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.pdf7. Международное совместное предприятие – форма хозяйственного и правового сотрудничества с иностранным партнером с целью создания общей собственности на основе финансовых и материальных ресурсов для создания прибыли. Совместные предприятия широко внедряются как в развивающихся, так и в промышленно развитых странах. Они могут иметь различную направленность – торговую, промышленную, сельскохозяйственную, научнотехническую.
Unit 3
COMMERCIAL ACTIVITIES AND TYPES OF CONTRACTS
DISCUSSION
What do you know about commercial activities in foreign trade and types of contracts? Answer the following questions and discuss them with your partner.
•What activities does foreign trade comprise?
•What basic types of contracts do you know?
•What auxiliary types of contracts can you name?
READING
COMMERCIAL ACTIVITIES AND TYPES OF TRANSACTIONS
Key concepts and terms
Match up the words on the left with their definitions on the right.
1) re-importing |
a) a person to whom a lease is granted |
|
2) barter |
b) something that counterbalances or compensates for something else |
|
3) link purchase |
c) a savings account deposited in the name of a trustee who controls it |
|
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during the certain period of time after which the balance is payable to a |
|
|
prenominated beneficiary |
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4) counterparty |
d) selling goods to foreign buyers and then buying them back |
|
5) leasing |
e) a person who grants a lease of property |
|
6) futures contract |
f) selling goods to foreign buyers |
|
7) countertrade |
g) buying goods from foreign sellers |
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8) trust account |
h) a contract to buy or sell a good, share, or currency on a future date, at a |
|
|
price decided when the contract is entered into |
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9) exporting |
i) international trade in which payment is made in goods rather than |
|
|
currency |
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10) lessor |
j) the other party in any transaction |
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11) lessee |
k) the exchange of one type of good or service for another without the use |
|
|
of money |
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12) offset |
l) the practice of hiring items of equipment rather than buying them outright |
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13) importing |
m) a deal where the export seller enters into a parallel contract |
with the |
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overseas buyer whereby the export seller purchases certain specific goods |
|
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from the buyer |
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14) factor |
n) the business of purchasing debts from clients at a discount and making a |
|
|
profit from their collection |
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15) factoring |
o) buying goods from foreign sellers and selling those to |
foreign |
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buyers without processing in one’s own country |
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16) re-exporting |
p) an agent entrusted with the possession of goods for the purpose of sale |
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|
41 |
Text 3.1. Read the text and explain the underlying principle of dividing all commercial activities into basic and auxiliary ones.
Foreign Trade Activities
Main Commercial Activities
Foreign trade comprises four main activities: importing, exporting, re-exporting (re-exports are goods that have been imported and then exported in the same form, i.e. not put through any manufacturing or finishing process) and re-importing (i.e. bringing back into a country an article or commodity that has earlier been exported from the same country, such as a motor car being re-imported after temporary export).
Types of Activities
All commercial activities in foreign trade may be divided into basic and auxiliary. Basic ones are associated with import/export transactions, i.e. with the conclusion of foreign trade contracts for the exchange of goods. Such activities cover selling goods for money that is usually reflected in a contract of sale, countertrade deals that are reflected in other types of contracts, the main being framework agreements, and such activities as leasing, tolling, consignation and futures.
To ensure the successful and profitable fulfilment of the above basic contracts, a number of auxiliary agreements (contracts) are to be concluded. Auxiliary activities ensure the successful performance of the basic ones, i.e. they are associated with carriage of goods, insurance, banking operations (financing the deals, settlement of payments between sellers and buyers, and guaranteeing the strict observance of their mutual liabilities), as well as customs and other activities. Agency agreements, agreements with the suppliers for the export of goods and with importers for the purchase of goods, agreements with advertising agencies and firms dealing with the market research and with other organisations helping to achieve the targets of foreign trade also refer to auxiliary activities. Such agreements as marine insurance policies or certificates and charter parties also refer to auxiliary ones. There may be about 10 or more auxiliary operations to one basic.
In some countries in accordance with commercial usage, contracts of sale and other agreements may be concluded either verbally or in writing. The laws of Russia do not recognize the validity of any international agreement concluded verbally. According to the Russian law, contracts must always be made in the form of duly signed documents containing the terms of an agreement between two firms or associations called counterparties to supply goods or services as a rule at a fixed price.
