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Tuesday, 11 September 2018

Forms of Counter Trade

The various forms of counter trade are;

1.  Barter.
2.  Counter purchase.
3.  Product buy back.
4.  Compensation trade (offset).
5.  Switch trading.

These various forms are briefly explain the below;

Barter: this is the same trade by barter of old involving exchange of goods with goods of perceived equal value. The inherent problems include, difficulty associated with double coincidence of wants measurement of value etc.
Counter purchase; this is a form of Counter Trade  where by the supplier or seller agrees to purchase other unrelated goods from the buyer the feature of may be any of these:
-    simple exchange of goods.
-    part cash payment with the second parts in credit.
-    agreement to buy goods on the seller or a different company in sellers or importer's country.

Product buy back: this involves a situation whereby a sellers or supplier of a machinery, production plant or equipment agrees to purchase goods manufactured with that equipment or factory.

Compensation deals or trade (offset): this involves part payment for transaction in goods and in cash.

Switching Trading; is an intergovernmental barter trading system cleaning arrangements. It involves partispating government deciding which goods they want to exchange at what price and at what volume. The books open for this transaction are balanced once a year either by payment in one convertible currency or by transfer of goods to next year. Another version occurs when surplus barter goods are switched to other countries by the stronger party who wants to earn convertible currency.

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