1. Concept and definition of residence

3.3. The residence concept is central to the measurement of transactions between residents and non-residents. The concept of residence in the present Manual is identical to that used in BPM5 and the 1993 SNA. It is not based on nationality or legal criteria but on a transactor’s centre of economic interest. Further, because territorial boundaries recognized for political purposes may not always be appropriate for economic purposes, the economic territory of a country is used as the relevant geographical area to which the concept of residence is applied. An institutional unit is a resident unit of a country or economy when it has a centre of economic interest in the economic territory of a country.

3.4. The economic territory of a country consists of the geographic territory administered by a government. Persons, goods and capital circulate freely within this territory. Included are islands that belong to the country, airspace, territorial waters and the continental shelf lying in international waters over which the country enjoys exclusive rights or over which it has, or claims to have, jurisdiction in respect of the right to fish or to exploit fuels or minerals below the seabed. Also included are territorial enclaves, such as embassies, consulates, military bases, scientific stations, information or immigration offices and aid agencies, located in other economies and used by the Government for diplomatic, military, scientific or other purposes, with the formal political agreement of the Governments of the economies where these enclaves are physically located. Thus, while territorial enclaves used by foreign Governments (or international organizations) may be located within a country’s geographical boundaries, such enclaves are not included in the host country’s economic territory.

3.5. An enterprise has a centre of economic interest, and thus residence, in an economy when it engages and intends to continue to engage in economic activities on a significant scale either indefinitely or over a long period of time from one or more locations, not necessarily fixed, within the economic territory of that economy. A period of one year is suggested as a guideline for determining residence, but this is not an inflexible rule.

3.6. Production undertaken outside the economic territory of a resident enterprise by the personnel, plant and equipment of that resident enterprise is treated as part of host country production, and the enterprise is treated as a resident unit (branch or subsidiary) of that country, if the enterprise meets the conditions noted in paragraph 3.5 above. In addition, the enterprise must maintain a complete and separate set of accounts of local activities (that is, income statement, balance sheet, transactions with the parent enterprise), pay income taxes to the host country, have a substantial physical presence, receive funds for enterprise work for the enterprise account and so forth. If these conditions are met, the enterprise is considered a foreign affiliate (see also chapter IV below). If these conditions are not met, the output of the enterprise should be classified as an export by a resident enterprise. Such production can generate an export only if the production is classified as domestic production (undertaken by a resident even though the physical process takes place outside the economic territory).

3.7. These considerations also apply to the particular case of construction activity carried out abroad by a resident producer. Special mention should be made of construction involving major specific projects (bridges, dams, power stations etc.) that often take several years to complete and are carried out and managed by nonresident enterprises through unincorporated site offices. In most instances, site offices will meet the criteria requiring that site office production be treated (as would the production of a branch or affiliate) as the production of a unit resident in the host economy and as part of the production of the host economy rather than as an export of services to that economy.

3.8. Offshore enterprises, including those engaged in manufacturing processes (including assembly of components manufactured elsewhere), trading and financial activity, are residents of the economies in which the offshore enterprises are located. This applies regardless of location in special zones of exemption from customs or other regulations or concessions.

3.9. Similarly, the principles used to determine the residence of an enterprise are applicable to an enterprise that operates mobile equipment (such as ships, aircraft, drilling rigs and platforms, and railway rolling stock) outside the economic territory where the enterprise is resident. Such operations may take place in (a) international waters or airspace or (b) another economy. In the first case (an enterprise with operations taking place in international waters or airspace), the activities should be attributed to the economy in which the operator maintains residence. In the second case (an enterprise with production taking place in another economy), the enterprise may be considered to have a centre of economic interest in the other economy. If operations (such as a railway network) are carried out by an enterprise on a regular and continuing basis in two or more countries, the enterprise is deemed to have a centre of economic interest in each country and thus to have separate resident units in each. The enterprises must also be accounted for separately by the operator and recognized as separate enterprises by tax and licensing authorities in each country of operation. In cases involving the leasing of mobile equipment to one enterprise by another for a long or indefinite period, the lessee enterprise is deemed to be the operator, and activities are attributed to the country where the lessee is resident.

3.10. For ships flying flags of convenience, it is often difficult to determine the residence of the operating enterprise. There may be complex arrangements involving ownership, mode of operation and chartering of such ships. In addition, the country of registry differs, in most instances, from the operator’s (or owner’s) country of residence. Nonetheless, in principle, the shipping activity is attributed to the country of residence of the operating enterprise. If an enterprise establishes, for tax or other considerations, a branch in another country to manage the operation, the operation is attributed to the resident (branch) operating in that country.

3.11. Transactions of agents should be attributed to the economies of principals on whose behalf the transactions are undertaken and not to the economies of agents representing or acting on behalf of principals. However, services rendered by agents to enterprises represented should be attributed to the economies in which the agents are residents.

3.12. A household has a centre of economic interest where it maintains one or more dwellings within the country that members of the household use as their principal residence. All individuals who belong to the same household must be residents of the same economy. If a resident household member leaves the economic territory and returns to the household after a limited period of time, the individual continues to be a resident even if he or she makes frequent journeys outside the economic territory. An individual may cease to be a member of a resident household when he or she works continuously for one year or more in a foreign country. Even if an individual continues to be employed and paid by an enterprise that is resident in his or her home country, that person should normally be treated as a resident in the host country if he or she works continuously in the host country for one year or more.

3.13. Civil servants (including diplomats) and military personnel employed abroad in government enclaves continue to have centres of economic interest in their home countries while, and however long, they work in the enclaves. They continue to be residents in their home economies even if they live in dwellings outside of these enclaves.³⁹ However long they study abroad, students should be treated as residents of their home economy, provided that they remain members of households in their home economies. In these circumstances, their centres of economic interest remain in their economies of origin, rather than in the economies where they study. Medical patients abroad are also treated as residents of their economies of origin, even if their stays are one year or more, as long as they remain members of households in their economies of origin. Any other individual who moves to another economy and stays, or expects to stay, for a year or more, is considered to undergo a change of centre of economic interest, that is, he or she is considered to be a migrant.

3.14. Refugees are persons displaced from their home economies by natural disasters or other causes (such as persecution or conflict). Such displacement to other economies may be for a short period or on a long-term basis. In the case of short-term displacement, refugees continue to be residents of their home economies; however, if the displacement is for a long period and the refugees change their centre of economic interest, they are considered to be migrants and thus no longer residents of their original economies.

3.15. The present Manual follows BPM5 in its concept of residence; issues relating to this concept are discussed in more detail in chapter IV of BPM5.

