## Chapter 23 (2025 SNA)/Chapter 15 (BPM7). Globalization

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### Introduction and scope
- Globalization defined as the economic integration of economies driven by reduced trade barriers and advances in communication, transportation, and technology (paragraph [23.1]).
- Deeper corporate linkages and fragmentation of production (notably MNE groups) create conceptual, measurement, and analytical challenges motivating additional breakdowns and supplementary presentations to complement traditional macroeconomic statistics (paragraphs [23.2–23.4]).
- Chapter organization:
  - Section B: global production arrangements;
  - Section C: MNE groups;
  - Section D: measurement challenges;
  - Section E: macroeconomic indicators and supplementary presentations;
  - Section F: analytical tools including trade in value added and global value chains (paragraph [23.4]).

### Global production and global value chains (GVCs)
- Fragmentation of production across resident and nonresident firms underpins global value chains, enabling global specialization, cost efficiencies, comparative advantages, and market access (paragraph [23.5]).
- GVCs treated as a fundamental pillar of the modern global economy; see paragraph [23.113] for additional GVC details (paragraph [23.5]).

### Global manufacturing and distribution arrangements — classification and treatments
- A decision tree (Figure [23.1]) classifies transactions in global arrangements as traditional merchandise trade, re-exports, merchanting, processing, or factoryless goods production from the principal enterprise’s perspective (paragraph [23.6]).

Re-exports (paragraphs [23.7–23.11])
- Definition and valuation:
  - Re-exports: goods produced in other economies, previously imported, and exported with no substantial transformation from the state in which previously imported (paragraph [23.7]).
  - Re-export price may differ from original import price due to transport costs, dealer’s margins, and holding gains or losses (paragraph [23.7]).
- Recording conventions:
  - Resident must acquire and resell goods with goods passing through territory to record re-exports; goods bought and resold without passing through territory are merchanting (paragraph [23.7]).
  - Goods imported from a contractor and subsequently exported by a factoryless goods producer are not re-exports but goods traded within global manufacturing arrangements (paragraph [23.7]).
  - Goods in transit are excluded from general merchandise of the territory of transit and are not recorded as imports or re-exports (paragraph [23.8]).
  - Goods substantially transformed (e.g., change in HS code) are recorded as domestically produced exports rather than re-exports (paragraph [23.9]).
  - Re-exports and re-imports may be shown separately as supplementary items where significant (paragraphs [23.10–23.11]).

Merchanting (paragraphs [23.12–23.20])
- Definition:
  - Merchanting: purchase by a resident from a nonresident and resale of same goods to another nonresident without goods being physically moved in and out of the compiling economy (paragraph [23.12]).
  - Inverse merchanting: both seller and subsequent purchaser are resident and goods do not leave and re-enter that economy; can be hard to detect from customs data (paragraph [23.13]).
- Recording rules (paragraph [23.14]):
  - (a) Acquisition by merchants: shown under goods as a negative export of the merchant’s economy.
  - (b) Sale by merchants: shown under goods sold under merchanting as a positive export.
  - (c) Net exports of goods under merchanting = sales minus purchases; includes merchants’ margins, holding gains/losses, and changes in inventories; net exports may be negative.
  - (d) Merchanting entries valued at transaction prices agreed by parties (not FOB).
- Rationale and partner allocation:
  - Merchant’s activity analogous to wholesaler/retailer; recording net exports as goods maintains global trade-in-goods balance and avoids artificial inflation of merchandise trade in the merchant’s economy (paragraph [23.16]).
  - Partner allocation of net exports: add positive and negative merchanting entries for each partner economy (paragraph [23.15]).
- Scope notes:
  - Merchanting label used only in the merchant’s economy accounts; counterparties treat sales/purchases as general merchandise (paragraph [23.17]).
  - Wholesaling/retailing/commodity dealing/manufacturing management where goods are present in owner’s economy are recorded as general merchandise (paragraph [23.18]).
  - Purchases by a merchant resold to a resident of the same economy are imports of general merchandise; purchaser intentions may be used as indicator with subsequent adjustment (paragraphs [23.19–23.20]).

Processing (paragraphs [23.21–23.27])
- Definition and core feature:
  - Principal owns or acquires material inputs and purchases manufacturing services from a nonresident processor; ownership of processed goods remains with the principal throughout processing (paragraph [23.21]).
  - Processor does not take ownership of goods during processing (Figure [23.2] notes).
- Recording of movements and transactions:
  - Material inputs purchased by principal:
    - (a) From residents of same economy: no international transaction.
    - (b) From residents of processor’s economy or a third economy: principal records imports of general merchandise (paragraph [23.25]).
  - Sales of finished goods by principal:
    - (a) Sold to residents of same economy: no international transaction.
    - (b) Sold to residents of processor’s economy or a third economy: principal records exports of general merchandise (paragraph [23.26]).
  - Processor’s charge: recorded as a service (processing fee), not under general merchandise (paragraph [23.27]).
- Additional points:
  - If processor provides materials, treated as intermediate consumption of the processor (paragraph [23.23]).
  - Principals often supply IPP inputs (product design) without charging for right of use (paragraphs [23.21, 23.23]).
  - Goods transactions between principal and other parties in processing arrangements may be shown as a supplementary sub-item of general merchandise (paragraph [23.22]).

Factoryless goods production (paragraphs [23.28–23.32])
- Definition and valuation:
  - Factoryless goods producer: principal controls production (entrepreneurial steps, technical specifications), outsources material transformation fully, and supplies IPP inputs without charging for right of use (paragraph [23.28]).
  - Contractor acquires material inputs and sells finished goods to principal at a price including material inputs and manufacturing costs but excluding the value of IPP used in transformation (paragraph [23.28]).
- Recording rules (paragraphs [23.30–23.32]):
  - Material inputs are substantially transformed by the contractor; IPP inputs supplied by the factoryless producer should be significant (23.30).
  - Guideline: input values of IPPs (R&D, design, innovation, trademarks, brand names, logos, etc.) supplied by the factoryless goods producer will be greater than the fee paid to the contractor excluding material inputs (23.30).
  - Goods bought from contractor are recorded as general merchandise imports at value agreed between principal and contractor (23.31).
  - Sales of finished goods:
    - (a) Sold to residents of same economy as principal: no international transaction (23.32(a)).
    - (b) Sold to residents of contractor’s economy or a third economy: principal records exports of general merchandise (23.32(b)).
- Illustrative numeric examples (Box 23.1) preserved exactly:
  - Re-exports example: Economy A records imports 1000 and exports 1200 (re-exports 1200).
  - Merchanting example: Economy A merchanting entries –10, +20, net +10; manufacturing services 3 expenditure.
  - Processing example: Economy A imports 10, exports 30, imports manufacturing services 15.
  - Factoryless example: Contractor purchases inputs 3; Economy B imports 3 and exports 7 to Economy A; Economy A records imports 7 and exports 28; principal resells to Economy D for 28.
  - Factoryless with merchanting inputs example: Economy A merchanting –3 and +4 (net +1), imports 8, exports 28; Economy B records imports 4 and exports 8; Economy C exports 3.

### Multinational enterprises (MNEs): definitions and control
- MNE definition and group:
  - MNE: legal entity with at least one nonresident affiliate or branch exercising control either directly by owning over 50 percent of voting power or by indirect transmission of control (23.33).
  - MNE = ultimate controlling parent; MNE group = MNE plus entities under same ultimate controlling parent regardless of residence (23.33).
- Control:
  - Control = ability to determine general corporate policy; in practice exists if investor has more than 50 percent of voting power (23.34).
  - Control may be direct or indirect and aligns with the Framework of Direct Investment Relationship (FDIR) (23.34).
  - Voting power and share ownership may differ (e.g., “golden shares”, dual classes) (23.35).
  - Government/public unit control can be exercised other ways than majority voting power (23.35).

