U.S. international sales and purchases of services.

DiLullo, Anthony J. ; Whichard, Obie G.

U.S. International Sales and Purchases of Services

In recent years, to improve the coverage and accuracy of its estimates of U.S. international sales and purchases of services, BEA has taken several steps:

* Instituted benchmark and annual

surveys of selected business,

professional, and technical

services;

* Improved the surveys covering

royalties and license fees; architectural,

engineering, construction,

and mining services; and

insurance;

* Developed or improved estimates

of international travel transactions

and of transactions in educational,

financial, and medical

services; and

* Added questions on sales of services

by affiliates to its surveys of

direct investment. (1)

This article builds upon these earlier efforts by presenting information on services in a more detailed and unified format than has been available previously. BEA plans to continue to improve its information on international services; areas that have been targeted for further development include financial services and transportation.

Services may be delivered to foreign markets through alternative channels. A business in one country can sell services to persons in another country either directly, through cross-border transactions, or indirectly, through affiliates in other countries. This article presents information on both channels of delivery. The information on private cross-border transactions in services, which are included in the U.S. international transactions (balance of payments) accounts, covers both U.S. sales and U.S. purchases of services. The information on transactions of affiliates, which is obtained from BEA's direct investment surveys, covers sales of services abroad by majority-owned foreign affiliates of U.S. companies and sales in the United States by majority-owned U.S. affiliates of foreign companies. (2) Although it would be interesting, for some purposes, to examine affiliates' purchases of services in their countries of location, no information on such purchases is collected in BEA's surveys.

The data on U.S. cross-border transactions in services are for 1986-89; the data for 1986 are the earliest available for several types of services transactions. The data on sales by foreign affiliates of U.S. companies are for 1986-88, and those on sales by U.S. affiliates of foreign companies are for 1987-88. Data on sales by U.S. and foreign affiliates in 1989 are not yet available, and the series on sales by U.S. affiliates did not begin until 1987. The data on both types of transactions will be updated annually and will be made available by BEA. The data will also be included in the new National Trade Data Bank. (3)

Separate data on the two channels of delivery permit analysis of their differing economic effects. To a large extent, the two channels differ in their impact on an economy because of differences in the location of factors of production that generate value added. U.S. cross-border sales mainly reflect value added by U.S. factors of production, whereas sales of services abroad by foreign affiliates of U.S. companies mainly reflect value added by foreign factors (primarily labor). Similarly, services that U.S. persons purchase directly from abroad mainly reflect value added by foreign factors of production, whereas services they purchase from U.S. affiliates of foreign companies mainly reflect value added by U.S. workers and other domestic factors of production.

The data included in this article are useful in analyzing the impact of international services business from alternative perspectives. The data on cross-border services transactions are useful in analyzing international services business from the perspective of the United States as a geographic location. Used together with the data on sales by affiliates, they are useful in analyzing the worldwide operations of multinational companies, in investigating the channels used to deliver services internationally, and in assessing access to, and penetration of, foreign markets.

Overview

For cross-border transactions, U.S. sales of private services were larger than purchases in 1986 ($76.0 billion, compared with $65.3 billion) (table 1). Sales also grew faster in 1986 - 89 - at an average annual rate of 14 percent, compared with 9 percent for purchases. By 1989, U.S. sales of services were $113.9 billion, and U.S. purchases of services were $85.7 billion; the surplus of sales over purchases, at $28.2 billion, was more than double the surplus of $10.7 billion recorded in 1986.

Table : Delivery of Services to Foreign and U.S. Markets Through Cross-Border Transactions and Through Sales by Affiliates

 [Millions of dollars]
 1986 1987 1988 1989

U.S cross-border (balance of

payments) transactions:

 U.S. sales (exports) 76,031 85,499 99,474 113,903
 U.S purchases (imports) 65,327 74,167 81,212 85,694

Sales by nonbank majority-owned

affiliates:

Sales to foreign persons by

foreign affiliates of U.S.

companies 72,849 87,011 100,733 n.a.

Sales to U.S. persons by U.S.

affiliates of foreign

companies n.a. 62,553 68,678 n.a. n.a. Not available

During the periods for which data are available, sales of services by both U.S. and foreign affiliates grew rapidly. Sales of services to foreign persons by majority-owned foreign affiliates of U.S. companies increased at an average annual rate of 18 percent in 1986-88, rising from $72.8 billion in 1986 to $100.7 billion in 1988. Sales of services to U.S. persons by majority-owned U.S. affiliates of foreign companies were smaller and grew more slowly; they increased from $62.6 billion in 1987 to $68.7 billion in 1988, an increase of 10 percent. (4)

The remainder of this article is in three parts. The first part describes the data and some of its limitations. The second discusses the composition of cross-border transactions by geographic area and by type of service or intangible asset, and the third discusses the composition of affiliate sales by geographic area and by industry of affiliate.

Description of the Data

Cross-border transactions

As mentioned earlier, cross-border services transactions are included in the U.S. international transactions, or balance of payments, accounts, which record all economic transactions between U.S. residents and nonresidents. The cross-border transactions covered by this article are those recorded in the five major line items for private services in these accounts - travel, passenger fares, other transportation, royalties and license fees, and other private services.

Recording methods. - With one exception, the data on cross-border transactions are presented as they are recorded in the international transactions accounts; "sales" of services corresponds to "exports" of services and "purchases" of services corresponds to "imports" of services. The exception is in transactions between affiliated parties in royalties and license fees and other private services, which are presented on a net basis in the international transactions accounts and on a gross basis in this article. In the international transactions accounts, net transactions of U.S. parent companies - U.S. parents' receipts from their foreign affiliates less payments to them - are recorded as exports, and net transactions of U.S. affiliates - U.S. affiliates' payments to their foreign parents less receipts from them - are recorded as imports. In this article, to provide the most detailed picture possible of the two-way flow of services transactions between the United States and foreign countries, these transactions are shown on a gross basis. Receipts of U.S. parents from their foreign affiliates and of U.S. affiliates from their foreign parents are shown as U.S. exports (sales) of services, and payments by U.S. parents to their foreign affiliates and by U.S. affiliates to their foreign parents are shown as U.S. imports (purchases). As a result, the U.S. cross-border sales and purchases of services shown on this basis exceed the exports and imports of services recorded in the U.S. international transactions accounts. However, because sales and purchases are larger by an equal amount ($7.7 billion in 1989), the balance between them is identical to the balance between exports and imports in the international accounts (table 2).

