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Countertrade

Patrick Giles, Mine to Market: The Legal Issues (1985)

Countertrade includes any form of trade involving an element of reciprocity. By this definition virtually every country engages in some form of countertrade (See Exhibit 1, the Reciprocity Spectrum). Certainly, the Nato countries, and especially the United States, are engaged in countertrade because of their offset programmes in the military and aerospace fields.

The General Agreement on Tariffs and Trade (the “GATT”) estimates that countertrade is involved in 8% of all merchandise trade. (The GATT does not cover services and is not effective in the agricultural area). Accepting the GATT definition of 8% of merchandise trade, countertrade accounts for $136 billion of trade in 1983.

Counterpurchase and Barter — Detailed Discussion

Set out below is an examination of the problems of counterpurchase from the viewpoint of the foreign supplier.

1.Protocol. The “link” between the two underlying sales agreements is generally created through the use of a [6a-2] protocol or preliminary statement by which the parties agree to enter into both underlying agreements simultaneously.

The protocol should be looked upon as a contract in itself, separate from the two underlying purchase agreements, and is fulfilled upon the parties' execution of both underlying sales agreements.

2.Primary Contract. The agreement for the primary sale of goods