Chapter 16| 361 Test 4

barter

A direct exchange of goods or services between 2 parties without a cash transaction.

counterpurchase

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

trust

Facilitating international transactions are usually 3rd party banking institutions - this adds ________ to the relationship.

buyback

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 certain percentage of the plant's output as partial payment for the contract.

switch trading

Refers to the use of a specialized third-party trading house in a countertrade arrangement. When a firm enters a counterpurchase or offset agreement with a country, it often ends up with what are called counterpurchase credits, which can be used to purchase goods from that country. It occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.

offset

Similar to a counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale. The difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made. From an exporter's perspective, this is more attractive than a straight counterpurchase agreement because it gives the exporter greater flexibility to choose the goods that it wishes to purchase.

export management company

These are export specialist that act as the export marketing department for client firms. It is decided if they will start operations and then step back after they are established, or if they will start the services and then continue.

time draft

This allows for a delay in the payment (usually 30,60,90, or 120 days). One it's accepted it can be a negotiable instrument that can be sold at a discount from its face value.

bill of exchange

This is a draft/order written by an exporter instructing an importer to how much to pay and at a specified time.

countertrade

This is a range of barter-like agreements that facilitate the trade of goods and services for other goods and services when they can't be traded for $.

letter of credit

This is issued by the bank at the request of an importer - states the bank will pay a specified sum of $ to the beneficiary (usually the exporter), on presentation of the documents of delivery. Adds trust.

bill of lading

This is issued to the exporter by the common carrier transporting the merchandise. This is a: 1. receipt 2. contract 3. documentation of title

sight draft

This shows that it's payable on presentation to the drawer.

small

to reduce export risks, you should enter the marker on a ___ scale

1

to reduce export risks, you should focus on how many markets?