PERMIJO,MELANIE M.

BSBA-311

1. A firm based in California wants to export a shipload of finished lumber to the

Philippines. The would-be importer cannot get sufficient credit from domestic sources to
pay for the shipment but insists that the finished lumber can quickly be resold in the
Philippines for a profit. Outline the steps the exporter should take to export to the
Philippines effectively.

 One option for the California-based company is to seek help from an Export-Import
Bank. This bank's mission is to assist in the financing of US exports and services in order
to enhance US jobs and market competitiveness. Using their direct lending operations, a
Philippines importer can obtain a loan to be used in the purchase of US lumber, which is
subsequently repaid with interest.
 The Philippines' importer could potentially request a letter of credit from their local bank.
The letter of credit says that the bank can pay a specific amount of money to a specific
beneficiary, usually the exporter, upon presentation of specific documentation. The bank
would pay the California-based company, allowing for on-time delivery of the lumber.

2. How do you explain the use of countertrade? Under what scenarios might its use
increase further by 2020? Under what scenarios might its use decline?

Countertrade is defined as a product transaction rather than a money transaction. When a

company or organization seeks to grow into a global market, these transactions are common. It
has numerous advantages for businesses, including acquiring a competitive advantage and a
variety of additional advantages. When exchange markets are limited or importers don't have
access to interchange (low reserves) after they must pay their acquisitions, the use of
countertrade may expand. Additionally, currency crises and monetary instability are two
important factors that contribute to countertrade. Countertrade comes with a lot of dangers, and
it's an old manner of doing business. Counter trade, on the other hand, is likely to increase as
long as countries lack hard money and exchange reserves. On the other hand, when trade barriers
reduce global commerce and many nations' international monetary systems improve greatly,
countertrades are expected to decline.

3. How might a company make strategic use of countertrade schemes as a marketing

weapon to generate export revenues? What are the risks associated with pursuing such a
strategy?

Counter trade is nothing more than an alternative method of conducting an overseas transaction
when traditional payment methods appear to be impossible, hazardous, expensive, or
nonexistent. Some countries, primarily underdeveloped countries, are more inclined to choose
counter trade to other types of trade. If a company is willing to enter a counter-trade deal, it
should seize an export opportunity with a competitor who is also willing to do so. Companies
who are willing to consider counter trading as a source of funding will have an advantage over
those that favor standard financing methods. In other situations, it will be dangerous in the sense
that some companies engaging in counter trade must be willing to staff an in-house trading
department dedicated to organizing and administering counter trade negotiations, as well as keep
in mind the quality of the products received through counter trade deals.