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1993 SNA Update Information - Country comments for issue:
Goods sent abroad for processing

Issue description
Issue description in [English] | [French] | [Russian] | [Spanish]
The 1993 SNA and the Balance of Payments Manual treat the goods sent abroad for processing differently. The 1993 SNA only records gross flows in the case of substantial processing (reclassification of the good at three-digit CPC). The Balance of Payments Manual, as a practical matter, suggests a convention that all processing be assumed substantial and therefore gross flows are recorded. Can a distinction be made between the different levels of processing? Further, the position is that when goods are sent abroad for processing, no change in ownership takes place and thus there are no actual transactions. It is mentioned that the current treatment of goods for processing in the 1993 SNA was to facilitate input-output analysis. Is this still a valid reason to record goods for processing on a gross basis or does the advent of globalization and the increasing amount of goods processed abroad suggest a change in practice would be appropriate?
Country comments
Number of country comments for selected issue:44
  Date postedSourceComment
 10/10/2006SwedenAgreement with proposal
 9/19/2006Central Bank of Tunisiaconcernant le point "négoce international" enregistré actuellement au niveau des services, les experts des comptes nationaux proposent de les intégrer parmi les échanges commerciaux. une nouvelle exception s'ajoute, ainsi, pour le principe de changement de propriété économique des biens échangés. Par ailleurs, et sur le plan pratique ce reclassement pose un problème de disponibilité de l'information dans la mesure où ces opérations ne sont pas recensés au niveau de la Douane, principale source de statistiques du commerce extérieur dans la majorité des pays. Ces statistiques sont, en effet, souvent relevés auprès du système bancaire. Cette pratique pose également un problème d'évaluation du service rendu en comparaison avec la nouvelle recommandation qui consiste à enregistrer les opérations commerciales effectuées dans ce cadre, avec un signe moins pour les importations et un signe plus pour les exportations.
 9/15/2006United KingdomWe agree with all the recommendations made by the AEG. The implications for national recording should be described.
 9/15/2006LatviaAfter deep discussions and expert consultations we basically support the 1993 SNA Update Issues.
 9/15/2006Norway m4Norway40;
 9/14/2006Bank of LithuaniaWe agree with the AEG recomendations.
 8/18/2006ItalyWe strongly support the idea of net recording for goods sent abroad for processing.
 8/18/2006SingaporeWe agree that it is conceptually correct to record the imports and exports of goods for processing on a pure change of ownership basis in SNA93 rev 1. However, we have encountered practical difficulties in its implementation, e.g. the identification/determination of changes in ownership of these goods, and the ensuring of data quality
 7/31/2006IsraelWe agree with the approach of not imputing change in ownership. Both in the SNA and BoP the need for consistency should be stressed, and guidance could be given about eventual practical problems such as difficulties to identify goods sent abroad for processing in foreign trade statistics.
 7/28/2006LithuaniaIn general we support the recommendations.
 2/23/2006South African Reserve Bank We disagree with the majority of the AEG’s recommendation to never impute a change in ownership. From a practical perspective we foresee substantial difficulties related to the accuracy of input–output statistics, consistencies in the production process, international trade statistics and probably labour/output relationships. We would like to see some options for greater flexibility in the final update.
 1/27/2006Central Bank of El SalvadorDe acuerdo con la recomendación del AEG, en el sentido de no imputar cambio de propiedad de los bienes enviados al exterior para procesamiento, inclusive si el procesamiento se hace el país de origen. Creemos sí que debe armonizarse el tratamiento estadístico con el MBP5. Para el análisis de insumo de producto debe separarse y darle tratamiento como una sola rama de actividad, tal como sucede con la industria de la Maquila.
 1/17/2006Central Bank of ChileEl SCN 1993 recomienda un tratamiento bruto de los bienes enviados al exterior para su procesamiento (exportaciones e importaciones); en cambio, la recomendación de tratamiento alternativo del Grupo de Expertos, sugiere un tratamiento neto.
Los argumentos que recomiendan el tratamiento bruto presenta su fuerza en una visión pragmática, dada las serias dificultades en la separación de los bienes enviados para su procesamiento al exterior y los bienes transformados que retornan a la economía, por tratarse de bienes distintos. Además, que en el tratamiento neto, es difícil pesquisar los servicios de maquila o transformación en el flujo de bienes del comercio exterior.
