Manual on Statistics of International Trade in Services

F.  Modes of supply and EBOPS 
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 non-
residents 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 

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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 non-
government entities) be separately identified from 
purchases of services supplied by government entities or 
from purchases of goods.
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