Table : [TABULAR OMITTED]

Classification. - The cross-border transactions are classified by type of service except for (1) royalty and license fee and other private services transactions between affiliated parties, (2) royalty and license fee transactions between unaffiliated parties, and (3) travel transactions. The first are classified by industry of the affiliate involved in the transaction and the second by type of intangible asset; the third - travel - is not a type of service, but a category for recording travelers' expenditures - both for goods (such as souvenirs and gifts) and for services (such as lodging, entertainment, and local transportation).

Sales by affiliates

The information on sales of services by affiliates is obtained from BEA's surveys of U.S. direct investment abroad and foreign direct investment in the United States. The information of particular interest for this article is that on sales of services abroad by U.S. companies through their majority-owned foreign affiliates and sales of services in the United States by foreign companies through their majority-owned U.S. affiliates. These sales represent delivery of services by a company in one country to customers in other countries through direct investment. For many services, such sales may constitute the only practical channel of delivery to foreign markets. Delivery through cross-border transactions may be difficult or impossible because the service needs to be produced and consumed at the same time and in the same place or because the producer and the consumer of the service need close and continuing contact.

Coverage and definition. - The data on sales of services by affiliates cover majority-owned nonbank affiliates of nonbank parents. Because they report extensive data to other Government agencies, banks are required to report only limited data on BEA's direct investment surveys, and they are exempted from the surveys that collect information on sales of services by affiliates.

In these data, sales of services are defined as sales characteristic of a particular group of industries: The industries that constitute the "services" division of the Standard Industrial Classification; petroleum services; finance (except banking), insurance, and real estate; agricultural services; mining services; and transportation, communication, and public utilities. Affiliates that are not classified in one of these industries often have sales of services. In fact, sales by affiliates that are classified in manufacturing and other goods-producing industries but that sell services as a secondary activity account for a significant portion of the sales of services by affiliates presented in this article. As discussed later, these sales are not available by type of service but are shown in the accompanying tables opposite the industry of the affiliate making the sale.

In BEA's direct investment surveys, an "affiliate" includes any business enterprise that is owned 10 percent or more by an investor of a different country, but the data on sales of services by affiliates presented in this article are restricted to affiliates that are majority-owned (50 percent or more owned) by direct investors. For foreign affiliates, data on sales of services are available only for majority-owned affiliates.

Classification. - Data on sales of services by affiliates are not reported to BEA by type of service; instead, sales are classified according to the primary industry of the affiliate making the sale, even though, in particular cases, secondary industries of the affiliate account for some of the sales. The primary industry of the affiliate often provides a good guide to the type of service being sold. This may be true even when the affiliate's primary industry is not a services industry, but the affiliate provides services in support of the goods it sells (such as computer and data-processing services sold by computer manufacturers). Because the degree of consolidation permitted for reporting foreign affiliates is less than that permitted for U.S. affiliates, the industry of the affiliate probably provides a better guide to the types of services sold by a foreign affiliate than it does to those sold by a U.S. affiliate.(5)

Comparability issues

The data on cross-border transactions are not completely comparable with the data on sales by affiliates because of differences in definition, concepts, classification, and data availability. For cross-border transactions, the data on sales are not completely because information for some purchases is not available. In addition, the data on sales by foreign affiliates are not completely comparable with those on sales by U.S. affiliates. Differences in methods of classification have been noted earlier. Comparability issues concerning individual services or types of transactions are noted below. The first four are differences between the data on cross-border transactions and those on affiliate sales.

One difference is in the treatment of construction. In the data on cross-border transactions, construction is considered a service, partly because of convention and partly because most of the transactions involve service-type activities such as construction management, engineering, and architecture. In contrast, in the data on sales by affiliates, construction is treated as goods producing because of the tangible and visible nature of the end product.

A second difference is in the treatment of investment income. In the data on cross-border transactions, "services" is defined to exclude such income. In contrast, in the data on sales by foreign affiliates, investment income of finance (except banking) and insurance companies is generally included in sales of services. This difference in treatment reflects the type of information on sales of services by affiliates that was initially requested in BEA's surveys of U.S. direct investment abroad and is to be eliminated beginning with data for 1989.(6)

A third difference is in the treatment of insurance. In the U.S. international transactions accounts, insurance exports are recorded as premiums received net of losses paid, and insurance imports are recorded as premiums paid net of losses recovered. (However, cross-border transactions are disaggregated in tables 5 and 7 to show premiums and losses separately.) In contrast, the data on sales by affiliates are not net of losses, because they are obtained from a breakdown of operating revenues, a measure that includes only premiums (and other receipts); thus, they should not be compared with the net amounts shown for cross-border insurance transactions.

A fourth difference concerns banks. As mentioned earlier, the data on sales by affiliates do not cover banks. In contrast, for cross-border transactions, some information on U.S. sales of banking services is available; none is available on U.S. purchases of these services.

An additional difference exists between sales and purchases in the data on cross-border transactions. Specifically, the data on cross-border transactions for medical services, like those for banks, are available for U.S. sales but not for purchases.

U.S. Balance of Payments

(Cross-Border) Transactions

U.S. receipts for exports (cross-border sales) of private services were $113.9 billion in 1989 (table 2). Travel and other private services, each at about 30 percent of total receipts, accounted for the majority of receipts. Passenger fares and other transportation accounted for 27 percent, and royalties and license fees for 11 percent.

U.S. payments for imports (cross-border purchases) of private services were $85.7 billion. Travel, at 41 percent of payments, was the largest single category. Passenger fares and other transportation accounted for 34 percent of payments, other private services for 22 percent, and royalties and license fees for 3 percent.

Travel, passenger fares, and other

transportation

Travel. - Travel includes aggregate estimates of transactions in a variety of services and related goods by persons traveling abroad for less than 1 year for business or personal reasons. The types of services and related goods most likely to be purchased by travelers are lodging, meals, entertainment, transportation within the country or area visited, gifts, and articles (except automobiles) for personal use. (Automobiles are included in merchandise trade in the international transactions accounts.)

U.S. receipts from foreign visitors to the United States were $34.4 billion in 1989 (table 3.4). About 25 percent, or $8.2 billion, of receipts were from Canada and Mexico. Transactions in the U.S. border areas with these countries accounted for 12 percent of receipts from Canada and 80 percent of receipts from Mexico. These transactions include expenditures for shopping, commuting to jobs in the U.S. border areas, and other similar activities. Border transactions differ from other travel transactions because they involve numerous visits and small average expenditures.

