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Home > How We Do It > Counter Trade

Counter Trade

Countertrade is a general term for an international transaction that is premised on some form of reciprocity. As a form of non-traditional trade, it can be distinguished by the presence of performance requirements prescribed by the buyer and agreed to by the seller as a condition of sale.

These requirements aim to ensure that some “reciprocal” benefits are obtained by the buyer from the seller as a result of the sale. As defined by the Association Pour La Compesantion Des Exchanges Commerciaxuz, Countertrade is a “commercial transaction whereby the seller undertakes to purchase goods and/or services in the client’s country, to transfer technology or manufacturing licenses or provide services to the client’s country, or to undertake any other transaction in exchange for the client’s commitment to purchase the goods and/or services covered by the Main Supply Contract, such a commitment being a condition on the above transaction.”

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In application, countertrade is used to leverage government importations with trade, investments and other related beneficial projects to be provided by the seller or supplier.

Benefits of Countertrade

Countertrade is a mechanism to:

-	Channel back of recoup foreign exchange spent for an importation;
-	Gain access to advanced technology and training, new foreign investments, research and development and related support for national development and modernization programs;
-	Promote mutually beneficial collaborative business ventures between local industry sectors and their foreign counterparts through joint ventures and industrial cooperation;
-	Promote export products and markets. Many developing nations and even developed nations require countertrade in their capital-intensive foreign procurement programs in order to fuel industrialization and sustain national development programs.

Adoption of Countertrade in Government Procedure

In countries that have adopted countertrade as a part of a government procurement policy, foreign suppliers and contractors are usually advised of the countertrade requirements during the bidding stage or supply negotiations stage to enable them to coordinate and gather information on such program from the government’s designated countertrade office. These suppliers/contractors may be required to execute a written document committing them to perform countertrade in relation to a particular Supply Contract. The common practice is for suppliers to execute a “Countertrade/Offset Agreement" or a similar agreement after being awarded a supply contract which contains the countertrade/offset commitment of the supplier together with the manner and period of performance of such countertrade obligations and other related conditions.