OSB Retry Application Errors

Recently our OSB administrator asked me how OSB determined what an application error was for the "Retry Application Errors" setting on the Transport page of a Business Service.  It turns out there is not much documentation on this at all.   So I did some testing.

OSB looks at the  response-code in the Response Metadata to flag an application error.  If this value is a non-zero, then it is treated as an application error.

The easiest way to manipulate this value is to add a Reply with Failure in the OSB service you are calling.

You can also manipulate the response code by inserting a response-code element in $inbound as shown below.  Note: This must be done in the response pipeline 

Note:  I only researched this for Business Services that were calling OSB Proxy Services as that was the architecture for the context of the question asked.  More research would need to be done to determine this behavior when call services outside the OSB.