Visitors to the United States from overseas (other than Canada and Mexico) accounted for 76 percent, or $26.2 billion, of U.S. travel receipts in 1989. Japanese visitors accounted for 25 percent of overseas receipts, and Western European visitors for 40 percent. More than one-half of receipts from Western Europe were from the United Kingdom, West Germany, and France. "Latin America and other Western Hemisphere" (excluding Mexico) accounted for 16 percent of the overseas total, and all other countries for 17 percent.

Travel receipts increased at an average annual rate of 19 percent in 1986-89. Most of the growth was in receipts from Japan and Western Europe. Rising incomes and appreciation of those countries' currencies against the U.S. dollar increased the attractiveness of the United States as a travel destination. Travel receipts from Canada also increased strongly; most of the increases occurred during the winter, when Canadians traveled to warm areas of the United States.

(1.) Some of the improvements are outlined in "U.S. Sales of Services to Foreigners" in the January 1987 issue of the Survey of Current Business. That article also describes the sources of information used to construct estimates of services transactions. More recent improvements are described in technical notes to the articles on U.S. international transactions in the June issues of the Survey, particularly the June 1989 issue. Information on the sources and methods used for estimating services recorded in the U.S. international transactions accounts may also be found in The Balance of Payments of the United States: Concepts, Data Sources, and Estimating Procedures (Washington, DC: U.S. Government Printing Office, May 1990).

(2.) In a recent series of studies of patterns of merchandise trade, Robert E. Lipsey and Irving B. Kravis have made similar distinctions between U.S.-owned and U.S.-located companies. See "The Competitive Position of U.S. Manufacturing Firms," Banca Nazionale del Lavoro Quarterly Review, No. 153 (June 1985): 127-54; "The Competitivenes and Comparative Advantage of U.S. Multinationals, 1957-84," Banca Nazionale del Lavoro Quarterly Review, No. 161 (June 1987): 147-65; and "Technological Characteristics of Industries and the Competitiveness of the U.S. and Its Multinational Firms," National Bureau of Economic Research, Working Paper No. 2933 (April 1989).

(3.) The National Trade Data Bank is a database that brings together, in one location, trade and export promotion data collected by 14 Federal Government agencies. For further information, write National Trade Data Bank, Office of Business Analysis, U.S. Department of Commerce, Room 4878, HCH Building, Washington, DC 20230.

(4.) As explained later, comparisons of sales by U.S. affiliates with those by foreign affiliates are complicated by a difference in the treatment of investment income. It is likely, however, that if this difference could be eliminated, foreign affiliates sales of services still would exceed those by U.S. affiliates, although by a smaller amount than these figures indicate.

(5.) Reports for foreign affiliates may be consolidated only if the affiliates are in the same country and only if they are integral parts of the same business operation. U.S. affiliates, in contrast, generally report to BEA on a fully consolidated domestic (U.S.) basis and include in the consolidation each affiliate owned more than 50 percent by the company above it. However, information for U.S. affiliates on the distribution of each affiliate's sales by industry of sales is reported for industry-coding purposes. This information is used in this article in analyzing the composition of sales of services by U.S. affiliates.

(6.) The initial survey questions requested that sales or gross operating revenues be disaggregated into only two categories, goods and services. When investment income was received from the primary activities of a company, it was included in the company's operating revenues. Because almost all of these cases involved companies in the finance (except banking) and insurance industries, both of which are services industries, the income was almost invariably included is sales of services. Beginning with the 1989 benchmark survey of U.S. direct investment abroad, investment income is being reported separately and will be excluded from sales of services by foreign affiliates. In the data on sales by U.S. affiliates, like those on cross-border transactions, "services" excludes investment income.

U.S. travel payments to foreigners were $35.0 billion in 1989. About 26 percent, or $9.1 billion, of payments were to Canada and Mexico. About 11 percent of payments to Canada and 55 percent of payments to Mexico were in the border areas. U.S. payments for travel overseas were $25.9 billion. The major destinations for U.S. overseas travelers were Western Europe (particularly the United Kingdom, West Germany, France, and Italy), which accounted for 44 percent of overseas travel payments, and the Carribean area, which accounted for about 20 percent. Payments to Japan were 7 percent of the overseas total, and payments to all other areas (particularly Australia, South Korea, and HongKong) were 28 percent.

Travel payments increased more slowly - at an average annual rate of 9 percent - than receipts in 1986-89. The depreciation of the dollar during this period, particularly against the Japanese and major Western European currencies, was partly responsible. A slowdown in travel to the major Western European destinations was partially offset by an acceleration in travel to other Western European countries, mainly in the southern and eastern areas where prices were lower, and to Mexico. Increases in travel to Mexico partly resulted from the depreciation of the peso against the U.S. dollar and from strong promotional efforts.

Passenger fares. - Passenger fares consist of the earnings of vessel and airline operators for transporting persons. Exports consist of receipts of U.S. operators for transporting foreign residents (1) between the United States and foreign countries and (2) between foreign countries. (7) Imports consist of payments to foreign operators for transporting U.S. residents to and from the United States. Passenger fare receipts, which were $10.1 billion in 1989, were entirely from U.S. airline operations. Ninety percent of receipts were from traffic to and from the United States, and the remainder were from air transportation of foreign persons between foreign countries. Over 90 percent of payments, which were $8.5 billion, were from foreign airline operations, and the remainder were from vessel operations.

The rapid increase in passenger fare receipts in 1986-89 - at an average annual rate of 23 percent - reflected the strong growth in travel by foreign visitors to the United States. Passenger fare payments increased much more slowly - at an average annual rate of 8 percent.

Other transportation. - Other transportation consists primarily of international transactions, other than passenger fares, of ship and airline operators. Exports include freight receipts of U.S. vessel and airline operators for transporting U.S. merchandise exports from U.S. ports to foreign destinations and for transporting freight between foreign countries; imports include freight payments to foreign operators for transporting U.S. merchandise imports. (8) Other transportation also includes port services. Exports include the value of goods and services provided to U.S. vessel and airline operators in connection with their operations outside the United States. Imports include the value of port services provided to foreign operators in the United States. Port services include fees for the following: Services such as piloting, towing, and berthing for ships and landing rights for airlines; cargo handling services, such as stevedoring and warehousing; fuel; and other goods and services, such as supplies, brokers' and port agents' fees, cleaning and catering services, and administrative and office services.

Other transportation receipts were $20.4 billion in 1989. Payments were $20.8 billion. For both receipts and payments, foreign carriers, which play a dominant role in transporting both U.S. imports and U.S. exports, accounted for a major share of the transactions. Port services provided to foreign operators accounted for two-thirds of receipts. Freight payments to foreign operators accounted for more than one-half of payments.