Los argumentos a favor de la medición neta son: i) el principio del cambio de propiedad y ii) un tratamiento simétrico en la eliminación de la incoherencia entre el procesamiento de los bienes en la economía interna y en el exterior.
Desde el punto de vista del análisis económico, la aceptación de la nueva propuesta, cambiaría drásticamente la actual apertura de las economías al comercio exterior, medido como una relación de la suma de las exportaciones e importaciones sobre el PIB, o las estimaciones de productividad al estimarla sobre un denominador menor.
La tendencia a nivel mundial es aumentar considerablemente los servicios de maquila en el exterior y cada vez afectará a un mayor número de países y transacciones. En Chile se han detectado situaciones como la siguiente: empresas del retail nacionales compran telas en India, compran diseño italiano, envían las telas y los materiales a China para su maquila (transformación) y luego envían los productos a varios países, entre ellos a Chile.
La posición de Chile es que desde el punto de vista conceptual el tratamiento neto sugerido es correcto porque mediría efectivamente el aporte al valor agregado de cada economía; sin embargo, razones pragmáticas de poder diferenciar los servicios de maquila entre las materias primas enviadas para ser transformadas y los productos terminados que regresan al país, podría presentar serias complicaciones para la implementación de esta medición.
 12/22/2005Serbia and MontenegroWe agree with the suggested changes.
 12/14/2005FranceL'INSEE soutient la recommandation, plus conforme au principe du transfert de propriété comme base de la mesure des échanges internationaux, visant à enregistrer comme un simple échange de services l'envoi de biens envoyés à I'étranger pour y subir des transformations/réparations importantes.
 12/13/2005CanadaThis has been an important issue for Canada over the years. When goods come to Canada for processing without ownership change two databases produce inconsistent estimates. The goods are recorded in gross trade flows in the customs-based database as there is no way to identify goods for processing in the customs process. Second, when the Annual survey of manufacture is done, the work is reported only on a net basis as a processing service produced. Infra-annual shipments data most often reflect the annual survey data and come in on a net basis. For many years, through the balance of payments system, we tried to keep track, at least in the revision process of flows crossing the border without change in ownership, but this led to large revisions of the merchandise trade surplus or deficit – offset of course by services. Canada opted, at the time of implementation of SNA93 to adopt a gross basis for trade, implicitly imputing an ownership change. The GDP is not affected by this but the allocation of production and trade between goods and services is affected.
On the one hand, if the accounts are to reflect the economic process, it is important to distinguish between goods bought at arms length to be used in a production process to ultimately sell the product at arms length. Goods crossing the border for processing only reflect the price of a service produced by the domestic economy, and the service producer plays no role in setting the price and marketing the final product which is a good. On the other hand, if in practical terms this cannot be accomplished without building in a revision process which is constantly re-allocating between goods and services flows, users distrust the data system and are not easily placated by the explanation that it doesn’t affect GDP. In addition, through globalization is important to understand the drift between goods and service production. Ultimately, it leads to great inconsistencies in reported trade flows around the world.
This issue needs to harmonized between BOP and SNA.
 12/12/2005Bank of KoreaWe agree that the view of AEG is theoretically excellent, but we think it is difficult to separate goods sent out for processing and goods returned after processing from other movements of goods in records of international trade flows. So we have qualms about adopting the AEG's view to implement in practice.
 12/9/2005RussiaRosstat largely supports the recommendations on the updating 1993 SNA, made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 12/2/2005NetherlandsWe generally support the recommendations of the AEG.
 12/2/2005AustraliaAustralia agrees with the AEG recommendations.
 12/2/2005TurkeyWe agree with the recommendations made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 12/1/2005NorwayWe think the present recommendation pays too much attention to the wish to avoid imputed ownership changes, relative to the need to describe actual production activities for those units doing the processing in question. We see a need for a symmetry so that when the processing abroad is seen as an import of 'processing services', the unit doing the processing is producing those 'processing services' and not regular manufacturing products. In that case the recommendation should be expanded to the effect that units producing 'processing services' should be kept separate from other regular production units of manufacturing industries. Further, there is a need for a criterion to distinguish processing orders that are comparable to regular manufacturing activities, significant transforming the raw materials supplied, from other minor processing orders that could be seen as producing processing services as a separate activity. In the first case, where significant transformation of the materials takes place, we would prefer a gross treatment of exports and imports as well as a description of the processing process as regular manufacturing activity.
