Contracts of Countertrade

With a contract of countertrade, the parties exchange between them on the basis of goods and services, rather than on money. For example, the importer will pay for the goods with other goods or services.

Modern countertrade is not well known because there isn't a good international culture for traders and legal advisers. However, the countertrade contracts are secure and many business transactions are carry out through them, both in developing countries where there are more raw materials than currency, both in the countries with problems of currency convertibility. Their use is mainly widespread in China, Russia and Cuba.

Types of countertrade:

- barter, according to which the exporter receives goods or services for other goods and services, without the use of money

- counterpurchase, according to which two contracts are signed: the first regulates the export, while the second regulates the obligation to release the goods as compensation. It is the form of trade compensation widespread in Eastern Europe and former Soviet republics. Generally the share of compensation is set in a certain currency. 

- buy-back, according to which the exporter provides turnkey plants and machinery receiving in compensation the goods produced by the plant or machinery. It is the form of trade compensation used into international cooperation.

Generally countertrade contracts are preceded by a protocol agreement or a letter of intent, in which the parties express their mutual interest to import or export certain goods or services and their intention to pay.

By Mr. Luca Santaniello

Lawyer at Santaniello & Partner

See also:

Special court for foreign companies in Italy