2. Valuation of transactions

3.16. Market price should be used as the basis for valuation of transactions in international trade in services. Thus, transactions will generally be valued at the actual price agreed on by the supplier and the consumer. BPM5 identifies some of the more common circumstances under which it may not be possible to establish a market price and recommends that in such circumstances it is appropriate to develop a proxy measure, if possible by analogy with known market prices established under conditions that are considered essentially the same as those pertaining to the unpriced transaction.

3.17. Particular problems may arise in valuing international transactions between related⁴⁰ enterprises integrated under the same management but situated in different economies. Transactions may not be market transactions because there is a lack of independence among the parties to the exchange, and the prices used in portraying such transactions in the books of the enterprises (called transfer prices) may or may not be market prices. Transfer pricing that is not based closely on market considerations could be expected to be common among related enterprises conducting business across national boundaries, because disparities between taxes and regulations imposed by different governments are a factor in management decisions on the optimum allocation of profits among units.⁴¹

3.18. The present Manual follows BPM5 by recommending that, where distortions between market and transfer prices are large, replacement of book values with market value equivalents is desirable in principle, although in practice such prices may be difficult to estimate. In view of the practical difficulties involved in substituting an imputed or notional market value for an actual transfer value, substitution should be the exception rather than the rule. However, if certain transfer prices are so divorced from those of similar transactions that the transfer prices significantly distort measurement, the prices should either be replaced by market price equivalents or be separately identified for analytical purposes.

3. Other principles relating to the recording of transactions

3.19. The appropriate time to record transactions in services is when they are rendered (that is, when they are delivered or received). This may differ from the time when payment is made or received, which may be either before or after (or at the same time as) the transaction takes place. Thus, transactions should be recorded, whenever possible, on an accrual rather than a cash-accounting basis. Services received are expenses and are recorded as debit entries, while services provided are revenues and are recorded as credit entries. Transactions in services should be recorded on a gross basis—that is, debit (imports) and credit (exports) transactions should be separately compiled, rather than recorded as the net of credits minus debits.

3.20. Transactions in services between residents of an economy and international organizations are included within the scope of resident/non-resident transactions.

3.21. Transactions may take place in a range of currencies, including the domestic currency of either the provider or the consumer of the services. To produce meaningful statistics, however, it is necessary for the compiler to convert all transaction values to a common unit of account. Most often, the common unit will be the national currency; this will facilitate the use of such statistics in conjunction with other economic statistics relating to the domestic economy. However, if this currency is subject to significant depreciation relative to other currencies involved in the international transactions of the economy, growth in money terms in transactions over time may result from this depreciation. A similar effect may be observed if a country is experiencing hyperinflation. In such cases it may be more analytically useful to express all transactions in another, more stable currency.

3.22. The most appropriate exchange rate to be used in converting transaction values from the currency of transaction to the currency of compilation is the market rate prevailing at the time that the transaction takes place. The mid-point between buying and selling rates should be used so that any service charge (the spread between the mid-point and those rates) is excluded. However, because the actual mid-point rate at the time at which the transaction occurs may not be available to the compiler, an accepted practice is to take the average mid-point rate for the period for which the data are being compiled.

3.23. BPM5 should be consulted for recommendations on conversion where there are multiple official exchange rates, or black or parallel market rates.⁴²

1. Allocation of modes of supply

3.41. The allocation of the various services to the modes of supply is a basic requirement in GATS. Services transactions between residents and nonresidents may be supplied according to one or more of four of the modes of supply (mode 1, cross-border supply; mode 2, consumption abroad; mode 3, commercial presence; and mode 4, presence of natural persons) discussed in chapter II above. In many cases, a single service transaction may involve more than one mode of supply. The present Manual acknowledges that compilers will not be able to identify the real and full complexity of allocating each EBOPS type of service by the GATS mode of supply. Consequently, to facilitate the feasibility of data collection and as a first step, some simplifying assumptions are recommended following the principles set out in paragraphs 2.79–2.81 above. In short, each EBOPS type of service is allocated either to one dominant mode or, where there is no single dominant mode, to the most significant modes of supply.

3.42. Using that methodology and taking the simplest cases first, the following EBOPS services are deemed to be predominantly cross-border or mode 1; transportation (except supporting and auxiliary services that are provided to domestic carriers in foreign ports or to non-resident carriers in domestic ports), communications, insurance and financial services, together with payments of royalties and license fees.

3.43. All services recorded in balance of payments as travel are deemed to be consumption abroad or mode 2 under GATS. However, the travel component of the balance of payments classification also includes the purchase of goods by travellers, which is outside GATS and hence excluded from mode 2. Thus, travellers’ expenditure on goods should be separately identified from their expenditure on services, and only the services portion of travel expenditure should be allocated to mode 2. The goods portion would not be allocated to any mode of supply. In addition, supporting and auxiliary services that are provided to domestic carriers in foreign ports or to non-resident carriers in domestic ports should be allocated to mode 2 if they can be separately identified.

3.44. Mode 3, commercial presence, is primarily concerned with FATS and not balance of payments statistics, and is discussed in detail in chapter IV below. However, there is one exception to this general rule. Foreign entities established on a short-term basis to supply services are considered as non-residents in the host country in BPM5 and in the present Manual, and their transactions with residents in that country are recorded in the balance of payments. However, those entities are considered as commercial presence under GATS, which ignores the one-year statistical rule. This is the case in construction services, such as services provided by an unincorporated site office carrying out a short-term construction project. It is therefore recommended that these construction services be allocated to mode 3. The balance of payments component construction services also includes transactions in services supplied through the presence of natural persons. Where transactions through the presence of natural persons form a large part of total construction services and they can be separately identified, they should be allocated to mode 4.

3.45. For the remaining commercial services covered by GATS—namely, computer and information services, other business services, and personal, cultural and recreational services—the picture is rather more complex and might involve significant elements of both mode 1 and mode 4. To take a simple example, a consultant resident in the compiling economy providing services to a non-resident client may deliver the service either at the site of the client (mode 4) or from the office of the consultant transmitting reports cross border (mode 1) or a combination of those two. It is recommended that, to the extent feasible, the location of the supplier at the time of major service transactions in the above EBOPS components be determined. This would enable an allocation of those services between mode 1 and mode 4. If research were to indicate that for certain EBOPS components a particular mode of supply provides only a small proportion of the total supply, then all of that type of service might be allocated to the dominant mode.

3.46. The simplifying assumptions for the allocation of trade by mode of supply set out in paragraphs 3.40 to 3.44 above should be regarded as a guide to first steps in the estimation process and be subjected to periodic review and empirical testing of their validity and appropriateness.

