presentation:
  - The Manual recommends developing disaggregation of international trade by currency of denomination.
  - Totals in trade-by-currency composition should equal totals in the goods and services accounts.
  - Presentation can allow further breakdowns (e.g., by product type or partner country).
- Definitions and data sources:
  - Currency of denomination: currency in which price and value of goods and services is fixed and known at or near the time of change of ownership or when service is rendered; refers to currency indicated on the invoice documenting the transaction.
  - Data sources: combination of surveys, settlements data from an International Transactions Reporting System, or other administrative data; currency of settlement could be acceptable if denomination data are not available or of sufficient quality.
  - For model-estimated transactions (e.g., parts of the unobserved and informal economy or implicit services such as implicit financial services on loans and deposits), additional assumptions are needed to estimate currency composition.
- Recommended publication practice:
  - Publish currency composition for gross totals of imports and exports of both goods and services annually.
  - First-level breakdown should distinguish domestic from foreign currency.
  - Beyond first level, specify most used currencies worldwide (such as the SDR basket of currencies) and currencies important to the compiling country.
  - Currency composition should include an unallocated item.
- Recommended reporting template (Table A5.2) structure:
  - Columns: Year; Goods (Credits/Revenues, Debits/Expenditures); Services (Credits/Revenues, Debits/Expenditures).
  - Rows: Total; Domestic Currency; Foreign currency; SDR basket; US dollar; Euro; Chinese renminbi; Japanese yen; British pound sterling; Other currencies, of which: Currency A; Currency B; Currency C; Unallocated.
  - Notes: Totals should equal total goods and total services in the goods and services accounts; report other currencies if a non-SDR currency is important for the compiling country.

### D. Price and Volume Measures
- Rationale:
  - Services have price and volume dimensions; useful for analysis and data validation to have volume and price data alongside current price values.
  - Changes in values of flows of goods and services can be decomposed into price changes and volume changes between periods.
- References for methods:
  - 2025 SNA Chapter 18, Measuring prices, volumes and productivity.
  - Export and Import Price Index Manual: Theory and Practice (2009).
  - Consumer Price Index Manual: Concepts and methods (2020).
- Relation to Manual:
  - Chapters 10 and 11 describe compilation of the goods account and services account, where price and volume measurement issues are relevant.

*Source: IMF draft BPM7, Annex 5. Selected Issues on Cross-Border Trade.*

### Chapter 18 discusses the application of index number theory to the derivation of volume measures

### Chapter 18 — Application of index number theory to the derivation of volume measures

### Purpose and scope
- The annex presents a very short introduction to the most important concepts and considerations of the application of price indices to imports and exports, and notes that further information should be sought from the Export and Import Price Index Manual: Theory and Practice and other guidance referred to in 2025 SNA Chapter 18.
- Chapter focus: deriving time series of exports and imports of goods and services expressed in prices of a certain reference period (volume measures), adjusted for changes in prices using export and import price indices (XMPI).

### Fundamental concepts and index construction (A5.30–A5.33)
- Volume measures are derived using export and import price indices (XMPI) or approximations of such indices; XMPI adjust trade statistics to reflect real changes in volume rather than price fluctuations (A5.30).
- Export price index: measures changes in prices of goods and services sold by residents to nonresident buyers over time; computes an average price change across export items using weighted averages where each item’s contribution is based on its share of total export value and comparisons are made to a reference period price (price relative) (A5.30).
- Import price index: measures rate of change in prices of goods and services purchased by residents from nonresident sellers (A5.31).
- Ideal computation steps (A5.33):
  - Establish a representative basket of goods and services reflecting the economic territory’s trade patterns.
  - Collect specified constant-quality transactions systematically over time, ideally through establishment surveys.
  - Calculate product-level indices from transaction price changes.
  - Aggregate product-level indices using a weighted formula with product weights derived from trade in goods and services data in a reference year.

### Quality, quantity, and index accuracy (A5.32)
- Both quantity and quality must be considered when evaluating product volume; examples from the Consumer Price Index Manual illustrate:
  - Constant nominal price with increased detergent concentration (more washes per kilogram) is effectively a price decrease from the consumer perspective.
  - Improvements in internet service speed or inclusion of a warranty with a dishwasher are effective price decreases.
  - Reductions in quality (e.g., less legroom in economy flights) at the same price are effectively price increases.
- Implication: quality adjustments are necessary to distinguish pure price change from changes in consumer value.

### Unit values: definition, strengths, and limitations (A5.34–A5.36, A5.37)
- Unit value definition: total value of shipments for a specific commodity class divided by the corresponding total quantity of that class during a given period; unit values represent average prices for that commodity class (A5.34).
- Advantages of using unit values from customs data (A5.35):
  - Relatively easy to obtain.
  - Provide broad coverage of trade.
  - Cost-effective source of information.
  - Efficient for aggregating price changes for homogeneous items.
- Disadvantages and biases of unit values (A5.35):
  - Potential bias from compositional changes in quantities and in the quality of goods traded (e.g., consumer preference changes).
  - Unreliability for heterogeneous items — unit value indices may reflect changes in types of goods transacted each period rather than pure price changes.
  - Customs data may be incomplete or may lack quantity reporting or contain less reliable quantity measures.
- Recommended hybrid approach (A5.36):
  - Combine unit values for homogeneous goods with price indices based on survey data for heterogeneous goods.
  - Rationale: leverage broad coverage of unit values and detailed quality-accounting of survey-based indices to mitigate biases and improve robustness; more resource intensive but likely more accurate.
- Valuation consideration (A5.37):
  - Current recommendation: valuation of goods based on the FOB valuation method (see paragraph [10.XX]); for imports, adjustments may be needed to convert customs-based unit values to FOB valuation.

