## C.4 Merchanting and Factoryless Producers; Clarifying Negative Exports in Merchanting; Merchanting of Services

## Source details

**Canonical URL:** [C.4 Merchanting and Factoryless Producers; Clarifying Negative Exports in Merchanting; Merchanting of Services](https://www.imf.org/-/media/files/data/statistics/bpm6/catt/catt-c4-global-consultation-questionnaire.pdf)

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- [Markdown version](/-/media/files/data/statistics/bpm6/catt/catt-c4-global-consultation-questionnaire.pdf.md)
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### Purpose and scope
- The questionnaire solicits coordinated answers between agencies responsible for balance of payments and national accounts (for example, Central Bank and National Statistics Office).
- Contact for questions: STABPM6Update@imf.org and copy SNA-Globalization@imf.org.
- The questionnaire covers conceptual issues, practical implementation, and interest in participating in an experimental exercise.

### Core conceptual proposals and questions (GN = guidance note)
- Proposal: classify activities related to factoryless goods producers (FGP) as manufacturing and record FGP transactions gross (output of the principal includes the input of the contractor and the value of the embedded intellectual property product (IPP)), instead of recording as distribution activity (net recording).
  - Question 3 asks whether respondents agree to record FGP transactions gross (response scale: Strongly disagree; Disagree; Neutral; Agree; Strongly agree).
- Proposal on recording output of the contractor in global manufacturing arrangements:
  - Under a FGP arrangement: record as a Good when the contractor takes ownership of the material inputs (where IPP and the management of the production process are provided by the principal).
  - Under a processing arrangement: record as a Service when the material inputs are owned by the principal (with no significant input of IPP by the principal).
  - Question 4 asks whether respondents agree with this proposal (response scale as above).
- Proposal: the definition of FGP activity should not depend on whether the contractor is an affiliated enterprise or not.
  - Question 5 asks respondents whether they agree with that proposal (response scale as above).

### Supplementary BOP components for goods related to global manufacturing arrangements
- GN proposes introducing supplementary item(s) under the BOP standard component of Goods to cover transactions related to goods traded as part of a global manufacturing arrangement.
- Two proposed options:
  - Option 1: one supplementary component under Goods/General merchandise with:
    - 1.A.a.1 General merchandise on a BOP basis
      - of which: 1.A.a.1.1 Re-exports
      - of which: 1.A.a.1.2 Goods traded within a global manufacturing arrangement
    - 1.A.a.2 Net exports of goods under Merchanting
      - 1.A.a.2.1 Goods acquired under merchanting (negative credits)
      - 1.A.a.2.2 Goods sold under merchanting
    - 1.A.a.3 Nonmonetary gold
  - Option 2: supplementary components distributed between General merchandise and Net exports under Merchanting with additional subitems:
    - 1.A.a.2.1.1 Input goods acquired from the third parties by the principal within a global manufacturing arrangement
    - 1.A.a.2.2.1 Input goods sold to the contractor within a global manufacturing arrangement
- Question 6 asks which option respondents favor (Option 1; Option 2; Option 3: No additional components) and requests supporting arguments.

### Decision support and tools
- Annex II of the GN proposes a decision tree to help compilers classify transactions in goods related to processing, FGP type arrangements, and merchanting.
  - Question 7 asks whether the decision tree is a supportive tool in distinguishing FGP transactions from other global manufacturing arrangements (response scale: Strongly disagree to Strongly agree).
  - Follow-up invites specification of reasons if respondents strongly disagree or disagree.

### Treatment of merchanting and negative exports
- GN states current treatment of negative exports in merchanting of goods is a compromise among experts; no changes to BPM6 recording are proposed but complementary explanations are suggested in relevant manuals.
  - Question 9 asks whether respondents support the team’s conclusion (Yes/No) and requests supporting arguments.

### Merchanting of services, intermediary fees, and bundling
- GN argument: concept of “merchanting of services” is impossible from a pure conceptual view because services cannot be stored and traded like goods and pure merchanting transactions cannot involve services under current international standards; observed arrangements are typically trilateral (intermediary, producer, consumer) forming a triangle of service-related transactions where an agent arranges a transaction for a fee.
  - Question 10 asks whether respondents agree with this conclusion (response scale: Strongly disagree to Strongly agree).
- Proposal: fees the intermediary (agent) receives should be recorded under trade-related services as a supplementary (voluntary) “of which” item in the international accounts of the partner countries (see Annex IV).
  - Question 11 asks whether respondents agree with this proposal (Yes/No) and requests supporting arguments.
- Bundling of services: GN suggests that services combined in a package (for example, tour operators) should not be recorded as a new product in the international accounts (contrary to ESA 2010 recommendation) but should be unbundled to record each package component (transport, accommodation services, etc.) separately.
  - Question 12 asks whether respondents agree with the proposed treatment (response scale: Strongly disagree to Strongly agree).

### Practical implementation questions and challenges
- Identification and estimation capacity:
  - Question 13 asks whether the institution can identify relevant units engaged in global manufacturing arrangements and distinguish transactions and prepare estimates of goods (with correct geographical breakdown) related to global manufacturing arrangements, particularly those undertaken by the principal (Yes/No). Follow-up requests methods and results if “Yes”.
- Practical challenges checklist (Question 14) — respondents asked to check applicable issues, including:
  - Difficult to identify enterprises engaged in global production arrangements in the Business Register and/or existing relevant surveys.
  - Difficult to identify ownership of material inputs.
  - Customs records do not identify processing trade (to facilitate identification of change of ownership on a BOP basis).
  - Difficult to identify complementary information from other sources and/or link the trade database to other (business) records.
  - Lack the capacity to develop a new collection instrument or undertake a study of profiling enterprises engaged in global production arrangements.
  - Other issues (free text).
- Trade-related intermediate services and bundling practice:
  - Question 15.1 asks about practical challenges encountered in recording components of trade-related intermediate services (free text).
  - Question 15.2 asks current practice in recording services bundled in a package (free text).
- Additional comments: Question 16 invites other comments or suggestions (free text).

### Experimental exercise participation
- Question 17 asks whether the institution would be interested in participating in an experimental exercise to estimate the proposed supplementary items related to FGP activities according to the option selected in Q6, with response options:
  - Yes
  - Yes, providing further advice on implementation is received
  - No

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/catt/catt-c4-global-consultation-questionnaire.pdf_