3.47. Compensation of non-resident employees is included in income in the balance of payments and is therefore not included in EBOPS. It may, however, yield indicators of mode 4 (presence of natural persons) activity. The present Manual therefore recommends that a breakdown of compensation of non-resident employees by the industry of the employing establishment be identified, to the extent possible, from existing data sources.

3.48. Services purchased in host economies by individuals and government units that are based in diplomatic and other similar enclaves in the host economy are included in government services, n.i.e., which is a residual category for government transactions that are not classified to other components of EBOPS. Those services transactions are covered by GATS (mode 2) when provided by non-government entities. However, this Manual does not recommend that the purchases of those services (that is, those supplied by nongovernment entities) be separately identified from purchases of services supplied by government entities or from purchases of goods.⁴⁴

2. Priorities for allocation to modes of supply

3.49. Ideally, each EBOPS component should be allocated among mode 1, cross-border supply; mode 2, consumption abroad; mode 3, commercial presence; and mode 4, presence of natural persons, using the principles above. It may be that compilers are only able to make this allocation at a less detailed level of EBOPS. Although less desirable, compilers are encouraged to make the allocation at least at the level of the 11 major components of the BPM5 classification (see para. 2.52 above). However, recognizing the difficulty of allocating balance of payments transactions to modes of supply, the Manual recommends that a full allocation of services by modes of supply be accorded a low priority.

1. Transportation services

3.53. Transportation covers all transportation services that are performed by residents of one economy for those of another and that involve the carriage of passengers, the movement of goods (freight), rentals (charters) of carriers with crew, and related supporting and auxiliary services. Some related items that are excluded from transportation services are freight insurance (included in insurance services); goods procured in ports by non-resident carriers and repairs of transportation equipment (both are treated as goods, not services); repairs of railway facilities, harbours and airfield facilities (included in construction services); and rentals or charters of carriers without crew (included in operational leasing services). Paragraphs 3.9 and 3.10 above discuss the issues relating to the attribution of residence of owners and operators of mobile equipment, including ships and aircraft.

3.54. EBOPS follows BPM5 in recommending a cross-classification of transportation by mode of transport and by kind of service. While BPM5 recommends the identification of three modes of transportation, EBOPS distinguishes eight modes of transportation—sea, air, space, rail, road, internal waterway, pipeline, and other supporting and auxiliary transportation services. EBOPS recommends the same classification of kind of service as BPM5—transport of passengers, transport of freight, and other supporting and auxiliary services. Discussion of the modes of transportation and kinds of service follows.

3.55. Sea transport covers all transportation services by sea.

3.56. Air transport covers all transportation services provided by air, including international passenger transportation.

3.57. The remaining modes of transport are a disaggregation of the single BPM5 mode “other transport.”

3.58. Space transport includes satellite launches undertaken by commercial enterprises for the owners of the satellites (such as telecommunication enterprises) and other operations performed by operators of space equipment, such as transport of goods and people for scientific experiments. Also included is space passenger transport and the payments made by an economy in order to have its residents included on the space vehicles of another economy.

3.59. Rail transport covers transport by trains.

3.60. Road transport covers international freight transport by lorries and trucks and international passenger transportation by buses and coaches.

3.61. Inland waterway transport relates to international transportation on rivers, canals and lakes. Included are waterways that are internal to one country and those that are shared among two or more countries.

3.62. Pipeline transport and electricity transmission covers international transport of goods in pipelines. Also included are charges for the transmission of electricity when this is separate from the production and distribution process. The provision of electricity itself is excluded, as is the provision of petroleum and related products, water and other goods supplied through pipelines. Also excluded are distribution services of electricity, water, gas and other petroleum products (included in other business services).

3.63. Other supporting and auxiliary transport services covers all other transportation services that cannot be allocated to any of the components of transportation services described above.

3.64. EBOPS and BPM5 distinguish the same breakdown into kinds of transportation service.

3.65. Passenger services covers all services provided between the compiling economy and abroad or between two foreign economies in the international transportation of non-residents by resident carriers (credit) and that of residents by non-resident carriers (debit). Included in passenger services are those passenger services performed within an economy by non-resident carriers; fares that are a part of package tours; charges for excess baggage, vehicles, or other personal accompanying effects; and expenditures for food, drink, or other items that passengers make while on board carriers. Also included in passenger services are rentals provided by residents to non-residents, and vice versa, of vessels, aircraft, coaches or other commercial vehicles with crews for limited periods (such as a single voyage) for the carriage of passengers.

3.66. Excluded are passenger services provided to nonresidents by resident carriers within the resident economies (included in travel services), cruise fares (included in travel services), rentals or charters that are financial leases (not included in EBOPS), and time charters without crew (included in operational leasing services).

3.67. Freight services may be divided into four categories. The first two are related to the fact that in an economy’s balance of payments statistics, following BPM5, goods are valued free on board (f.o.b.)⁴⁵ at the customs frontier of the exporting economy, and thus freight charges are, by convention, borne by the importing economy (whether or not these are directly charged to the importer or included in the import price). The first category relates to international transportation of the compiling economy’s exports and imports of goods; included are transportation services provided by (a) resident operators, beyond the customs frontier of the compiling economy, on the compiling economy’s exports (credits), and (b) non-resident operators, beyond the customs frontier of the exporting economy, on the compiling economy’s imports (debits).

3.68. The second category of freight transportation is transport services provided by (a) resident operators of the compiling economy inside the customs frontier of the exporting economy, on the compiling economy’s imports (credits), and (b) operators not resident in the compiling economy, inside the customs frontier of the compiling economy, on the compiling economy’s exports (debits).

3.69. The third category is concerned with freight transportation supplied for goods that are not exports or imports of the compiling economy, but rather are (a) transit trade through an economy, (b) transport of goods between third economies (cross-trade), (c) coastal transportation or other transportation of goods between points within an economy, (d) movements of goods to or from entities located outside territories where the entities are residents (such as government agencies) provided by non-resident carriers, and (e) transport of mail for postal and courier services. This category comprises transportation services provided by resident operators for these goods when they are owned by non-residents (credit) and by non-resident operators on these goods when they are owned by residents of the compiling economy (debit).

3.70. The fourth group consists of rentals (or operational leases) provided by residents to nonresidents, and vice versa, of vessels, aircraft, freight cars or other commercial vehicles with crews for limited periods (such as a single voyage) for the carriage of freight. Also included are towing related to the transportation of drilling platforms, floating cranes and dredges. Financial leases and time charters without crew are excluded.

