International Trade: U.S. and India Data on Offshoring Show	 
Significant Differences (27-OCT-05, GAO-06-116).		 
                                                                 
Trade in business, professional, and technical (BPT) services	 
associated with offshoring needs to be accurately tracked, but a 
gap exists between U.S. and Indian data. The extent of and	 
reasons for this gap are important to understand in order to	 
address questions about the magnitude of offshoring and to	 
analyze its future development. Under the authority of the	 
Comptroller General of the United States, and as part of a body  
of GAO work on the issue of offshoring of services, this report  
(1) describes the extent of the gap between U.S. and Indian data,
(2) identifies factors that contribute to the difference between 
the two countries' data, and (3) examines the challenges the	 
United States has faced in collecting services trade data. GAO	 
has addressed this report to the congressional committees of	 
jurisdiction.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-116 					        
    ACCNO:   A40457						        
  TITLE:     International Trade: U.S. and India Data on Offshoring   
Show Significant Differences					 
     DATE:   10/27/2005 
  SUBJECT:   Comparative analysis				 
	     Data collection					 
	     Data integrity					 
	     International trade				 
	     International trade regulation			 
	     Service industry					 
	     Statistical data					 
	     Surveys						 
	     Policies and procedures				 
	     India						 

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GAO-06-116

                 United States Government Accountability Office

GAO

                       Report to Congressional Committees

October 2005

INTERNATIONAL TRADE

         U.S. and India Data on Offshoring Show Significant Differences

                                       a

GAO-06-116

October 2005

INTERNATIONAL TRADE

U.S. and India Data on Offshoring Show Significant Differences

                                 What GAO Found

The gap between U.S. and Indian data on trade in BPT services is
significant. For example, data show that for 2003, the United States
reported $420 million in unaffiliated imports of BPT services from India,
while India reported approximately $8.7 billion in exports of affiliated
and unaffiliated BPT services to the United States.

At least five definitional and methodological factors contribute to the
difference between U.S. and Indian data on BPT services. First, India and
the United States follow different practices in accounting for the
earnings of temporary Indian workers residing in the United States.
Second, India defines certain services, such as software embedded on
computer hardware, differently than the United States. Third, India and
the United States follow different practices for counting sales by India
to U.S.-owned firms located outside of the United States. The United
States follows International Monetary Fund standards for each of these
factors. Fourth, BEA does not report country-specific data for particular
types of services due to concerns about the quality of responses it
receives from firms when they allocate their affiliated imports to
detailed types of services. As a result, U.S. data on BPT services include
only unaffiliated imports from India, while Indian data include both
affiliated and unaffiliated exports. Fifth, other differences, such as
identifying all services importers, may also contribute to the data gap.

The U.S. Bureau of Economic Analysis (BEA) has experienced challenges in
identifying all U.S. services importers and obtaining quality survey data
from importers. To test BEA's survey coverage, GAO provided BEA with lists
of firms identified from public sources as likely importers of BPT
services from India. The results of this test showed that some services
importers were not included in BEA's mailing lists. However, BEA has taken
action to address these challenges, including collaborating with other
federal agencies, such as the U.S. Census Bureau and the Internal Revenue
Service, to better identify firms to survey. However, data-sharing
restrictions hamper BEA's efforts.

U.S. and Indian Data on Trade in BPT Services, 2002 and 2003

Year	U.S.--reported unaffiliated imports from India

2002

India--reported affiliated and unaffiliated exports to the United States

2003

                                     $8,725

0 2,000 4,000 6,000 8,000 10,000 Dollars in millions

Source: GAO analysis of data from BEA's October 2004 Survey of Current
Business and NASSCOM's 2005 Strategic Review.

                 United States Government Accountability Office

Contents

  Letter

Results in Brief
Background
A Significant Gap Exists between U.S. and Indian Trade-in-Services

Data Five Factors Contribute to the Difference between U.S. and Indian
Trade in Services Data BEA Encounters Challenges in Surveying All U.S.
Importers of

Business, Professional, and Technical Services Conclusions Recommendations
Agency Comments and Additional Information Provided by the

Reserve Bank of India 1 2 4

7

10

16 21 22

22

Appendixes

          Appendix I: Scope and Methodology 25 Appendix II: Comments from the
                Department of Commerce 28 Appendix III: GAO Contact and Staff
                                                           Acknowledgments 30

Tables Table 1: Selected Firms Importing BPT Services from India Compared
with BEA Mailing Lists 19 Table 2: List of BEA Surveys 26

Figures Figure 1: Total U.S. Imports of Both Private Services and Other    
                                    Private Services, 2003                  6
           Figure 2:  Comparison of U.S.-Reported and India-Reported Data  
                                              on                           
                     Trade in Selected Services between the United States  
                                              and                          
                                     India, 2002 and 2003                  10 
           Figure 3: India-Reported Total Worldwide Exports of Information 
                        Technology and Software Services, 1999 to 2003     17 

Contents

Abbreviations

BEA U.S. Bureau of Economic Analysis
BOP balance of payments
BPT business, professional, and technical
ESC Electronics and Computer Software Export Promotion Council
IMF International Monetary Fund
IRS Internal Revenue Service
IT-ITES Information Technology and Information Technology-Enabled

Services NASSCOM National Association of Software and Service Companies
OECD Organization for Economic Co-operation and Development RBI Reserve
Bank of India STPI Software Technology Parks of India

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

October 27, 2005

Congressional Committees:

The offshoring of services from the United States to overseas locations
has grown recently and is the subject of debate over its extent and
consequences for the United States. We reported in September 2004 that one
category of services trade-business, professional, and technical (BPT)
services-is most often associated with services offshoring.1 We also noted
that imports from India-a major source of services offshoring- were
rising, but that a gap exists between U.S. and Indian trade data on these
services. The extent of and reasons for this gap are important to
understand in order to address questions about the magnitude of offshoring
and to analyze its future development.

In response to widespread congressional interest, we have prepared this
report under the authority of the Comptroller General of the United
States. We examine in this report several issues related to the gap
between U.S. and Indian trade data on BPT services. Specifically:

o 	What is the extent of the gap between U.S. and Indian data on trade in
BPT services?

o 	What factors explain the difference between U.S. data on imports of BPT
services and India's data on exports of those same services?

o  What challenges has the United States faced in collecting services
data?

