1. Goods sent abroad for processing manual
NAWG – 22 May 2013
Simon Humphries
Item 4 (Doc. N° 780) of the agenda

2. Background
Cross border production inflates trade flows, although ownership may not change.
Doesn’t match financial transactions
Addressed in SNA 2008 – BPM6 - key change
Goods for processing now recorded according to change of ownership principle (no exceptions).
Easy concept, but difficult to implement as IMTS is based on physical movement rather than change of ownership.

3. Task Force Established in 2011 22 MS participated + ECB and OECD
Conclusions were very general, reflecting very different sources available in each MS.
Eurostat commissioned an “implementation” Manual in December 2012.

4. Timetable December 2012 - December 2013 1st draft by end-March.
Circulated to TF and Eurostat.
2nd draft for NAWG comment (by end May)
3rd draft for DMES comment (by end June)
4th draft for DMES approval (October 2013)

5. Main recommendations 1 No single source can be agreed.
Availability and quality of NoT codes varies between MS
NoT codes not appropriate for all aspects of Goods for Processing (eg goods subsequently sold abroad and manufacturing services)
Additional data collection needed (BoP or enterprise surveys)

6. Main recommendations 2
Compare alterative sources of data and (if possible) reconcile.
Data sources may be used in parallel - high frequency IMTS data and annual surveys.
Inward and outward processing will need different approaches (different populations)
Remove obstacles to data sharing.
Share experience to move towards EU best practice.

7. Sources 1 - Customs Intrastat/Extrastat.
On a physical movement, rather than change of ownership basis.
But, identify GfP via nature of transaction codes (NoT).
Not implemented consistently. 1 digit only required for INTRASTAT, no requirement on EXTRASTAT
2-digit required to be of use.
Quality of MS reported data, suggests NTRA can’t be only source eg Manufacturing services and goods sold abroad after processing

8. Sources 2. Surveys
Processing fees (and goods flows) can be collected via surveys (or ITRS)
BoP/Trade in services surveys
SBS
Prodcom
Understand nature of MNEs (eg profiling units)

9. Activity
Preferred source
Secondary source
Validation
Notes
Goods sent abroad and returned after processing
IMTS – NoT codes
Enterprise survey
In MS where GfP is important, validate IMTS results with enterprise survey results.
Goods sent abroad for processing, but subsequently sold abroad
Enterprise or BoP survey/ direct reporting
NoT codes will be useful to identify the population of enterprises engaged.
Outward processing - NoT codes only provide the value of the goods before processing, not the value of the final export.
Goods under merchanting
BoP survey/direct reporting
If data are available from both BoP and enterprise surveys, they should be reconciled and a single source used.
As goods do not enter compiling economy, IMTS does not capture merchanting transactions
Manufacturing services on physical inputs owned by others
Trade in services survey
IMTS – NoT codes.
Review the diff between goods sent abroad and returned after processing with SITS survey results.
Manuf. services is not always = to the diff. in goods sent abroad and returned after processing, but should be broadly in line.

10. Outstanding issues
Processing or merchandise trade where processor provides some materials to produce finished goods. Manual recommends treating change in value as processing (ie include value of foreign sourced components).
Merchanting v merchandise trade? Manual has a simple rule “any processing, apart from packing and labelling”, to distinguish merchandise trade. IMTS uses "operation with the objective of producing a new or really improved item“. So different.
Agree approach for quasi transit trade.

11. Issues for discussion Recommended sources for each activity
Can legal constraints be overcome to allow more data sharing?
Is it practical to add NoT codes, when countries have been reducing them over time?
How do we capture non-resident VAT registered companies trade data?

12. Next steps NAWG comments by end-May
Update draft and submit for DMES comment by end-June
Update draft and submit for DMES approval in October

13. Eurostat questions
Do you agree with the general content of the Manual? Are important aspects missing?
Do you agree with the ESA 2010 guidance (reference paragraphs and illustrating figures); is section 2 useful?
Section 3 on conceptual issues presents a decision tree and a numerical example. Do you consider this section useful?
Section 4 on data sources and methods: are they sufficiently described?
Impact of the change on supply and use analysis and how new data should be presented to users (section 5 "Analysis"): Do you think the manual is providing sufficient developments?
Are the recommendations in Annex B clear enough? What should be further developed?
Are the case studies presented in Annex C "Nature of transaction case studies" clearly described?
What are your views about which digit level processing fees should be broken down according to the CPA 2008 classification?