### Special Purpose Entities (SPEs): role, identification, typology, and reporting
- Role and impact:
  - SPEs: entities with little or no physical presence set up to benefit from regulatory and tax regimes; can substantially affect macro statistics (inflating FDI, pass-through funds, IPP ownership) (23.36–23.37).
  - Host jurisdictions should report supplementary data for SPEs when significant (23.37).
- Identification:
  - Decision tree (Figure 23.4) uses criteria: physical presence, number of employees, registration status, nonresident control, objectives (access capital markets; isolate owners from financial risks; reduce regulatory and tax burden; safeguard confidentiality), and transactions mainly with nonresidents (23.36).
- Typology (Table 23.1) categories:
  - Category I: Corporate Groups’ Captive Financial Entities (e.g., 1.1 Conduits; 1.2 Holding companies; 1.3 Holding financial assets for securitization; 1.4 Intra group lending companies; 1.5 Captive factoring and invoicing companies; 1.6 Captive financial leasing companies; 1.7 Other captive financial companies) (Table 23.1).
  - Category II: Specialized Financial Entities (e.g., 2.1 Captive insurance companies; 2.2 Securitization vehicles/Financial vehicle corporations; 2.3 Holding financial and nonfinancial assets (including real estate) for related companies; 2.4 Companies carrying out other financial functions) (Table 23.1).
  - Category III: Corporate Groups’ Nonfinancial Entities (e.g., 3.1 Ancillary companies; 3.2 Operational leasing companies; 3.3 Merchanting companies; 3.4 Royalty and licensing companies; 3.5 Legal ownership of intangible assets) (Table 23.1).
  - Category IV: Wealth management entities (4.1 Companies holding/managing wealth and real estate for individuals and families) (Table 23.1).
  - Category V: Government Owned Financial Entities (5.1 SPEs owned by governments for fiscal purposes) (Table 23.1).
  - Category VI: Other structures conducting transactions not covered elsewhere (Table 23.1).
- Note: Types listed may be SPEs but not all entities of those types are necessarily SPEs; use the SPE definition and decision tree to determine SPE status (Table 23.1).

### Intellectual Property Products (IPPs): ownership, decision framework, and measurement challenges
- Trends and measurement difficulty:
  - MNEs create SPEs to manage IPPs; intangible nature makes transfer and use hard to observe and identify economic ownership (23.40–23.41).
- Decision-tree framework (Figure [23.5]) examines:
  - (a) Is unit a member of an MNE group?
  - (b) Is unit producer of the IPP?
  - (c) Main activity of the unit or expected IPP use?
  - (d) Does unit receive IPP-related income or pay for use (royalties/licenses)? (23.42).
- Default treatments when information is insufficient:
  - Unit main producer of goods and non-IPP services (1.1.1): default assign economic ownership to unit; intra-group IPP transactions recorded only when receipts observed.
  - Unit main IPP producer (1.1.2): default assign economic ownership to producing unit (1.1.2.2) unless evidence unit generates no IPP-related turnover or sold originals to parent/customers (1.1.2.1).
  - Units using IPPs but not producers (1.2): generally not economic owners unless evidence of purchases of IPP originals; imputing transfers and capitalizing is not recommended (1.2.1.3).
  - SPEs and low-tax jurisdiction units (1.2.2): default assign economic ownership to these units corresponding to legal ownership; preferentially classify income under “IPP-related services provided by SPEs” to reflect limited domestic economic activity.

### Measurement challenges, tax-motivated structuring, and compiler responses
- Central measurement issues:
  - Residence and economic presence concepts less informative for MNE activity; transfer pricing distortions or failure to record intra-group IPP use can misallocate production between parent and affiliates (Section C).
  - Faulty or incomplete implementation of IPP ownership decision tree can misattribute IPP ownership across economies and distort GDP, trade, income, and depreciation on movable and intangible assets.
  - Even correct measurement can produce flows that are surprising to users (e.g., IPP originals recorded in low-tax economy producing high measured value added with little employment).
- MNE strategies affecting statistics:
  - Distorted transfer pricing to shift income to lower-tax economies;
  - Reassigning ownership of IPPs/movable assets across economies;
  - Interposing finance or holding affiliates in low-tax economies;
  - Offshore factoring corporations billing/collecting worldwide sales;
  - Corporate inversions where an overseas affiliate becomes parent.
- Compiler recommendations:
  - Adjust transfer prices to actual exchange values where practical when prices incompatible with SNA valuation principles.
  - Provide additional breakdowns showing effects of adjustments or inability to adjust.
  - Use macroeconomic indicators and supplementary information to distinguish domestically and foreign-controlled corporations (Section E).
  - Practical office strategies: focus on large MNEs; coordinate data collection from MNE groups; track changes in group composition; conduct coherence analysis; maintain communication with group representatives; create specialized statistical units combining national accountants, balance of payments experts, and business accountants.

### Cross-border mobility of corporate assets and implications
- Movable corporate assets, especially IPPs, can be registered in other economies to maximize post-tax profits, making the location of profit generation and value added ambiguous.
- IPP creation often funded by affiliates via cost-sharing agreements; measurement of IPP-related transfers, royalties, and reported transfer prices can bias recorded flows relative to discounted present value of expected returns.
- Identifying transfers of previously produced IPPs within exports/imports and capital formation, when practical, helps understand roles of those transactions in GDP and components.

### Consistency, coherence, and practical compilation of MNE group data
- Challenge: capture all MNE activity without duplication and properly allocate by economic territory since SNA/BPM do not treat MNE group as single entity.
- Inconsistent recording across data sources can produce large discrepancies.
- Practical compiler approaches:
  - focus on large MNEs;
  - coordinate data collection across group entities;
  - track group composition changes;
  - perform coherence analyses;
  - maintain liaison with group representatives;
  - create integrated statistical teams.

### Macroeconomic indicators and supplementary presentations to monitor globalization
- Indicators given increased prominence in 2025 SNA as they are less affected by globalization/MNE activity:
  - gross/net national income (GNI/NNI);
  - gross/net national disposable income (GNDI/NNDI);
  - household (adjusted) disposable income (paragraphs [23.68–23.69]).
- Rationale:
  - GNI and net measures better reflect income available to residents when MNE activity generates operating surplus accruing to nonresident owners.
  - NNI captures depreciation and depletions that gross measures omit.
  - Household (adjusted) disposable income is hardly affected by MNE activities because mainly employee remuneration from domestic affiliates feeds into it (paragraph 23.68).
- Institutional sector and external accounts:
  - Increase granularity for nonfinancial and financial corporations by ultimate control and ownership to show MNE impacts (paragraph [23.69]).
  - Limit increased granularity to nonfinancial corporations and financial corporations; no breakdown of subsectors needed (paragraph [23.69]).
  - For economies with significant SPEs, identify SPEs as “of which” supplementary items within institutional sector and external accounts (paragraphs [23.70–23.71]).
  - Template breakdowns include codes and “Of which: SPEs” categories for domestic and foreign-controlled corporations (Figure 23.6).

Supplementary statistics and enterprise characteristics
- Supplementary direct investment statistics:
  - Presentations by ultimate investing economy and ultimate host economy address interpretation issues from pass-through direct investment flows (paragraph [23.72]).
- Trade and investment income by enterprise characteristics:
  - Recommend compiling goods trade by enterprise characteristics (TEC) and services trade by enterprise characteristics (STEC) and presenting trade and investment income by ownership (domestic/foreign) and size (paragraphs [23.73–23.75]).
  - SME threshold encouraged: fewer than 250 employees; further breakdown between independent SMEs and SMEs part of a group (paragraph [23.75]).
  - When enterprise-level data unavailable (e.g., imports by individuals), report as “Unknown” (paragraph [23.75]).
- Other encouraged supplementary BoP stats for GVC analysis:
  - Total value of re-exports with product/partner breakdown;
  - Total value of goods acquired/sold under merchanting and product/partner breakdown;
  - Reconciliation table between international merchandise trade statistics and balance of payments goods statistics;
  - Product and partner breakdown of balance-of-payments goods and extended services categories (paragraph [23.77]).