To address these questions, we compared U.S. and Indian services trade
data, reviewed official methodologies, and interviewed U.S. and Indian
government officials from relevant agencies, including the Department of
Commerce's U.S. Bureau of Economic Analysis (BEA) and the Reserve Bank of
India (RBI). In order to examine the coverage of BEA surveys for
collecting services data, we supplied BEA with a list of companies we
collected to compare with its mailing lists. We identified these companies
through publicly available sources, including public media, company
filings with the Securities and Exchange Commission, annual reports of
companies, the list of National Association of Software and Service

1GAO, International Trade: Current Government Data Provide Limited Insight
into Offshoring of Services, GAO-04-932 (Washington, D.C.: Sept. 22,
2004).

Companies (NASSCOM) members, and lists of companies compiled by
information technology interest groups. Our lists of firms are not
necessarily representative of all U.S. firms importing from India, and we
do not generalize our results. We also met with representatives and
reviewed documents from members of NASSCOM, which assists in collecting
India's services data. We interviewed a range of U.S. and Indian
businesses that supply these data to the United States and India and
reviewed relevant literature on the reliability of U.S. statistics.
NASSCOM did not provide us with their methodology for ensuring the
reliability of their data. However, RBI recently released a public report
outlining a new methodology to collect services exports data separately
from NASSCOM, and in accordance with balance of payments (BOP)
requirements of the International Monetary Fund (IMF).2 As a U.S.
government agency, we do not have review authority over these data.
Therefore, we were not able to independently assess the quality and
consistency of these data. However, for the purposes of this report, we
found both U.S. and Indian data to be sufficiently reliable for reporting
the difference between the official U.S. and Indian trade data in BPT
services. We conducted our analysis in accordance with generally accepted
government auditing standards from March 2005 through September 2005. A
detailed description of our scope and methodology appears in appendix I.
This report is one of a series of reports that we plan to issue on
offshoring.

Results in Brief	A significant gap exists between U.S. and Indian data on
trade in BPT services. U.S. data indicate that U.S. firms import a small
fraction of what India reports as exports to the United States in this
category, and this trade-as well as the difference in these data-is
growing. For 2002, the United States reported $240 million in unaffiliated
imports of BPT services from India, while India reported about $6.5
billion in affiliated and unaffiliated exports in similar services
categories.3 For 2003, the United

2Reserve Bank of India, Balance of Payments Statistics Division,
Department of Statistical Analysis and Computer Services, Computer
Services Exports From India: 2002-03 (Mumbai: September 2005). The full
report may be accessed at
http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx.

3Affiliated trade occurs between U.S. parent firms and their foreign
affiliates and between foreign-owned firms in the United States and their
foreign parent companies; while unaffiliated trade occurs between U.S.
entities and foreigners that do not own, nor are owned by, the U.S.
entity. BEA does not report bilateral affiliated BPT services data (see
discussion in the next section of this report).

States reported $420 million in unaffiliated imports of BPT services from
India, while India reported approximately $8.7 billion in affiliated and
unaffiliated exports of similar services to the United States. Thus, the
gap in data has increased by about one-third from 2002 to 2003.

At least five definitional and methodological factors contribute to the
difference between U.S. and Indian data on BPT services. First, India
counts the earnings of temporary Indian workers residing in the United
States as exports to the United States. However, the United States only
includes temporary foreign workers who have been in the United States less
than 1 year and who are not on the payrolls of firms in the United States.
Indian officials estimate that this factor may account for 40 to 50
percent of the difference between U.S. and Indian data. Second, India
defines services more broadly than does the United States. For example,
Indian data on trade in services include packaged software and software
embedded on computer hardware, which the United States classifies as trade
in goods. An Indian official estimated that this factor accounts for
approximately 10 to 15 percent of Indian exports. In addition, India
includes in its data certain information technology-enabled services, such
as some financial services, that are not included in BEA's definition of
BPT services. Third, India treats sales to U.S.-owned firms located
outside of the United States as exports to the United States, but the
United States does not count these as imports. For each of these three
definitional factors, the United States follows IMF standards.4 Fourth,
for trade between U.S. firms and their foreign affiliates, BEA does not
report BPT data by country due to its concerns about the quality of
responses it receives from firms when they allocate their affiliated
imports to detailed types of services. Therefore, U.S. import data on BPT
services from India are available for unaffiliated parties only, while
Indian data include both affiliated and unaffiliated trade but do not
separate them. Finally, there may be other collection or methodological
differences between the United States and India that contribute to the
overcounting or undercounting of services trade.

BEA faces challenges in identifying the full range of U.S. services
importers and in collecting quality services data. We provided BEA with
lists of firms that public sources indicated are likely importers of
services from India, and asked BEA to match these lists against its
mailing lists. We found that

4The recently released RBI report documents India's efforts to compile
export data in conformity with definitions given in IMF's Balance of
Payments Manual, 5th edition (1993) and the Manual on Statistics of
International Trade in Services (2002).

BEA survey data did not include some of these firms. Although most of
these firms were on BEA's mailing list, some were not; therefore, they
were not surveyed. BEA stated it had previously eliminated many of these
firms because they did not have reportable transactions or were below
survey exemption levels. Subsequently, BEA conducted further research on
the firms that it did not identify and added several of these firms to its
mailing lists. In addition, it appears that BEA should have sent multiple
surveys to some of our identified firms for different types of services
imports, thus potentially undercounting imports. However, BEA has taken
several actions over time to improve survey data and coverage, such as
outreach to survey recipients, initiating external reviews of its
programs, and collaborating with other federal agencies, but challenges
still remain. For example, the U.S. Census Bureau (Census) maintains a
large database of U.S. companies with names and addresses that BEA could
use to identify additional importers of services. However, data-sharing
limitations exist, and BEA is negotiating with Census and the Internal
Revenue Service regarding BEA's accessing Census data to expand its
mailing lists for surveys.

We are recommending that the Secretary of Commerce direct BEA to
systematically expand its sources of information for identifying firms to
survey. BEA should consider ways to improve both its identification of the
appropriate survey forms to send to firms and the information it requests
about services imports, particularly regarding affiliated imports. We also
recommend that BEA continue to pursue additional company information from
previous Census surveys and consider requesting Census to add questions to
future surveys to help identify services importers.

We provided a draft copy of this report to the Department of Commerce for
its review and comment. Commerce generally agreed with the recommendations
in our report. In addition, while this report was being finalized, we
received additional information from the Reserve Bank of India and
incorporated this information in the report where appropriate.

