4.

3 Consignment Method

consignment in international trade is like a variation of open account in which payment will
sent to the exporter which also known as consignor shipped that goods to importer which is
also known as consignee and only collect the payment when the importer had sold that goods.
After the goods have been sold by the foreign. An international consignment transaction is
based on a contractual arrangement in which the foreign distributor receives, manages, and
sells the goods for the exporter who retains title to the goods until they are sold. Clearly,
exporting on consignment is very risky as the exporter because it not been guaranteed any
payment and its goods are in a foreign country in the hands of an independent distributor or
agent. Consignment helps exporters become more competitive based on the better availability
and faster delivery of goods. Selling on consignment can also help exporters reduce the direct
costs of storing and managing inventory. The key to success in exporting on consignment is
to partner with a reputable and trustworthy foreign distributor or a third-party logistics
provider. Appropriate insurance should be in place to cover consigned goods in transit or in
possession of a foreign distributor as well as to mitigate the risk of non-payment. This
method also commonly used in domestic trade.

https://2016.export.gov/tradefinanceguide/eg_main_043221.asp
4.4 Counter Trade

Countertrade is a contract form of international trade in which goods or services are

exchanged for other goods or services rather than for hard currency for the trade transaction.
This type of international trade is more common in developing countries with limited foreign
exchange or credit facilities. Under counter trade, there are an arrangement where the
exporter of goods and services to market is made conditional upon undertaking to accept
import of goods or services from that market as full or part payment. There are so many
forms of counter trade, and some of these include the following;

a. Barter
Bartering is the oldest countertrade arrangement. It is about the direct exchange of goods and
services with an equivalent value but with no money involved in this form. The exports are
paid with goods or services supplied from the importing countries; the bartering transaction is
referred to as a trade. For example, a bag of nuts might be exchanged for coffee beans or
meat. involves the direct exchange of goods and services having an equivalent value, but with
no cash settlements.

b. Compensation
Compensation trade is a form of barter in which one of the flows is partly in goods and partly
in hard currency. The full or partial payments of the exports is made in goods and the
delivery and counter delivery terms also are specified in one contract. The counter delivery is
normally within of 3 years delivery. There is total compensation where deals are full
exchanges of goods for goods and goods also being exchanged are valued in currency terms.
There is also part compensation where the original seller negotiates on the basis that, from the
counter party settlement will be partly in the form of goods and partly in cash.

c. Buyback
Occurs when a firm builds a plant in a country to the other country and agrees to take a
certain percentage of the plant's output as partial payment for the contract. The exports are
normally for capital-intensive products. There is industrial Co-operation where a large
corporation based in developed country negotiates with country party to install the
manufacturing equipment in the latter’s underdeveloped country and provide the technical
that who know how to relate to manufacturing activities. There are also offsets. Offsets
usually being used in the exchanges that involving aircraft or military equipment which there
are direct offsets and indirect offsets.

d. Counter purchase
Under a counter purchase arrangement, the exporter sale of goods and services to one
company in other country and promises to make a future purchase of a specific product from
the same company in that country and agrees to also purchase other goods from the importer
within a specified period. Unlike bartering, exporters entering into a counter purchase
arrangement must use a trading firm to sell the goods they purchase and will not use the
goods themselves.

e. Offset
Agreement by one nation to buy a product, components and raw materials from the buyer of
the finished product, or the assembly of such product in the buyer nation. In an offset
arrangement, the seller assists in marketing products manufactured by the buying country or
allows part of the exported product's assembly to be carried out by manufacturers in the
buying country. This practice is common in aerospace, defence and certain infrastructure
industries. Offsetting is also more common for larger, more expensive items. An offset
arrangement may also be referred to as industrial participation or industrial cooperation.
https://www.investopedia.com/terms/c/countertrade.asp