ROC Engineering, a Chinese shipbuilding company, agrees to build a fleet of submarines for the Sri Lankan navy, for which it will be paid in the local Sri Lankan currency. As per the agreement, ROC must also spend a substantial amount of the money it generates through this deal within the country. In accordance with the contract, ROC buys Sri Lankan tea at a reduced rate. This is an example of which of the following forms of countertrade?
A) descending bid
B) offset
C) barter
D) compensation deal
E) buyback arrangement

Question

Quizplus · Accepted Answer

This is an example of an offset agreement, where ROC Engineering is required to spend a portion of the revenue generated from the deal within Sri Lanka, fulfilling part of the contract by purchasing local goods (in this case, tea). Offset agreements often involve such stipulations to benefit the buyer's local economy.

ROC Engineering, a Chinese Shipbuilding Company, Agrees to Build a Fleet