### Extended supply-use tables (eSUTs), TiVA, and GVC thematic accounts
- eSUTs:
  - Provide granularity for transactions associated with globalized production; support TiVA and GVC thematic accounts (paragraph [23.78]).
  - Extensions may include origin/destination detail, goods for processing, re-exports, and firm attributes (size-class, trading status, control) (paragraph [23.78]).
  - eSUTs capture input/output differences within same industry and should be parsimonious, focusing on core activities where foreign presence exists (paragraph [23.79]).
  - Data sources: MNE surveys, balance of payments surveys, tax data, integrated business statistics, reconciled trade statistics (paragraph [23.80]).
- Trade in Value Added (TiVA) indicators:
  - TiVA measures value added by each economy/industry in production of traded and consumed goods/services worldwide, addressing double counting in gross trade flows.
  - Model compiles worldwide input-output table combining national SUTs with trade statistics to track intermediate exports and final demand and to compute indicators such as domestic content of exports and decomposition of exports/imports by value added source.
  - TiVA often reveals domestic value added “returning” via imported intermediates; granular TiVA relies on eSUTs and international cooperation (section on TiVA).
- GVC thematic account:
  - Bottom-up, enterprise-centered SUTs for a specific product or product group tracking full chain from conception to end use (R&D, production, distribution, marketing, after-sales).
  - Compilation steps: determine scope and firms, compile national SUTs with common industry/product breakdowns (ISIC), add GVC-relevant detail, collect enterprise-level business lines and functions, and assemble GVC-specific institutional sector accounts.
  - Implementation flexible: can be single-country or multi-country, single or multiple industries; may produce GVC satellite accounts with one or several GVC-specific SUTs (sections 23.86–23.119).

### Activities of Multinational Enterprises (AMNE) statistics and FATS
- Coverage:
  - AMNE statistics may be produced for inward AMNE (foreign-controlled enterprises in compiling economy) and outward AMNE (foreign affiliates controlled by resident direct investors) (paragraphs [23.82–23.86]).
  - AMNE scope: direct investment enterprises where direct investor(s) directly or indirectly hold/control a majority of voting power (subsidiaries); excludes associates (paragraphs [23.82–23.86]).
- Key variables:
  - Core: sales (turnover)/output; employment; value added; exports/imports of goods and services; number of enterprises.
  - Supplementary: assets; remuneration of employees; net worth; net operating surplus; gross fixed capital formation; taxes on income; R&D expenditures; total purchases of goods/services; intra-group exports/imports (paragraphs [23.86–23.90]).
- Statistical units and attribution:
  - Collection units: enterprise group, enterprise, or establishment; tradeoffs exist regarding asset collection and industry classification.
  - Geographic attribution:
    - Inward AMNE: by economy of ultimate controlling parent; also encouraged to provide by immediate investor for links to direct investment data.
    - Outward AMNE: attributed based on location of enterprises whose activities are described (paragraph [23.84]).
  - By activity/product: ideally by ISIC; certain variables (sales, output, exports/imports) may be attributed by product where feasible (paragraph [23.84]).
- Compilation approaches:
  - Direct surveys requesting covered enterprises’ operations, or identify foreign-owned subset within existing domestic enterprise data.
  - Use direct investment registers to identify units and economy of attribution.
  - AMNE questionnaire design may add key questions to direct investment surveys or be collected via separate annual surveys for controlled portion of universe (paragraphs [23.86–23.95]).
- Goals:
  - Enable comparison of foreign-controlled enterprises with total/domestically-controlled enterprises.
  - Provide enterprise-level detail for GVC and MNE analysis and to complement balance of payments and IIP statistics.

*Source: 2025 SNA / BPM7 draft chapter excerpt. International Monetary Fund (IMF).*

### Chapter 23 (2025 SNA)/Chapter 15 (BPM7). Globalization

### Chapter 23 (2025 SNA)/Chapter 15 (BPM7). Globalization

### Introduction (paragraphs [23.1–23.4])
- Globalization is defined as the economic integration of economies around the world, driven by reduced trade barriers and advances in communication, transportation, and technology (paragraph [23.1]).
- These developments have increased cross-border movements of goods, services, capital, information, and people and have contributed to increasingly complex corporate structures that span multiple economies, notably multinational enterprise (MNE) groups (paragraph [23.1]).
- The chapter focuses on conceptual, measurement, and analytical challenges from deeper corporate linkages and fragmentation of production processes across economies and motivates additional breakdowns and supplementary presentations to complement traditional macroeconomic statistics (paragraphs [23.2–23.3]).
- Organization: Section B describes global production arrangements; Section C defines MNE groups; Section D presents measurement challenges; Section E introduces macroeconomic indicators and supplementary presentations; Section F describes analytical tools including trade in value added and global value chains (paragraph [23.4]).

### Global production and global value chains (paragraphs [23.5 and cross-references])
- Fragmentation of production across resident and nonresident firms is a distinct aspect of globalization and forms the basis of global value chains (GVCs), which enable global specialization, cost efficiencies, comparative advantages, and market access (paragraph [23.5]).
- The chapter treats GVCs as a fundamental pillar of the modern global economy and refers readers to paragraph [23.113] for more details about GVCs (paragraph [23.5]).

### Global manufacturing and distribution arrangements (paragraphs [23.6–23.27])
- A decision tree (Figure [23.1]) is used to identify whether a transaction in a global arrangement is traditional merchandise trade, re-exports, merchanting, processing, or factoryless goods production; the decision tree is from the point of view of the principal enterprise that organizes or arranges manufacture/movement and has ownership of the goods at some stage (paragraph [23.6] and Figure notes).

Re-exports (paragraphs [23.7–23.11])
- Definition: Re-exports are goods produced in other economies, previously imported, and then exported with no substantial transformation from the state in which they were previously imported (paragraph [23.7]).
- Price of re-exported goods may differ from original import price due to transport costs, dealer’s margins, and holding gains or losses (paragraph [23.7]).
- Inclusion criteria: A resident must acquire and subsequently resell the goods with the goods passing through the territory to be recorded as re-exports; goods bought and resold without passing through territory are merchanting (paragraph [23.7]).
- Conventions:
  - Goods imported from a contractor and subsequently exported by a factoryless goods producer are not treated as re-exports but as goods traded within a global manufacturing arrangement (paragraph [23.7]).
  - Goods in transit are excluded from general merchandise of the territory of transit and are not recorded as imports or re-exports (paragraph [23.8]).
  - Goods substantially transformed (e.g., change in HS code) are recorded as domestically produced exports rather than re-exports (paragraph [23.9]).
  - Re-exports should be shown separately as a supplementary item where significant; deriving imports destined for re-export from re-exports (with timing adjustment) may be of interest (paragraph [23.10]).
  - Re-imports are domestic goods imported in the same state as previously exported without substantial transformation; where significant, re-imports may be shown separately (paragraph [23.11]).