3.71. Those services that are not covered above and that relate to one mode of transport only are recorded under the other category for the appropriate mode of transport (sea, air, rail, road and inland waterway transport). Services that relate to more than one mode of transport and that cannot be allocated to individual modes of transport are recorded under other supporting and auxiliary transport services. Included, for example, are cargo handling (such as loading and unloading of containers), storage and warehousing, packing and repackaging, towing (except as covered in the previous paragraph), pilotage and navigational aid for carriers, maintenance and cleaning performed in ports and airports on transportation equipment, salvage operations, and agents’ fees associated with passenger and freight transportation (including freight forwarding and brokerage services),

3.72. Included as memorandum items to EBOPS are a series of items relating to freight transportation on merchandise, valued on a transaction basis, disaggregated by mode of transportation (air freight, sea freight, rail freight, road freight, inland waterways freight and pipeline freight). For these items:

1. Credits include all freight transport services provided (for import, export, cabotage⁴⁶ or cross-trade) by resident transport enterprises to all non-residents;

2. Debits include all freight transport services provided (for import, export, cabotage or cross-trade) to all residents by non-resident transportation enterprises.

3.73. The transaction basis of measurement is useful because it represents the actual market transactions as they occur, with no correction, adjustment, or imputation. The transport service is recorded if, and only if, a transaction in transport services occurs between a resident and a non-resident. The recording of the separate transport service depends on the delivery terms that are specified in the contract for the sale/purchase of the goods and realised in the market transaction.

3.74. When the transportation contract is made between two residents of the same country, for transport services to be provided on an exported good, the transport service would be excluded in the transaction-based measurement method. This occurs, for example, when the delivery terms specified in the contract for the sale/purchase of a good are franco domicile (“carriage paid”) and when the exporter has contracted with a resident of the exporting country to provide the transportation service.

3.75. The following cases would be included in the transaction-based measurement method:

1. Where a contract to provide transport services is made between a resident and a non-resident and the delivery term is specified as ex-works, then the full transport service is recorded. This would include that part of the transportation service provided before the border of the exporting country;

2. Transport services between residents and nonresidents relating to cross-trade and cabotage.

3.76. This transaction-based information is requested by different users to complement the information of BPM5. Enterprises generally have this information in their accounts, and for this reason it is considered to be more robust than the information on a f.o.b. basis, which is often an estimated value (and which remains necessary as a BPM5 and 1993 SNA standard). The trans action-based information is already used by some balance of payments compilers as a basis for making the estimates on an f.o.b. basis for merchandise transportation (together with complementary information necessary for making these estimates). These items are considered to be analytically useful, and although not recommended in BPM5, they should be compiled if they are available as part of the process of compiling the data on freight transportation.

2. Travel

3.77. The travel⁴⁷ component of EBOPS differs from most other internationally traded services in that it is the consumer of these services that gives travel its distinctive characterization. The consumer (or traveller⁴⁸) moves to another economy to obtain goods and services. Thus, unlike most other services in EBOPS, travel is not a specific product; rather it is a range of goods and services consumed by travellers. It is for this reason that travel is not identified with any corresponding categories of CPC, Version 1.0.

3.78. Travel covers primarily the goods and services acquired from an economy by travellers during visits of less than one year to that economy. The goods and services are purchased by, or on behalf of, the traveller or provided, without a quid pro quo (that is, are provided as a gift), for the traveller to use or give away. Excluded are transportation of travellers within the economies that they are visiting, where such transportation is provided by carriers not resident in the particular economy being visited, as well as the international carriage of travellers, both of which are covered in passenger services under transportation. Also excluded are goods purchased by a traveller for resale in the traveller’s own economy or in any other economy.

3.79. A traveller is an individual staying for less than one year in an economy of which he or she is not a resident for any purpose other than (a) being stationed on a military base or being an employee (including diplomats and other embassy and consulate personnel) of an agency of his or her government, (b) being an accompanying dependent of an individual mentioned under (a), or (c) undertaking a productive activity directly for an entity that is a resident of that economy. Expenditures made by individuals covered in (a) and (b) are recorded under government services, n.i.e. Expenditures made by individuals (including seasonal and border workers) covered in (c) in the economy of the employing enterprise are included under travel. The one-year guideline does not apply to students or to patients receiving health care abroad, who remain residents of their economies of origin even if the length of stay in another economy is one year or more.

3.80. Although BPM5 recommends a breakdown of travel into business and personal travel in its standard components, the present Manual recommends a further breakdown of each of these components of travel.

3.81. Business travel covers the acquisition of goods and services by business travellers, who are going abroad for all types of business activities, such as carrier crews stopping off or laying over, government employees on official travel, employees of international organizations on official business, and employees doing work for enterprises that are not resident in the economies in which the work occurs. They may visit an economy for sales campaigns, market exploration, commercial negotiations, missions, meetings, production or installation work, or other business purposes on behalf of an enterprise resident in another economy. Business travel also includes the acquisition of goods and services for personal use by seasonal, border and other workers who are not resident in the economy in which they are employed and whose employer is resident in that economy.

3.82. Business travel includes the goods and services acquired for their own personal use by travellers whose main purpose of travel is for business (including goods and services for which business travellers are reimbursed by employers) but not the sales or purchases that they may conclude on behalf of the enterprises they represent.

3.83. The acquisition of goods and services for personal use by seasonal, border and other workers, who are not resident in the economy in which they are employed and whose employer is resident in that economy, is separately identified in the EBOPS subcomponent expenditure by seasonal and border workers. All other business travel is included in the EBOPS subcomponent other business travel.

3.84. Personal travel covers goods and services acquired by travellers going abroad for purposes other than business, such as holidays, participation in recreational and cultural activities, visits with friends and relations, pilgrimage, and education- and health-related purposes. The present Manual recommends a breakdown of personal travel into three sub-components - health-related expenditure (total expenditure by those travelling for medical reasons), education-related expenditure (i.e., total expenditure by students), and all other personal travel expenditure. This breakdown is the same as the supplementary information recommended in BPM5. In addition, separate data collected on, or estimated for, expenditure specifically on health and education services are useful for analytical purposes, and if these are available they should be provided separately.

3.85. The present Manual recommends an alternative disaggregation for travel services, to distinguish expenditure on goods, expenditure on accommodation and food and beverage serving services, and all other travel expenditure. This alternative disaggregation, included in the memorandum items to EBOPS, will allow the allocation of expenditure on services to mode 2 supply of services. The separate identification of expenditure on accommodation and food services will facilitate more general analysis of travel expenditure.

