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.

-Firms engaged in international trade have to trust someone they may have never seen, who lives in a
different country, who speaks a different language, who abides by (or does not abide by) a different
legal system, and who could be very difficult to track down if he or she defaults on an obligation”.
Therefore, if someone in the California’s firm has previously dealt with a Philippine’s company or is
actually a Filipino, then he or she would be a great assistant to the company in a way that he or she
could potentially have contacts that can evaluate this Filipino company or directly evaluate the
trustworthiness of the firm herself or himself. However, besides or without someone like this, the legal
steps are the only ways to ensure that the Cal company will receive the payment; it should use a third
party trusted by both companies as an intermediary. The Cal firm should require the Filipino firm to
obtain a guarantor or a loaner, who is usually an international bank, to issue a letter of credit on which
the bank promises to pay on the behalf of the Filipino company. There are some steps for the California
exporter to take in order to guarantee the payment from the Filipino company

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?

-When cash is in a shortage of a company, countertrade often occurs in trading of goods and services.
“Countertrade is an alternative means of structuring an international sale when conventional means of
payment are difficult, costly, or nonexistent” Countertrade denotes a range of barter-like agreements;
its principle is to trade goods and services for other goods and services when they cannot be traded for
money. “Countertrade practices have expanded during the past decade. Long associated primarily with
East-West trade, they appear to be spreading to other areas. The international community, however,
has not been effective in ad- dressing these practices which are, in large measure, contrary to the basic
tenets of free and multilateral trade...Countertrade facilitates management of the centralized planned
economy” Moreover, countertrade is very much favored for political and economic reasons for a
government.

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 as strategy?

-Countertrade includes a range of barter like agreements. It is primarily used when a firm exports to a
country whose currency is not freely convertible and may lack the foreign exchange reserves required to
purchase the imports”. However, because of the financial and economic limits of developing countries,
there is often a limit on the amount of countertrade that a local firm could make. Such limit then could
hinder the agreements between the local firm and the foreign firm because it might not satisfy the deal
they intend to make previously.