Merchanting (paragraphs [23.12–23.20])
- Definition: Merchanting is the purchase of goods by a resident from a nonresident combined with subsequent resale of the same goods to another nonresident without the goods being physically moved in and out of the compiling economy (paragraph [23.12]).
- Inverse merchanting: Occurs when both the seller to the nonresident merchant and the subsequent purchaser from that merchant are resident in the same economy and the goods do not leave and re-enter that economy; inverse merchanting can be difficult to identify from customs data (paragraph [23.13]).
- Recording rules (paragraph [23.14]):
  - (a) Acquisition of goods by merchants is shown under goods as a negative export of the economy of the merchant.
  - (b) Sale of goods by merchants is shown under goods sold under merchanting as a positive export of the economy of the merchant.
  - (c) The difference between sales and purchases is shown as “net exports of goods under merchanting,” which includes merchants’ margins, holding gains and losses, and changes in inventories of goods under merchanting; net exports may be negative (footnote reference in paragraph [23.14]).
  - (d) Merchanting entries are valued at transaction prices agreed by parties, not free on board (FOB) (paragraph [23.14]).
- Partner allocation of net exports of goods under merchanting should be done by adding positive and negative merchanting entries for each partner economy (paragraph [23.15]).
- Rationale for recording merchanting as goods and treating purchases as negative exports:
  - The merchant’s activity is analogous to a wholesaler/retailer whose output is measured by trade margin; recording net exports as goods maintains a global trade in goods balance; recording gross purchases and sales would artificially inflate merchandise trade in the merchant’s economy (paragraph [23.16]).
- Merchanting label is used only in accounts of the economy where the merchant is resident; in counterpart economies, export sales to merchants and import purchases from merchants are included under general merchandise (paragraph [23.17]).
- Wholesaling, retailing, commodity dealing, and manufacturing management where goods are present in the owner’s economy are recorded as general merchandise rather than merchanting (paragraph [23.18]).
- Purchases by a merchant resold to a resident of the same economy are imports of general merchandise, not merchanting; if the purchaser later resells to a resident of another economy, those sales are recorded as exports of general merchandise (paragraph [23.19]).
- When purchaser intentions about resale destinations are uncertain, intentions can be used as an indicator with subsequent adjustment if intentions are not realized (paragraph [23.20]).

Processing (paragraphs [23.21–23.27])
- Definition and structure: Under processing, the principal owns or acquires material inputs and purchases manufacturing services from a nonresident processor, with ownership of processed goods remaining with the principal throughout processing (paragraph [23.21]).
- Simplest scenario: Goods are shipped abroad for processing and returned; movements are recorded in IMTS of both economies but no general merchandise transactions are recorded (paragraph [23.21]).
- Variations: The principal’s material inputs and final buyers can be located in any combination of economies; key feature is that the processor does not take ownership of the goods during processing (Figure [23.2] notes).
- Treatment of transactions:
  - Purchases of material inputs by the principal:
    - (a) If obtained from residents of the same economy as the principal, there is no international transaction.
    - (b) If obtained from residents of the processor’s economy or a third economy, the principal records imports of general merchandise (paragraph [23.25]).
  - Sales of finished goods by the principal:
    - (a) If sold to residents of the same economy as the principal, there is no international transaction.
    - (b) If sold to residents of the processor’s economy or a third economy, the principal records the sale as exports of general merchandise (paragraph [23.26]).
  - The processor’s charge (processing fee) should be recorded as a service, not under general merchandise (paragraph [23.27]).
- Additional points:
  - Where the processor provides materials, those materials are treated as intermediate consumption of the processor (paragraph [23.23]).
  - Principals often supply intellectual property inputs (product design) without charging for right of use (paragraphs [23.23, 23.21]).
  - Goods transactions between the principal and other parties in a processing arrangement may be shown as a supplementary sub-item of general merchandise (paragraph [23.22]).

Factoryless goods production (paragraphs [23.28 and Figure notes])
- Definition: A factoryless goods producer is a principal that controls production by undertaking entrepreneurial steps and providing technical specifications but fully outsources material transformation; the principal supplies inputs of intellectual property (product design) without charging for the right to use (paragraph [23.28]).
- Transaction structure and valuation:
  - The factoryless goods producer outsources acquisition of all material inputs and manufacturing to a contractor (usually nonresident); the contractor acquires material inputs and sells finished goods to the principal at a price that includes material inputs and manufacturing costs but does not include the value of intellectual property used in transformation (paragraph [23.28]).
  - Finished goods may be used as inputs into further production, sent for further processing, or dispatched to final customers; goods may be shipped directly from the contractor’s economy to final buyers and may not pass through the principal’s economy (Figure [23.3] notes).
- Variations: Material inputs and final buyers may be located in various economies; principal may source inputs and sell them via merchanting to the contractor; the key aspect is that the contractor takes ownership of the material inputs (Figure [23.3] notes). 

*Chapter 23 (2025 SNA)/Chapter 15 (BPM7). Globalization.*

### 23.29 Transactions between the factoryless goods producer and other parties may be shown as a supplementary sub-item of

### 23.29 Transactions between the factoryless goods producer and other parties may be shown as a supplementary sub-item of

### Factoryless goods production: definitions and recording rules
- Under factoryless goods production, material inputs are substantially transformed by the contractor (23.30).
- The inputs of intellectual property products into the transformation retained by the factoryless goods producer should also be significant (23.30).
- Guideline: input values of intellectual property products such as research and development, design, innovation, and other marketing assets (trademarks, brand names, logos, etc.) supplied by the factoryless goods producer will be greater than the fee paid to the contractor excluding the material inputs (23.30).
- Recording of transactions:
  - Goods that the factoryless goods producer buys from the contractor are recorded as general merchandise imports at the value agreed between the principal and the contractor; these goods are considered inputs to the production of the factoryless goods producer (23.31).
  - Sales of finished goods:
    - (a) When goods are sold to residents of the same economy as the factoryless goods producer, there is no international transaction (23.32(a)).
    - (b) When goods are sold to residents of the same economy as the contractor or a third economy, the factoryless goods producer records the sale as exports of general merchandise (23.32(b)).

### Illustrative examples of global manufacturing and distribution arrangements (Box 23.1)
- Example 1 — Re-exports:
  - A car dealer of Economy A imports a car from Economy C for 1 000. A resident of Economy B buys the car for 1200 and drives it home through Economy A to Economy B.
  - Economy A records:
    - General merchandise imports (from Economy C) 1000 Expenditure
    - General merchandise exports (to Economy B) 1200 Revenue
    - Of which: Re-exports 1200 Revenue
  - Goods are recorded gross in Economy A because ownership changes twice and the goods pass through Economy A (Box 23.1).
- Example 2 — Merchanting with manufacturing services that do not change the condition of the goods:
  - Resident of Economy A acquires books from Economy C for 10, sends them to Economy B for a resident of Economy B to box for a charge of 3 payable by the resident of Economy A, then sells to Economy D for 20.
  - Economy A entries:
    - Goods acquired under merchanting (from Economy C) –10 Revenue (negative exports)
    - Goods sold under merchanting (to Economy D) 20 Revenue
    - Net exports of goods under merchanting 10 Revenue
    - Manufacturing services on physical inputs owned by others (with Economy B) 3 Expenditure
  - Treatment: merchanting applies because goods remain in the same condition (Box 23.1).
- Example 3 — Processing arrangement: manufacturing services that change the condition of the goods:
  - Resident of Economy A acquires oil from Economy C for 10, sends it to Economy B for refining for a charge of 15; oil remains owned by resident of Economy A and is sold to Economy D for 30.
  - Economy A entries:
    - General merchandise import (from Economy C) 10 Expenditure
    - General merchandise export (to Economy D) 30 Revenue
    - Import of manufacturing services on physical inputs owned by others (from Economy B) 15 Expenditure
  - Economy B records only manufacturing services exports to Economy A, not goods exports (Box 23.1).
  - Economy B may wish to identify values of material inputs received and goods sent abroad after processing as supplementary items.
- Example 4 — Factoryless goods production:
  - Principal in Economy A contracts production to manufacturer in Economy B. Contractor purchases material inputs from Economy C for 3. Contractor transforms inputs per principal’s specifications. Principal purchases finished sportswear from contractor for 7 and resells to final buyer in Economy D for 28 without goods passing through Economy A.
  - Economy A entries:
    - General merchandise imports (from Economy B) 7 Expenditure
    - General merchandise exports (to Economy D) 28 Revenue
  - Economy B entries:
    - General merchandise imports (from Economy C) 3 Expenditure
    - General merchandise exports (to Economy A) 7 Revenue
  - Economy C and Economy D record counterpart transactions with Economy A and Economy B. No trade is recorded between Economy B and Economy D (Box 23.1).
- Example 5 — Factoryless goods production with material inputs acquired and resold under merchanting by the principal:
  - Principal in Economy A sources material inputs from Economy C for 3 and resells them to contractor in Economy B for 4 without goods passing through Economy A. Contractor transforms inputs; principal purchases finished goods from contractor for 8 and resells to final buyer in Economy D for 28 without goods passing through Economy A.
  - Economy A entries:
    - Goods under merchanting (with Economy C) –3 Revenue (negative exports)
    - Goods under merchanting (with Economy B) 4 Revenue
    - Net exports of goods under merchanting 1 Revenue
    - General merchandise imports (from Economy B) 8 Expenditure
    - General merchandise exports (to Economy D) 28 Revenue
  - Economy C records goods exports of 3 to Economy A; Economy B records goods imports of 4 and goods exports of 8 with Economy A; Economy D records goods imports of 28 with Economy A.
- Items marked with an asterisk are recommended to be shown separately as supplementary items for recording global production arrangements of Economy A (see paragraphs [23.XX and 23.XX]) (Box 23.1).

