Exporting, Importing And Counter Trade Flashcards
What are high-risk methods in trade?
High-risk methods include open account and advance payment.
Open account
Exporter bills importer after merchandise ships;
Advance payment
importer pays exporter before merchandise ships.
What is a letter of credit?
A letter of credit is issued by a bank at the request of an importer, stating that the bank will pay a specified sum to a beneficiary upon presentation of specified documents.
The importer pays a fee for this service.
What is a draft in international commerce?
A draft is an order written by an exporter instructing an importer to pay a specified amount at a specified time.
It is also called a bill of exchange.
What are the two categories of drafts?
The two categories of drafts are sight drafts and time drafts.
A sight draft is payable on presentation; a time draft allows for a delay in payment.
What is a bill of lading?
A bill of lading is issued to the exporter by the common carrier transporting the merchandise and serves as a receipt, contract, and document of title.
It can be used to obtain payment or a written promise before the merchandise is released.
What is countertrade?
Countertrade is 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.
What are some examples of countertrade?
Examples include PepsiCo trading soft drinks for Soviet tomato paste and Indonesian aircraft maker IPTN trading aircraft for Thai sticky rice.
What is barter in countertrade?
Barter is a direct exchange of goods and/or services between two parties without a cash transaction.
It is the most restrictive countertrade arrangement.
What is counterpurchase?
Counterpurchase is a reciprocal buying agreement where a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
What is offset in countertrade?
Offset is similar to counterpurchase, where one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale.
What is buyback in countertrade?
Buyback occurs when a firm builds a plant in a country or supplies technology and agrees to take a percentage of the plant’s output as partial payment.
What is switch trading?
Switch trading involves a specialized third-party trading house in a countertrade arrangement, where counterpurchase credits are sold to another firm.
What are the advantages of countertrade?
Countertrade can finance exports when other means are unavailable and may provide a competitive advantage.
What are the disadvantages of countertrade?
Countertrade is not as convenient as cash deals and is best suited for large multinational corporations.
There are risks associated with product quality and resale.