We also would like to add that gross treatment of processing is important when national accounts are used in combination with other information in analyzing environmental impacts of economic activities (i.e waste, emissions).
 12/1/2005BrazilIn the AEG meeting in Bangkok we vote for impute a change of ownership.
 12/1/2005Central Bank of NicaraguaConsideramos que los bienes enviados/recibidos al exterior para su transformación deben ser registrados en cifras netas tal y como se recomendó inicialmente en el manual de cuentas nacionales de 1968 y el manual de balanza de pagos revisión 4.
Lo anterior sustentado en el hecho de que para países pobres altamente endeudados, el registro en cifras brutas, podría llevar a análisis errados de algunos indicadores macroeconómicos, tal es el caso del indicador de sostenibilidad de la deuda externa.
En el caso particular de Nicaragua, para acceder a los beneficios de la Iniciativa de Países Pobres Altamente Endeudados (HIPC por sus siglas en inglés), debería presentar entre otros requisitos, un indicador de deuda externa a exportaciones mayor a 1.5. El valor total de las exportaciones utilizado para el cálculo de este indicador incluyó el valor de las exportaciones de zona franca en términos netos.
 12/1/2005National Bank of MoldovaWe consider that goods sent abroad for processing should be reflected under merchandise trade following the BPM5 statements, imputing change in ownership in all cases regardless where goods are physically delivered after processing. Goods before and after processing could be very different and this treatments should reflect interchanges of goods after processing from those before processing.
 12/1/2005Hong Kong, China• On conceptual ground, we fully recognize the use of the change of ownership principle in recording goods for processing. In particular, goods for processing has been growing very fast in the world that there appears a need to improve its measurement so as to better reflect the changing world phenomenon.
• However, we are of the view that the practical difficulties involved should be fully addressed before we make any decision to revise the current international standard. Indeed, this issue should be considered not only from the conceptual ground, but also from other perspectives, including the impact on data users, harmonization of national accounts with international merchandise trade statistics, and availability of reliable input data.
• To treat goods for processing as services would have large impacts on national accounts data. Data users may have concern on the substantial modification to national accounts statistics. They may also get confused if harmonization of national accounts with merchandise trade statistics cannot be fully achieved.
• Since merchandise trade statistics are based on customs returns, they do not distinguish between goods for processing and other merchandise trade. Reliable estimates of trade in goods for processing would therefore have to be obtained through well-structured surveys for derivation of imports and exports of goods. Compared with merchandise trade statistics, the survey-based estimates of goods for processing may be subject to considerable sampling and non-sampling errors. Furthermore, in the scenario as described in para.8 of the AEG paper SNA/M1.05/16, the validity of the contribution of these transactions to expenditure-based GDP hinges on the availability of reliable estimates of the value of goods exported to economy C from B after processing. Although some rough measure of such "trade flows" may be obtained through dedicated surveys, there are limitations and constraints in such measure. This would undermine the reliability of the GDP estimates.
• Besides, the time lag of compiling GDP by expenditure approach may also be affected as the survey-based estimates would usually be available with a longer time lag to allow time for respondents to report data.
 12/1/2005United KingdomWe support the majority AEG decision for never imputing a change of ownership for goods sent for processing, whether the processing is done abroad or domestically. There are, however, some practical issues which countries will need guidance on to implement this decision. This will particularly affect two areas:
• first the need for clear guidance on the recording by product and industry, especially when goods are sent abroad. We assume that such goods need to be excluded from exports and imports of goods. We need clear guidance to assist statistical and customs authorities to identify such goods so that they can be excluded. Linked to this, the value added generated by the processing unit in the non-resident country; will need to be recorded as trade in services (imports) by the unit in the resident country, and will need to be allocated to an industry and product consistently through the supply and use product framework. Even though considered as purchases of imports of services, in many cases it will still form part of the output of a manufacturing industry, when the final goods are sold.
• second if it does not already exist there needs to be a very clear definition of processing to distinguish it from assembly. This would need to draw a distinction between the following cases, for example. Processing usually involves the addition of raw materials such as paint or sewing cotton. An assembler may add more substantial components to items being "processed" - perhaps fitting tyres to a car or even wings to an aeroplane. In these cases, the activity will be recorded on either the product the actual goods are classified or a different product, for example the appropriate industrial service.
