Ch. 16 MGT357

Barter

A direct exchange of goods and/or services between two parties without a cash transaction. Most restrictive countertrade arrangement. Usually a one time thing, used in deals where trading parters are not creditworthy or trustworthy.

Countertrade

A range of barter like agreements that facilitate the trade of goods and services for other goods and services when they cannot be traded for money.

Counterpurchase

A reciprocal buying agreement - Occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sales is made.

Time draft

Allows for a delay in payment normally 30, 60, 90, or 120 days. Once a time draft has been accepted it becomes a negotiable instrument that can be sold at a discount from its face value

Export Import Bank

An independent agency of the U.S. government. Provides financing aid to facilitate exports, imports, and the exchange of commodities between the U.S. and other countries. Achieves its goal through loan and loan guarantee programs.

Draft

An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time. -The instrument normally used in international commerce for payment, also called a bill of exchange

Export management companies

Are export specialists that act as the export marketing department or international department for client firms.

Document of title

Can be used to obtain payment or a written promise before the merchandise is released to the importer.

Contract

Carrier is obligated to provide transportation service in return for a certain charge

Sight draft

Is payable on presentation to the drawee

Letter of Credit

Issued by a bank at the request of an importer -States the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents. -Main advantage is that both parties are likely to trust a reputable bank even if they do not trust each other.

Bill of lading

Issued to the exporter by the common carrier transporting the merchandise. Services three purposes which is the receipt, contract, and document of title.

Receipt

Merchandise described on document has been received by carrier

Buyback

Occurs when a firm builds a plant in a country or supplied technology equipment, training, or other services to the country - and agrees to take a certain percentage of the plant's output as partial payment for the contract.

Offset

One party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale.

Foreign Credit Insurance Association

Provides coverage against commercial risks and political risks. Protects exporters against the risk that the importer will default on payment.

Switch trading

The use of a specialized third party trading house in a countertrade arrangement.