### Multinational Enterprise (MNE) groups: definitions and control
- Definition:
  - An MNE is a legal entity that has at least one nonresident affiliate or branch, and exercises control over its affiliate(s) or branch(es) either directly—by owning over 50 percent of the voting power in the entity—or by indirect transmission of control (23.33).
  - The MNE is the ultimate controlling parent—the direct investor at the top of the control chain. The MNE group consists of the MNE and the set of entities—regardless of their economies of residence—that are under the control of the same ultimate controlling parent (23.33).
- Control:
  - Control refers to the ability to determine general corporate policy of a corporation; in practice, control is determined to exist if an investor has more than 50 percent of the voting power in an enterprise (23.34).
  - Control may be direct or indirect and is aligned with the Framework of Direct Investment Relationship (FDIR) (23.34).
  - Distinguish ownership and voting power: voting power may be greater or less than the percentage of shares held (e.g., “golden shares” or dual classes of shares) (23.35).
  - Control by government or another public unit can be exercised in ways other than owning more than half of the voting power (23.35).

### Special Purpose Entities (SPEs): role, identification, and typology
- Role and impact:
  - MNEs often set up entities with limited physical presence to benefit from regulatory and tax regimes; SPEs are specific cases of such entities (23.36).
  - Although SPEs have no or little physical presence, they can substantially impact macroeconomic statistics—for example, inflating (foreign) direct investment statistics due to pass-through funds or data for services exports if they own IPPs (23.37).
  - Host jurisdictions are encouraged to report supplementary data for SPEs, particularly when such entities are significant (23.37).
- Identification:
  - A decision tree (Figure 23.4) assists in identifying resident SPEs using criteria including physical presence, number of employees, registration status, control by nonresidents, objectives (access to capital markets; isolate owners from financial risks; reduce regulatory and tax burden; safeguard confidentiality), and transactions mainly with nonresidents (23.36; Figure 23.4).
- Typology (Table 23.1) — categorical overview (summary of categories and types):
  - Category I: Corporate Groups’ Captive Financial Entities — e.g., 1.1 Conduits; 1.2 Holding companies; 1.3 Holding financial assets for securitization; 1.4 Intra group lending companies; 1.5 Captive factoring and invoicing companies; 1.6 Captive financial leasing companies; 1.7 Other captive financial companies (Table 23.1).
  - Category II: Specialized Financial Entities — e.g., 2.1 Captive insurance companies; 2.2 Securitization vehicles/Financial vehicle corporations; 2.3 Holding financial and nonfinancial assets (including real estate) for related companies; 2.4 Companies carrying out other financial functions (Table 23.1).
  - Category III: Corporate Groups’ Nonfinancial Entities — e.g., 3.1 Ancillary companies; 3.2 Operational leasing companies; 3.3 Merchanting companies; 3.4 Royalty and licensing companies; 3.5 Legal ownership of intangible assets (Table 23.1).
  - Category IV: Wealth management entities — 4.1 Companies holding/managing wealth and real estate for individuals and families (Table 23.1).
  - Category V: Government Owned Financial Entities — 5.1 SPEs owned by governments for fiscal purposes (Table 23.1).
  - Category VI: Other structures — entities conducting transactions not covered in other categories (Table 23.1).
- Note: The entity types listed may be SPEs, but not all entities of the types listed are necessarily SPEs; the SPE definition and decision tree assist compilers in determining which entities are SPEs (Table 23.1).

### MNEs, SPEs, and Intellectual Property Products (IPPs): ownership and measurement challenges
- MNEs increasingly establish SPEs not only to channel financial investments, but also to manage IPPs (23.40).
- Measurement difficulties:
  - The intangible nature of IPPs makes transfer and use difficult to observe, especially within MNE groups; main difficulty relates to identifying economic ownership (as opposed to legal ownership), which affects treatment of IPP-related flows such as royalties and licenses (23.41).
- Decision framework:
  - A decision tree (Figure [23.5]) assists in determining economic ownership of IPPs and IPP-related transactions by examining:
    - (a) Control/ownership of the unit: Is the unit a member of an MNE group?
    - (b) Is the unit the producer of the IPP?
    - (c) What is the main kind of activity of the unit, or is the unit expected to use the IPP in its production process?
    - (d) Does the unit receive income related to IPPs, or does the unit pay for the use of IPPs (royalties and licenses)? (23.42).

*International Monetary Fund (IMF).*

### 23.43 Together  these  steps  should  lead  to  a  coherent  decision  on  ownership,  the  recording  of  capital  form

### 23.43 Together these steps should lead to a coherent decision on ownership, the recording of capital form

### Decision tree and determining economic ownership of IPPs within MNE groups
- Steps in the decision tree are intended to lead to a coherent decision on:
  - ownership,
  - the recording of capital formation, and
  - the recording of IPP-related service flows (including imports/exports).
- Acknowledged limitation: availability of information to implement each step may be insufficient, particularly inside MNE groups where:
  - classifying IPP-related transactions is challenging,
  - identifying separately IPP funding, IPP purchases, sales, and payments for IPP use can be difficult.
- Default solutions are provided for each decision-tree situation when information is insufficient.
- Situations and default treatments:
  - Unit is a main producer of goods and non-IPP services (1.1.1): default is to assign economic ownership to the unit in question; intra-group transactions for IPP use should be recorded only when data sources indicate receipts for IPP use by member units.
  - Unit is a main IPP producer (1.1.2): default is to assign economic ownership to the producing unit (1.1.2.2) unless there is evidence the unit does not generate any IPP-related turnover or there is evidence of sales of the original to the parent or other customers (1.1.2.1). No observed IPP-related turnover implies the unit is indirectly funded by the parent; without conclusive evidence the default is to assign ownership to the producer.

### Units using IPPs but not identified as producers
- Units that are observed to use or own IPPs but are not identified as the producer (1.2):
  - Generally will not be considered economic owners of IPPs unless there is evidence of purchases of IPP originals.
  - Payments for IPP use may be observed (1.2.1.1), but even without such payments units may use IPPs provided by the MNE parent in their production processes (1.2.1.3).
- Alternative approach (not recommended under 1.2.1.3):
  - Imputing transfer of the IPP original from the parent and capitalizing the IPP on the balance sheet of the observing unit; this approach is difficult and risky because the nature, size, and timing of flows are principally unknown.