3.86. All goods and services (except international passenger fares) acquired by travellers from the economies in which they are travelling for their own use are recorded under travel. These goods and services may be paid for by the traveller, paid for on his or her behalf or provided to him or her without a quid pro quo. The most common goods and services entered under travel are lodging, food, beverages, entertainment and transportation within the economy visited (all of which are consumed in the supplying economy), and gifts, souvenirs and other articles purchased for travellers’ own uses and which may be taken out of the economies visited.

3. Communications services

3.87. The present Manual recommends that the BPM5 component communications services be further disaggregated into two sub-components—first, postal and courier services, and second, telecommunications services.

3.88. Postal and courier services covers the pick-up, transport and delivery of letters, newspapers, periodicals, brochures, other printed matter, parcels and packages, including post office counter and mailbox rental services.

3.89. Within this component, postal services also include paste restante services, telegram services and post office counter services, such as sales of stamps, money orders etc. Postal services are often, but not exclusively, supplied by national postal administrations. Excluded are financial services rendered by postal administration entities, such as postal giro, banking and savings account services (recorded under financial services), and mail preparation services (recorded under other business services, other). Postal services are subject to international agreements, and the flows between operators of different economies should be recorded on a gross basis.

3.90. Also within this component, courier services focus on express and door-to-door delivery. Couriers may use self-owned, privately shared or public transportation to carry out these services. Included are express delivery services, which might include, for example, on-demand pick-up or time-definite delivery. Excluded are, for example, the movement of mail carried by air transportation enterprises (recorded under transportation, air, freight), storage of goods (recorded under transportation, other, auxiliary and supporting services), and mail preparation services (recorded under other business services, other).

3.91. Telecommunications services encompasses the transmission of sound, images or other information by telephone, telex, telegram, radio and television cable and broadcasting, satellite, electronic mail, facsimile services etc., including business network services, teleconferencing and support services. It does not include the value of the information transported. Also included are cellular telephone services, Internet backbone services and on-line access services, including provision of access to the Internet.⁴⁹ Excluded are installation services for telephone networks equipment (included in construction services), and database services and related computer services to access and manipulate data provided by database servers (included in computer and information services).

4. Construction services

3.92. Construction services covers work performed on construction projects and installation by employees of an enterprise in locations outside the territory of an enterprise. The present Manual recommends that construction services be disaggregated into construction abroad and construction in the compiling economy. This disaggregation allows for the recording of both the construction services provided and the goods and services purchased in the host economy by non-resident enterprises that are providing the services, on a gross basis. Thus construction abroad comprises the construction services provided to non-residents by enterprises resident in the compiling economy (credit) and the goods and services purchased in the host economy by these enterprises (debit). Construction in the compiling economy comprises construction services provided to residents of the compiling economy by nonresident construction enterprises (debit) and the goods and services purchased in the compiling economy by these non-resident enterprises (credit).

3.93. This recommendation is a deviation from BPM5, which recommends that expenditures for goods and services purchased in the host economy be included in other business services, other. It is acknowledged that, for strong practical reasons, countries may prefer to continue to follow the treatment recommended in BPM5; in such cases, the treatment should be described in the explanatory methodological notes that accompany the publication of the data on construction services.

3.94. Both sub-components of construction services cover the work performed on construction projects and installations by employees of an enterprise in locations outside the economic territory of the enterprise (the work is generally performed for a short time period; the one-year rule for residence of such enterprises is to be applied flexibly, as described in paragraph 3.5 above). Construction services are valued on a gross basis—that is, they are valued inclusive of all goods and services used as inputs to the process of providing construction services, and also inclusive of all of the other costs of production and the operating surplus that accrues to the owners of the construction enterprise. This valuation principle is the same as that which applies in the valuation of all production (of both goods and services), as described in the 1993 SNA. Box 3 provides a numerical example.

Box 3.

Example of the measurement of construction services

Enterprise A, resident in country A, provides construction services in country B valued at 10,260. To provide these services, enterprise A purchases inputs of materials and labour consisting of:

		units
Materials (goods and services) and labour purchased in country A		1 200
	Of which:
	Goods	645
	Services	120
	Labour	435
Materials and labour purchased in country B		6 655
	Of which:
	Imported from country A	525
	Imported from country C	1 730
	Sourced in country B	2 290
	Labour	2 110
Total cost of purchased inputs		7 855
In addition, a gross operating surplus accrues to enterprise A of:		2 405
Giving a gross value of construction services of:		10 260

View Table

		units
Materials (goods and services) and labour purchased in country A		1 200
	Of which:
	Goods	645
	Services	120
	Labour	435
Materials and labour purchased in country B		6 655
	Of which:
	Imported from country A	525
	Imported from country C	1 730
	Sourced in country B	2 290
	Labour	2 110
Total cost of purchased inputs		7 855
In addition, a gross operating surplus accrues to enterprise A of:		2 405
Giving a gross value of construction services of:		10 260

The total value of the construction services produced is the sum of the inputs into the production process and the gross operating surplus accruing to the producing enterprise. Thus, the value of construction services is 10,260 units.

What would be measured in construction services trade between residents and non-residents?

In country A			In country B
Construction abroad			Construction in the compiling economy
	Credit	10 260a		Credit	4 545b
	Debit	4 545b		Debit	10 260a

View Table

In country A			In country B
Construction abroad			Construction in the compiling economy
	Credit	10 260a		Credit	4 545b
	Debit	4 545b		Debit	10 260a

If the goods valued at 645 units that are purchased in country A are shipped to country B for use in the construction process, the balance of payments compiler must ensure that they are excluded from the goods component of the balance of payments because they are purchases made by residents of country A from residents of country A, and not purchases made in country B.

^aGross value of construction services. ^bAmount of goods and services purchased by enterprise A in economy B (the host economy), equal to 525+1730+2290 units; this amount would be recorded in other business services under BPM5 recommendations.

3.95. Expenditure on goods and services in the host economy includes expenditure by the construction enterprise on locally supplied items as well as expenditure in the host economy by the construction enterprise on goods and services that have been imported to the host economy, where the goods and services are for use on the construction site. In the particular case where the construction enterprise purchases goods and services in its home economy, these still constitute part of the value of construction services. However, because they have not been purchased in the host economy, they are excluded from goods and services purchased in the host economy.⁵⁰ Depending on the method of data collection used, it may not be possible to identify separately the goods purchased in the home economy and the host economy; for practical purposes, the compiler may need to estimate a breakdown or otherwise attribute all goods purchased to either the host or the home economy of the construction enterprise.

3.96. It may not be possible to identify the purchase of goods and services separately from labour costs; in this case the compiler will need to estimate a breakdown or alternatively allocate all costs either as goods and services or as labour costs. An example of the measurement of construction services is shown in box 3.