The second point links to the first as the distinction will need to be clear as the goods are exported or imported to ensure accurate data collection.
It is important that the conclusions being reached here are shared with those responsible for trade agreements (GATT, CATS etc) to check that they will not cause problems in operating those policies.
 11/30/2005Slovak RepublicSO SR agree with AEG recommendations.
 11/30/2005FinlandThis issue also relates to the problem of treatment of multinational companies and should be discussed in the broader context and in the context of merchanting issues.
 11/30/2005Croatian National BankWe support the AEG efforts to harmonize treatment of the goods sent abroad for processing in various statistics. It is necessary to make a clear definition of goods sent abroad for processing. Taking into account level of significant transformation on processed goods (or change in value added), we consider that goods sent abroad for processing are goods which are exported from country under the certain tariff code and imported back under the tariff code which belongs to finished products (net recorded). In other cases, if goods are exported and reimported under the same tariff code (low value added, no significant transformation), they should be treated as repaired rather than processed (gross recorded, the value of repairs should be recorded as a service).
 11/30/2005ItalyIstat fully agrees with the recommendations made at the July 2005 meeting of the Advisory Expert Group on National Accounts.
 11/30/2005National Bank of the Republic of MacedoniaIt is our opinion that goods for processing should be included on gross basis in the trade balance, thus imputing a change in ownership. Regarding the recommendations of the AEG, it should be taken into account that there is a physical alteration of the merchandise that occurs, as well as the fact that the values and other data can be collected more accurately through the trade recording system.
 11/30/2005State Bank of PakistanWe have gone through recommendations made by Advisory Expert Group (AEG) and fully agree with them.
 11/30/2005State Bank of VietnamRegarding the treatment of goods sent abroad for processing, we may agree with the recommendations of the AEG in principle but in practice it would be necessary to clear the following problems:
- What is goods sent abroad for processing
- To have clear criteria for it when the alternative method should be used
- National accountants can not easily collect data on processing services which come from enterprise statistics that depends on the foreign trade statistics and the custom statistics, that means it should be recorded and classified as goods for exports, imports and for processing separately.
- It need to have information sources to adjust in the estimation over time series.
 11/29/2005National Bank of KazakhstanOn our opinion, given the fact that change of ownership does not happen on conducting transactions on goods sent abroad for processing and the magnitude of these transactions is increasingly growing we suppose that goods sent abroad for processing should not be imputed, including such operations effected between affiliated companies.
 11/29/2005People's Bank of ChinaI agree with your improvements and have no other suggestions.
 11/21/2005USAWe disagree with the recommendation of the majority of the AEG to never impute a change in ownership. Imputing a change in ownership would allow the input-output statistics to accurately and consistently reflect the underlying production processes.
 5/19/2005Bank of IndonesiaBI agrees to harmonize the treatment of goods sent abroad for processing will be stated in the SNA and in the BOPM 5th edition. In practice, Indonesia finds difficulties in implementation.
 5/12/2005Czech National BankA lot of effort has been made by national merchandise trade statisticians to prepare relevant trade statistics for goods for processing. In the Czech Republic, the net concept had been used for recording goods for processing till the end of 1996 and then a gross concept was introduced. Our preference is to follow the net concept with including the value added into the trade balance rather than into the balance of services.
 5/12/2005Bank of ThailandGoods sent abroad for processing should be included under merchandise trade as it at least reflects alternation of the form of commodity from its original character. Goods before and after processing could be very different in nature & character that they be categorized under different commodity groups. This is comparable to 2 separate transactions, say, export of a primary goods followed by import of a finished goods (after processing).
 5/9/2005AustraliaNo AEG decision made. The ABS supports a strict change of ownership treatment.
 5/6/2005VietnamRegarding the treatment of goods sent abroad for processing, we may agree with the recommendations of the AEG in principle but in practice it would be necessary to clear the follwing problems:
- What is goods sent abroad for processing
- To have clear criteria for it when the alternative method should be used
- National accountants can not easily collect data on processing services which come from interprise statistics that depends on the foreign trade statistics and the custom statistics, that means it should be recorded and classified as goods for exports, imports and for processing separately.
- It need to have information sources to adjust in the estimation over time series.
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