International Management Chapter 14 part 2

There are five types of countertrade

Barter Counterpurchase Switch trading Offset Compensation or buyback

What alternatives do exporters have when conventional methods of payment are not an option?

Exporters can use countertrade when conventional means of payment are difficult, costly, or nonexistent

Where can exporters get financing help?

U.S. exporters can draw on two forms of government-backed assistance to help their export programs They can get financing aid from the Export-Import Bank They can get export credit insurance from the Foreign Credit Insurance Association

Barter

a direct exchange of goods and/or services between two parties without a cash transaction The most restrictive countertrade arrangement Used primarily for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy

Counterpurchase

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

Time Draft

allows for a delay in payment - normally 30, 60, 90, or 120 days

The Export Import Bank (Eximbank)

an independent agency of the U.S. government Provides financing aid that will facilitate exports, imports, and the exchange of commodities between the U.S. and other countries

Bill of Lading

is issued to the exporter by the common carrier transporting the merchandise It serves three purposes: It is a receipt It is a contract It is a document of title

Sight Draft

is payable on presentation to the drawee

Compensation or Buybacks

occurs when a firm builds a plant in a country—or supplies technology, equipment, training, or other services to the country—and agrees to take a percentage of the plant's output as a partial payment for the contract

Switch Trading

occurs when a specialized third-party trading house buys a firm's counterpurchase credits and sells them to another firm

Export Credit Insurance

provided in the U.S. by the Foreign Credit Insurance Association (FICA) Provides coverage against commercial risks and political risks

Offset

similar to counterpurchase - one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale This party can fulfill the obligation with any firm in the country to which the sale is being made