### Special cases: SPEs and low-tax jurisdiction units
- Units created to take advantage of low-tax jurisdictions (1.2.2):
  - Default is to assign economic ownership of the IPP to these units, corresponding with legal ownership.
  - Rerouting ownership and income flows from the legal owner to an economic owner is not recommended.
  - Income received by these units should preferably be classified under a separate heading such as “IPP-related services provided by SPEs” because these services are likely to have very little impact on employment and physical economic activity in the domestic economy.
  - Separate reporting of these IPP services improves clarity in national accounts and balance of payments statistics.

### Global production outside MNE groups and factoryless production
- Principal–manufacturer arrangements (2):
  - Situation 2.1.1 (manufacturer owns IPP and uses it): manufacturer invests on own account in IPP; no need to record IPP transfers; principal obtains a full product including IPP service.
  - Situation 2.1.2 (principal owns IPP and provides blueprints to contractor): no IPPs or IPP-related transactions need be identified when observing the contractor’s production activities; contractor delivers product to principal without reflecting user costs of the IPP.
- Factoryless producers:
  - If a factoryless producer uses IPPs developed by others (2.2.2.2), it is an IPP owner when it purchased IPP originals; alternatively it could use IPPs owned by dedicated IPP producers.
- Outside MNEs, IPP transfers are usually observed from market transactions, making recording less complicated and ownership identification more straightforward.

### Measurement challenges in recording MNE and intra-group flows
- Central issues:
  - Concepts of residence and economic presence are less important to MNE groups and complicate allocation of production by economy.
  - Distorted transfer pricing or failure to record intra-group IPP use can misallocate production between parent and affiliates (see also Section C).
  - Estimates recorded by MNEs in national statistical surveys may not suit national accounts and external sector statistics purposes.
- Potential impacts:
  - Misinterpretation or mismeasurement can adversely affect key macroeconomic indicators, including GDP, trade in goods and services, income, and depreciation charges associated with movable corporate assets, especially intangible assets.
  - Faulty data implementing the decision tree may attribute IPP ownership to the wrong economy, leading to distortions in GDP and other indicators.
  - Even correct measurements can produce flows that are surprising to data users and inappropriate for some analyses (example: IPP originals transferred to a low-tax economy leading to high measured value-added with little employment).

### Allocation of activities, tax-motivated structuring, and transfer pricing
- MNEs frequently structure operations, ownership, and intra-enterprise pricing to maximize enterprise-wide after-tax profits, complicating statistical interpretation.
- Strategies used by MNEs that affect allocation and measurement include:
  - distorted transfer pricing to shift income to lower-tax economies,
  - assigning/transferring ownership of IPPs or other movable assets across economies,
  - interposing finance or holding company affiliates in low-tax economies,
  - establishing offshore factoring corporations to bill and collect worldwide sales, and
  - inverting corporate ownership structures with an overseas affiliate becoming the parent.
- Transfer prices incompatible with SNA valuation principles should be adjusted to actual exchange values if practical.
- Complex structures can:
  - mask ultimate ownership links,
  - inflate (foreign) direct investment flows and positions by counting passing-through flows, and
  - complicate compiling and reconciling statistics.
- Recommended compiler responses:
  - provide additional breakdowns showing effects of adjustments to transfer prices or inability to adjust,
  - use macroeconomic indicators and supplementary information (Section E) to distinguish domestically and foreign-controlled corporations.

### Cross-border mobility of corporate assets and implications
- Mobility of movable corporate assets, including intangible assets such as IPPs, can make the true location of profit generation and value added ambiguous because IPPs are not physically constrained and can be registered in other economies to maximize post-tax profits.
- IPP creation is often funded by affiliates elsewhere via cost sharing agreements where research costs at one location are funded by affiliates across the group.
- Measurement of IPP-related flows within an MNE (sales/transfers of IPP assets, royalties based on reported transfer prices) can bias recorded flows relative to the discounted present value of expected future returns, which may not be available to compilers.
- Identification within exports/imports and capital formation of transfers of previously produced IPPs, if practical, contributes to understanding roles of those transactions in GDP and its components.

### Consistency and coherence of MNE group data
- Challenge: ensure all MNE group activity is captured, not duplicated, and properly allocated by economic territory because the SNA/Manual does not treat the MNE group as a single entity.
- Inconsistent recording across data sources (different units, definitions, recording methods) can produce large discrepancies.
- Practical compiler strategies used in some national statistical offices:
  - focus on large MNEs,
  - coordinate data collection from the MNE group,
  - track changes in group composition,
  - conduct coherence analysis,
  - maintain good communication with group representatives,
  - create specialized statistical units combining national accountants, balance of payments experts, and business accountants.

### Macroeconomic indicators and supplementary information to monitor globalization
- 2025 SNA gives increased prominence to indicators other than GDP that are generally less affected by globalization and MNE activity, including:
  - gross/net national income (GNI/NNI),
  - gross/net national disposable income (GNDI/NNDI),
  - household (adjusted) disposable income.
- Rationale:
  - These indicators may better reflect the impact of MNE activities on an economy’s residents.
  - Example: a direct investment affiliate wholly owned by a foreign parent engaged in capital-intensive production may generate most value added as operating surplus accruing to foreign parents (reinvested earnings), leaving relatively small employee remuneration in the domestic economy—GNI excludes property income that accrues to foreign investors, so GNI comes closer to measuring flows retained by residents.
  - Net measures such as net national income (NNI) capture depreciation and depletions (e.g., mineral, energy, biological resources) that gross measures may not deduct.
- Need for comprehensive global production chain view:
  - Analysis of IPP use in production typically requires a worldwide input-output table; a national input-output table will not provide a complete picture.

*UNECE Guide to Measuring Global Production (2015); 2025 SNA.*

### 23.68 When  current  transfers  represent  a  large  share  of  an  economy’s  income,  net  national  disposable  incom

### 23.68 When  current  transfers  represent  a  large  share  of  an  economy’s  income,  net  national  disposable  incom

### Net national disposable income and household indicators
- When current transfers represent a large share of an economy’s income, net national disposable income (NNDI) can provide a better measure of the income available to residents for consumption or saving. (Paragraph 23.68)
- For focus on material well-being of households, indicators such as net household (adjusted) disposable income may provide the best summary of economic conditions. (Paragraph 23.68)
- Household (adjusted) disposable income is hardly affected by MNE group activities, since basically only remuneration from employment by domestic affiliates of MNE groups feeds into household (adjusted) disposable income. (Paragraph 23.68)

### Supplementary data and increased granularity in institutional sector and external accounts
- Institutional sector accounts show the full sequence of economic accounts from output and value added to net lending and borrowing, the financial accounts, and the resulting balance sheets for institutional sectors. Adding granularity based on ultimate control and ownership of corporations highlights the full impact of MNE activities and domestic enterprises that are part of MNE groups. (Paragraph 23.69)
- Recommendation: increased granularity should be limited to the nonfinancial corporations sector and the financial corporations sector; breakdown of MNE groups is not needed for any subsector. (Paragraph 23.69)
- For economies with a significant presence of SPEs, it is recommended that SPEs be separately identified as “of which” items within the institutional sector accounts and external accounts to better understand SPE contributions from national and external accounts perspectives. (Paragraph 23.70)
- Presentation recommendation for such economies: identify SPEs as an “of which” supplementary category for foreign-controlled financial and non-financial corporations in institutional sector accounts with enhanced granularity. (Paragraph 23.70)
- Figure [23.6] provides a template for breakdown of nonfinancial and financial corporations by domestic multinational corporations and foreign-controlled corporations, with “of which” categories for SPEs. (Paragraph 23.71)

