Reciprocal Barter. On a rare occasion, a sourcing provider and an enterprise customer may choose to barter services by one party in return for services by the other. EDS and Worldcom adopted this model, but Worldcom later filed for bankruptcy protection, exposing EDS to a duty to deliver services without any assurance of receiving reciprocal services from the bankrupt customer.
Countertrade Agreements. Such bilateral barter agreements have a solid foundation in international trade with the former Soviet Union, its former Comecon members (Czechoslovakia, East Germany, Hungary and Poland) and the former Chinese foreign trade organizations before the capitalist market reforms in China. Countertrade requires special contract monitoring on each side. Key issues include:
- The size of the countertrade flow, the specific goods and services involved and the term of the agreement, including an exit plan by each party;
- Projections of changes in the supply and demand for the countertraded goods or services on the world market during the term;
- The impact of import-sensitive countertraded goods or services on local markets, which could result in trade regulatory relief (in the case of goods, in the form of countervailing duties and anti-dumping duties) or in some form of political or economic backlash;
- The quality and competitiveness of the countertraded goods or services;
- The pricing of the countertraded goods or services at the time of the deal and pricing adjustments included in the contract.
Further reading:
EDS-Worldcom Reciprocal Sourcing Agreements
SOURCE: http://www.outsourcing-law.com/2009/10/reciprocal-outsourcing-by-eds-and-worldcom-inc/
P. Verzariu, S. Bozek & J. Matheson, “East-West Countertrade Practices: An Introductory Guide for Business,” U.S. Dept. of Commerce Industry & Trade Admin. Aug. 1978).
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