Background	As we reported in September 2004, improvements in information
technology, decreasing data transmission costs, and expanded
infrastructure in developing countries have facilitated services
offshoring. Offshoring is reflected in services import data because when a
company replaces work done domestically with work done overseas, such as
in India or China, the services are now being imported from overseas. For
example, when a U.S.-based company pays for a service (such as computer
and data

processing services in India), the payment is recorded as a services
import (from India in this example). BEA reports data on trade in services
that are frequently associated with offshoring.

BEA's trade in services data consist of cross-border transactions between
U.S. and foreign residents and comprise five broad categories of services.
One of these five categories of services is "other private services,"
which includes key sectors associated with offshoring under the
subcategory of BPT services.5 In 2003, BPT services accounted for $40.8
billion or 48 percent of U.S. imports of "other private services," which
totaled $85.8 billion.6 (See fig. 1.)

5Selected BPT services that are relevant to offshoring include such
subcategories as accounting, auditing, and bookkeeping; architectural,
engineering, and other technical; computer and data processing; database
and other information; legal; management, consulting, and public
relations; and research, development, and testing. Other categories, such
as financial services, may also involve offshoring.

6Preliminary services trade data for 2004 are available, but primarily at
an aggregate level. Since data at a country and detailed service level are
not available for affiliated BPT services, we discuss 2003 data. For 2004,
U.S. imports of total private services amounted to about $263.1 billion,
and U.S. imports of other private services totaled about $95.7 billion.

Figure 1: Total U.S. Imports of Both Private Services and Other Private
Services, 2003

Total private services imports, 2003 (dollars in billions)

Other private services imports, 2003 (dollars in billions)

1%

Other services ($1.0)

Travel ($56.6) 3% Education ($2.7)

Telecommunications ($4.8)

Other private Financial services

services ($9.8) ($85.8)

Insurance services ($26.7)

($20.9)

Royalties and license fees ($20.0)

Other transportation ($44.7)

Source: GAO presentation of Department of Commerce data.

Business, professional, and technical services ($40.8)

U.S. data on BPT services differentiate between affiliated and
unaffiliated trade. Affiliated trade occurs between U.S. parent firms and
their foreign affiliates and between foreign parent firms and their
affiliates in the United States; while unaffiliated trade occurs between
U.S. entities and foreigners that do not own, nor are owned by, the U.S.
entity. In 2003, total U.S. imports of affiliated BPT services accounted
for approximately $29.9 billion, or about 73 percent of all U.S. imports
of these services. BEA does not disaggregate affiliated trade by country,
in particular types of services, due to its concerns about the accuracy
and completeness of data firms' report. Total U.S. imports of unaffiliated
BPT services amounted to approximately $11.0 billion in 2003, or about 27
percent of the total

unaffiliated U.S. imports of BPT services.7 According to U.S. data, the
growth of U.S. trade in BPT services has been rapid. For example, from
1994 to 2003, total unaffiliated U.S. imports of these services more than
doubled. In addition, U.S. exports of unaffiliated BPT services almost
doubled during the same period.

To report data on trade in BPT services, BEA conducts mandatory quarterly,
annual, and 5-year benchmark surveys of firms in the United States. In
administering its services surveys, BEA seeks to collect information from
the entire universe of firms with transactions in BPT services above
certain threshold levels for the period covered by each survey. The
mailing lists for the surveys include firms in the United States that have
previously filed a survey and other firms that BEA believes may have had
transactions in the services covered by the survey. The mailing lists of
firms receiving surveys are derived, in part, from U.S. government
sources, industry associations, business directories, and various
periodicals. Firms receiving the surveys are required to report
transactions above a certain threshold value, which BEA believes, in
theory, captures virtually the entire universe of transactions in the
services covered by its surveys. Those firms with transactions falling
below the threshold value are exempt from reporting data by type of
service, but they are asked to voluntarily provide estimates of the
aggregate value of their transactions for all services covered by the
survey.

The trade data that BEA produces help government officials, business
decision makers, researchers, and the American public to follow and
understand the performance of the U.S. economy. For example, analysts and
policy makers use U.S. trade data to assess the impact of international
trade on the U.S. balance of payments and the overall economy. In
addition, U.S. trade data are used by trade policy officials to negotiate
international trade agreements.

A Significant Gap U.S. data show a significantly smaller volume of trade
in BPT services

between India and the United States than Indian data show. BEA data
onExists between U.S. U.S. imports of unaffiliated BPT services from India
indicate that U.S. firms and Indian Trade-in-import only a small fraction
of the total that India reported in exports of Services Data similar
services to the United States. In addition, this gap has grown

7For 2004, total U.S. imports of unaffiliated BPT services increased to
$12.5 billion.

between 2002 and 2003. This gap does not exist just for U.S. and Indian
data. A similar gap also exists between other developed countries' import
data and Indian export data.8

BEA data show a rapid increase in U.S. imports of unaffiliated BPT
services from India. For 2002, the total unaffiliated U.S. imports of BPT
services from India totaled approximately $240 million. For 2003, the
total unaffiliated U.S. imports of BPT services from India increased to
about $420 million.9 India reports exports to the United States of similar
services of about $6.5 billion for 2002 and $8.7 billion for 2003.10 Thus,
the value of the gap between U.S. and Indian data in 2002 was
approximately $6.2 billion and, in 2003, was about $8.3 billion, an
increase of about one-third.11 (See fig. 2.)

RBI, which is India's central bank, is responsible for reporting official
Indian data on trade in services. However, RBI data on trade in services
incorporate the data collected by India's primary information technology
association-the National Association of Software and Service Companies
(NASSCOM). To improve the completeness of the data NASSCOM provides to
RBI, NASSCOM includes data on the software services exports it receives
from an Indian government program, the Software Technology Parks of India
(STPI). While RBI does not provide country-specific data on India's
exports of services to the United States, NASSCOM's data do provide a
country-specific breakdown. Thus, the data cited above for India

8Organization for Economic Co-operation and Development, Information
Technology Outlook 2004 (Paris: 2004).

9BEA data on U.S. imports from India of selected BPT services show a
similar trend. For example, of the total unaffiliated U.S. imports of BPT
services from India, BEA reported $186 million for 2002 and $372 million
for 2003 in unaffiliated U.S. imports of selected BPT services that are
particularly relevant to offshoring. These selected BPT services include
computer and information services; research, development, and testing
services; and management consulting and public relations services.