Freight. - Freight receipts were $5.8 billion in 1989. Two-thirds were receipts of U.S. ocean vessel operators, and one-third were receipts of U.S. airline operators. Ocean freight receipts were largely for liner, or scheduled, service and for transportation of agricultural exports, particularly grain, to countries in Asia. Air freight receipts were primarily for service to countries in Western Europe and to Japan. Other freight receipts, mainly for transporting Canadian-owned oil and gas by pipeline in transit through the United States, were small.

Freight payments were $11.8 billion in 1989. Ocean freight payments were 80 percent of the total, and air freight payments were 19 percent. Twenty percent of ocean freight payments were for transporting crude petroleum and petroleum products. About one-half of these payments were to vessel operators based in flag-of-convenience countries, such as Panama and Liberia (recorded under "international organizations and unallocated" in table 3), for transporting crude petroleum from South America and the Middle East, and about one-fourth of these payments were to Western European operators, mainly in the United Kingdom and Norway, for transporting crude petroleum from the North Sea to the United States. Ocean freight payments for transporting other goods were mainly to Japan, Western Europe, the flag-of-convenience countries, South Korea, and countries in southeast Asia.

Port services. - Receipts for port services provided to foreign operators in the United States were $13.8 billion in 1989. Ship operators received 55 percent of port services, and airline operators received 44 percent. Payments by U.S. ship and airline operators for port services abroad were $8.2 billion, of which airlines paid 72 percent and ship operators 27 percent.

Port services provided to ship operators were related mainly to freight transportation activities, and port services provided to airline operators were related mainly to passenger transportation activities. For both ship and airline operators, the largest single component of port services was fuel.

Royalties and license fees

Royalties and license fees consist of receipts and payments for the use of patented techniques, processes, formulas, and other intangible property rights used in goods production, as well as copyrights, trademarks, franchises, rights to broadcast live events, and other intangible rights. Licensing and other agreements for the use of intangible property rights provide an important means for transferring technology and for marketing goods; thus, they provide an important alternative or complement to direct exporting. Licensing and other agreements with foreign companies that have extensive production facilities and marketing networks may be used by companies to sell their technology or to promote products bearing their brand names in foreign markets. Such agreements may be entered into either with unaffiliated foreign companies or with foreign affiliates. Companies may prefer to enter into licensing agreements with their foreign affiliates to obtain a return on their intangible assets in foreign countries while exercising additional control over their technology and products.

Total royalty and license fee receipts - including transactions between both affiliated and unaffiliated parties - were $12.3 billion in 1989, and payments were $2.7 billion (table 4.4). Although payments doubled between 1986 and 1989, they were only 22 percent as large as receipts in 1989. Thus, the United States remained a strong net exporter of rights to technology and other intangible assets.

Affiliated transactions. - Affiliated cross-border transactions are those between parents and affiliates - that is, between U.S. parent companies and their foreign affiliates and between U.S. affiliates and their foreign parent groups. (9)

Affiliated receipts consist of U.S. parents' receipts from their foreign affiliates and U.S. affiliates' receipts from their foreign parent groups. Affiliated receipts, which increased at an average annual rate of 19 percent in 1986-89, accounted for almost 80 percent of total royalty and license fee receipts in 1989. Almost all of the affiliated receipts were received by U.S. parent companies from their foreign affiliates. Although U.S. parent companies have agreements with affiliates in many countries, over 60 percent of U.S. parents' receipts were from only five countries: Japan accounted for 16 percent; the United Kingdom, 14 percent; West Germany, 12 percent; France, 10 percent; and Canada, 9 percent. By industry, the majority of receipts were from affiliates engaged in manufacturing machinery, passenger cars and other transportation equipment, and chemicals.

Affiliated transactions also accounted for a majority - 68 percent - of payments of royalties and license fees. Affiliated payments, which include U.S. parents' payments to their foreign affiliates and U.S. affiliates' payments to their foreign parents, were almost entirely accounted for by U.S. affiliates' payments to parent companies, largely in the United Kingdom, Japan, Switzerland, and West Germany. Payments to the United Kingdom, which accounted for 24 percent of the total in 1989, almost tripled in 1986-89 as a result of large investments in the United States by British companies.

Unaffiliated transactions. - Receipts from unaffiliated foreign companies were $2.6 billion in 1989, or 21 percent of total receipts of royalties and license fees. Thirty-nine percent of these receipts were from Japan and 5-6 percent each were from the United Kingdom, West Germany, Canada, and South Korea. Fees for industrial processes, largely those used in machinery and chemical manufacturing, accounted for about 70 percent of unaffiliated receipts.

Payments of royalties and fees by U.S. companies to unaffiliated foreign companies were mostly for industrial

(7.) Because the U.S. international accounts measure only transactions between U.S. and foreign residents, receipts of U.S. operators for transporting U.S. residents overseas (which are transactions between U.S. residents) are not included in passenger fares. Similarly, earnings of foreign airlines for transporting foreign residents between the United States and foreign countries (which are transaction between foreign residents) are not included.

(8.) In estimating freight receipts and payments for the international transactions accounts, the convention used is that the importer owns the goods being transported and bears the cost of transportation. Thus, receipts of U.S. operators for transporting U.S. merchandise imports are excluded from U.S. transportation receipts because they represent transactions between U.S. residents - U.S. importers and U.S. vessell and airline operators. Similarly, revenues of foreign operators for transporting U.S. merchandise exports are excluded from U.S. payments because they represent transactions between foreign importers and foreign operators.

(9.) A U.S. affiliate's foreign parent is the first person outside the United States in its ownership chain that has a direct investment interest in the affiliate. Its foreign parent group consist of (1) the foreign parent, (2) any foreign person, proceeding up the foreign parent's ownership chain, that owns more than 50 percent of the person below it, up to and including the ultimate beneficial owner, and (3) any foreign person, proceeding down the ownership chain(s) of each of these members, that is owned more than 50 percent by the person above it. processes, largely those used in machinery and automotive manufacturing. These payments were mainly to the United Kingdom, West Germany, and Japan. Payments of fees for rights to broadcast live events were unusually strong - 42 percent of total unaffiliated payments - in 1988, mainly because of the purchase of rights to broadcast the Olympic games from South Korea.

Other private services

Other private services consist of a number of diverse activities. Detail by type of service for transactions between unaffiliated persons is presented in tables 5 and 7 - 10. Estimates are shown for education; financial services; insurance; telecommunications; business, professional, and technical services; and miscellaneous services not included elsewhere. Similar detail, by type of service, for transactions between affiliated persons is not available because the data are reported only in the aggregate (table 6).

