Manual on Statistics of International Trade in Services

(b)  Balance of payments statistics by modes of supply  
2.79.  Balance of payments service transactions broadly 
correspond to mode 1, mode 2, and part of mode 4. Yet a 
given balance of payments service category generally 
includes transactions corresponding to several modes. 
Moreover, several modes of supply may be used for a 
single service transaction. With a view to facilitating the 
analysis and compilation of service transactions between 
residents and non-residents by modes of supply, the 
Manual suggests the use of two simplification rules. 
2.80.  First, separate identification of modes deemed to 
be relatively marginal in a given service category is not 
recommended. Thus, if the major part of a given service 
category corresponds to services supplied under one 
mode, this mode could be fully allocated to that service 
category. For example, telecommunications services 
would be allocated to cross-border supply (mode 1) 
because most transactions between residents and non-
                                                                                 
on these statistical criteria. These limitations are discussed 
further in the present chapter as well as in chapters III and IV 
below. 

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21 
residents are cross border. According to this 
methodology, a given service category in the balance of 
payments accounts would normally correspond to only 
one or two modes of supply. 
2.81.  Second, there are cases where specific balance of 
payments service transactions involve several modes of 
supply, such as when an architect designs a construction 
project, delivers it through a telecommunications link 
and has to make some visits to the country of the 
consumer at the implementation phase. In those cases, it 
is recommended that, if estimates cannot be provided for 
the subdivision of the transaction value by modes, the 
transaction be allocated to the most important mode in 
terms of time and resources associated with it. 
Balance of payments services components 
corresponding to Mode 1 
2.82.  Mode 1 applies when a service is delivered from 
a supplier abroad to a consumer in his or her territory of 
residence. This is the case for most balance of payments 
transactions recorded under transportation, 
communication services, insurance services, financial 
services, and royalties and license fees. Non-mode 1 
transactions in these components mainly take place in 
two instances: 
(a)   Transactions  fully  occurring  through  presence 
of natural persons (mode 4), which are presumed to be 
marginal in these components; 
(b)  Transactions that involve both modes 1 and 4 
(such as an insurance agent travelling to discuss the 
terms of a contract, whereas most of the insurance 
service would be produced in the country where the 
insurance company is located). In those cases, it might 
appear reasonable to allocate the transaction to mode 1. 
Thus, applying the simplified approach, the BPM5 
components indicated above would be allocated to mode 1. 
Balance of payments services components 
corresponding to both mode 1 and mode 4 
2.83.  Mode 1 also applies to part of transactions in 
computer and information services, other business 
services, and personal, cultural, and recreational 
services. However, these components also comprise 
transactions corresponding to mode 4 situations, where 
the supplier travels to the territory of the consumer. For 
these components, further analysis and empirical 
information are needed to determine how they can be 
separately identified or estimated. In particular, the 
knowledge of the location of the supplier at the time 
when major transactions are delivered would be critical 
for a proper assessment of the share of modes 1 and 4 in 
these balance of payments components. 
Balance of payments components and mode 2 
2.84.  The travel category broadly corresponds to mode 
2 or consumption abroad, although it does not categorize 
all the types of services supplied to travellers. Further 
refinements would be needed for a better measurement 
of mode 2.  In particular, an adjustment would be needed 
to exclude any goods purchased by travellers. A 
memorandum item is provided in EBOPS for this 
purpose. 
2.85.  Repairs and supporting and auxiliary services to 
carriers in foreign ports are also covered by mode 2. 
Although  repairs are included in goods in BPM5, 
supporting and auxiliary services are included in 
transportation. 
An exception: balance of payments, mode 3 
transactions in construction services 
2.86.  The preceding paragraphs have set out how 
balance of payments transactions may be allocated to 
modes 1, 2, and 4. Commercial presence (mode 3) 
concerns mostly domestic sales of foreign affiliates (i.e., 
transactions between residents), as described in FATS 
statistics. 
2.87.  There are cases, however, where a commercial 
presence is not considered as being resident in its host 
country, such as an unincorporated site office carrying 
out a short-term construction project. The services 
provided in the host country by this type of commercial 
presence are transactions between residents and non-
residents, and they are recorded in the balance of 
payments accounts under construction services and not 
in FATS statistics. These services are to be considered 
as supplied through mode 3 because under GATS, a 
commercial presence may be any type of establishment 
owned or controlled by foreign entities, even those 
created for a short period. 
2.88.  In turn, the balance of payments component 
construction services also includes transactions resulting 
from mode 4 - presence of natural persons. Whether or 
not these mode 4 transactions are minor relative to the 
mode 3 transactions in this category will depend on the 
characteristics of the compiling country. 

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22 
Balance of payments components and mode 4 
2.89.  Preceding paragraphs have shown that some 
transactions in BPM5 service components correspond to 
mode 4. In addition, supplementary information on other 
mode 4 activities may be provided by the compensation 
of employees component of income in BPM5. 
2.90.  Compensation of employees covers income in the  
form of wages, salaries and other compensation 
received by non-resident individuals who are employed 
in resident enterprises that are producing goods and/or 
services, including manufacturing and agriculture, as 
well as industries primarily producing services. To 
provide relevant supplementary information on mode 
4, identification of the part of compensation of 
employees arising from production of services is 
encouraged.