10India's data reported here include the category of IT and IT-enabled
services (ITES). BEA's definition of BPT services is not identical to this
Indian category, although they roughly compare. We discuss this difference
further in the next section of this report. Furthermore, RBI recently
provided new data and definitions on computer services exports, which
exclude exports of ITES services.

11However, U.S. data on BPT imports as a share of Indian data on exports
of BPT services, narrowed over this time period. In 2002, U.S. data on BPT
imports were about 3.7 percent of Indian data on BPT exports. In 2003,
U.S. data on BPT imports increased to about 4.8 percent of Indian data on
BPT exports.

come from NASSCOM. According to a recent RBI report, a technical group
recommended in 2003 that RBI compile data on software and information
technology exports through quarterly surveys, and through a comprehensive
survey to be conducted every 3 years. The first of these studies was
released in September 2005, as our report was being finalized, and
provides data on Indian exports of computer services for 2002.12 The 2005
RBI report showed that India reported approximately $4.3 billion in
computer services exports to the United States and Canada for 2002 (2003
data have not yet been provided).13 Although RBI's report did not provide
an estimate of the U.S. share of these exports, on the basis of NASSCOM's
estimate that 80 to 85 percent of exports to North America were destined
for the United States in 2002, we estimate that India exported
approximately $3.5 billion in computer services to the United States.

12Computer services as defined by IMF's Balance of Payments Manual include
the following: databases, such as development, storage, and online time
series; data processing, including tabulation, provision of processing
services on a time-share or specific basis, and management of the
facilities of others on a continuing basis; hardware consultancy; software
implementation; and maintenance and repair of computer and peripheral
equipment.

13RBI's report did not provide us with a U.S. dollar value of services
exports; therefore, we converted the values provided using the
rupee/dollar exchange rate published by IMF for 2002.

Figure 2: Comparison of U.S.-Reported and India-Reported Data on Trade in
Selected Services between the United States and India, 2002 and 2003

                                      Year

                                      2002

                                      2003

                                     $8,725

                        0 2,000 4,000 6,000 8,000 10,000

Dollars in millions

U.S.--reported unaffiliated imports from India

Those examining trends in offshoring often compare U.S. and Indian data
series; however, there are at least five factors that make this comparison
difficult and affect the difference between U.S. and Indian data. These
factors relate to (1) the treatment of services provided by foreign
temporary workers in the United States; (2) the definition of some
services, such as computer programs embedded in goods and certain
information technology-enabled services; (3) the treatment of transactions
between firms in India and the overseas offices of U.S. firms; (4) the
reporting of country-specific data on trade in affiliated services; and
(5) the sources of data and other methodological differences in the
collection of services trade data.

India--reported affiliated and unaffiliated exports to the United States

Source: GAO analysis of data from BEA's October 2004 Survey of Current
Business and NASSCOM's 2005 Strategic Review.

Note: Although BEA data were collected on the basis of a respondent's
fiscal year, they approximate a calendar year basis. However, NASSCOM
reports data for India's fiscal year (April 1 to March 31).

  Five Factors Contribute to the Difference between U.S. and Indian Trade in
  Services Data

India's Treatment of Earnings of Foreign Temporary Workers Providing
Services in the United States Contribute to the Difference in U.S. and
Indian Trade Data

According to U.S. and Indian officials, U.S. and Indian data differ in
their treatment of salaries paid to certain temporary foreign workers
providing services to clients in the United States. U.S. data do not
include such salaries as cross-border trade in services. The United States
only includes the salaries paid to temporary foreign workers who have been
in the United States less than 1 year and are not on the payrolls of firms
in the United States. However, Indian data do include, as Indian exports,
the value of services provided by Indian workers employed in the United
States for more than 1 year, according to Indian officials. The U.S.
approach accords with the international standards of IMF. According to BEA
and international standards, cross-border trade in services occurs between
residents of a country and nonresidents, or "foreigners," and residency of
a temporary foreign worker employed abroad is based, in part, on the
worker's length of stay in the country. Therefore, according to these
standards, if a temporary foreign worker stays or intends to stay in the
United States for 1 year or more, that worker is considered a U.S.
resident, and the value of the work performed is not included in U.S.
import data.

The treatment of services provided by temporary foreign workers in the
United States is likely a significant factor contributing to the
difference between U.S. and Indian data, according to Indian officials.
Some Indian officials estimated that in past years, approximately 40
percent of India's exports to the United States of services corresponding
to BPT services were delivered by temporary Indian workers in the United
States. For example, for 2002, RBI found that approximately 47 percent of
India's global exports of computer services occurred through the on-site
delivery of services by temporary Indian workers.

India Defines Services Differently Than Does the United States

U.S. and Indian data differ, in part, due to differences in how both
countries count services trade. India counts as trade in services certain
transactions in software that are classified as trade in goods in U.S.
data. For example, Indian data on trade in services include software
embedded on computer hardware, which the United States classifies as trade
in goods. Consistent with internationally recommended standards, the
United States does not separate the value of embedded software that is
physically shipped to or from the United States from the overall value of
the media or computer in

which it is installed.14 Thus, the value of such software is not recorded
as trade in services but is included in the value of the physical media
and hardware--which are counted as trade in goods in U.S. data. We were
not able to determine the extent to which this factor contributes to the
difference in U.S. and Indian data because we found no estimates of the
proportion of embedded software in Indian data on services exports to the
United States. Indian officials stated that the difference in the
treatment of embedded software likely does not significantly contribute to
the difference in data because India exports a relatively low value of
embedded software. For example, according to Indian officials, the portion
of India's global services exports delivered through physical media and
hardware accounts for 10 to 15 percent of the total value of
India-reported exports of services corresponding to BPT services.

U.S. and Indian data also differ in how they define services in their
respective data series. Unlike BEA, RBI and NASSCOM do not report data
under the category of BPT services. RBI officials stated that it reports
trade data on services similar to BPT services under the category of
Software Services. RBI does not report a breakdown of its data on software
services into subcategories of services. According to a NASSCOM official,
NASSCOM classifies its trade data on services that most closely correspond
to BPT services under Information Technology and Information
Technology-Enabled Services (IT-ITES). The subcategories of services under
this classification do not directly correspond to the subcategories of BPT
services, but are similar. For example, under its IT-ITES classification,
NASSCOM reports data on IT Services and Software, while BPT services
include computer and data processing, and database and other information
services. However, NASSCOM includes data on certain information
technology-enabled services, such as certain financial services, that are
not included in BEA's definition of BPT services, but are recorded
separately. Although these categories roughly compare, a reconciliation of
these subcategories has not yet been done. Thus, we were not able to
determine the extent to which these definitional differences contribute to
the difference between U.S. and Indian data.

