Countertrade & Offset
Countertrade means exchanging goods or services which are paid for, in whole or part, with other goods or services, rather than with money. A monetary valuation can however be used in counter trade for accounting purposes. In dealings between sovereign states, the term bilateral trade is used, also defined as "Any transaction involving exchange of goods or service for something of equal value."
An offset (agreement) is an agreement between two parties whereby a supplier agrees to buy products from the party to whom it is selling, in order to win the buyer as a customer and offset the buyer's outlay. Generally the seller is a foreign company and the buyer is a government that stipulates that the seller must then agree to buy products from companies within their country. This is frequently an integral part of international defense and aerospace contracts.
Offset is a legal trade practice in mainly the aerospace and military industries. These commercial practices do not need state regulations but, since the purchasers are mostly military departments of sovereign nations comparable to the US Defense Department, many countries have offset laws, public regulations or, alternatively, formal internal offset policies. The international names for these commercial practices connected to weapons trade are various: industrial compensations, industrial cooperation, offsets, industrial and regional benefits, balances, "juste retour" or "equilibrium", to define mechanisms more complex than countertrade. The main difference between a generic offset and countertrade, both common practices in the international defense trade, is the involvement of money. In countertrade, goods are paid through barters or other mechanisms without the exchange of money, while in other defense offsets money is the measure and the medium of exchange.
A defence offset is an agreement between a prime contractor (the awardee of a government contract) and a government, and results in transactions (commensurate contracts) with recipient suppliers. Transactions can take several forms, from direct transactions (work directly related to the product or service that the government is procuring) to indirect transactions (work or investments which are not related to the government procurement but which nonetheless meet eligibility guidelines), and can involve third parties such as academic institutions which can participate in research and development initiatives that benefit the economy of the procuring government.
Our role is to assist all parties involved in this process, which is mainly aimed at compensation between the parties.
Contact us for more information, and send us your request for offset and compensation consultancy and/or submit us your offset, countertrade or compensation project.