Goods sent abroad for processing

1
Goods sent abroad for processing

• Based on presentation to SNA AEG Bangkok June
  2005
• By Anne Harrison OECD

2
Previous question

• Records goods sent for processing gross or net?
• Opinions divided both in BOPCOM and AEG

3
Gross and net

• Gross impute a change of ownership
• Net do not impute change of ownership

4
BPM position

• Goods A to B to A - yes
• Goods A to B1 to B2 - no
• Goods A to B to C - no
• EXCEPT
• If B is unincorporated subsidiary of A
• If B is direct investment entity of A

5
SNA position (domestic)

• Goods A to B to A - no
• Except if B is establishment of A
• Goods from abroad - yes

6
Summary

• We have a hybrid system
• Not transparent for either compilers or analysts

7
Accounting implications

• Goods out less goods in SHOULD be equal to
  processing fee
• Different data sources
• Different products
• Different times
• Holding gains

8
Analytical implications

• What is processor doing? Who takes on risk of
  production?
• Major interaction with out-sourcing
• Ratio of imports to domestic production
• Is processing a good or a service?

9
Alternatives

• Always impute change of ownership or
• Never impute change of ownership

10
SNA (domestic)

• Either alternative significant change especially
  for input output tables
• Changing rules for domestic processing might be
  more significant that for international

11
Always impute change of ownership
Imports Exports
Change own Change own
Goods recd for processing 100 Goods sent after processing 120
Goods recd after processg 110 Goods sent for processing 50
12
Never impute change of ownership
Imports Exports
Change own Change own
Processing fee to non-res 60 Processing fee from non-res 20
13
Supply and use

• Intermediate consumption 100
• Value added 20
• Output 120
• OR
• Value added / Output 20
• Intermediate cons/output 120

14
Problem

• Goods sent for processing in period t
• Goods returned after processing in period t1

15
Questions for the AEG

• Always impute change for goods going abroad?
• Never impute change for goods going abroad?
• Keep present situation?
• If a or b, make same changes for domestic
  processing?

16
Questions for BOPCOM

• If AEG says always impute change, would BOPCOM
  follow or go for never?
• If the latter would this apply to unincorporated
  establishments and to direct investment
  enterprises

17
Both groups (SNA and BOPCOM)

• However processing recording, robust valuation
  needs values of goods on and out (from Customs)
  reconciled with processing fee (from business)
• Does BOPCOM support provision of this data?