14IMF, Balance of Payments Manual, 5th edition (Washington, D.C.: 1993);
and United Nations, European Commission, IMF, Organization for Economic
Co-operation and Development, United Nations Conference on Trade and
Development, and World Trade Organization, Manual on Statistics of
International Trade in Services, (Geneva; Luxembourg; New York; Paris; and
Washington, D.C.: 2002).

India Counts Sales to Overseas Offices of U.S. Firms as Exports to the
United States

The treatment of services involving the overseas offices of U.S. firms by
BEA and India is another factor explaining some of the difference between
U.S. and Indian data. Unlike the United States, India counts the sales of
services from firms in India to U.S.-owned firms outside the United States
as exports to the United States. U.S. data do not count such sales as U.S.
imports of services from India, because BEA considers the overseas offices
of U.S. firms to be residents of the countries where they are located
rather than residents of the country of the firm's owners. The U.S.
approach is consistent with international standards.

U.S. and Indian officials could not provide us an estimate of the extent
to which the treatment of transactions involving the overseas offices of
U.S.owned firms contribute to the difference in U.S. and Indian data.
However, one high-level Indian official stated that it is likely a
significant factor.

U.S. and Indian Data Differ in the Reporting of Affiliated Trade in
Services

The reporting of affiliated trade in services differ in U.S. and Indian
data. BEA reports country-specific data only for unaffiliated U.S. imports
of BPT services, while Indian data include both affiliated and
unaffiliated trade in services but do not separate the two. BEA reports
detailed data only for unaffiliated trade because it has concerns about
the accuracy and completeness of the data that firms report about
affiliated trade in BPT services by country. For example, multinational
firms with global offices may find it difficult to establish where,
between whom, and what type of services have been transacted; and report
these data along national lines to a statistical agency. BEA does collect
data on overall affiliated services trade, but it reports only the total
value across all countries due to its concerns about the reliability of
how companies are allocating these totals to specific countries. In
addition, due to concerns over the reporting burden on U.S. companies, BEA
collects less detailed data on affiliated transactions than on
unaffiliated transactions.

U.S. data on overall affiliated trade across all countries show that a
significant majority of total U.S. imports of BPT services take the form
of trade between parents and affiliates. For example, for 2003,
approximately three-quarters of all U.S. imports of BPT services-about
$29.9 billion- represented trade within multinational firms. If
U.S.-Indian trade in these services reflects this overall share of trade
through affiliates, then unreported affiliated trade with India may be
much larger than the unaffiliated trade that is reported. Therefore, the
lack of reported data on affiliated imports of BPT services contributes to
the difference in data.

Other Data Collection and Methodological Differences May Contribute to the
Difference between U.S. and Indian Data

There are differences in the sources of data the United States and India
use to collect data on trade in services, which may contribute to
overcounting or undercounting of services trade. While both BEA and
NASSCOM prepare estimates of cross-border trade in services by surveying
qualifying firms, U.S. and Indian data differ in the universe of such
firms covered by their survey methodologies.

The universe of firms in India exporting services is relatively easily
identified because these firms have an incentive to report data on their
exports of services and tend to be concentrated in certain industries. For
example, firms exporting software services are required to report export
data to the government of India's STPI program. STPI requires firms to
report these data in order to comply with India's foreign exchange
controls and to qualify for certain tax incentives and infrastructure
benefits. To improve the completeness of its own survey data from its
member firms, NASSCOM incorporates information on other exporters
collected under the STPI program prior to providing these data to RBI. In
addition, services exporting firms tend to be concentrated in certain
industries. For instance, according to Indian officials, NASSCOM surveys
its member firms in India to collect the annual dollar value of these
firms' exports. The member firms that NASSCOM surveys number approximately
900 and, according to a NASSCOM official, these firms contribute a large
share of India's total exports of these services. In addition, RBI has
begun its own comprehensive survey of companies, which according to RBI,
covered all of the identified companies engaged in software and IT
services exports activities. RBI identified these companies on the basis
of lists provided by NASSCOM, STPI, and the Electronics and Computer
Software Export Promotion Council (ESC).

In contrast to how India identifies firms exporting services, BEA does not
have an easily available list of services importers. Instead, it must
identify firms from public sources. BEA acknowledges that its survey
methodology may contribute to the undercounting of U.S. imports of
services due, in part, to the difficulty it faces in identifying the
universe of services importers. The firms in the United States that BEA
surveys to estimate U.S. imports are in many different industries and
number in the thousands. Thus, BEA notes that it is difficult to establish
and maintain a comprehensive mailing list for all U.S. firms importing
services from foreign sources, particularly if the group of firms that
import services changes substantially from year to year. In addition,
maintaining accurate coverage using surveys is particularly difficult when
there is rapid growth in the activity, as is the case with BPT services
imports from India. Under

BEA regulations, BEA exempts smaller importers from reporting their
imports.15 Instead, it estimates these imports on the basis of a sample.
If the value of smaller transactions is higher than BEA assumes in its
estimation procedures, then imports of services would be understated. BEA,
therefore, may undercount the total value of U.S. imports of services.

The data collection entities--BEA and NASSCOM--also differ significantly
in mission and scope. BEA is the U.S. agency charged with collecting,
analyzing, and reporting official statistics on a broad range of U.S.
imports and exports of services. BEA is regarded as a leading statistical
organization, and it provides both statistical concepts and best practices
to other countries and statistical organizations worldwide. NASSCOM is not
a government statistical agency. It is a private trade association that
represents the interests of the software and services industry in India,
and data collection is but one element of a broader mission that focuses
on representing that industry. Recently, RBI has recognized a need to
reexamine the current methodology on the collection of software exports
data, and is utilizing a methodology to collect services data in
accordance with IMF standards.16 As a U.S. government agency, we were not
able to fully review India's methodologies, but we did further examine in
the next section of this report the challenges BEA faces in collecting
services statistics.

15Under 15 C.F.R. S: 801, U.S. persons and intermediaries are required to
report annual transactions with unaffiliated foreigners for transactions
of over $1 million in any one kind of service. Respondents whose
transactions fall below this level must report the total level of
transactions in all services. Under 15 C.F.R. S: 806, for transactions
with affiliated foreigners, quarterly and annual reporting are required
only for affiliates whose total assets, sales, or net income exceed $30
million. For majority-owned foreign affiliates, detailed foreign direct
investment reporting is required if assets, sales, or net income is
greater than $100 million.