Affiliated transactions. - Affiliated services transactions - that is, transactions between parents and affiliates - include include both reimbursements for allocated expenses (such as research and development assessments or allocated overhead expenses for management and accounting services performed by the parent company for the entire multinational company) and charges for specific services affiliates purchase from, or sell to, their parent companies.

Affiliated receipts for other private services were $11.6 billion in 1989 (tables 5.4 and 6.2). Receipts by U.S. parents accounted for 70 percent of the affiliated total. The majority of the receipts were from foreign affiliates in manufacturing, insurance, and service industries. Receipts by U.S. affiliates were largely by affiliates in manufacturing industries and wholesale trade.

Table : [Tabular Omitted]

Affiliated payments for other private services were $6.6 billion. In contrast to receipts, payments were more evenly divided between U.S. parents and U.S. affiliates. U.S. parents in manufacturing (mainly machinery), insurance, and services industries accounted for the majority of payments to foreign affiliates. Affiliates in manufacturing industries accounted for two-fifths of U.S. affiliates' payments to foreign parents.

Unaffiliated transactions. - In transactions between unaffiliated persons, receipts were $25.0 billion in 1989, or 68 percent of total receipts for other private services, and payments were $12.1 billion, or 65 percent of total payments for these services. In 1986-89, the average annual rate of increase for receipts was 9 percent, compared with 7 percent for payments.

Education. - Education receipts consist of expenditures for tuition and living expenses by foreign residents enrolled in U.S. colleges and universities. Payments consist of tuition and living expenses of U.S. institutions for study abroad.

Education receipts were $4.6 billion in 1989, or 18 percent of total unaffiliated receipts for other private services; education payments were $0.6 billion, or 5 percent of total unaffiliated payments for other private services. More than one-half of receipts were from developing countries, and almost 70 percent of payments were to countries in Western Europe.

Financial services. - The coverage of estimates of financial services is limited, largely because of the lack of source data that can be adapted to developing estimates appropriate for the international transactions accounts. Financial services receipts include commissions and fees for transactions in U.S. securities paid to U.S. securities brokers by foreign residents. Payments include commissions and fees for transactions in foreign securities paid by U.S. residents to foreign brokers. In addition, receipts include noninterest income of U.S. banks and commissions received by U.S. commodities brokers from foreign residents. Available estimates of non-interest income of U.S. banks are limited to fees for bankers acceptances, commercial letters of credit, standby letters of credit, undrawn funds under commitment, and items for collection.

Financial services receipts were $5.0 billion in 1989, or 20 percent of total unaffiliated receipts for other private services. These receipts, which increased at an average annual rate of 16 percent in 1986-89, were among the fastest growing components of the total. Even though the data on bank fees are limited, they accounted for 56 percent of financial services receipts in 1989, while securities and commodities brokers' fees and commissions accounted for 44 percent.

Payments for financial services were $2.0 billion in 1989, or 17 percent of unaffiliated payments for other private services. The average annual rate of increase for payments was 6 percent in 1986-89. These estimates consist of U.S. payments of commissions to foreign securities brokers only.

Insurance. - Insurance includes premiums received and paid for primary insurance and for reinsurance. Losses paid by U.S. insurers and losses recovered from foreign insurers are netted against the premiums. Examples of primary insurance are life insurance; accident and health insurance; and fire, marine, and casualty insurance. Each of these types of insurance may be reinsured by the primary insurer; reinsurance is the ceding of a portion of a premium to another insurer, who then assumes a corresponding portion of the risk. This form of insurance is one way of providing coverage for events with so high degree of risk or liability that a single insurer would be unwilling or unable to underwrite insurance against their occurrence. Some examples of reinsurance are insurance for product liability, medical malpractice, and various types of hazards.

Net insurance receipts (premiums received less losses paid) were $1.3 billion in 1989, or 5 percent of unaffiliated receipts6for other private services.(10) Net receipts of primary insurance were $1.4 billion, and net losses for reinsurance were $0.2 billion (table 7.4). In 1986-89, losses averaged 50 percent of premiums for primary insurance, compared with 84 percent of premiums for reinsurance.

Net insurance payments (premiums paid less losses recovered) were $0.7 billion in 1989, or 6 percent of unaffiliated payments for other private services.(11) Net payments of primary insurance were $0.6 billion, and net payments of reinsurance were $0.2 billion.(12) In 1986-89, losses were 51 percent of premiums for primary insurance, compared with 78 percent of premiums for reinsurance. Reinsurance losses recovered were higher in 1989 than in 1986-88 because of unusually large losses associated with Hurricane Hugo.

Primary insurance was concentrated in transactions with only a few countries. In 1989, most of the premiums received were from Canada and Japan, and most of the premiums paid were to the United Kingdom and Bermuda. Reinsurance transactions also tended to be concentrated, mainly among countries with large reinsurance markets, but they were less concentrated than primary insurance transactions. Canada and the United Kingdom together accounted for over 40 percent of the reinsurance premiums received in 1989. Premiums were also received from numerous other countries, the most important which were Bermuda, West Germany, and Japan. Over one-half of U.S. reinsurance premium payments were to the United Kingdom and Bermuda; other countries in Western Europe, Caribbean countries, and Japan received most of the remainder.

Telecommunications. - Telecommunications transactions include settlements between U.S. and foreign communications companies for the transmission of messages between the United States and other countries, channel leasing, electronic mail, video conferencing, and support services. In addition, payments include fees for the leasing of satellite channels from the International Telecommunications Satellite Organization.

Telecommunications receipts by U.S. companies were $2.7 billion in 1989, or 11 percent of unaffiliated receipts for other private services (table 8). Payments to foreign companies were $5.4 billion, or 45 percent of unaffiliated payments. Information from a benchmark survey for 1986 indicated that over three-fourths of receipts and nearly 90 percent of payments were for settlements for the transmission of messages between the United States and other countries.(13) The large excess of payments over receipts was due to more calls being initiated in the United States than abroad, partly reflecting relatively low rates and high average incomes in the United States.

Table : [Tabular Data Omitted]

Business, professional, and technical services. - This category covers a number of different types of services, such as advertising; computer and data-processing services; database and other information services; research, development, and testing; management, consulting, and public relations; legal services; construction, engineering, architectural, and mining services; industrial engineering; and installation, maintenance, and repair of equipment (table 9,).

