IMF Committee on Balance of Payments Statistics (BOPCOM) has published an interesting article on "The Treatment of Freight and Insurance Associated to Merchanting and the Geographical Allocation of Net Merchanting".
"Merchanting transactions, according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), should be recorded in the balance of payments as transactions in goods. However, as the goods involved, by definition, do not cross the customs boundary of the merchant’s country, data compilation issues have arisen. Although BPM6 provides guidance on the valuation of goods under merchanting, the treatment of freight costs for these goods is considered ambiguous. This note clarifies that, according to the recommendations of BPM6, freight transport and insurance costs associated to merchanting are to be recorded at transaction prices as agreed between the parties, and dependent on the agreed delivery terms, that is not “free on board” (fob). In addition, the note also clarifies that the country allocation of “net exports of goods under merchanting” should be done by adding up all credit and debit entries of goods under merchanting for each partner country"
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