Chapter 14

Question 1

Barter / Swap

Answer 1

direct exchange of goods having offsetting values w/o any flow of money taking place

Question 2

Counter - Purchase

Answer 2

Occurs when a company agrees to buy a certain amount of materials from a country to which a sale is made.

Question 3

Offset

Answer 3

Similar to counter purchase as supplier is obliged to purchase goods/services up to an agreed percentage of original sale. Difference is supplier can fulfill counter trade obligation with any company in the country to which the sale is being made.

Question 4

Buy-back

Answer 4

Occurs when a firm builds a manufacturing facility in a country or supplies technology, equipment, training, or services to the country and agrees to take a certain percentage of the plant’s output as partial payment for contract

Question 5

Switch Trade

Answer 5

Use of specialized, third party trading house in a countertrade agreement. The 3rd party trading house buys the selling company’s counter purchase credit at a discount& sells them to another company that can better use them.