C. Treatment of goods for processing in the 2008 SNA/ BPM6

20.11.    Goods for processing without change of ownership. IMTS 2010 (paras. 1.19-1.20) recommends that goods for processing be recorded when they enter or leave the economic territory, irrespective of whether a change in ownership takes place. However, the recording of transactions in the balance of payments is based on the principle of change of ownership between residents and non-residents: Goods supplied to another economy for processing without a change of ownership and returned to the economy of the owner after processing are not recorded as a goods transactions in the balance-of-payments statistics compiled according to BPM6. Instead, the BPM6 (see paras. 10.22 (f) and 10.62-10.71) records a manufacturing service on physical inputs owned by others to reflect the relationship between the owner and processor and only the fee charged by the processor is included under this item. The fifth edition of the Balance of Payments Manual,[6]  inputed a change of ownership in the case of goods for processing, but BPM6 reversed this practice, thereby establishing a major conceptual difference from merchandise trade statistics. 

20.12.    Recording of the sale of goods to a third country after processing in BPM6. If the goods are sold to a third economy after processing, then the value of the goods (including the value of processing) is recorded as an export of the economy of the owner and an import of the third economy; the value of the processing is recorded as an export of services of the processing economy and an import of services of the economy of the owner (see BPM6, paras. 10.22 (f) and 10.62-10.71). 

20.13.    Definition of goods for processing in BPM6. Manufacturing services on physical inputs owned by others cover, inter alia, processing, assembly, labelling and packing undertaken by enterprises that do not own the goods concerned. The manufacturing is undertaken by an entity that does not own the goods and that is paid a fee by the owner. In these cases, as the ownership of the goods does not change, no general merchandise transaction is recorded between the processor and the owner. Examples of processes that are often undertaken under arrangements for manufacturing services on physical inputs owned by others include oil refining, liquefaction of natural gas, assembly of clothing and electronics, assembly (excluding assembly of prefabricated constructions, which are included in construction), labelling and packing (excluding cases of packing incidental to transport, which is included in transport services) (see BPM6, paras. 10.62-10.63).