A French subsidiary owes a Mexican subsidiary $6 million and the Mexican subsidiary simultaneously owes the French subsidiary $4 million.Through a mutual settlement a single payment of $2 million is made from the French subsidiary to the Mexican subsidiary,the remaining debt being canceled.This example best exemplifies:

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Bilateral netting involves offsetting mutual obligations between two parties to arrive at a single payment. In this example, the French subsidiary owes $6 million to the Mexican subsidiary while the Mexican subsidiary owes $4 million to the French subsidiary. Through bilateral netting, they are able to settle their accounts by making a single payment of $2 million and canceling the remaining debt. Transfer loan, fronting loan, and multilateral netting do not apply in this scenario.

A French Subsidiary Owes a Mexican Subsidiary $6 Million and the Mexican