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Differentiating merchanting and manufacturing services transactions

14.88.        As noted above, delineating between manufacturing services and merchanting transactions is not always trivial. The key issue here concerns the degree of transformation provided by the processing firm.

14.89.        In practice countries adopt a variety of methods to determine this delineation. One approach looks to identify whether the imported good and corresponding exported good significantly change their product classification (Harmonised Code (HS), for example a change at the six digit level). This criterion has the advantage of being consistent with the definition used for re-exports in the BPM6 (10.37) and the IMTS 2010[1]. Although BPM5 had a different method for recording goods for processing, it did state that following the 1993 SNA methodology, goods reclassified, in a different three-digit group of the Central Product Classification (CPC), were considered to have undergone a substantial transformation.