Barter trading or countertrade: common countertrade practices
The more common countertrade practices are as follows:
A single exchange of goods for goods. No payment in currency made.
An exchange of goods for goods and money, or an exchange of goods for services and money (see GACV27050).
|Evidence account||Counter purchase is often expressed in the form of an evidence account. For the purpose of payment, the evidence account is established with the foreign trade bank or a central bank and the exporter’s counter purchases are credited against current or future counter purchase obligations. Such deals provide a degree of flexibility to the exporter, since, instead of facing an immediate demand, the evidence account allows the exporter more time to leisurely ‘shop around’ to effect the counter purchase.|
|Compensation and buyback||The sale of machinery, equipment, technology or a manufacturing or processing plant in exchange for a specified amount of the final product as full or partial payment.|
|Clearing agreement||A bilateral arrangement between two countries to purchase designated amounts of each other’s products over a specified period of time, with the use of a freely convertible currency of a third country, that is, a ‘hard’ currency.|
|Switch or triangular trade||An arrangement whereby one of the parties to a bilateral trade agreement transfers its credit balance to a third party. For example, countries A and B have a clearing agreement and A buys a product from country C and payment is effected by having country B transfer its payment under the clearing agreement to country C instead of to country A.|
|Swap||The exchange of identical or similar goods from different locations in order to save transportation costs. This type of transaction differs from barter in that an identical or similar product is exchanged solely for the purpose of gaining the advantage of a closer source of supply. An example would be where a Japanese buyer purchases a quantity of Venezuelan produced oil and swaps it for an equal amount of Alaskan produced oil, which has been purchased by a buyer on the East Coast of the USA.|
|Offset arrangement||The sale of a product, usually of a high technology nature, is possible on the condition that the exporter incorporates in the final product specified materials, parts or components which have been acquired from the country of importation.|
|With regards to customs valuation, the main consideration would be whether the provisions of Method 1 preclude the application of that method to any transaction involving countertrade. In view of the number of different forms countertrade can take, it is not possible to arrive at a single conclusion in this regard. Thus it is necessary to take a decision on the basis of the facts of each transaction, including the type of countertrade involved. Nevertheless, the basic intention of the WTO Valuation Agreement to use Method 1 to the greatest extent possible should be borne in mind (WCO Comm 11.1 also refers).|