The triangle trade---triangular trading---arrangement is more often used by the export-trader. Many export-manufacturers use it these days in connection to their offshore manufacturing businesses.

Increasing number of export-manufacturers are investing in overseas production plants or moving the production to overseas countries, while maintaining the headquarter (i.e., export office) in its own country, in order to take advantages of

• lower production cost (lower labor and material costs)
• lower or free import tariff (in importing country) granted to a similar product originating from other exporting countries (less developed countries usually)

and then using the triangle trade arrangement to become competitive in their exports.

Under the triangle trade arrangement, generally, two buyer-seller relationships co-exist, which is a typical case in an export-trading. Buyer (foreign importer) buys from seller (exporter). Seller (exporter) in turns buys from third party (supplier), usually a manufacturer. Seller and the third party enter into a buyer-seller relationship. The third party ships the goods directly to the buyer, instead of to the seller.

The difference between the seller's and the third party's invoice value represents the profit margin of the seller.

The third party can be a manufacturer, subsidiary plant, subcontractor, or trader, which can be located in the exporter's country or another country, the latter is common in practice.

Following cases may be involved in a triangle trade arrangement:

• Seller, who is an export-trader, buys from supplier using a transferred credit, where the foreign importer opens a transferable letter of credit in favor of the seller.
• Seller, who is an export-trader, buys from supplier on open account basis.
• Seller, who is an export-manufacturer, owns the production plant abroad.
• Seller, who is an export-manufacturer, buys from supplier (another manufacturer) using a transferred credit, where the foreign importer opens a transferable letter of credit in favor of the seller.
• Seller, who is an export-manufacturer, buys from supplier (another manufacturer) on open account basis.

Please see Summary of Triangle Trade Procedure below involving a transferable letter of credit.

Countertrade is a generic term that describes various techniques for the conditional exchange of goods and/or services between seller and buyer. In layman's parlance, countertrade is "You buy from me and I will buy from you". As the trade reciprocation entails a requirement to buy in exchange for a right to sell, it is indeed a form of non-tariff barrier.

Countertrade provides a means of trade with countries using a blocked currency---currency that is not readily convertible into other currencies---or lacking the foreign exchange, thus removing the difficulties and risks in a trade financing and paving the way for a successful deal that otherwise would fail. Countertrade also provides a means to preserve foreign exchange reserves by eliminating the use of hard currency.

Countertrade is thriving in modern international trade. In early 1970's, countertrade was used by about 20 countries and now, more than 100 countries are using it. A wide range of goods and services are transacted on countertrade, for example, oil, airplanes, automobiles, mineral, machinery, agricultural products, shoes, wine, and advertising time.

Barter

Barter is the direct exchange of goods and/or services, of approximately equivalent value, between parties without the use of money or credit.

Offset

Offset is found most often in the large-scale capital goods, such as commercial aircrafts and military hardwares.

Offset is either direct or indirect. In a direct offset, part of the cost of the export product is offset by buying the agreed amount of goods---components or materials---from the importing country, which the exporter incorporates in the export product. Other direct offsets include coproduction, licensing, subcontracting, and joint ventures.

In an indirect offset, the import goods are not used in the export product.

Compensation or Buyback

Compensation or buyback is normally found in the exports of plants, machinery or technology, where the exporter is compensated by, or obliged to buy from the importer, the goods produced by such plants, machinery or technology.

Counterpurchase or Parallel Barter

The seller is obliged to buy from the buyer goods and/or services that are usually unrelated to the goods and/or services sold by the seller. The counterpurchase involves two separate contracts and the deliveries can take place within a period of one to five years.

Clearing Agreement

Two countries agree to buy particular types and quantities of each other's goods within a period of time, using a designated clearing currency. At the end of the period, the country that buys more may settle the shortfall either in hard currency and/or goods, or issue a credit to the other country in the subsequent clearing agreement, if any.