Buyback
From Supply Chain Management Encyclopedia
Russian: Байбэк
Buyback, or compensation deal, involves repayment in the form of goods derived from directly from, or produced by, the technology, plant, or equipment provided by the seller. A buyback occurs when a firm builds a plant in a country--or supplies technology, equipment, training, or other services to the country--and agrees to take a certain percentage of the plant's output as partial payment for the contract. For example, Occidental Petroleum negotiated a deal with the former Soviet Union under which Occidental would build several ammonia plants in the Soviet Union and as partial payment receive ammonia over a 20 - year period.
The buyback, is a such form of countertrade that involves two separate and parallel contracts. In one contract, the supplier agrees to build a plant or provide plant equipment, patents or licenses, or technical, managerial, or distribution expertise for a hard currency down payment at the time of delivery. In the other contract, the supplier company agrees to take payment in the form of the plant's output equal to its investment (minus interest) for a period of as many as 20 years.
Essentially, the success of compensation trading rests on the willingness of each party to be both a buyer and a seller. The People's Republic of China has used compensation trading extensively. Egypt also used this approach to develop an aluminum plant. A Swiss company, Aluswiss, built the plant and also exports alumina (an oxide of aluminum found in bauxite and clay) to Egypt. Aluswiss takes back a percentage of the finished aluminum produced at the plant as partial payment for building the plant. As this example shows, compensation differs from counterpurchase in that the technology or capital supplied is related to the output produced.46 In counterpurchase, as noted before, the goods taken by the supplier typically cannot be used directly in its business activities.
International buy-back contracts[1]
Contractual
References
- ↑ International buy-back contracts -http://www.jurisint.org/doc/html/con/en/2000/2000jiconen13.html