3.97. Projects carried out by subsidiaries, branches or associates of non-resident enterprises (direct investors) and certain site offices (see para. 3.7 above) are excluded here. However, the activities of branches and subsidiaries are included in the coverage of foreign affiliates (see chapter IV below) because such projects are regarded as part of the production of the host economy. The present Manual recommends that the coverage of enterprises providing construction services be the same as that of BPM5. That is, compilers should ensure that the construction services data compiled according to the present Manual relate to the same group of enterprises that are deemed to provide construction services in the balance of payments statistics.

3.98. Construction services covers all goods and services that form an integral part of construction contracts, including site preparation work, construction work for buildings, construction work for civil engineering, installation and assembly of machinery, and other construction services, such as renting services of construction or demolition equipment with operator or exterior cleaning work of buildings. Also included are construction repairs.

5. Insurance services

3.99. Insurance services covers the provision of various types of insurance to non-residents by resident insurance enterprises, and vice versa. These services are estimated or valued by the service charges included in total premiums rather than by the total value of the premiums. The estimation procedures recommended in the present Manual (as in BPM5) are described in box 4.

3.100. The present Manual recommends that insurance services be disaggregated into five separate components—life insurance and pension funding, freight insurance, other direct insurance, reinsurance, and auxiliary services to insurance. This is a disaggregation of the BPM5 classification. Information on gross premiums and gross claims, separately for each of life insurance, freight insurance and other direct insurance, which may be the basis for estimating the service charge, is of analytic value and is recorded in the memorandum items.

3.101. Holders of life insurance policies, both with profit and without profit, make regular payments to an insurer (there may be just a single payment), in return for which the insurer guarantees to pay the policy holder an agreed minimum sum or an annuity, at a given date or at the death of the policy holder, if this occurs earlier. Term life insurance, where benefits are provided in the case of death but in no other circumstances, is a form of direct insurance, and is excluded here and included in other insurance.

3.102. Pension funds are separate funds established for the purpose of providing income on retirement for specific groups of employees. They are organized and directed by private or public employers or jointly by employers and their employees. They are funded by contributions from the employer and/or the employees and by the investment income earned on fund assets, and they also engage in financial transactions on their own account. They do not include social security schemes organized for large sections of the community that are imposed, controlled or financed by general government. Pension fund management services are included. In the case of pension funds, “premiums” are generally described as “contributions”, while “claims” are generally described as “benefits.”

3.103. Freight insurance services relate to insurance provided on goods that are in the process of being exported or imported, on a basis that is consistent with the measurement of goods f.o.b. and freight transportation as described in paragraphs 3.67–3.70 above. This means that freight insurance services should be included in the compiling economy when they (a) relate to exports of goods beyond the customs frontier of the compiling economy and are supplied by resident insurers (credits) or (b) relate to imports of goods to the compiling economy, beyond the customs frontier of the exporting economy when they are provided by nonresident insurers (debits).⁵¹ In addition, freight insurance services includes services related to other transportation of goods, where the insurance services are provided between a resident and a non-resident of the compiling economy.

3.104. Freight insurance provides coverage against theft of, damage to, or complete loss of freight. Box 4 describes the recommended method for estimating freight insurance services. Excluded from the coverage of freight insurance services is the insurance of the vehicles that are used to transport the goods.

3.105. Other direct insurance covers all other forms of casualty insurance. Included are term life insurance; accident and health insurance (unless these are provided as part of government social security schemes); marine, aviation and other transport insurance; fire and other property damage; pecuniary loss insurance; general liability insurance; and other insurance, such as travel insurance and insurance related to loans and credit cards.

3.106. Reinsurance is the process of subcontracting parts of the insurance risk, often to specialized operators, in return for a proportionate share of the premium income. Reinsurance transactions may relate to packages that mix several types of risks.

3.107. Auxiliary services comprises transactions that are closely related to insurance and pension fund operations. Included are agents’ commissions, insurance brokering and agency services, insurance and pension consultancy services, evaluation and adjustment services, actuarial services, salvage administration services, and regulatory and monitoring services on indemnities and recovery services.

6. Financial services

3.108. Financial services covers financial intermediation and auxiliary services, except those of life insurance enterprises and pension funds (which are included in life insurance and pension funding) and other insurance services that are conducted between residents and non-residents. Such services may be provided by banks, stock exchanges, factoring enterprises, credit card enterprises and other enterprises.⁵² Included are services provided in connection with transactions in financial instruments, as well as other services related to financial activity, such as advisory, custody and asset management services. In addition, two memorandum items are recommended, financial intermediation services indirectly measured and financial services including FISIM. These are included to provide a means by which total financial services may be more completely compared internationally, because financial institutions in some countries may charge explicitly for services that can be measured only indirectly in others.

3.109. In general, financial intermediaries incur liabilities that they then lend to other entities on terms and conditions different from those applicable to their incurrence of liabilities. That is, they intermediate between lenders and borrowers by channelling funds from one to the other, putting themselves at risk in the process. The liabilities incurred and the assets acquired through this process are shown on the balance sheets of the intermediaries. These activities comprise financial intermediation.

3.110. In principle, financial intermediation services should also include FISIM, reflecting services that are not explicitly charged. FISIM is described briefly in box 5. The 1993 SNA recommends the allocation of FISIM to consuming sectors, including as a component of the external account of goods and services, in effect reclassifying a portion of interest income as financial services. However, the 1993 SNA also allows countries not to allocate any production of FISIM, consistent with the approach in the 1968 SNA. For practical reasons and reflecting the views of national balance of payments compilers at the time of its writing, BPM5 does not recommend including an estimate of FISIM in exports and imports of services. In consonance with the principle of maintaining consistency with BPM5, the present Manual likewise excludes FISIM from international trade in financial services. However, countries that estimate FISIM attributable to external transactions for purposes of constructing national accounts are encouraged to disclose these estimates. Thus, financial intermediation services indirectly measured is included as a memorandum item to EBOPS; another memorandum item, financial services including FISIM, identifies the total of financial services directly and indirectly measured.

