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Countertrade, in its current form, has been around since 1960. It is much like a barter system or the concept of trading goods for other goods which has gone on for thousands of years. Counter trade is still used today since it is not always financial viable for two companies that are doing business in different currency to use cash payment for goods or services. This is usually due to one country not allowing import which makes their local currency nonconvertible. Governments can also require firms to use counter trade in whole or in part of their import dealings as a way to control currency exchange rates. Regardless of the reason, counter trade is a way for companies to continue to do import and export business without having to worry about currency conversion.

Counter trade in its simplest form is when one company offers another company products or services in return for their products or services. There are many different types of counter trade options available to companies: barter, counter purchase, offset, switch trading and compensation. Barter is direct exchanges of goods between the two parties and is the simplest form of countertrade. Products change hand at the time of the agreement and each company moves on. Counter purchase and offset are buying agreements where one company agrees to buy from the firm or another firm in the region at a future date for goods or services they will receive today. Unlike a traditional currency, counter trade agreements require the two companies to stay in business together for longer periods of time: until payment of goods is made in full.

Switch trading is done by 3rd party firms who specialize in buying and selling counter purchases from companies that cannot use the services or goods received in a counter purchase. The switch company will have a network of firms to find someone who is willing to purchase the counter trade materials at a profit. The original owner of the contract will sell to the switch trade company the goods or services who in turn will sell them to the company who needs the items.

The reason that countertrade is so popular is that it allows countries that either because of their economical standing or because of government law do not have convertible currency or have poor exchange rates to do business with more economically viable companies in different countries. While the more economically affluent companies would prefer to do business in cash, they know they are closing themselves to these smaller

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