16Upon the recommendation of India's National Statistical Commission, RBI
developed a technical group consisting of members of the Ministry of
Commerce, NASSCOM, STPI, the State Bank of India, and a few major software
companies to recommend better ways to collect data on software and IT
exports.

  BEA Encounters Challenges in Surveying All U.S. Importers of Business,
  Professional, and Technical Services

BEA faces challenges in collecting services import data, including
identifying the full universe of services importers. To test its survey
coverage, we provided BEA with lists of firms that we identified from
public sources as likely importing BPT services from India. Although the
BEA mailing lists included most of the firms we identified, they did not
include all of these firms. In addition, BEA may be undercounting imports
because it is challenging to identify all of the applicable surveys to
send to firms. BEA also has not always received quality survey responses
from firms. BEA has taken action to improve survey coverage and responses
through outreach to survey respondents and by attempting to collaborate
with other federal agencies, but it has not been able to access data that
could assist in identifying the universe of firms importing services.

BEA Has Challenges in Tracking Services Offshoring Trends

Services offshoring presents its own challenges for statistical agencies.
As previously discussed, identifying services importers becomes difficult
if the group of firms and individuals importing services changes over
time, or if there is a rapid increase in services imports. In the case of
BPT services, both the United States and India have reported a rapid
increase of exports to the United States and BEA may be undercounting U.S.
firms importing such services from India due to this growth. (See fig. 3.)
BEA acknowledges that it is able to identify a higher proportion of U.S.
exporters than U.S. importers. This is because exporters tend to be large
firms providing one particular type of service and are concentrated in
certain industries, while importers vary in size and industry affiliation.
Thus, BEA officials expressed concern that they are not able to identify
and survey small firms that import BPT services infrequently, and are
potentially undercounting U.S. trade in these services.

Figure 3: India-Reported Total Worldwide Exports of Information Technology
and Software Services, 1999 to 2003

                            Dollars in billions 10 8

                                       6

                                       4

                                       2

            0 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 Year

                   Source: GAO presentation of NASSCOM data.

Test of Firms Importing from India Confirms Challenges to Collecting
Services Data

To test for potential undercounting of U.S. imports, we provided BEA with
lists of firms that we identified through publicly available sources as
likely to be importing BPT services from India.17 BEA then (1) reviewed
its mailing lists of firms that were sent surveys to verify that it had
previously identified and surveyed these firms and (2) verified whether
the firms we identified reported imports from India. Table 1 shows the
following:

o 	BEA had included in its mailing lists 87 of the 104 firms we identified
as likely importing BPT services from India; thus, BEA did not send
surveys to 17 of these firms. After further analysis, BEA added 13 of

17The sources utilized were publicly available and included the following:
media articles covering the period from 2002 to 2005; information
technology association lists compiled using 2001 to 2005 data; and
Securities and Exchange Commission filings and annual reports using 2004
data.

these firms to its mailing lists and has sent them surveys, thus improving
the universe of services importers.

o 	Of the 66 affiliated firms that received surveys, 48 firms received the
quarterly survey for affiliated imports; thus, BEA did not send 18
affiliated firms this quarterly survey, although they received other
surveys.

o 	Of the 21 unaffiliated firms that received surveys, 6 received the
quarterly survey for unaffiliated imports; thus, BEA did not send 15
unaffiliated firms this quarterly survey, although they received other
surveys.

BEA may miss some BPT services imports because it is difficult to identify
the total number of surveys that apply to all of the services transactions
for which each firm was qualified.18 On the basis of the review of our
lists, it appears that some of the firms that BEA identified in at least
one of its comprehensive mailing lists were not on the mailing lists for
other surveys that we expected. These firms likely had transactions
covered by surveys other than the one they received. For example, several
companies we identified as having an affiliate office in India did not
receive one of the surveys for affiliated transactions, although these
firms received a survey for unaffiliated transactions.

With respect to BEA's effort to verify whether firms that we identified
actually reported imports from India, of the 51 firms responding to the
quarterly surveys, 15 firms indicated imports from India. Thus, 15 of the
104 firms we identified on the basis of public-source data as likely
importing BPT services from India, reported those imports to BEA.
High-level BEA officials indicated that it is possible that companies are
not reporting country information because they fall below the survey
exemption levels and, thus, were not required to provide such detailed
data to BEA. BEA requests firms falling below survey exemption levels to
voluntarily report

18BEA uses separate surveys to collect data on affiliated and unaffiliated
trade in services. To collect data on unaffiliated trade in BPT services,
BEA uses quarterly, annual and 5-year benchmark surveys of selected
services transactions with unaffiliated foreign persons (BE25, BE-22,
BE-20). BEA collects data on affiliated trade in BPT services using BEA's
surveys of direct transactions of U.S. Reporter with Foreign affiliate
(BE-577), and 5-year benchmark surveys of U.S. direct investment abroad
(BE-10). Affiliated trade-in-services data are also collected through the
benchmark (BE-12) and quarterly (BE-605) surveys of foreign direct
investment. A firm's operations may span several of these categories;
thus, BEA sends some firms multiple surveys.

aggregate transactions for all countries combined, without a
countryspecific breakdown.

Table 1: Selected Firms Importing BPT Services from India Compared with
BEA Mailing Lists

                                                                   Responding 
                                             Firms         Firms        firms 
                         GAO-Firms on    receiving responding to   indicating 
                     identified any   appropriatea   appropriate imports from 
                     BEA                                         
               Firms    firms mailing       survey       surveys        India 
                                 list                            
          Affiliated            81 66           48            46 
        Unaffiliated            23 21            6             5 
               Total           104 87           54            51 

Source: GAO analysis of BEA data.

Note: The publicly available sources utilized to identify these firms
included data covering the period from 2001 to 2005.

aAppropriate surveys refer to those surveys that we believe firms should
have received on the basis of publicly available information about their
investments and imports.

While these results cannot be generalized, they confirm the challenges of
collecting services import data. However, they do not provide an
indication of the magnitude or extent of these challenges. In addition,
our lists of firms were based on a review of multiple sources of publicly
available information. Without directly surveying each firm, however, it
is not possible to confirm that they actually purchased BPT services from
India.

