85) Rather than use cash, Indonesia traded textiles with the United States in exchange for corn.
This is an example of which form of countertrade?
A) switch trading
B) counterpurchase
C) buyback
D) barter
E) offset
86) The direct exchange of goods and/or services between two parties without a cash transaction is
referred to as
A) switch trading.
B) counterpurchase.
C) barter.
D) offset.
E) buyback.
87) The most restrictive countertrade arrangement is
A) counterpurchase.
B) offset.
C) barter.
D) switch trading.
E) buyback.
88) What is a disadvantage of barter as a countertrade arrangement?
A) It is a very complex arrangement.
B) If goods are exchanged simultaneously, one party ends up financing the other.
C) Firms engaged in barter run the risk of having to accept goods they do not want or cannot use.
D) It involves huge cash transactions.
E) It cannot be used in transactions with trading partners who are not creditworthy.
89) To cater to the growing demand for luxury automobiles, Italy agrees to buy 5,000 cars from
Comfort Cars Inc. in exchange for 5,000 barrels of oil. Since Comfort Cars Inc. is not seen as
creditworthy, Italy decides to make this a one-time-only deal. What form of countertrade is Italy
using?
A) counterpurchase
B) offset
C) switch trading
D) barter
E) buyback
90) The type of countertrade where a firm agrees to purchase a certain amount of materials back
from a country to which a sale is made is called
A) barter.
B) counterpurchase.
C) compensation.
D) switch trading.
E) buyback.
91) A firm sells some products to a foreign country. The foreign country pays the firm in dollars
but in exchange the firm agrees to spend some of the proceeds from the sale on textiles produced
by the foreign country. What type of countertrade arrangement are the two parties engaged in?
A) switch trading
B) buyback
C) counterpurchase
D) barter
E) compensation
92) A buying agreement where the exporting country can fulfill the agreement with any firm in the
country to which the sale is being made is called a(n)
A) switch trade.
B) offset.
C) buyback.
D) arbitrage.
E) barter.
93) From an exporter’s perspective, why is an offset more attractive than a straight
counterpurchase agreement?
A) It is the simplest countertrade arrangement.
B) It gives the exporter greater flexibility to choose the goods that it wishes to purchase.
C) It allows the use of a specialized third-party trading house.
D) It gives the exporter counterpurchase credits, which can be used in another country.
E) It allows direct exchange of goods and/or services between two parties without a cash
transaction.
94) A type of countertrade where a third-party trading house buys the firm’s counterpurchase
credits and sells them to another firm that can better use them is called
A) barter.
B) switch trading.
C) offset.
D) buyback.
E) compensation.
95) Full-Sole Shoes concludes a counterpurchase agreement with Japan for which it receives some
counterpurchase credits. Full-Sole Shoes does not want any foreign goods, however, so it sells the
credits to a third-party trading house at a discount. The trading house finds a firm that can use the
credits and sells them at a profit. This is an example of
A) barter.
B) switch trading.
C) an offset.
D) a buyback.
E) compensation.
96) Energy Source International builds a plant in Switzerland and agrees to take a certain
percentage of the plant’s output as partial payment for the contract. This type of countertrade is
called a(n)
A) counterpurchase.
B) offset.
C) switch trade.
D) buyback.
E) barter.
97) Consolidated Petroleum negotiated a deal with Saudi Arabia in which Consolidated Petroleum
would build several refineries in Saudi Arabia and receive oil as partial payment over a 20-year
period. This is an example of
A) switch trading.
B) a buyback.
C) a counterpurchase.
D) an offset.
E) barter.
98) A drawback of countertrade is that
A) it fails to enable firms to finance an export deal.
B) it is detrimental to the economy of the importing country.
C) developing nations have trouble raising the foreign exchange necessary to pay for imports.
D) it does not allow firms to invest in an in-house trading department dedicated to arranging and
managing deals.
E) it may involve the exchange of poor-quality goods that cannot be disposed of profitably.
99) One drawback of a countertrade agreement is that
A) it fails to give firms a way to finance an export deal.
B) it requires an in-house trading department to be maintained, which can be expensive and
time-consuming.
C) it is detrimental to the economy of the importing country.
D) developing nations may have trouble raising the foreign exchange necessary to pay for imports.
E) it is not an acceptable means of trading in most developing countries.
100) Countertrade is most attractive for
A) small exporters.
B) large multinational enterprises.
C) only U.S.-based firms.
D) any firm in democratic nations.
E) new companies.
101) Describe some of the common pitfalls encountered by companies trying to do business
abroad for the first time.
102) Compare and contrast the experience of exporting for U.S. firms with that of German and
Japanese firms.
103) Describe the role of the U.S. Department of Commerce in helping U.S. firms increase their
knowledge of export opportunities.
104) How does the Small Business Administration (SBA) help potential exporters?
105) Describe the role of export management companies. List their advantages and disadvantages.
106) Compare and contrast a customs broker with a confirming house.
107) How does a lack of trust affect firms engaged in international trade? How can the problem be
solved?
108) Briefly describe the various financial devices that help exporters solve the problem of a lack
of trust in international trade.
109) Explain the difference between a sight draft and a time draft.
110) Briefly describe the different forms of government-backed assistance that help potential U.S.
exporters finance their export programs.
111) Describe the mission of the Ex-Im Bank.
112) Explain why a company would use export credit insurance.
113) What is countertrade? When can it be used?
114) Briefly describe the different types of countertrade arrangements.
115) Describe the types of companies that benefit most from countertrade.