### Price measurement for services (A5.38–A5.41)
- Services pose unique challenges due to intangibility and difficulty in observing quantity and quality changes; some services’ values (e.g., insurance and some financial services) are not directly observable and must be derived from other observable transactions (A5.38).
- Data collection emphasis: build information from surveys of enterprises to obtain accurate transaction prices for services (A5.38, A5.40).
- Construction methods (A5.39):
  - Exports and import price indices for business-to-consumer (B2C) service categories should follow Consumer Price Index Manual methods (e.g., travel credit items and air passenger fares).
  - Export price indices for services can build upon producer price index methods or be a subset thereof; selection of enterprises restricted to exporting firms and only to services being exported.
  - Import price indices for business-to-business (B2B) services: focus on tracking price changes of specific services utilized by importing enterprises over time.
- Practical constraints: collecting price-change data from exporting and importing enterprises is challenging, leading to frequent application of second-best solutions in practice (A5.40).

### Digitalization and implications for price indices (A5.41)
- Digitalization creates measurement challenges:
  - Rapid changes in product characteristics, product disruptions, and significant quality improvements make it difficult to distinguish genuine price changes from improvements in quality or features.
  - Maintaining consistent price comparisons over time becomes increasingly complex and requires innovative approaches.
- Note: further discussion of digitalization challenges is in Chapter 16 (A5.41).

### Digital trade — definitions and measurement framework (E; A5.42–A5.52)
- Handbook reference: IMF/OECD/UNCTAD/WTO, Handbook on Measuring Digital Trade, Second edition (2023) (Reference).
- Digital technologies effects (A5.42):
  - Enable online ordering of goods and services, improved market access for producers, efficient input sourcing (especially for micro, small, and medium-sized enterprises), greater consumer access, variety, and lower prices.
  - Platforms act as transformative actors across wholesale, retail, transport, accommodation, food services, and more, matching supply and demand and facilitating transactions.
- Digital trade definition (A5.43–A5.44):
  - Digital trade: exchange of goods and services facilitated by digital technologies and platforms; defined by the nature of the transaction (digitally ordered and/or digitally delivered) rather than the nature of the product.
  - Digital trade is a subset of all international trade in goods and services; accounting principles (scope, time of recording, valuation) from goods and services accounts apply.
  - Goods can be digitally ordered but cannot be digitally delivered; all services can be digitally ordered and many can be digitally delivered.
- Digitally ordered trade (A5.45):
  - International sale or purchase conducted over computer networks by methods specifically designed to receive or place orders (e.g., websites, mobile apps, EDI).
  - Orders via telephone, fax, or manually typed email are excluded.
  - The definition aligns with the 2011 OECD definition of e-commerce; digitally ordered trade is synonymous with international e-commerce.
- Digitally delivered trade (A5.46–A5.47):
  - Delivered remotely over computer networks: electronically delivered products (software downloads, e-books, streaming) and outputs such as documents, designs, blueprints delivered as digital files.
  - Only services can be digitally delivered; some services (transport, construction, travel) cannot be digitally delivered. Services deliverable remotely are “digitally deliverable services” (examples: software and cloud computing, online banking, e-learning, tele-health, architectural services delivered as attachments).
- Modes of supply link (A5.48):
  - Digitally delivered services relate to modes of supply classification; digitally deliverable services delivered via cross-border mode of supply (mode 1) would generally be digitally delivered services; a very small proportion via consumption abroad (mode 2) could also be digitally delivered.
- Overlap and accounting (A5.49–A5.51):
  - Total digital trade = digitally ordered trade + digitally delivered trade − trade that is both digitally ordered and digitally delivered (A5.49).
  - Nonfinancial digital intermediation Platforms (DIPs): online interfaces facilitating direct interaction between multiple buyers and multiple sellers without taking economic ownership or rendering the intermediated goods/services; examples include e-commerce marketplaces, social media platforms with shopping features, and gig economy platforms (A5.50).
  - DIPs are remunerated via fees from buyer, seller, or both; transactions typically involve a buyer, a seller, and a DIP; when actors are resident in different economies, relevant transactions must be recorded in the international accounts (A5.51).
- Handbook utility (A5.52):
  - The Handbook provides concepts (digitally ordered, digitally delivered, and DIP-facilitated trade), a reporting template for measuring digital trade (Figure A5.1), and extensive measurement guidance.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/draft-bpm7-annex-5-v7-selected-issues-on-crossborder-trade.pdf_