Countertrade Guidelines

Developing a trade finance strategy is never easy. Many alternatives must be considered, including the long-term benefits and risks of countertrade arrangements. Because of financial, contractual, and administrative complexities, countertrade should only be used when more conventional financing is not practical. Although certainly not all-inclusive, the following guidelines offer a good starting point for minimizing countertrade risks:

1. Establish a risk threshold that is measurable in terms of money expended, time required, and administrative difficulty. Beyond this threshold, the transaction will become uneconomical and should be terminated.

2. Identify a countertrade broker capable of selling exchanged goods.

3. Insist on adequate shipping and collection insurance as well as on bank guarantees of customer performance.