### Template breakdown (nonfinancial and financial corporations)
- Nonfinancial Corporations (codes shown in template):
  - Domestically controlled nonfinancial corporations: S11 S11DO S11001 S110011 S11002 S110021 S11003 (as per template). (Figure 23.6)
  - Foreign-controlled nonfinancial corporations; Of which: SPEs. (Figure 23.6)
- Financial Corporations (codes shown in template):
  - Domestically controlled financial corporations: S12 S12DO S12001 S120011 S12002 S120021 S12003 (as per template). (Figure 23.6)
  - Foreign-controlled financial corporations; Of which: SPEs. (Figure 23.6)

### Supplementary (foreign) direct investment statistics
- Complex financing and ownership structures of MNE groups, driven by factors such as tax optimization or labour and transport cost reduction, often lead to channeling investments through several economies, producing large portions of direct investment flows that are pass-through in nature. (Paragraph 23.72)
- Supplementary presentations of direct investment statistics by ultimate investing economy and by ultimate host economy can help address interpretation challenges caused by immediate partner-economy compilation. (Paragraph 23.72)
- These supplementary statistics are covered in detail in [Annex 6 on Selected Issues on Direct Investment/BPM7 Annex 6, Selected Issues on Direct Investment]. (Paragraph 23.72)

### Supplementary presentation of trade and investment income by enterprise characteristics
- Recommendation: supplementary presentation of trade and investment income by characteristics of the enterprise, including ownership (domestically controlled or foreign-controlled) and size, to develop GVC indicators and better identify MNE roles in current account international transactions. (Paragraph 23.73)
- Economies are encouraged to compile goods trade by enterprise characteristics (TEC) and services trade by enterprise characteristics (STEC). Many economies have added ownership (foreign or domestic) to TEC and STEC. (Paragraph 23.74)
- TEC/STEC statistics can answer questions on:
  - What kind of enterprises are behind trade flows of goods and services?
  - Share of small and medium-sized enterprises (SMEs) in total trade.
  - Share of enterprises trading with a certain partner economy and their trade value. (Paragraph 23.74)
- These statistics enable a supplementary presentation disaggregating exports and imports and external flows of investment income by ownership, size-class of enterprises, trading partner, product, and industry. (Paragraph 23.74)

### Template for identifying enterprise characteristics in the current account (Table 23.2)
- Main breakdown: domestic versus foreign ultimate control; identification of SMEs that employ fewer than a threshold number of employees. (Paragraph 23.75)
- Encouraged threshold for SME: fewer than 250 employees to enhance international comparability; other thresholds may be considered. (Paragraph 23.75)
- Template calls to further divide SMEs into:
  - Independent SMEs (not part of a group)
  - SMEs that are part of a group (to identify SMEs that might benefit from capital inputs of affiliated parties). (Paragraph 23.75)
- Where underlying data are not available at enterprise level (e.g., imports by individuals), transactions should be reported as “Unknown”. (Paragraph 23.75)
- The template represents a recommended level of disaggregation; economies may provide further disaggregation where possible or may be constrained by confidentiality or data availability. Economies should consider the most economically relevant breakdown possible when publishing these statistics. (Paragraph 23.76)

### Other supplementary balance of payments statistics encouraged for GVC analysis
- Reporting encouraged for:
  - Total value of re-exports and main product and/or partner breakdown.
  - Total value of goods acquired or sold under merchanting and main products and/or major trading partners.
  - A reconciliation table between international merchandise trade statistics and balance of payments goods statistics.
  - Product and partner breakdown of total trade in goods on a balance of payments basis and geographical break of Extended Balance of Payments Services categories. (Paragraph 23.77)

### Extended supply-use tables (eSUTs) and links to GVC/TiVA
- eSUTs provide more granularity regarding transactions associated with globalized production processes and support the compilation of TiVA and GVC thematic accounts. Extensions may include details on origin (imports), destination (exports), goods for processing, re-exports, and breakdowns by firm attributes (size-class, trading status, control). (Paragraph 23.78)
- Control details may be identified by TEC and STEC data; other extensions may include links to generation of income accounts, employment statistics, and greenhouse gas emissions. (Paragraph 23.78)
- eSUTs capture differences in input/output structures of different producers within the same industry absent from conventional supply and use tables. Economies can implement eSUTs according to priorities, resources, and data availability; eSUTs should be parsimonious and focus on core activities where extra granularity is needed. If there is no foreign presence in a given industry, no granularity is needed. (Paragraph 23.79)
- Data collected for the supplementary presentation of trade and investment income (paragraphs [23.XX–23.XX]) can improve eSUTs, GVC thematic accounts, and TiVA estimates. eSUTs build on national supply and use tables and input-output tables and integrate MNE surveys, balance of payments surveys, tax data, integrated business statistics, and reconciled trade statistics. eSUTs provide a holistic view to understand globalization effects on production processes. (Paragraph 23.80)
- Detailed discussions and recommendations for eSUTs can be found in the OECD Handbook on Extended Supply and Use Tables. (Paragraph 23.80)

### Alternative presentations: reclassified SPEs (nationality basis)
- Economies with significant SPE importance are encouraged to consider a voluntary supplementary presentation of SPEs reclassified from economies of legal incorporation to economies of their parents (nationality basis). While outside the [SNA/Manual] conceptual framework, this allows users to see effects of consolidating SPE flows with parent flows and the effects of pass-through within MNEs on core macroeconomic indicators. Presenting SPE statistics on a nationality basis complements residency-based statistics and is not a substitute. (Paragraph 23.81)
- This supplementary approach should be considered only for economies where SPEs are important, particularly where resident MNEs set up many foreign SPEs or non-resident MNEs set up many resident SPEs. The approach is resource intensive and considered too ambitious to implement consistently across economies where SPEs are not important. (Paragraph 23.81)

### Activities of Multinational Enterprises (AMNE) statistics and FATS
- AMNE statistics and closely related Foreign Affiliates Statistics (FATS) provide information on foreign-controlled enterprises to complement direct investment and globalization indicators. AMNE statistics cover a range of variables on direct investment enterprises and are compiled separately from balance of payments and international investment position statistics, focusing on overall holdings and activities of direct investment enterprises rather than just interrelations with related enterprises. The objective is to provide an additional perspective complementary to data on international flows and positions. (Paragraphs 23.82, 23.85)
- AMNE statistics cover foreign direct investment enterprises in which the direct investor (or group of investors) directly or indirectly holds or controls a majority of the voting power (i.e., subsidiaries). This coincides with the scope of foreign controlled corporations in the SNA but differs from the scope of foreign direct investment enterprises because associates are excluded. (Paragraph 23.83)
- For inward AMNE statistics (foreign-controlled enterprises in the compiling economy), geographical attribution should be by the economy of the ultimate controlling parent. Compilers are encouraged also to provide some data attributed by the economy of the immediate investor to facilitate links with foreign direct investment data. (Paragraph 23.84)
- Outward AMNE statistics (statistics for foreign enterprises controlled by foreign direct investors resident in the compiling economy) should be attributed based on the location of the enterprises whose activities are being described. (Paragraph 23.84)
- Ideally, all AMNE variables should be attributed on the basis of industrial activities of the establishment or enterprise according to ISIC; particular variables such as sales, output, exports, and imports may be attributed by types of products produced and sold. (Paragraph 23.84)

*Source: 2025 SNA / BPM7 draft chapter excerpt.*

### 23.86 AMNE statistics may be produced for both foreign-controlled enterprises in the compiling economy (a subset of inwa

### AMNE statistics and analytical tools (sections 23.86–23.119)

### Coverage and universe
- AMNE statistics may be produced for:
  - foreign-controlled enterprises in the compiling economy (a subset of inward direct investment; “inward AMNE statistics”);
  - foreign affiliates controlled by MNEs in the compiling economy (a subset of outward direct investment; “outward AMNE statistics”);
  - outward AMNE statistics also may cover the activities of resident direct investors.
- AMNE statistics cover direct investment enterprises in which the direct investor (or a group of investors in combination) directly or indirectly holds or controls a majority of the voting power (i.e., subsidiaries).
- AMNE coverage excludes associates and follows the definition of direct investment discussed in the Manual (paragraphs [6.8]–[6.24]).
- Only enterprises with foreign control are covered in AMNE statistics, corresponding to foreign-controlled corporations in Figure 23.6.

