However, the use of cheques in international commerce is quite limited.
- Telegraphic Transfers
This is a form of fast payment. The importer should pay to his bank a sum in the local
currency, equivalent to the amount in the foreign currency due to the exporter.
- Postal Transfer
The corresponding banks receive the advice by post instead of receiving it by telegram.
- Swift Network
Transfers can also be made through SWIFT (Society for Worldwide Interbank Financial
Telecommunication). The remittances are fast.
- Compensation or Counter-Trade
Counter-trade is a way to manage foreign exchange risk by ensuring that imports
matched exports. It is a trade agreement, in which the sale of goods and services by a
producer is linked to an import purchase of other goods and services.
- Different Types of Counter-Trades
There are three principal forms of counter operations, namely in commerce, in industry
and in finance.
Commercial counter-trade. Relevant to this category of counter-trade in goods are the
systems of barter and counter purchase. Barter is one of the basic types of counter trade
and it consists of a direct exchange of goods between two parties. Barter involves no
currency and is included without the help of intermediaries.
Industrial counter trading. It involves repurchase of production. Such counter-trade
agreements are normally of long duration. Two commonly known forms of industrial
counter-trade are Offset and Buyback.
The offset is a kind of industrial counter-trade in which the importer participates in the
production of goods that he will acquire later on. Offset involves co-production, transfer
of technology, etc. Between the exporter and importer.
On the other hand, a buyback transaction is an agreement in which an exporter of plants
and machinery accepts to take compensation in the form of future output from those
plants and machinery. A buyback contract essentially comprises two parallel money
transactions, and the seller is fully compensated by receipts of output from the plant and