BEA is addressing concerns related to the identification of U.S.
importers, the undercounting of services, and the administration of its
surveys. For example, BEA contracted with a private firm to undertake an
external review of its data sources and methods of identifying these
services importers. The review will examine the extent of undercounting in
both affiliated and unaffiliated services transactions, including the
possible sources of undercounting, and any additional methods or sources
of information that will improve survey coverage. The goals of this effort
include identifying the extent of qualified firms that are not currently
on the survey mailing lists, and to improve the estimates of international
transactions. BEA expects the results of this review early in fiscal year
2006. BEA also has made efforts to ensure that firms receive the surveys
for which they are qualified. BEA routinely sends surveys to firms that
may be exempt from reporting in order to make a determination that they
are still exempt. In addition, firms having transactions in services not
covered in

the surveys they receive are required to request additional surveys from
BEA.

BEA Has Not Received Quality Responses on Affiliated Trade by Country

In order to report data on trade in services, BEA needs to receive
accurate and complete survey responses. However, BEA notes that the
information it receives from firms on their affiliated imports of
particular types of services has not proved sufficiently reliable to
support the release of country-level estimates. As previously discussed,
BEA is able to report overall affiliated trade for specific countries, but
it is not able to report BPT trade for specific countries. This is because
BEA has concerns over the quality of responses it receives from firms when
they allocate affiliated imports to detailed types of services. Global
firms may have difficulty accurately attributing services exported to the
United States when their operations are spread across multiple countries.
In addition, a high-level BEA official said that firms may not fully
report all of their affiliated transactions for which they should report.
This official noted that these reporting difficulties may reflect business
record-keeping practices, which are intended to meet financial reporting
requirements, rather than government surveys.

In order to address these challenges, BEA is taking action to improve the
quality of survey responses and to overcome the difficulty of reporting
detailed data on affiliated imports of services. For example, an
examination of BEA's data on affiliated transactions is a component of
BEA's contract with a private firm that is conducting an external review
of BEA's data sources and methods of identifying services importers. In
addition, BEA has requested Census to conduct an external review of its
survey forms and instructions, and to make recommendations that would
improve clarity and promote accurate reporting. BEA is also performing its
own review of its surveys to determine the clarity of survey instructions
and is providing training to survey recipients on how to complete the
surveys accurately. In addition, to improve the quality of its data on
affiliated services imports, including affiliated imports of BPT services,
BEA is considering collecting data on both affiliated and unaffiliated
transactions on the same survey form. BEA is also considering expanding
the types of affiliated BPT services for which it requests data to match
the detailed data it collects on unaffiliated imports of BPT services.

BEA Has Difficulty in Gaining Access to Other Federal Agency Data

BEA is currently negotiating access to data from other federal agencies to
expand its existing sources of data and to improve its survey coverage,
but BEA has been unable to access this data from other federal agencies.
According to BEA officials, other federal agencies, such as Census,
possess data that could assist BEA in preparing its estimates of trade in
services, including information on firms in the United States that could
be importing services. For example, Census surveys firms to collect data
of firms' business expenses, which include the purchase of BPT services.
These surveys may be useful to identify importers because large purchasers
of services may also be importing these services. The survey data that
Census currently collects are not directly useful for BEA because the data
on business expenses do not separate domestic from international expenses
and do not distinguish between affiliated and unaffiliated transactions.
However, BEA would get name and addresses of potential services importers.
In addition, BEA could potentially request that Census add questions to
one or more of the surveys that Census administers in order to identify
services importers.

However, BEA currently faces legal restrictions in gaining access to data
utilized by Census. Although federal laws allow such data sharing between
Census and BEA, BEA is generally restricted from gaining access to federal
tax information that Census obtains from the Internal Revenue Service.
According to BEA officials, BEA is negotiating with Census and the
Internal Revenue Service to gain access to sources of data to improve its
mailing lists.

Conclusions	The large difference between U.S. and Indian data on BPT
sources makes the analysis of the extent of offshoring more difficult.
Some of this difference in data can be attributed to varying definitions
of BPT services, but some also appears to be due to incomplete U.S. data.
BEA has been seeking various ways to improve the overall quality of U.S.
services trade data, but our test of whether they had identified BPT
service importers indicated that they were not identifying all U.S.
importers of services. Given the importance of this category of data in
understanding the extent of offshoring of services, a subject of
continuing public and congressional concern, we believe that additional
efforts to strengthen the quality of U.S. services data are merited.

Recommendations	We are recommending that the Secretary of Commerce direct
BEA to systematically expand its sources of information for identifying
firms to survey. BEA should consider ways to improve its identification of
the appropriate survey forms to send to firms and the information
requested about services imports, particularly with regard to affiliated
imports. We also recommend that the Secretary direct BEA to pursue
additional company information from previous Census surveys and consider
requesting Census to add questions to future surveys to help identify
services importers.

  Agency Comments and Additional Information Provided by the Reserve Bank of
  India

The Department of Commerce provided written comments on the draft report,
which are reproduced in appendix II. Commerce concurred with our
recommendation that BEA should strive to improve its coverage of services
imports. In particular, Commerce agreed that BEA should pursue additional
company information from Census. Commerce also provided technical
comments, which we incorporated into the report as appropriate.

Following the receipt of agency comments from Commerce, RBI publicly
released a report outlining a new methodology to compile services export
data in accordance with IMF standards. Although RBI's new survey
methodology conforms more closely to IMF standards for defining
international transactions in services, differences between U.S. and
Indian data remain due to a variety of factors we discuss in this report.
For example, the RBI report acknowledges that Indian data include not only
exports of computer-related services but also exports of ITES. Since the
primary objective of RBI's survey was to collect data on software exports
in conformity with IMF's definition of computer services, RBI's survey
data exclude data from companies exclusively exporting ITES, and include
only data on computer services. However, RBI's report does not indicate
that RBI's survey methodology addresses other factors contributing to the
difference between U.S. and Indian data. For example, it appears that
RBI's survey data include the earnings of foreign temporary workers
employed abroad without taking into account their length of stay or
intention to remain abroad. RBI estimated this on-site work to account for
approximately 47 percent of India's total worldwide exports, although some
portion of this total may include services provided by temporary Indian
workers employed abroad for over 1 year. In addition, RBI's report does
not indicate that sales of embedded software are excluded from RBI's
survey data.

We are providing copies of this report to interested congressional
committees and the Secretary of Commerce. Copies will be available to
others upon request. In addition, the report will be available at no
charge
on the GAO Web site at www.gao.gov.

If you or your staff have any questions about this report, please contact
Mr.
Yager on (202) 512-4128. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
Other GAO contacts and staff acknowledgments are listed in appendix III.

