Explanatory Notes to the Classification Table of Exchange Operations Approved by Notice No. 20/GBM/2017, December 27

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27 Bank of Mozambique October 2019

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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ii ABBREVIATIONS AC Central Administration CIF Cost Insurance and Freight FOB Free On Board GBM Governor of the Bank of Mozambique ICE – AC Foreign Portfolio Investment - Central Administration ICE – B Foreign Portfolio Investment - Banks ICE – BC Foreign Portfolio Investment - Central Bank ICM – AC Portfolio Investment in Mozambique - Central Administration ICM – B Portfolio Investment in Mozambique - Banks ICM – BC Portfolio Investment in Mozambique - Central Bank ICM – OS Portfolio Investment in Mozambique - Other Sectors IDE Foreign Direct Investment IDM Direct Investment in Mozambique IER Investment Between Related Companies MCI Interbank Foreign Exchange Market ME Foreign Currency N.I.O.P. Not Included in Other Parts OI – AC Other Investment - Central Administration OI – B Other Investment - Banks OI – BC Other Investment - Central Bank OI – OS Other Investment - Other Sectors OS Other Sectors P&D Research and Development TA Air Transport TAC Transfers from Central Administration TE Specific Transport TF Rail Transport TFL River/Lake Transport TM Maritime Transport TOS Transfers from Other Sectors TR Road Transport

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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iii INDEX ABBREVIATIONS ................................................................................................................................ii INDEX .............................................................................................................................................iii I. INTRODUCTION ...............................................................................................................................1 II. DESCRIPTION OF THE CATEGORIES OF THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS.......2

1. GOODS.............................................................................................................................................2
2. General Merchandise ...................................................................................................................2
3. SERVICES.....................................................................................................................................3
4. Transport ................................................................................................................................3
5. Travel ....................................................................................................................................5
6. Telecommunications, IT and Information Services ...........................................................6
7. Construction Services .............................................................................................................7
8. Insurance and Pension Fund Services ......................................................................................7
9. Financial Services or Bank Commissions ...........................................................................8
10. Intellectual and Industrial Property (“franchising”, “royalties”, copyrights, patents, etc.) ........8
11. Government Goods and Services ......................................................................................................8
12. Other Commercial Services .......................................................................................................8
13. INCOMES............................................................................................................................10
14. Income from Work........................................................................................................11
15. Income from Financial Investments ...................................................................................11
16. Income from Natural Resources ..........................................................................................12
17. CURRENT TRANSFERS ......................................................................................................13
18. Current Transfers from Central Administration ...................................................................13
19. Current Transfers from Other Sectors............................................................................14
20. CAPITAL OPERATIONS..........................................................................................................15
21. Acquisition or Disposal of Non-Financial Non-Produced Assets...........................................15
22. Capital Transfers.........................................................................................................16
23. FINANCIAL OPERATIONS ........................................................................................................17
24. Foreign Direct Investment..............................................................................................17
25. Direct Investment in Mozambique .......................................................................................18
26. Investment Operations Between Related Companies.........................................................20
27. Portfolio Investment ..........................................................................................................21
28. Other Investment ..................................................................................................................24

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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iv 7. COMPLEMENTARY OPERATIONS ..............................................................................................32 71. Complementary Operations I ..................................................................................................32 72. Complementary Operations II .................................................................................................33 73. Complementary Operations III ................................................................................................34 III. EQUIVALENCE TABLE ......................................................................................................35

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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1 I. INTRODUCTION The rules and procedures to be observed in carrying out exchange operations, approved by Notice No. 20/GBM/2017 of December 27, provide in paragraph 2 of Article 4 for the establishment by the Bank of Mozambique, for operational purposes, of the Classification Table of Exchange Operations. The responsibility for issuing Explanatory Notes to this table has been assigned to the Licensing and Foreign Exchange Control Department of the Bank of Mozambique. The Explanatory Notes, which form part of this document, aim to assist users of the Classification Table of Exchange Operations, especially banks (their main recipients and users), as well as other interested parties and the general public, in correctly classifying exchange operations. This is achieved by providing additional information on the content of the classifications existing in the Table, as well as supporting elements for their computerized processing, without prejudice to the definitions and concepts established in the Foreign Exchange Law, its Regulations, and other exchange rules. The new Table also seeks to replace, standardize, and update the previously used Table for Foreign Exchange Licensing and Control purposes, for compiling Balance of Payments statistics, and for Interbank Foreign Exchange Market operations. The Central Bank and banks operating in Mozambique use the Classification Table of Exchange Operations daily to frame and record exchange operations and to produce statistics on them. Compared to previous Tables, the changes consist of adding new classifications and splitting some existing ones. As a result, the latter part of these Explanatory Notes contains an Equivalence Table between the previous and new Tables, serving to maintain the historical record of exchange operations carried out to date.

