Countertrade: Countertrade is an umbrella term for several sorts of trade in which the seller is required to accept goods, services, or other instruments or trade, in partial or whole payment for its products. Forms include barter, buy-back or compensation, offset requirements, swap, switch, or triangular trade, evidence or bilateral clearing accounts. Some include offsets as a form of countertrade; others make a distinction based on the view that countertrade is a reciprocal exchange of goods and services used to alleviate foreign exchange shortages of importers and that offsets are used as a means for advancing industrial development objectives and may include equity investments.
In counterpurchase (one of the most common forms of countertrade), exporters agree to purchase a quantity of goods from a country in exchange for that country's purchase of the exporter's product. The goods being sold by each party are typically unrelated but may be equivalent in value.
In a compensation or buy-back deal, exporters of heavy equipment, technology, or even entire facilities agree to purchase a certain percentage of the output of the facility.
Barter is a simple swap of one good for another. Switch trading is a complicated form of barter, involving a chain of buyers and sellers in different markets.
Countertrade is a generic term that includes offset, but today countertrade has come to generally mean the use of reciprocal trade tools, such as barter or other export activities to meet hard currency needs, primarily in commercial transactions. Countertrade is often used to facilitate trade flows and investments into countries that either have difficulties externalizing hard currency, or impose certain counterpurchase obligations on vendors that are selling their products into the country. Countertrade is often used to create financing and investment solutions, to mitigate sovereign/political and commercial risk. Financing facilities often deploy countertrade techniques that may utilize barter, clearings, credit insurance and enhancements, structured financing using off-take arrangements, counterpurchase, etc.
Offset or offsets is generally connected with the sales of infrastructural and/or "big ticket" items, both defense and non-defense, to foreign governments, which require the seller to provide some reciprocal economic benefit to the country. These benefits may be through local procurement, co-production, marketing assistance, investments, technology transfer, R&D, or other acceptable offset activities. The buying government often defines these in its regulations, guidelines or standard contractual documentation. Some countries have offset obligations that are called countertrade; however, offset goes by many names including industrial participation, industrial cooperation, industrial benefits, or similar expressions where some offsetting benefit is being provided to assist the sale.