Chapter 13
Other Modes of Trade

Section 1  Introduction
Section 2  Specimen letters
Section 3  Useful Expressions (Self study after class)
Section 4  Guide to Writing
Section 5  Exercises

Section 1 Introduction

Apart from traditional or straight import and export, trading opportunities are created through countertrade (对等贸易).

Countertrade takes multiple and varied forms, such as counter purchase (对等购买), switch trading (转手贸易), buy-back (返销, 回购), offset (抵消) or compensation trade (补偿贸易), etc.

Processing trade (加工贸易) is another popular trade pattern in many developing countries. For example, the General Administration of Customs, China, reports 16 specific types of processing trade. But processing with assembly (装配加工) and processing with imported inputs (进料加工) are the most important types.

Section 2  Specimen Letters

     Specimen 1: Proposal for a buy-back arrangement

We learn from … that you have insufficient capital for our new model of coffee processing machine ML-367. Would you therefore be interested in a buy-back deal (回购交易)?

Such a buy-back deal may help you take a step towards your strategic mission (战略任务) to expand production in the coming three years. … The deal would be structured (做结构说明) on the basis of the broad outline (概述) below.

We accept as payment a specified quantity of coffee processed by you with our machine until the invoice account (发票帐目) for our machine is fully settled (结清).

The exact quantity of coffee to be supplied is fixed (确定) at a level so that the estimated value of the coffee (i.e. quantity multiplied by the estimated unit price of the coffee) is equal to the total payment due (到期的).

You are already on our list of May visits to Vietnam. ….

The catalogue of our machinery, along with a pricelist, is attached for your reference.

Specimen 2: A positive reply to a countertrade proposal

We agree to your proposal of...，and … for discussion and conclusion of the deal.

We enclose our order sheet for …We would also draw your attention to our other products such as handmade gloves and handbags, ...

To achieve a balanced counter purchase (对等购买)  deal, we will ensure that our export articles (商品) will add up to (总额达到) US $ ... by increasing or decreasing the quantity of individual products chosen by you when signing specific contracts.

To facilitate (方便) payments we suggest that …. We also suggest that we include in the contract a provision (条款) of quality guarantee.

In reply (在答复中), please also state what other terms and conditions you plan to include in the agreement.

Specimen 3: Suggesting terms of a counter purchase deal

Our bankers, xxx, inform us that you require … and wish to pay for them with the window curtains (窗帘) processed under countertrade arrangements. Subject to …(以……为准), we should be pleased to conclude the deal.

We can offer you 50 sets of sewing machines, …, at the price of … The cost of the machines will be advanced (预付, 垫付) by us and be repaid by you in installments (分期偿还),  plus freight (运费) and interest (利息) at ... per annum.

Meanwhile, we would like to receive your quotation for linen (亚麻布) window curtains at 1,000 dozens a month. Upon receipt of your firm offer (实盘), we will try to package the two deals and work out a draft agreement (协议草案)  for you to consider.

We look forward to your quotation and your suggestions as to (关于) other terms and conditions.

    Specimen 4: A positive reply to the above proposal

We are pleased to learn … that you will consider a countertrade arrangement for the supply of Model A15 sewing machines.

As requested by you, we are making you an offer (报盘), subject to your acceptance by March 31, for 10,000 dozens of  linen window curtains at US$ ... per piece CIF EMP, to be delivered monthly in 10 lots two months after the trial operation of the sewing machines. The price of these curtains is to pay for the 50 sewing machines you supply plus freight and an annual interest of ... %.

For your information, we enclose a copy of our counter purchase agreement (对等购买协议)  with a Swiss firm. May we suggest the same arbitration clause (仲裁条款) included in the draft agreement (协议草案) you are to prepare.

We look forward to receiving the formal agreement from you soon.

Specimen 5: Negotiating terms of a processing/assembly deal
(谈判加工/组装交易的条款)

After … we would like to confirm the following points.

A processing and assembly arrangement under discussion is rewarding (有好处的) to both parties. ….

We agree to process and assemble the car heaters (汽车加热器) according to the technical data and blueprints (蓝图) provided by you. It should be noted that in the first two months, the on-site (现场) supervision and guidance of your engineers and technicians is a necessity for the sake of (为了) product quality. In addition, our workers can receive hands-on training service (实践培训服务). This is beneficial to both parties.

 

 

We charge a processing and assembly fee only for working on the materials and components supplied by you. However, in order to avoid down-time (停工时间) and maintain smooth progress (平稳进展), we suggest that except for precision items (精密物件), locally manufactured components can be used as supplements if your supply takes time to arrive. It is well understood that the quality of components such as PVC wire, screws (螺丝) and audio frequency transformers (音频变压器), though locally manufactured, are favorably compared with those of counterparts (同类产品) beyond China.

The overall processing fee is US$ … per unit, including charges for labor, packing, depreciation of machinery, storage and transport.

The auxiliary (辅助的) and packing materials used for processing and assembly as stated in Item 3 shall be purchased by us on your behalf and the cost involved shall constitute (构成) part of the processing and assembly fee, or if you like, they can be accounted for (核算) and paid separately.

 

All the car heaters processed and assembled by us shall bear your trademark (商标). Should any disputes and claims arise in regard to quality, patent (专利) and other property rights involved, they shall be settled by you.

We shall deliver a total output of ….. finished products (heaters) a month on condition that the materials and components provided by you reach us in time. If any defect (缺陷) is found in the materials supplied by you, you shall, upon receipt of our advice, send over replacements (替代品) immediately.

Payment for the processing and assembling charges is to be made by sight L/C to be opened in our favor, and the L/C shall reach us no later than 21 days prior to (=before) the date of each shipment.

Insurance for the materials, components and finished or semi-finished products, so long as they are in our warehouses or on our factory premises, is to be covered by us on your behalf. Insurance for the finished products on board for export (船上出口成品) is likewise to be taken care of by us. The premiums (保险费), however, shall be borne by you because they are your property.

 

As agreed upon during our preliminary (初步的) discussions, inspection of the finished products shall be made by the Shanghai Commodity Inspection Bureau (SCIB) based on your designs and other standards. The result of inspection or certificate issued by the SCIB shall be considered final and binding upon (有约束力) both parties.

       If the aforementioned (前述的) points are acceptable to you, we may enter into an agreement for two years as a trial. But one thing worthy of note is that the processing and assembling charges (费用) shall be subject to change (可以变化的) according to the variation of exchange rate.

       Your early comments would be most welcome.