Net exports of goods under merchanting
Definition
14.65. Merchanting is defined in BPM6 (paragraphs 10.41 to 10.49) as the purchase of goods by a resident, of the compiling economy, from a non-resident followed by the subsequent resale of the goods to another non-resident without the ever goods entering the residents’ compiling economy. It should be noted that merchanting only relates to transactions in international merchandise trade. As an example, a resident in the compiling economy purchases goods (the merchandise) from another economy (from a non-resident) and then resells these goods either in the same economy they were purchased in or in a third economy (again to non-residents); at no time do the goods ever enter the economy of the resident owner of the goods (the compiling economy).
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14.67. If minor processing takes place, that does not change the physical characteristics of the good, a balance of payments transaction for manufacturing services on physical inputs owned by others (the 'minor processing' fee) can be included in addition to the entry for merchanting service (see also BPM6 Box 10.1)
Recording and compilation
14.68. BPM6 recommends that merchanting be recorded in the goods account of the balance of payments as net exports of goods under merchanting, as follows:
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14.69. Importantly, the 'net' item reflects not only the merchants' margin from providing what are essentially akin to distribution services, but also any holding gains and losses[1] and also any changes in inventories incurred during the period. As such the 'net' item may be negative as a result of changes in inventories and holding losses.
Conceptual and compilation challenges
14.70. Three important conceptual and compilation challenges are involved in compiling merchanting transactions, as also noted for example in the Guide on Measuring Global Production.
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