Countertrade

A form of exchange in which an exporter in one country accepts equipment, raw materials and technology from an importer in another country as payment for finished products. This type of trading is practiced especially by Communist countries but is gaining in use by China and in developing countries of Africa and South America.

Countertrade arrangements may consist of counter purchase, reverse countertrade, buyback arrangements, switch transactions or swap deals. Countertrade is also a way to avoid reliance on tax haven operations for trading companies established in low-tax or no-tax countries so as to reduce burdensome taxes on profits.