Question

Smooth-Ride Inc., a U.S.-based motorcycle manufacturer, sold custom cycles to Germany. Germany paid Smooth-Ride in dollars, but in exchange, Smooth-Ride agreed to spend some of its proceeds from the sale on electronic equipment produced in Germany. Which type of countertrade arrangement does this example illustrate

Answer 1

Smooth-Ride Inc., a U.S.-based motorcycle manufacturer, sold custom cycles to Germany. Germany paid Smooth-Ride in dollars, but in exchange, Smooth-Ride agreed to spend some of its proceeds from the sale on electronic equipment produced in Germany-The type of counter trade arrangement illustrated by the example is that of Counter Purchase.

Explanation:

Counter trade agreement refers to the agreement of exchanging goods and services of a country with the goods and services of other country either in part or whole ,rather than using money as a medium of exchange

There are basically three type of counter trade

• Barter,
• counter purchase,
• offset

Barter system :-It refers to the direct exchange of goods and services between two parties in a trade arrangement.

Counterpurchase refers to an  agreement in which a  exporter agrees to  purchase a specific quantity of unrelated goods or services from a country in exchange of the value of the goods exported.

Offset:It refers to an additional contract  to buy goods and services from the importers country

Smooth-Ride Inc., a U.S.-based motorcycle manufacturer, sold custom cycles to Germany. Germany paid Smooth-Ride in dollars, but in exchange, Smooth-Ride agreed to spend some of its proceeds from the sale on electronic equipment produced in Germany-The type of counter trade arrangement illustrated by the example is that of Counter Purchase.