MERCHANTING
Training Workshop on 2008 SNA for ECO Member States
14-17 October 2012, Tehran, Islamic Republic of Iran
GULAB SINGH
United Nations Statistics Division
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Merchanting
 Definition: Purchase of a good by a resident (of the
compiling economy) from a non-resident combined with
the subsequent resale of the same good to another nonresident without the good being present in the compiling
economy – BPM6 para 10.41
 Merchanting is calculated as the value of goods sold
(estimated at basic prices) less the cost of purchasing
them.
 In the BPM5 and the 1993 SNA this merchanting margin
was classified as an export of service.
 Recording of merchanting is extremely challenging for the
merchant resident country as the goods in question never
cross the frontier of the country where the merchant is
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resident.
Change from 1993 SNA and BPM5 treatment
– Why?
 1993 SNA and BPM5 guidance on merchanting results
in a structural asymmetry
 While exports of merchanting services are recorded,
no imports of this service are recorded.
• Importing countries value the imported goods at the price
paid, which includes the value of the “services”.
• The supply of a service without a use breaks the core
economic accounting principle of symmetry.
• This causes asymmetry for merchanting services.
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Reasons to change 1993 SNA and BPM5 treatment
 As the ownership of the relevant goods changes from
foreign providers to the merchants (residents), it is
recorded imports of the goods.
 Then, when the relevant goods are resold to nonresidents, merchanting services are recorded in the
accounting period of resale, and
 Negative imports of the relevant goods is recorded in
order to reverse the entry in the previous period.
• Negative imports may provide misleading data on goods
and
• are very difficult to implement in practice.
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Merchanting in 2008 SNA and BPM6
 2008 SNA and BPM6 move to form of gross recording,
in which:
• Acquisition of goods by merchants is to be shown under goods
as a negative export of the country in which the merchant is
resident, and
• The subsequent sale of goods is shown under “goods sold
under merchanting” as a positive export of the country in which
the merchant is resident
• The difference between sales and purchases of merchanted
goods is shown as “net exports of goods under merchanting”.
 Merchanting entries are valued at transaction prices as
agreed by parties and not on fob basis.
 In the SU tables difference between the sale and
purchases of merchanted goods appear as production
of service in the merchant’s economy.
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Merchanting – An example
Country B
Purchaser
Country A
Producer
80
100
Country C
Merchant
Physical movement of Goods
Ownership of goods
Cash flow
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Merchanting – numerical example
 Example: Merchant in country C buys 80 from country A
(producer) and then sells to country B (purchaser) at 100.
Goods worth 80 do not enter C’s territory. Goods are
shipped directly from country A to country B.
 1993 SNA and BPM5 recording
•
•
•
•
A’s exports of goods 80
B’s imports of goods 100
C’s exports of services 20 (no import of service is recorded in world trade)
Imbalance in trade of goods.
 2008 SNA and BPM6 recording: based on change in ownership
• A’s exports: 80
• B’s imports: 100
• For C: Only 20, the net value of exports in goods (under merchanting), is
recorded. This means that C’s exports of goods: -80 (acquisition), and C’s
exports of goods: +100 (on disposal),
• Total trade in goods: exports = 100, imports = 100
• 20 is also recorded as production of services in C.
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Example
1993 SNA and BPM5
Exports
 Merchant in Country
C buys from country
A at 80 and sells in
country B for 100.
Imports
A (goods)
80
C (merchanting
services)
20
Total
100
 Goods do not enter
country C.
B (goods)
100
Total
100
2008 SNA and BPM6
Exports
Imports
C (goods,
merchanting)
20
Acquisition
Disposal
-80
100
A (goods)
80
B (goods)
100
Total
100
Total
100
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How to capture merchanting activity?
 Capturing merchanting activity is challenging merchanted goods do not cross the border of the country
of the merchant’s residence.
 Identify enterprises engaged in merchanting to establish
a frame for collecting data on the activity,
 It may also be difficult for statisticians in the supplier
country to assign goods sold to a foreign merchant to the
correct country of destination, since they are likely to be
recorded as shipped to the country of the final buyer.
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How to capture merchanting activity?
 Merchanting activities can be identified in a number of
ways:
• Enterprise solely involved in merchanting would have large
turnover per person as they normally employs a relatively small
staff while having substantial turnover. Use BR to identify such
enterprises using ratio analysis
• MNEs sometimes engage in merchanting in conjunction with the
production of other goods or services. These merchanting activities
can be captured through a specific question on sales and
purchases of merchanted goods.
• Administrative data such as corporation tax records or dividend tax
payments can also be used to identify firms with large taxable
profits but no substantial physical presence in the economy, which
are characteristics of merchants
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Merchanting – A sum up
 Acquisition of goods by merchants should be shown under
goods as a negative export of the country of merchant’s
residence, and
 The subsequent sale of goods should be shown under
“goods sold under merchanting” as a positive export of the
country in which the merchant is resident
 The difference between sales and purchases of
merchanted goods should be shown as “net exports of
goods under merchanting”
 Merchanting activity can be captured through surveys of
enterprises engaged in merchanting.
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Thank You
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