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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2 II. DESCRIPTION OF THE CATEGORIES OF THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS

1. GOODS
2. General Merchandise General Merchandise – refers to movable goods whose ownership changes between a resident and a non-resident, and vice versa. It excludes the following specific categories: triangular trade goods, goods sent (received) for processing, repair of movable goods, non-monetary gold, traveler’s goods, goods acquired by non-residents for construction, and government goods and services.
3. Exports / Imports of Goods This refers to an operation between a resident entity and a non-resident entity resulting in the transfer of ownership and the exit (export) or entry (import) of goods into/from the national customs territory.
4. Other Specific Goods These are goods that by their nature are statistically separated from general merchandise and are classified as follows:
5. Triangular Trade “Merchanting” Settlement of goods acquired by residents and sold to non-residents in the same or different periods, which do not pass through Mozambican territory. These operations must be considered on a net basis, by the difference between the purchase and sale values of the goods.
6. Goods Acquired in Ports and Similar Locations by Transport Means Refers to fuel supply operations and other goods for maritime, air, and other navigation (including the provision of meals and provisions).
7. Goods Sent for Processing Covers the settlement of processing operations carried out abroad. By nature, they do not involve a transfer of ownership, as the goods cross the country’s border with the objective of being processed. In cases where the good to be processed is sold to a resident of the economy where processing occurs, or to a resident of another economy, it shall be considered general merchandise.
8. Goods Received for Processing Refers to the settlement of processing operations carried out within national territory. By nature, they do not involve a transfer of ownership, as the goods cross the country’s border with the objective of being processed. This situation includes the importation of crude oil and exportation of its derivatives for processing. In cases where the good to be processed is acquired by a resident of the economy where processing occurs, the operation is considered as an import of goods.

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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3 11905. Non-Monetary Gold Covers all gold not classified as monetary, which may be in the form of bars, powder, or other rough or semi-manufactured forms. Purchases and sales of gold that are not distributed are valued at the transaction price, not FOB. 11906. Repair of Movable Goods (ships, aircraft, and other transport equipment) Refers to repair operations reflecting the value paid for repairs, not the value of the goods before or after repair. It excludes IT equipment repairs, construction repairs, and maintenance of transport equipment carried out in ports and airports. 2. SERVICES Services – covers the provision of assistance or performance of tasks by a resident entity in favor of another non-resident entity (export of services) or vice-versa (import of services), or the use of a good under similar circumstances without transfer of ownership of the physical good. 21. Transport Transport – refers to receipts and payments associated with transactions between residents and non-residents, relating to the transport activity of people and goods from abroad to the country and vice-versa, as well as the inherent provision of various support and auxiliary services in airports, ports, railway terminals, and road stations, as well as the activity of transport agency services and travel agencies. It also includes the transport of gas and other fuels through pipelines (gas and oil pipelines) and electricity transmission. 211. Maritime Transport Refers to receipts and payments associated with transactions between residents and non-residents, relating to maritime transport activities of people and goods from abroad to the country and vice-versa. The following subdivisions are considered: 21101. TM - Passenger Transport – covers tickets, tour packages, cruises, excess baggage, on-board sales, fees paid by carriers to travel agencies and other reservation service providers, and rental of transport means with crew for limited periods. 21102. TM - Freight (Transport of Goods) – refers to the value of transport costs from the supplier’s customs border to the delivery location specified by the importer. 21103. TM - Support and Auxiliary Services – covers payments made for services received in ports, for example: (i) port expenses, storage, pilotage and navigation assistance, and cleaning of transport equipment; (ii) commissions and agency fees; (iii) other support and auxiliary services provided; and (iv) various taxes. It also includes the rental of transport means and auxiliary equipment including their respective crew. If it involves passenger transport, it is classified under “Passenger Transport”, and if it involves goods, it is included in “Freight (Transport of Goods)”. The rental (operational leasing) of transport means and auxiliary equipment without their respective crew is recorded under “Other Commercial Services”.

