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MERCHANTING - United Nations

Merchanting SNA Update Issue 41 International Monetary Fund Statistics Department Hidetoshi Takeda Prepared for January 2006 AEG meeting1 Executive Summary

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Merchanting 
        
    
Among BOPCOM members, the views are divide
d. A small majority 
merchanting as goods, most on a gross basis. 
On the other hand, a significant number of 
BOPCOM members prefer the status quo, pa
rtly because of practical difficulties 
accompanied with recording the relevant transact
ions as goods on a gross basis, and concerns 
over the impact on the 
      
Introduction 
The treatment of merchanting has been discus
r the treatment of merchanting, also see  
Balance of 
Balance of Payments Textbook 
      
Global manufacturing
 (see case 1 in the attachment): su
ch activities aim to make profits 
from production of goods and the internationa
l transactions of goods take place as a 
“Commodity arbitrage (d
      
      
As they are not recorded as owned by the merc
      
Type (i), global manufacturing to be classi
fied as trade in goods, to be recorded on a 
processing activities occurred 
in the importing country, then 
service, not goods transactions 
would be recorded, given the recent AEG 
decision on goods for processing. 
global manufacturing” and be ex
cluded from merchanting.  
This approach has the following merits: 
It avoids exceptional treatment in relation to ‘c
gives a view that is compatible with data on 
      
the new methodology in some instances. 
Types (ii) and (iii), global wholesaling/re
tailing and commodity dealing, also to be 
recorded, on a change of ownership basis, as goods, under a title “goods under 
merchanting.”
 The combination of (2) and (3) 
a gross basis. The impact of this approach on 
the balance of payments goods data would vary 
from country to country, but could be significant
http://www.oecd.org/document/40/0,2340,en_2649_34243_31430440_1_1_1_1,00.html
      
In practice, compilers may have difficulty
and so clear definitions will be required 
as to the intent of the distinction. 
assification within services, the presumption would be the status 
fora once a decision is made on 
      
Balance of Payments Manual, Fifth Edition (1993) 
Balance of Payments Textbook (1996) 
1993 System of National Accounts 
Shimon Arieli, Soli Peleg: Offshore outsourci
ng of production—the problem of “fabless” 
enterprises (2005) 
Emile Bruneau: Note on converters (2000) 
  ATTACHMENT   
Examples of the Different Categor
The following examples illustrate the basic pictur
e of transactions included in each category 
Case 1: Transactions accompanied by global manufacturing 
A Japanese manufacturer purchas
es parts from its subsidiary 
Japan merchanting 20   Japan goods (under 
manufacturing) 
100   80 
China goods  100  China goods  100 
merchanting 20   goods 180 180 
goods 80 100  
   
e ignored in all three examples. 
assembly C 
Manufacture A 
Physical movement 
Ownership of goods 
 - 2 - ATTACHMENT   
    
A USA wholesaler purchases goods from China for 
USA merchanting 20   USA goods (under 
merchanting) 
  20  
China goods 80   China goods   80  
Canada goods  100  Canadagoods  100 
merchanting 20   goods 100 100 
goods 80 100  
   
Global wholesaler A 
Physical movement 
of Goods 
Ownership of goods 
 - 3 - ATTACHMENT   
    
Case 3: Commodity  Dealing
A USA oil dealer purchases oil from Saudi Ar
abian oil company purchased oil at 80. Given 
the decrease in the oil prices (from 80 to 75), th
e USA dealer resells the oil to Japanese oil 
Current recording                           Proposed recording 
  Credit  Debit    Credit  Debit 
USA merchanting - 5   USA goods (under 
merchanting) 
- 5  
goods  80   Saudi 
goods  80  
Japan goods  75  Japan goods  75 
merchanting - 5   goods  75 75 
goods  80 75  
   
 
                                                
The above case treats holding losses; the recording principles are the same for a holding gain
Oil Company 
Oil dealer 
Oil dealer 
Physical movement of 
Ownership of goods