A firm concludes a counterpurchase agreement with a foreign country for which it receives some counterpurchase credits for purchasing its goods.The firm 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.

Question

Quizplus · Accepted Answer

This scenario describes switch trading, which involves a company trading their counterpurchase credits to a third-party trading house, who then find another company that can use the credits and sells them for a profit. This enables the original company to avoid taking on foreign goods they do not want while still benefiting from the counterpurchase agreement.

A Firm Concludes a Counterpurchase Agreement with a Foreign Country