Loren Yager
Director, International Affairs and Trade

List of Committees

The Honorable Charles Grassley
Chairman
The Honorable Max Baucus
Ranking Member
Committee on Finance
United States Senate

The Honorable Susan Collins
Chairman
The Honorable Joseph Lieberman
Ranking Minority Member
Committee on Homeland Security and

Governmental Affairs
United States Senate

The Honorable Bill Thomas
Chairman
The Honorable Charles Rangel
Ranking Minority Member
Committee on Ways and Means
House of Representatives

The Honorable Tom Davis
Chairman
The Honorable Henry A. Waxman
Ranking Minority Member
Committee on Government Reform
House of Representatives

Appendix I

Scope and Methodology

This report discusses (1) the extent of the difference between U.S. and
Indian data on trade in business, professional, and technical (BPT)
services, (2) the factors that explain the difference between U.S. data on
imports of BPT services and India's data on exports of those same
services, and (3) the challenges that the United States has faced in
collecting services data.

To obtain information on the extent of the difference between U.S. and
Indian services trade data, we analyzed and compared U.S. and Indian data
and interviewed U.S. and Indian government officials from the relevant
agencies, including the U.S. Bureau of Economic Analysis (BEA), and the
Reserve Bank of India (RBI). RBI relies on a trade association, the
National Association of Service and Software Companies (NASSCOM), to
collect data on these services. Although we reviewed NASSCOM's survey form
and discussed with a NASSCOM official the collection of their statistics,
NASSCOM did not provide us with their methodology for ensuring the
reliability of their data. Therefore, we were not able to independently
assess the quality and consistency of their data. However, for the
purposes of this report, we found these data to be sufficiently reliable
for reporting the difference in the official U.S. and Indian trade data in
BPT services.

To determine the factors that explain the difference in U.S. and Indian
trade data, we reviewed official methodologies, interviewed relevant
officials, and conducted a search of available literature. We reviewed
documentation and technical notes from BEA and RBI to determine the U.S.
and Indian methodologies for collecting and reporting trade in services
data and to assess the limitations and reliability of various data series.
We discussed these topics with BEA officials. In addition, we traveled to
India to interview RBI officials and NASSCOM representatives and to obtain
documentation on the collection and limitations of Indian data. We also
interviewed a range of U.S. and Indian businesses in India that supply
trade data to the United States and India to determine how they report
data. We performed a literature search and obtained information from the
Brookings Institution, the Institute for International Economics, and the
Organization for Economic Co-operation and Development (OECD). To
determine the international standards for collecting and reporting
trade-in-services data, we reviewed relevant documentation from
international organizations, including the International Monetary Fund and
the United Nations.

In September 2005, as our report was being finalized, RBI released a
report entitled "Computer Services Exports from India: 2002-03," which
discusses the methodology and results of a comprehensive survey that RBI

Appendix I
Scope and Methodology

conducted to collect data on India's "computer services" exports for 2002
in conformity with the International Monetary Fund's Balance of Payments
Manual, 5th edition (1993). The RBI report provides information about
RBI's survey methodology, including the number and types of companies
surveyed and the information sought through the survey. In addition, the
report outlines recommendations for RBI to collect data on software and
information technology exports through representative quarterly surveys
and a comprehensive survey every 3 years. We incorporated this additional
information from the RBI report where appropriate.

To examine the coverage of BEA's surveys for collecting trade-in-services
data, we supplied BEA with lists of U.S.-based companies we identified as
likely importers of services from India to compare with its mailing lists.
We developed two lists. The first list included the names and addresses of
companies in the United States with affiliate offices in India that are
likely importing BPT services from India through affiliates. The second
list included the names and addresses of companies that are likely
purchasers of services through unaffiliated parties in India. We
identified these companies through publicly available sources, including
public media, company filings with the Securities and Exchange Commission,
annual reports of companies, the list of NASSCOM member companies, and
lists of companies compiled by information technology interest groups. Our
lists of firms are not necessarily representative of all U.S. firms
importing from India, and we do not generalize our results.

We asked BEA to compare these lists with the following mailing lists for
affiliated and unaffiliated surveys to identify how many companies it was
surveying:

                          Table 2: List of BEA Surveys

Mailing list BEA survey

Affiliated Business, Professional, and Technical Services BE-577

Affiliated Computer and Information Services BE-577

Unaffiliated Business, Professional, and Technical Services BE-25, BE-22

Unaffiliated Computer and Information Services BE-25

Source: GAO presentation of BEA data.

We requested that BEA provide us with the number of companies from both
lists that BEA was able to identify and not identify on its

Appendix I
Scope and Methodology

corresponding mailing lists. For companies that received a survey, we
asked BEA to identify the number of these companies that responded to the
survey and provided information on purchases from India. For companies
that were not on any mailing list, BEA was asked to identify (1) whether
the firms were excluded from its mailing list because they were assumed to
be below exemption levels for the particular survey, (2) whether the firms
are on BEA's current mailing list for the particular survey, and (3)
whether the firms are listed on other BEA mailing lists. We discussed the
results of this review with BEA officials.

To assess the challenges the United States has faced in collecting and
reporting data on trade in services, we reviewed relevant BEA
documentation and interviewed BEA officials. We reviewed BEA documentation
to determine BEA's data limitations and to assess the challenges BEA faces
in collecting and reporting U.S. data on trade in services. To determine
the challenges of expanding BEA's survey coverage through interagency data
sharing we interviewed officials at BEA and the U.S. Census Bureau
(Census), and we reviewed Census documentation. We also interviewed BEA
officials to discuss these identified challenges and to determine the
plans and actions BEA has taken to improve the quality of U.S. data.
Finally, we interviewed Internal Revenue Service (IRS) officials to gain
an understanding of IRS policy on restricting access to federal tax
information that the IRS provides to Census.

We performed our work from March 2005 through September 2005 in accordance
with generally accepted government auditing standards.

Appendix II

Comments from the Department of Commerce

Appendix II
Comments from the Department of
Commerce

Appendix III

                     GAO Contact and Staff Acknowledgments

                    GAO Contact Loren Yager, (202) 512-4128

Staff 	In addition to the person named above, Virginia Hughes, Bradley
Hunt, Ernie Jackson, Sona Kalapura, Judith Knepper, Robert Parker, Cheryl

Acknowledgments Peterson, and Tim Wedding made major contributions to this
report.

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