3.111. Included in financial services (excluding FISIM) are, for example:

1. Explicit and implicit commissions and fees associated with financial transactions, such as:

   1. Deposit taking and lending, including mortgage and non-mortgage loan services for business and personal purposes;

   2. Letters of credit, bankers’ acceptances, lines of credit and other similar instruments;

   3. Financial leasing;

   4. Factoring;

   5. Financial derivative transactions;

   6. Underwriting, placement of issues, brokerage and redemption of securities, including commissions related to the income payments related to securities;

   7. Clearing of payments;

2. Financial advisory services;

3. Custody services for financial assets or bullion;

4. Financial asset management services;

5. Merger and acquisition services;

6. Corporate finance and venture capital services;

7. Credit card and other credit granting services;

8. The spread on foreign exchange transactions;

9. Administration of financial markets;

10. Credit rating;

11. Service charges on purchases of IMF resources;

12. Charges associated with undrawn balances under standby or extended arrangements with the IMF.

3.112. Excluded from financial services are, for example:

1. Interest earned on deposits, loans, financial leases and debt securities (this is investment income, not included in services);⁵³

2. Dividends earned;

3. Life insurance and pension intermediation services (included in life insurance and pension funding);

4. Other insurance services;

5. Non-financial advisory services provided by banks (such as management advisory services, which are included in business and management consultancy and public relations services);

6. Gains and losses made on purchase and sales of securities and financial derivatives on own account;

7. FISIM.

3.113. In addition to explicit fees that may be charged for the conversion of foreign exchange, implicit service fees for foreign exchange transactions are valued as the spread between the mid-point rate and the buying or selling rate. Not all fees are invoiced separately; they may be included indistinguishably with the financial transactions to which they relate. An example is the invoiced price of a security that includes a charge for the brokerage service provided, as well as charges for the international transfer of foreign currency. Although such services are difficult to record, if possible estimates should be included in financial services. Note that fees paid by non-bank agents may be directly paid on accounts held abroad, or they may be included indistinguishably with related financial transactions.

3.114. Transactions in financial derivatives may take place through an intermediary. In this case, implicit or explicit service charges may be involved. The present Manual recommends that, where charges are explicitly made, they should be included in financial services, and where such services are not explicitly charged, FISIM should be estimated for inclusion in the memorandum item financial intermediation services indirectly measured, in line with the revised treatment of financial derivatives in balance of payments and national accounts statistics.⁵⁴

3.115. Financial services may be provided by, among others, banks, credit card and travellers’ cheque issuers, stock market administrators, factoring services, rating agencies and financial consultants.

7. Computer and information services

3.116. The present Manual recommends that more disaggregated information be produced than is recommended in BPM5. Thus, three sub-components are recommended - computer services, news agency services, and other information provision services.

3.117. Computer services consists of hardware and software-related services and data-processing services. Included are hardware and software consultancy and implementation services; maintenance and repair of computers and peripheral equipment; disaster recovery services, provision of advice and assistance on matters related to the management of computer resources; analysis, design and programming of systems ready to use (including web page development and design), and technical consultancy related to software; development, production, supply and documentation of customized software, including operating systems made on order for specific users; systems maintenance and other support services, such as training provided as part of consultancy; data-processing services, such as data entry, tabulation and processing on a time-sharing basis; web page hosting services (i.e., the provision of server space on the Internet to host clients’ web pages); and computer facilities management.

3.118. Excluded from computer services are the provision of packaged (non-customised) software (classified as goods and therefore not included in EBOPS⁵⁵) and non-specific computer training courses (included in other personal, cultural, and recreational services).

3.119. News agency services include the provision of news, photographs, and feature articles to the media. In the GNS/W/120 list of services that was a basis for the GATS commitments in the Uruguay Round, these services are a part of “recreational, cultural and sporting services” rather than computer and information services in the case of BPM5. These services are therefore separately identified in EBOPS, thus facilitating a linkage with GNS/W/120.

3.120. Other information provision services includes database services - database conception, data storage and the dissemination of data and databases (including directories and mailing lists), both on-line and through magnetic, optical or printed media; and web search portals (search engine services that find internet addresses for clients who input keyword queries). Also included are direct, non-bulk subscriptions to newspapers and periodicals, whether by mail, electronic transmission or other means.

8. Royalties and license fees

3.121. The present Manual recommends a disaggregation of the BPM5 component into franchises and similar rights and other royalties and license fees. Franchises and similar rights comprise international payments and receipts of franchising fees and the royalties paid for the use of registered trademarks. Other royalties and license fees includes international payments and receipts for the authorised use of intangible, non-produced, non-financial assets and proprietary rights (such as patents, copyrights and industrial processes and designs) and with the use, through licensing agreements, of produced originals or prototypes (such as manuscripts, computer programs, and cinematographic works and sound recordings). Payments and receipts for the outright purchase or sale of these assets and rights are excluded (following BPM5, these are recorded as capital account transactions, not as services). Excluded also are distributive rights for audiovisual products for a limited period or a limited area; these are included in audiovisual and related services.

9. Other business services

3.122. The coverage of other business services is identical to the coverage of the BPM5 component; however, the disaggregation proposed is more detailed than that of BPM5, although it corresponds broadly to the BPM5 supplementary breakdown.

3.123. Merchanting is defined as the purchase of a good by a resident of the compiling economy from a nonresident and the subsequent resale of the good to another non-resident; during the process, the good does not enter or leave the compiling economy (changes in stocks held abroad by merchants are excluded from the estimation of merchanting services). The difference between the value of goods when acquired and the value when sold is recorded as the value of merchanting services provided. Although the goods flows associated with merchanting activity are not part of services statistics, separate data recorded on a gross basis, including the value of the goods, are useful for analytical purposes, and a separate memorandum item, merchanting gross flows, is included in EBOPS for this purpose.

3.124. Other trade-related services covers commissions on goods and service transactions between (a) resident merchants, commodity brokers, dealers, and commission agents and (b) non-residents. This component also includes transactions in ships, aircraft and sales of goods by auction. Excluded are franchising fees (included in franchises and similar rights), brokerage in financial services (included in financial services) and transport-related fees (included in the appropriate component of transportation services).

3.125. Operational leasing services covers resident/nonresident leasing (rental) and charters, without operators, of ships, aircraft and transportation equipment, such as railway cars, containers and rigs, without crew. Also included are the leasing payments relating to other types of goods. Excluded are financial leasing (sometimes called capital leasing), leasing of telecommunications lines or capacity (included in telecommunications services), rental of ships and aircraft with crew (included in transportation services) and rental of vehicles to foreign travellers (included in travel).

3.126. Legal services covers legal advisory and representation services in any legal, judicial and statutory procedures; drafting services of legal documentation and instruments; certification consultancy; and escrow and settlement services.

3.127. Accounting, auditing, bookkeeping and tax consulting services covers the recording of commercial transactions for businesses and others; examination services of accounting records and financial statements; business tax planning and consulting; and preparation of tax documents.

3.128. Business and management consulting and public relations services covers advisory, guidance and operational assistance services provided to businesses for business policy and strategy and the overall planning, structuring and control of an organization. Included are management auditing; market management, human resources, production management and project management consulting; and advisory, guidance and operational services related to improving the image of the clients and their relations with the general public and other institutions.

