Country experience: Hong Kong: imports of manufacturing services and related goods transactions
Case I: Outward processing to mainland China with processed goods returned to Hong Kong
14.40 In processing activities between Hong Kong (principal in the reporting economy) and mainland China (non-resident processor), the import value of the manufacturing services is derived from the total processing fee charged by the non-resident processor and the amount reimbursable by the principal for the materials procured by the processor.
14.41 The cost of materials supplied by the principal from or via Hong Kong for processing without change of ownership is not included in “exports of goods” in the BOP statistics. By the same token, the value of the processed goods returned to Hong Kong should not be treated as “imports of goods”. The cost of input materials supplied by the principal to the processor from a third economy directly is included in “imports of goods” of the economy of the principal.
Case II: Offshore trade activities involving outward processing with processed goods sold offshore
14.42 As with case I, the value of manufacturing services is reported under “imports of services”. The import value of the manufacturing services is derived from the total processing fee charged by the non-resident processor and the amount reimbursable by the principal for the materials procured by the processor. Margins earned from the offshore sale of the processed goods are not included in “exports of services”.
14.43 As for trade in goods, the cost of goods for processing supplied by the principal from or via Hong Kong to the processor without change of ownership is not included in “exports of general merchandise”. The value of the processed goods sold offshore directly without their returning to Hong Kong is treated as “exports of general merchandise”. The cost of materials supplied by the principal to the processor from a third economy directly is included in “imports of general merchandise” in the economy of the principal.
Country Experience: Hong Kong: exports of manufacturing services and related goods transactions
14.44 For illustration purposes, it is assumed that a Hong Kong company provides manufacturing services on materials owned and supplied by an Australian company (non-resident principal) and the processed goods are returned to Australia. The value of manufacturing services is reported under “exports of services”. The respondent can provide the export value of manufacturing services based on the total processing fee charged and the amount reimbursable by the non-resident principal for the materials the processor procured. For trade in goods, the value of the processed goods is not treated as “exports of general merchandise” because the ownership belongs to the Australian company. Besides, the value of the input materials supplied to the processor by the principal from Australia or a non-resident are not included in “imports of general merchandise”. However, the value of materials procured by the Hong Kong company from a non-resident to be used in the processing activity has already been already recorded under “imports of general merchandise” and would be part of the manufacturing fee.
Freight transport and freight insurance services: cost, insurance and freight and free on board valuations
14.45 It is not always possible to measure the value of freight transport and freight insurance services directly. However, freight cost estimates, including both transport and insurance premiums, can be derived from the cost, insurance and freight (CIF) and free on board (FOB) adjustments that are made to the merchandise trade statistics for BOP purposes. The difference between CIF and FOB values is considered a freight cost (transport and insurance premiums). That cost is generally deemed payable by the importer of the goods. Where that cost is provided by residents to non-residents, or by non-residents to residents, there will be recordings in the BOP. Table 14.2 displays those differences in recording.
14.46 As table 14.2 shows, it is recommended that merchandise exports be valued on an FOB basis, following the BPM6 principle for recording general merchandise credits. It is recommended that imports, in international merchandise trade statistics, be valued on a CIF basis (countries are encouraged to compile FOB-type values for imported goods as supplementary information), whereas in the BOP, imports of goods should be valued on an FOB basis, i.e., the value of the transportation cost and insurance premiums from the border of the exporter to the border of the importer is recorded as imports of those services (if the services are provided by non-residents) and the remaining value is recorded as imports of goods.
14.47 Compilers should note that, when calculating the freight transport and insurance costs for BOP purposes, the statistical value does not necessarily reflect the sum of the actual invoice values, but instead follows the principle adopted in the accounting framework (see the numerical example in MSITS 2010, box III.4). However, many users are also strongly interested in obtaining data on the actual costs, as they reflect the total value of freight-related services provided; that is why MSITS 2010 suggests making those data available to users on a supplementary basis (i.e., beyond the BPM6/EBOPS 2010 recommendations). The valuation of freight transport services on a transaction basis indicates market-price transactions, excluding any adjustments or estimations. Such additional information can be used as supplements to the FOB/FOB valuation principle in BOP statistics or the CIF/FOB principle in international merchandise trade statistics.
14.48 A variety of methods for estimating freight and insurance on imports is described in the BPM6 Compilation Guide, table 12.2. A common approach of CIF/FOB adjustments is to calculate conversion factors, or ratios of CIF imports to FOB imports, that should take into consideration the mode of transport, the geographical distance and the type of commodity transported. International merchandise trade data from customs can be used to estimate CIF/FOB ratios, provided that those data include information on invoice and delivery terms. Dedicated surveys are also used in some countries.
14.49 To compile the ratios between the statistical value (CIF-type) and the invoiced value (of transactions with FOB-type delivery terms), it is suggested that compilers use transactions for which FOB-type delivery terms are available, and to calculate the ratio between the FOB-type invoiced value and the corresponding CIF-type statistical value. The ratio thus compiled can subsequently be applied to the total statistical value (CIF-type) to obtain an FOB-type value. Such a ratio should be calculated for freight transport and insurance, respectively. When there is insufficient information available from customs merchandise trade statistics, a combination of the techniques detailed above and direct data collection or surveys can be used to allow full coverage of all the cases of imports and exports, types of contracts and residence of the carrier.
14.50 Freight insurance services are usually estimated by compilers on the basis of insurance premiums, the former often calculated as a ratio with the non-life insurance premiums. Depending on the terms of the freight, additional adjustments may be needed on the basis of the value of the goods being traded (i.e., if the terms are not on an FOB basis) and the terms of contract (i.e., whether the shipment between the borders of the exporter and the importer is undertaken by a resident or a non-resident).
14.51 It is advised to compile the value of total freight insurance, whereas the freight transport component must be broken down by mode, as follows: sea, air, other, of which, space, rail, road, inland waterway, pipeline transport and electricity transmission.
Back to B.1. Goods-related services
 See IMTS 2010, para. 4.8.
 The report from Statistics Denmark provides an overview on differences between the statistical cost, insurance and freight (CIF) and free on board (FOB) value; the EuroGrant 2009 Balance of Payments, grant agreement number 20821.2009.001-2009.715, final report May 2010. The Glaab report recommends collecting invoice values instead of statistical value and the import and export of freight services should be collected.
 MSITS 2010, para. 3.107-3.110.
 The delivery-terms FOB method was developed by Statistics Netherlands.