What Is a Counterpurchase?
A counterpurchase is a specific type of countertrade transaction in which two gatherings consent to both buy goods from and sell goods to one another yet under separate sales contracts.
How a Counterpurchase Agreement Works
One form of counterpurchase is an international trading deal wherein an exporter consents to purchase a number of goods from a country in exchange for the country's purchase of the exporter's product. The goods being sold by each party are normally unrelated however might be of equivalent value.
Under a counterpurchase arrangement, the exporter sells goods or services to an importer and furthermore consents to purchase different goods from the importer inside a predefined period. Dissimilar to bartering, exporters who go into a counterpurchase arrangement should utilize a trading firm to sell the goods they purchase and won't utilize the actual goods.
In a counterpurchase, the main contract recorded is the original sales contract, illustrating the terms where an initial buyer purchases from an initial seller. The second, parallel contract frames the terms in which the original seller consents to buy unrelated goods from the original buyer. Fundamentally, this is a contractually implemented relationship between two gatherings who concur, sooner or later, to give business to each other.
Different Examples of Countertrades
A counterpurchase is one illustration of a bigger group of agreements known as countertrades. Countertrade is a reciprocal form of international trade wherein goods or services are exchanged for different goods or services as opposed to for hard currency. This type of international trade is more normal in lesser-created countries with limited foreign exchange or credit facilities. Countertrade agreements basically give a mechanism to countries with limited access to liquid funds to exchange goods and services with different nations.
Bartering is the most seasoned countertrade arrangement. It is the direct exchange of goods and services with an equivalent value yet with no money settlement. The bartering transaction is alluded to as a trade. For instance, a bag of nuts may be exchanged for coffee beans or meat. Other common models include:
- A buyback is a countertrade happens when a firm forms a manufacturing facility in a country — or supplies technology, equipment, training, or different services to the country and consents to take a certain percentage of the plant's output as partial payment for the contract.
- A offset is a countertrade agreement in which a company counterbalances a hard currency purchase of an unknown product from that nation later on.
- Remuneration trade is a specific form of barter where one of the flows is mostly in goods and halfway in hard currency.
A major benefit of countertrade is that it works with the protection of foreign currency, which is a prime consideration for destitute nations and gives an alternative to traditional financing that may not be accessible in non-industrial countries. Different benefits incorporate lower unemployment, higher sales, better capacity utilization, and simplicity of entry into testing markets.
A major drawback of countertrade is that the value suggestion might be uncertain, especially in situations where the goods being exchanged have huge cost unpredictability. Different detriments of countertrade incorporate complex talks, possibly higher costs and calculated issues.
- A counterpurchase is a specific type of countertrade transaction in which two gatherings consent to both buy goods from and sell goods to one another however under separate sales contracts.
- Counterpurchase is one illustration of a countertrade, which gives a means to countries with limited liquidity in hard currency to exchange goods and services with different countries.
- International trade deals will utilize a counterpurchase between an importer and exporter through the intervention of a trading firm.