### Key economic variables for AMNE statistics
- Basic variables of substantial interest:
  - sales (turnover) and/or output;
  - employment;
  - value added;
  - exports and imports of goods and services;
  - number of enterprises.
- Other supplementary variables that might be collected:
  - assets (both financial and nonfinancial);
  - renumeration of employees;
  - net worth;
  - net operating surplus;
  - gross fixed capital formation;
  - taxes on income;
  - research and development expenditures;
  - total purchases of goods and services;
  - intra-group exports and imports.
- Definitions of these variables are given in the 2025 SNA and in referenced documents.
- Compilers are encouraged to have comparable data for the total population of enterprises, or for domestically-controlled enterprises on the same basis as inward AMNE statistics, to enable performance comparisons.

### Statistical units
- AMNE statistics can be collected at:
  - enterprise group level;
  - enterprise level;
  - individual business locations or establishment level.
- Tradeoffs:
  - total assets are more naturally collected from enterprise groups or enterprises than from establishments;
  - enterprise groups and enterprises may have activities in multiple industries, complicating primary-activity classifications;
  - no single recommendation is made for the appropriate statistical collection unit.
- Practical approach: develop AMNE statistics within existing statistical systems where units are already defined to reduce choices.

### Time of recording and valuation
- Flow variables (e.g., output, value added):
  - should cover the whole of the reference period (usually a year);
  - should be measured on an accrual basis.
- Stock variables (e.g., assets, net worth):
  - should be as at the end of the reference period.
- All transactions and positions variables in principle should be measured at market value.

### Attribution of AMNE variables
- Geographic attribution:
  - For inward AMNE statistics (foreign-controlled enterprises in the compiling economy): attributed by the economy of the ultimate controlling parent.
  - Compilers are encouraged to also provide data attributed by the economy of the immediate investor (the first foreign parent) to facilitate links with direct investment data.
  - For outward AMNE statistics (foreign enterprises controlled by direct investors resident in the compiling economy): attributed based on the location of the enterprises whose activities are being described.
- By activity and product:
  - Ideally, all AMNE variables should be attributed by industrial activities according to ISIC (United Nations International Standard Industrial Classification of All Economic Activities).
  - Particular variables such as sales (turnover) or output, exports, and imports may be attributed by product types produced and sold.
  - Some variables (e.g., value added and employment) do not readily lend themselves to a product classification.
  - Longer-term goal: disaggregate, by product, variables that lend themselves to product attribution (such as sales (turnover) or output, exports, and imports) to avoid interpretation problems related to secondary activities and to align with trade in goods and services classification.

### Compilation issues and practical approaches
- Two basic approaches to developing AMNE statistics (not mutually exclusive):
  - Conduct surveys that directly request information on operations of covered enterprises (appropriate for both inward and outward AMNE statistics).
  - Identify the subset of existing domestic enterprise data accounted for by foreign-owned firms (inward AMNE statistics only).
- Direct investment registers can be used to:
  - identify units to be covered;
  - identify the economy of attribution (for inward AMNE statistics).
- Inward AMNE collection can be combined with collection of supplementary data on foreign-controlled corporations in the external accounts.
- Survey design considerations:
  - Key AMNE questions might be added to existing direct investment transactions and positions surveys.
  - Direct investment surveys may be conducted more frequently (e.g., quarterly) with quick turnarounds; AMNE statistics are often required less frequently (e.g., annually) and cover only the controlled portion of the direct investment universe — separate surveys may therefore be more appropriate.
  - For inward AMNE statistics, it should be possible to link direct investment statistics to existing domestic economic statistics (for example, national accounts) through ownership-structure information to identify foreign-controlled resident enterprises and owner residence.
  - Additional questions may be needed on direct investment surveys to capture the ultimate controlling parent.

### Analytical tools: global production and GVCs
- Rationale:
  - Parts and components of final products are increasingly produced across different economies, so intermediate goods and services may cross borders multiple times before final assembly and sale.
  - International trade in goods and services is often intra-group trade organized by MNEs.
  - Production fragmentation has deepened divergence between gross trade flows and production/final demand as accounted for in national accounts.
- Trade in Value Added (TiVA) indicators:
  - TiVA addresses double counting in gross trade flows by measuring value added by each economy and industry in production of traded and consumed goods and services worldwide.
  - TiVA model involves compiling a worldwide input-output table combining national supply and use tables with trade statistics, enabling tracking of exports used as intermediate consumption in other economies and recording final demand, taxes less subsidies on products, value added at basic prices, and output for each industry in each economy.
  - Key TiVA indicators include:
    - domestic content of an economy’s exports (domestic value added of exports as a percentage of total gross exports);
    - decomposition of an economy’s gross exports by source economy in value added terms;
    - decomposition of an economy’s gross imports by source economy in value added terms;
    - decomposition of value-added content of exports by goods and services value added.
  - TiVA statistics often reveal that a portion of value added of imported intermediate goods reflects an economy’s own domestic value added that has “returned” to the economy.
  - Granular TiVA statistics can be computed using eSUTs (see paragraphs [23.78-23.80]); TiVA estimates rely on supply and use or input-output tables from multiple economies and typically require international cooperation and, where detailed national data are lacking, assumptions by compilers.
- Global Value Chain (GVC) thematic account:
  - GVCs encompass the full range of activities to bring a product from conception to end use, including research and development, production, transportation and distribution, marketing and sales, and after-sales services.
  - A GVC thematic account uses a bottom-up approach within the national accounts framework to identify and articulate a GVC for a specific product or group of products.
  - The GVC thematic account consists of GVC-specific supply and use tables (SUTs) — national or multi-country — based on an enterprise-centered approach, combining detailed business statistics, business lines and functions, and GVC-specific institutional sector accounts.
  - GVC thematic accounts include production (and generated income and employment), investment income, investment (nonfinancial and financial), and balance-sheet information not readily available in sectoral presentations.
  - Compilation steps:
    - determine scope of the GVC and identify firms participating in the supply chain;
    - compile national SUTs with a common breakdown of industries and products, explicitly identifying ISIC divisions and groups and GVC-relevant products;
    - add significant additional detail as outlined in the United Nations Handbook for comprehensive GVC analysis.
  - Enterprise data requirements:
    - business, trade, and investment data for a GVC thematic account should be collected from the business line of a global enterprise to specify industry-specific GVCs controlled by lead firms;
    - enterprises or enterprise groups can delineate statistical units by business lines and business functions;
    - to reflect governance in SUTs, further breakdown by ISIC categories should indicate whether firms are foreign controlled or nationally controlled and whether they are part of the GVC.
  - Product and trade representation:
    - standardized products in GVC-specific accounts reflect the GVC-related products, including the final product and intermediate goods and services used to produce it;
    - trade of these products between GVC partner countries is explicitly shown.
  - Implementation flexibility:
    - GVC thematic accounting can be implemented depending on an economy’s needs without overburdening or reducing accuracy or consistency of national accounts;
    - may focus on a single country or expand to multi-country accounts with major GVC partners;
    - may focus on one or more industries based on their relative economic importance, international investment, trade relations, or specific policy questions;
    - GVC satellite accounts may comprise only one or several GVC-specific SUTs, but preferably will include GVC-specific institutional sector accounts.
  - Compilers can focus on the most relevant GVCs based on relative importance in terms of value added, international investment, trade relations, and policy needs; GVC thematic accounting aims to address implicit homogeneity assumptions among firms by deconstructing contributions across fragmented production processes.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/sna-ch23-bpm7-ch15.pdf_