Receipts for business, professional, and technical services were $6.1 billion in 1989, or about one-fourth of unaffiliated receipts for other private services (table 9.4). Installation, maintenance, and repair of equipment; computer and data-processing services; construction, engineering, architectural, and mining services; and "other" business, professional, and technical services accounted for most of these receipts. A substantial share of services to equipment consisted of servicing aircraft engines, steam-generating turbines, and reciprocating engines. Receipts for computer and data-processing services included services such as systems analysis, design, engineering, custom programming, equipment leasing (except financial leasing), and maintenace and repair of computer equipment; a large share of these receipts in 1989 were for rights for the use of programs for mainframe computers. Engineering and architectural services were larger than construction and mining services in the group that includes these services; construction services were limited mainly to supervisory and managerial activities. Medical services was the major component of receipts for "other" business, professional, and technical services (table 10).(14) Most foreigners who came to the United States for medical treatment were from "Latin America and other Western Hemisphere."

(10.) As an alternative indicator of the importance of insurance, premiums alone accounted for 18 percent of unaffiliated receipts for other private services and 46 percent of payments. (11.) See footnote 10. (12.) Payments of primary insurance are probably underestimated because it is difficult to identify all U.S. persons that purchase insurance from nonresident companies. Data on reinsurance and receipts of primary insurance are obtained from U.S. insurers, a homogeneous group that is more easily identified. Additionally, data on recovery of losses associated with payments of primary insurance are not collected. Estimates are prepared by BEA based on the experience of U.S. primary insurers. (13.) When calls are made from one country to another, the carriers in the two countries jointly provide the service and share the revenue collected. The corresponding international transactions represent the share of the revenue transmitted by the carrier in the country of origin (which is the carrier that collects the fee from the caller) to the carrier in the country of destination. (14.) Estimates of receipts for medical services are based on information about the operations of selected major medical centers, university hospitals, and hospitals in major foreign visitor destinations. Payments for medical services were not estimated because of the difficulty in identifying individuals who purchase these services abroad. SURVEY OF CURRENT BUSINESS

Payments for business, professional, and technical services were $2.0 billion, or 16 percent of unaffiliated payments for other private services. Most of these payments were accounted for by services to equipment; construction, engineering, architectural, and mining services; and advertising services. Services to equipment involved primarily industrial machinery. Drilling and other petroleum-related activities performed abroad for U.S. companies accounted for a large share of payments for construction, engineering, architectural, and mining services. Advertising included fees for preparing and placing advertising copy.

Other unaffiliated services. - U.S. receipts for other unaffiliated services were $5.3 billion in 1989. Expenditures of foreign governments and international organizations accounted for 70 percent of the total. These expenditures embassies and consulates in the United States, the cost of maintaining missions to the United Nations, and outlays of international organizations headquartered in the United States, such as the United Nations, the International Monetary Fund, and the World Bank; they also include outlays by agents of foreign governments and quasi-government agencies providing legal, public relations, news dissemination, and travel and trade promotion services. Film rentals accounted for 20 percent of other unaffiliated services receipts, and wages of U.S. residents temporarily working abroad and receipts from Canadian locals of U.S. trade unions accounted for the remainder.

U.S. payments for other unaffiliated services were $1.3 billion in 1989. Wages of commuters from Mexico and Canada, of foreign students, and of other nonresidents temporarily employed in the United States accounted for 80 percent of the total. Film rentals, payments to Canadian locals of U.S. trade unions, and consular fees made up most of the remainder.

Sales by Affiliates

Table 11 shows the complete matrix of available data on sales of services by nonbank majority-owned U.S. affiliates of foreign companies and foreign affiliates of U.S. companies for all countries and industries combined. Data for foreign affiliates are available for 1986-88; data for U.S. affiliates are available for 1987 and 1988. Highlights of the data for the two groups of affiliates in 1988 - the most recent year for which data are available - are discussed in the two sections that follow.

Table : Table 11. - Sales of Services by Nonbank Majority-Owned U.S. Affiliates of Foreign Companies and by Nonbank Majority-Owned Foreign Affiliates of U.S. Companies

 [Millions of dollars]
 1986 1987 1988

Sales by foreign affiliates

Total 82,622 97,455 111,47
 To affiliated persons 19,611 22,910 24,026
 To unaffiliated persons 63,011 74,545 87,121
 To U.S. persons 9,774 10,444 10,413
 To U.S. parents 7,916 8,409 8,042
 To unaffiliated U.S. persons 1,857 2,035 2,371
 To foreign persons 72,849 87,011 100,733
 To other foreign affiliates 11,695 14,501 15,983
 To unaffiliated foreign persons 61,154 72,510 84,750
 Local sales 60,737 72,681 85,429
 To other foreign affiliates 4,887 5,473 6,781
 To unaffiliated foreigners 55,850 67,208 78,648
 Sales to other countries 12,111 14,331 15,304
 To other foreign affiliates 6,808 9,028 9,202
 To unaffiliated foreigners 5,303 5,302 6,102

Sales by U.S. affiliates

Total n.a. 66,305 72,657
 To U.S. persons n.a. 66,553 68,678
 To foreign persons n.a. 3,752 3,979
 To the foreign parent group n.a. 1,634 1,978
 To foreign affiliates n.a. 187 167
 To other foreigners n.a. 1,930 1,834

n.a. Not available Note. - Sales of services in this table are those characteristic of the following: Industries in the "services" division of the Standard Industrial Classification; finance (except banking), insurance, and real estate; agricultural, mining, and petroleum services; and transportation, communication, and public utilities. The exclusion of banking reflects the limitation of the data to nonbanks, not a judgment that banking is not a service. Data for foreign affiliates include, and data for U.S. affiliates exclude, investment income included in operating revenues of finance and insurance companies.

Sales by foreign affiliates

Worldwide sales of services by non-bank majority-owned foreign affiliates (MOFA's) were $111.1 billion in 1988. Nearly 80 percent, or $87.1 billion, of these sales were to unaffiliated persons, mainly foreign persons. Of the $24.0 billion in sales of services to affiliated persons, one-third of the sales were to U.S. parents, and two-thirds were to other foreign affiliates of the same U.S. parent as that of the affiliate making the sale.