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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4 212. Air Transport Encompasses receipts and payments associated with transactions between residents and non-residents, relating to air transport activities of people and goods from abroad to the country and vice-versa. The following subdivisions are considered: 21201. TA - Passenger Transport – covers tickets, tour packages, excess baggage, on-board sales, fees paid by carriers to travel agencies and other reservation service providers, and rental of transport means with crew for limited periods. 21202. TA - Freight (Transport of Goods) – covers the value of transport costs from the supplier’s customs border to the delivery location specified by the importer. 21203. TA - Support and Auxiliary Services – covers payments made for services received in airports, for example: (i) airport expenses, storage, pilotage and navigation assistance, and cleaning of transport equipment; (ii) commissions and agency fees; (iii) other support and auxiliary services provided; and (iv) various taxes. It also includes the rental of transport means and auxiliary equipment including their respective crew. If it involves passenger transport, it is classified under “Passenger Transport”, and if it involves goods, it is included in “Freight (Transport of Goods)”. The rental (operational leasing) of transport means and auxiliary equipment without their respective crew is recorded under “Other Commercial Services”. 213. Rail Transport Refers to receipts and payments associated with transactions between residents and non-residents, relating to rail transport activities of people and goods from abroad to the country and vice-versa. The following subdivisions are considered: 21301. TF - Passenger Transport – covers tickets, tour packages, excess baggage, on-board sales, fees paid by carriers to travel agencies and other reservation service providers, and rental of transport means with crew for limited periods. 21302. TF - Freight (Transport of Goods) – covers the value of transport costs from the supplier’s customs border to the delivery location specified by the importer. 21303. TF - Support and Auxiliary Services – covers payments made for services received in railway stations, for example: (i) rail expenses, storage, pilotage and navigation assistance, and cleaning of transport equipment; (ii) commissions and agency fees; (iii) other support and auxiliary services provided; and (iv) various taxes. It also includes the rental of transport means and auxiliary equipment including their respective crew. If it involves passenger transport, it is classified under “Passenger Transport”, and if it involves goods, it is included in “Freight (Transport of Goods)”. The rental (operational leasing) of transport means and auxiliary equipment without their respective crew is recorded under “Other Commercial Services”. 214. Road Transport Refers to receipts and payments associated with transactions between residents and non-residents, relating to road transport activities of people and goods from abroad to the country and vice-versa. The following subdivisions are considered: 21401. TR - Passenger Transport – covers tickets, tour packages, excess baggage, on-board sales, fees paid by carriers to travel agencies and other reservation service providers, and rental of transport means with crew for limited periods. 21402. TR - Freight (Transport of Goods) – covers the value of transport costs from the supplier’s customs border to the delivery location specified by the importer. 21403. TR - Support and Auxiliary Services – covers payments made for services received in road stations, for example: (i) road expenses, storage, pilotage and navigation assistance, and cleaning of transport equipment; (ii) commissions and agency fees; (iii) other support and auxiliary services provided; and (iv) various taxes. It also includes the rental of transport means and auxiliary equipment including their respective crew. If it involves passenger transport, it is classified under “Passenger Transport”, and if it involves goods, it is included in “Freight (Transport of Goods)”. The rental (operational leasing) of transport means and auxiliary equipment without their respective crew is recorded under “Other Commercial Services”.

EXPLANATORY NOTES TO THE CLASSIFICATION TABLE OF EXCHANGE OPERATIONS APPROVED BY NOTICE NO. 20/GBM/2017, OF DECEMBER 27

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5 215. River or Lake Transport Refers to receipts and payments associated with transactions between residents and non-residents, relating to river transport activities of people and goods from abroad to the country and vice-versa. The following subdivisions are considered: 21501. TFL - Passenger Transport – covers tickets, tour packages, excess baggage, on-board sales, fees paid by carriers to travel agencies and other reservation service providers, and rental of transport means with crew for limited periods. 21502. TFL - Freight (Transport of Goods) – covers the value of transport costs from the supplier’s customs border to the delivery location specified by the importer. 21503. TFL - Support and Auxiliary Services – covers payments made for services received in ports and other locations, for example: (i) port expenses, storage, and cleaning of transport equipment; (ii) commissions and agency fees; (iii) other support and auxiliary services provided; and (iv) various taxes. It also includes the rental of transport means and auxiliary equipment including their respective crew. If it involves passenger transport, it is classified under “Passenger Transport”, and if it involves goods, it is included in “Freight (Transport of Goods)”. The rental (operational leasing) of transport means and auxiliary equipment without their respective crew is recorded under “Other Commercial Services”. 216. Postal Services Refers to receipts and payments associated with transactions between residents and non-residents, relating to the collection, transport, and distribution of correspondence. The following subdivision is considered: 21601. SC - Postal and Express Mail Services – covers the collection, transport, and distribution of correspondence, including the rental of post boxes, sale of postage stamps, and door-to-door collection or delivery of correspondence. 217. Specific Transport Refers to transports that by their nature differ from those presented in the preceding categories. The following subdivisions are considered: 21701. Freight (Transport of Goods) - Covers transports using pipelines, namely gas or oil pipelines, and electricity transmission. 21702. Support and Auxiliary Services - Covers other types of transport services that do not fall into the preceding categories. 22. Travel Travel – covers receipts and payments relating to expenses incurred by travelers when they are in another country of which they are not residents and remain there for periods of less than one year. Current expenses incurred during their stay in the host country relate to accommodation, food, and transport (personal use, training or education,