3.129. Advertising, market research and public opinion polling services transacted between residents and nonresidents covers the design, creation and marketing of advertisements by advertising agencies; media placement, including the purchase and sale of advertising space; exhibition services provided by trade fairs; the promotion of products abroad; market research; telemarketing; and public opinion polling on various issues.

3.130. Research and development services covers those services that are transacted between residents and nonresidents and associated with basic research, applied research and experimental development of new products and processes. In principle, such activities in the physical sciences, social sciences and humanities are covered, including the development of operating systems that represent technological advances. Also included is commercial research related to electronics, pharmaceuticals and biotechnology. Excluded are technical studies and consultancy work (both included in business and management consultancy, public relations services).

3.131. Architectural, engineering and other technical services covers transactions between residents and nonresidents related to architectural design of urban and other development projects; planning and project design and supervision of dams, bridges, airports, turnkey projects etc.; surveying; cartography; product testing and certification; and technical inspection services. Mining engineering is excluded and included in mining services.

3.132. Waste treatment and de-pollution services includes the treatment of radioactive and other waste; stripping of contaminated soil; cleaning up of pollution including oil spills; restoration of mining sites; and decontamination and sanitation services. Also included are all other services that relate to the cleaning or restoring of the environment.

3.133. Agricultural, mining, and other on-site processing services comprises:

1. Agricultural services that are incidental to agriculture, such as the provision of agricultural machinery with crew, harvesting, treatment of crops, pest control, animal boarding, animal care, and breeding services. Services in hunting, trapping, forestry and logging, and fishing are also included here.

2. Mining services provided at oil and gas fields, including drilling, derrick building, repair and dismantling services, and oil and gas well casing cementing. Services incidental to mineral prospecting and exploration, as well as mining engineering and geological surveying, are also included here.

3. Other on-site processing services, which covers on-site processing of or work on goods that have been imported without change of ownership, processed but not re-exported to the country from which the goods were consigned (but are instead either sold in the processing economy or sold to a third economy) or vice versa.

3.134. Other business services covers services transactions between residents and non-residents, such as the placement of personnel, security and investigative services, translation and interpretation, photographic services, building cleaning, real estate services to businesses and any other business services that cannot be classified to any of the business services listed above. Included are the distribution services of electricity, water, gas and other petroleum products, where these are identifiable separately from transmission services (included in pipeline transport and electricity transmission).

3.135. Services between related enterprises, n.i.e., is a residual category. It covers payments between related enterprises for services that cannot be specifically classified to any other component of EBOPS. It includes payments from branches, subsidiaries and associates to their parent enterprise or other related enterprises that represent contributions to the general management costs of the branches, subsidiaries and associates (for planning, organizing and controlling) and also reimbursements of expenses settled directly by parent enterprises. Also included are transactions between parent enterprises and their branches, subsidiaries and associates to cover overhead expenses.

10. Personal, cultural and recreational services

3.136. This comprises two subcomponents, audiovisual and related services and other personal, cultural and recreational services.

3.137. Audiovisual and related services comprises services and associated fees related to the production of motion pictures (on film or videotape), radio and television programmes (live or on tape) and musical recordings. Included are receipts or payments for rentals; fees received by resident actors, producers etc. for productions abroad (or by non-residents for work carried out in the compiling economy); fees for distribution rights sold to the media for a limited number of showings in specified areas; and access to encrypted television channels (such as cable services). Fees to actors, directors and producers involved with theatrical and musical productions, sporting events, circuses and other similar events and fees for distribution rights (for television, radio, and film) for these activities are included. Excluded are purchases and sales of films, television and radio programmes, recorded music, musical compositions and manuscripts, and the rights to these (because purchases and sales of merchandise and assets are not within the scope of EBOPS). Also excluded are the sale of rights for video editions of films and television programmes.⁵⁶ Purchases and sales of rights should be included in the memorandum item audiovisual transactions.

3.138. Other personal, cultural and recreational services include such services as those associated with museums, libraries, archives and other cultural, sporting and recreational activities. Two separate subcomponents, beyond the detail recommended in BPM5, should be identified here for GATS purposes. These are the provision of education services and of health services. Education services comprise services supplied between residents and non-residents relating to education, such as correspondence courses and education via television or the Internet, as well as by teachers etc. who supply services directly in host economies. Health services comprise services provided by doctors, nurses and paramedical and similar personnel, as well as laboratory and similar services, whether rendered remotely or on-site. Excluded is all expenditure by travellers on education and health (included in travel).

11. Government services, not included elsewhere

3.139. Government services, n.i.e., is a residual category covering government transactions (including those of international organizations) not contained in the other components of EBOPS as defined above. Included are all transactions (in both goods and services) by embassies, consulates, military units and defence agencies with residents of economies in which the embassies, consulates, military units and defence agencies are located and all transactions with other economies. Excluded are transactions with residents of the home economies represented by the embassies, consulates, military units and defence agencies, and transactions in the commissaries, post exchanges and these embassies and consulates.

3.140. A breakdown of this item into services transacted by embassies and consulates, services transacted by military units and agencies and all other transactors is recommended.⁵⁷

3.141. Transactions classified to this component comprise those for goods and services (such as office supplies, furnishings, utilities, official vehicles and operation and maintenance, and official entertainment) and personal expenditures incurred by diplomats and consular staff and military personnel, as well as their dependants in the economies in which they are located. Also included in this component are transactions, subject to the same considerations as those in the preceding item, by other official entities (such as aid missions and government tourist, information and promotion offices) located in economies abroad. Also included are transactions associated with general administrative expenditures etc. that are not classified elsewhere. In addition, this component includes transactions associated with aid services that are provided by non-military agencies, that do not give rise to any payments and that have offsets in transfers. Finally, transactions associated with the provision of joint military arrangements and peacekeeping forces, such as those of the United Nations, are included in government services, n.i.e.

3.142. Most transactions included in this EBOPS component are not covered by GATS. In particular, GATS excludes:

1. Goods supplied to or by embassies, consulates, military units etc, because GATS applies only to services transactions;

2. Services supplied by embassies, consulates, military units etc. because these services are supplied in the exercise of government authority (see annex V, part 1, article 1);

3. Supplies of services to embassies, consulates, military units etc. by government entities from other countries (including from the country of location).

3.143. GATS covers only the supply of services by nongovernment entities to government entities, foreign diplomats, and consular staff and their dependants, which are allocated to mode 2. These services are included in government services, n.i.e when they cannot be classified in other components. However, identification of these transactions would require the compilation of data on goods supply separately from the supply of services, as well as a further breakdown by type of supplier of the service. This is not recommended in the present Manual.