By location of customer, nearly 10 percent of sales of services by MOFA's were to U.S. persons, mainly U.S. parents. The remainder were to foreign - mainly unaffiliated - persons. This section focuses on these sales to foreign persons, which represent sales delivered by U.S. companies to foreign markets through the channel of direct investment. These sales are shown by country in table 12 and by industry of affiliate by country in table 13. Table 12. - Sales of Services to Foreign Persons by Nonbank Majority-Owned Foreign Affiliates of U.S. Companies, by Country of Affiliates

 [Millions of dollars]
 1986 1987 1988
 All countries 72,849 87,011 100,733
Canada 13,655 15,750 16,876
Europe 36,030 43,859 52,094
 Belgium 1,515 1,918 2,107
 France (D) 5,318 6,147
 Germany, Federal Republic of 4,887 6,065 7,088
 Italy 2,026 (D) (D)
 Netherlands 5,213 6,067 6,798
 Norway 368 392 413
 Spain 887 1,145 (D)
 Sweden 589 719 (D)
 Switzerland 1,677 2,169 2,691
 United Kingdom 13,121 15,612 19,395
 Other (D) (D) (D)

Latin America and other Western

 Hemisphere 6,931 8,379 8,248
 South and Central America 2,654 3,036 3,518
 Argentina 414 389 375
 Brazil 719 988 1,349
 Mexico 462 519 (D)
 Venezuela 730 775 (D)
 Other 730 775 (D)
 Other Western Hemisphere 4,277 5,343 4,730
 Bermuda 2,779 (D) 3,458
 Other 1,498 (D) 1,272
Other countries 11,703 14,855 18,636
 Africa 938 771 (D)
 South Africa 258 159 116
 Other 680 612 (D)
 Middle East 1,130 1,185 (D)
 Israel (D) (D) (D)
 Saudi Arabia (D) (D) 620
 Other (D) (D) (D)
 Asia and Pacific 9,635 12,899 (D)
 Australia 2,523 3,198 3,846
 Hong Kong 1,462 1,510 1,770
 India 19 15 12
 Indonesia 138 147 177
 Japan 4,217 6,080 8,410
 Korea, Republic of 114 118 137
 Malaysia 87 224 (D)
 New Zealand 169 238 316
 Philippines 238 255 262
 Singapore 380 (D) (D)
 Taiwan 176 261 398
 Other 203 (D) (D)
International 4,530 4,168 4,879

Addenda:

 European Communities (12) 32,733 39,759 47,323
 Eastern Europe 0 0 0

(*) Less than $500,000. (D) Suppressed to avoid disclosure of data of individual companies.

Sales to foreign persons. - Of the $100.7 billion in sales of services by MOFA's to foreign persons, sales in the country of the affiliate (local sales) accounted for 85 percent and sales to other foreign (non-U.S.) countries for 15 percent. The preponderance of local sales reflects the need for many services businesses to serve their customers from a nearby location. Over 90 percent of the sales to other foreign countries were by affiliates located in either Europe (and thus possibly "local" in the sense that they may have been mainly to neighboring European countries) or "other Western Hemisphere." The sales by "other Western Hemisphere" affiliates were accounted for largely by offshore finance and insurance affiliates engaged in activities that do not require a local presence. For example, these affiliates may serve as a location for booking transactions with other parts of the multinational firms to which they belong; in addition, their revenues probably include a substantial amount of income on investments made in other countries. (As explained earlier, sales of services by foreign affiliates include investment income of affiliates in finance and insurance.)

Affiliates in Europe accounted for $52.1 billion, or over 50 percent, of MOFA's sales of services to foreign persons in 1988 (table 12). Sales by affiliates in the United Kingdom, at $19.4 billion, were by far the largest; sales by affiliates in West Germany, the Netherlands, and France also were large - $6 billion to $7 billion each. Among other countries, sales to foreign persons were largest for MOFA's in Japan ($8.4 billion), "international" ($4.9 billion), Australia ($3.8 billion), and Bermuda ($3.5 billion).(15)

By industry, the largest portion of sales of services by MOFA's to foreign persons was accounted for by affiliates classified in the "services" division of the Standard Industrial Classification (table 13.3). These sales were $27.7 billion in 1988; affiliates in Europe accounted for 70 percent of them. Within "services," sales to foreign persons were largest for affiliates in computer and data-processing services and in "other services." It should be noted that affiliates in computer and data-processing services accounted for only part of the total sales of these services; affiliates in machinery manufacturing (which includes computer manufacturers) and wholesale trade (which includes distributors of computers) also had substantial sales of such services.

Table : [Tabular Data Omitted]

After "services," sales by MOFA's to foreign persons were largest in insurance, at $20.7 billion, and in finance (except banking), at $15.1 billion. Both figures contain an unknown amount of investment income, in addition to revenues for the performance of services, and thus are not completely comparable with the figures for other industries. In insurance, affiliates in three countries - Canada, Japan, and the United Kingdom - accounted for over two-thirds of the sales to foreign persons, which were mainly to unaffiliated customers in the country of the affiliate. Sales by affiliates in "Latin America and other Western Hemisphere" also were significant; captive offshore insurance affiliates, many in Bermuda, that provided casualty insurance to other foreign affiliates of their U.S. parents accounted for a substantial portion of these sales. In finance, about one-third of the sales to foreign persons were by affiliates in the United Kingdom, where deregulation has enabled foreign-owned firms to engage in a wider variety of activities in recent years.

Affiliates in manufacturing accounted for $11.4 billion of sales of services to foreign persons, and those in wholesale trade for $11.3 billion. In both cases, a large share of the sales were by affiliates of U.S. computer manufacturers and were presumably accounted for mainly by computer and data-processing services. European affiliates accounted for about two-thirds of the sales in each industry.

Affiliates in petroleum had $7.2 billion in sales of services to foreign persons. The services sold by these affiliates probably consisted mainly of oil and gas field services and of petroleum transportation. Of the $7.2 billion, $3.2 billion was by affiliates in "international." Other industries with $1 billion or more in sales of services to foreign persons were transportation ($4.3 billion), real estate ($1.2 billion), and public utilities ($1.3 billion).

Sales by U.S. affiliates

Worldwide sales of services by nonbank majority-owned U.S. affiliates (MOUSA's) in 1988 were $72.7 billion, considerably below the $111.1 billion of sales by MOFA's. The two figures are not completely comparable because of the difference in the treatment of investment income; however, it appears that if this income could be excluded from both data sets, MOFA's would still have larger sales than MOUSA's.(16)

Of the $72.7 billion in sales of services by MOUSA's, 95 percent, or $68.7 billion, were to U.S. persons, and 5 percent, or $4.0 billion, were to foreign persons. The sales to foreign persons were about evenly divided between sales to members of foreign parent groups and sales to unaffiliated foreigners. Because it is relatively uncommon for U.S. affiliates of foreign companies to have foreign affiliates of their own, sales of services to such affiliates were very small.

The remainder of this section discusses MOUSA sales to U.S. persons by country of ultimate beneficial owner (UBO) and by industry of affiliate. (17) These sales represent deliveries of services by foreign companies to the United States through the channel of direct investment.

Sales to U.S. persons. - Affiliates with European UBO's accounted for $40.0 billion, or nearly 60 percent, of MOUSA sales to U.S. persons (table 14). Among these affiliates, sales by affiliates with British UBO's, at $19.5 billion, were by far the largest. Sales by affiliates with Netherlands and Swiss UBO's ($6 billion each) and with West German UBO's ($3.5 billion) also were large. Outside Europe, sales by affiliates with UBO's in Canada ($16.3 billion), Japan ($4.3 billion), and Australia ($3.2 billion) were largest.

Table : Table 14. - Sales of Services to U.S. Persons by Nonbank Majority-Owned U.S. Affiliates of Foreign Companies, by Country of UBO

 [Millions of dollars]
 1987 1988
 All countries 62,553 68,678
Canada 16,356 16,293
Europe 36,226 40,029
 Belgium 111 55
 France 1,830 1,949
 Germany, Federal Republic of 3,113 3,545
 Italy (D) 225
 Netherlands 5,218 6,402
 Norway (D) 225
 Spain 18 18
 Sweden 755 754
 Switzerland 5,054 6,157
 United Kingdom 18,713 19,490
 Other (D) 1,208
Latin America and other Western Hemisphere 2,493 2,242
 South and Central America 404 399
 Argentina 7 7
 Brazil 13 16
 Mexico 184 120
 Venezuela 33 33
 Other 168 223
 Other Western Hemisphere 2,088 1,844
 Bermuda 1,325 984
 Other 763 860
Other foreign countries 7,393 9,783
 Africa 105 (D)
 South Africa (D) 130
 Other (D) (D)
 Middle East 1,344 (D)
 Israel 61 64
 Saudi Arabia (D) 253
 Other (D) (D)
 Asia and Pacific 5,944 8,299
 Australia 2,187 3,210
 Hong Kong 487 566
 India (*) (*)
 Indonesia 3 3
 Japan 3,097 4,332
 Korea, Republic of (D) 21
 Malaysia 13 13
 New Zealand 31 41
 Philippines 34 38
 Singapore 32 (D)
 Taiwan 1 1
 Other (D) (D)
United States 87 331

Addenda:

 European Communities (12) 30,057 32,449
 Eastern Europe (D) 11

* Less than $500.000 D Suppressed to avoid disclosure of data of individual companies. UBO Ultimate beneficial owner

In interpreting the information in table 15 on the industry distribution of sales of services to U.S. persons, it should be kept in mind that the data are classified by industry of affiliate, not by type of service. As noted earlier, this classification probably provides a better guide to the types of services sold by foreign affiliates than it does to those sold by U.S. affiliates. U.S. affiliates in goods-producing industries accounted for a majority of sales of services outside the primary industries of the affiliates making the sales. Although these sales to U.S. persons cannot be classified by type of service, it appears, judging from information on the composition of total sales that affiliates report for industry coding purposes, that if they could be, the sales would be redistributed to several other industries, especially insurance, and gas field services and other petroleum services), equipment rental, and real estate.

By industry, sales of services to U.S. persons by affiliates in insurance, at $28.2 billion, were far larger than those by affiliates in any other industry and accounted for over 40 percent of the total for all industries combined in 1988 (table 15.2). Premium income accounted for most of these sales, nearly 60 percent of which were by affiliates with UBO's in Canada and the United Kingdom. By type of insurance, life insureres - most of them with Canadian UBO's - accounted for the majority of the sales. Property and casualty insurers accounted for most of the remainder. Foreign investment in property and casualty insurance has expanded in recent years, as the industry has become more internationally oriented and as some foreign insurance companies have established or acquired affiliates in the United States in order to service the U.S. affiliates of clients in their home countries. Sales by affiliates in accident and health insurance were very small, perhaps reflecting differences between the United States and the major potential investing countries in methods of financing the delivery of health care.

After insurance, sales by MOUSA's were largest in "services" ($13.3 billion) and real estate ($8.4 billion). Over 30 percent of the sales in "services" were by affiliates with British UBO's. By industry within "services," sales to U.S. persons were largest for affiliates in "other services" ($3.8 billion), hotels and other lodging places ($2.4 billion), and advertising ($1.9 billion). In "other services," affiliates that provide building cleaning and maintenance services accounted for almost one-third of the sales; sales by affiliates that provide temporary employment services, amusement and recreation services, auto rental, and security services also were substantial. For both "other services" and advertising, sales by affiliates with British UBO's were largest. For hotels and lodging places, sales by affiliates with Japanese UBO's were largest.

A large share of the sales by real estate affiliates represents rental income of developers of commercial property, particularly office buildings in major urban areas. Sales by affiliates with Canadian UBO's were considerably larger than those by affiliates with UBO's in any other country, possibly reflecting the value that proximity to the property owned or managed offers to investors in real estate. Sales by affiliates with British UBO's were next largest.

In both manufacturing and transportation, affiliates' sales of services to U.S. persons were about $5 billion. In manufacturing, over 40 percent of the sales were accounted for by affiliates with British UBO's. These sales include insurance, oil and gas field services, computer and data-processing services (sold by computer manufacturers), research and development, and equipment rental.

In transportation, most of the sales were by small regional railroads, trucking companies, and companies providing warehousing or related services, such as freight forwarding and containerization. Sales by affiliates providing air or water transportation were small, probably because of U.S. restrictions on foreign participation in these industries. [18] UBO's in Canada and the United Kingdom accounted for about one-half of the $4.8 billion in sales. (16.) This statement is based on available information showing that if the $18.5 billion in investment income included in total sales by MOUSA's were added to sales of services by MOUSA's, the resulting sum -- $91.1 billion -- falls short of the $111.1 billion in sales of services by MOFA's. In addition, for industries other than finance and insurance for which no significant comparability problem exists, sales of services by MOUSA's -- at $40.1 billion -- are considerably lower than sales of services by MOFA's -- at $68.9 billion. (17.) An ultimate beneficial owner of a U.S. affiliate is that person, proceeding up the affiliate's ownership chain beginning with and including the foreign parent, that is not owned more than 50 percent by another person. (18.) In the United States, coastal and inland shipping by water is restricted to domestic carriers, and the foreign ownership share of a U.S. airline is limited to 25 percent. (Foreign airlines have facilities in the United States, such as ticket offices and terminal facilities, that provide services only to their foreign owners, but such facilities are not considered U.S. affiliates for the purposes of BEA surveys.)