Text 3.2. Read the text and explain the essence of countertrade.
Countertrade
Economic Background
Countertrade is a term which denotes various methods of linking two export transactions. Countertrade is exchanging goods or services that are paid for, in whole or part, with other goods or services. Under a countertrade transaction a seller agrees to take full or partial payment in kind, i.e. it is a form of trading in which an exporter of goods undertakes to accept goods or services (rather than money) from an importer in exchange.
Less developed countries, oil exporting countries, and some others demand in a growing measure countertrade arrangements when accepting the supply of goods or services from exporters in the industrialised countries. Some developing countries lack hard currency and credit facilities to pay for their imports in money and also wish to expand their own export markets. Such countries seek to balance their exports and imports in compliance with the requirements of their national economies. Oil exporting countries use the oil which they produce as consideration in kind for industrial and other products which they need.
Countertrade is not the most desirable form of international trade; it is clearly a second-best policy. It is not in harmony with the concept of an open, cash-based trading system, which the WTO and the OECD (Organisation for Economic Cooperation and Development) aim to maintain and promote. They have expressed concern at the growth of countertrade in recent years, because countertrade replaces the pressures of competition and market forces with reciprocity, protection and price setting.
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In spite of this general objection, in practice countertrade is a method which is still employed in international business. Its defenders argue that while countertrade is not ideal, for an economy which has allowed its monetary system to break down, in the short run it is better than no trade at all. Countertrade transactions are frequently used in the oil business.
Types of Countertrade Transactions
The forms which countertrade transactions assume are infinite and vary from country to country and from case to case. However, some types of countertrade transactions can be discerned, e.g. reciprocal sales, barter, buyback deals, offset and switch trading.
1) Reciprocal Sales
Reciprocal sales (counterpurchase or counterdelivery or link purchase) are a common form of countertrade, especially with the former Comecon (Council for Mutual Economic Assistance) countries and with developing countries. Counterpurchase refers to short and medium-term transactions and denotes sales of goods and services to a country by a company that promises to make a future purchase of a specific product from the country. Under the counterpurchase transaction the seller assumes responsibility to purchase an agreed value of the buyer’s products to help finance the original sale (see the scheme below). The exporter agrees, as a condition of obtaining the order, to arrange for purchase of goods or services from the importer’s country. The sequence of events is as follows:
а) The exporter obtains an order subject to arranging for the disposal of goods or services from the importing country.
б) Two parallel but separate contracts of sale are set up, the export contract and the countersale, i.e. one for the sale of goods to the importing country, and one for the counterpurchase of goods from the importing country.
The organisation directly responsible for the counterpurchase will not necessarily be the exporter proper, but could be some other trading house or trader. On the other hand, there is normally recourse to the original exporter if the counterpurchase obligations are not fulfiled. The counterpurchase element of a contract may be about 10 per cent of the total contract value.
|
Goods (cost C1) |
|
Exporter |
Payment (C2) |
Importer |
(Seller) |
|
(Buyer) |
|
Goods (cost C3) |
|
|
|
|
C1 = C2 + C3, where C – cost
2) Barter
As is known, the basis of all early commerce was barter. This term is employed loosely in commercial circles. It is sometimes used – incorrectly – for all types of countertrade, irrespective of the legal nature of the arrangements made by the parties.
In law, a barter is an exchange of goods or services directly for other goods or services of equal value, without the use of money as means of purchase or payment, e.g. sugar from Cuba is exchanged for screws produced in Britain. As a rule, little or no currency is involved. This allowed nations to take advantage of the division of labor and the gains from specialisation. Barter, however, is inefficient compared with the use of money and is not at all convenient because people’s precise needs seldom coincide. The greatest disadvantage of barter is the fact that it depends upon a double coincidence of wants as the person who has goods of one type and wants goods of another has to find somebody who wishes to make the opposite exchange, either for their own use or as a professional intermediary. People must spend a lot of time and effort finding others with whom they can make a mutually satisfactory swap. The use of precious metals as a medium of exchange and the subsequent development of money avoided this inconvenience. Despite all disadvantages, barter still exists but nowadays it is only used when the monetary system of a country has broken down, in countries subject to civil disorder or hyperinflation, or internationally by countries with inadequate supplies of foreign
43
exchange. Barter involves a single contract for the simultaneous exchange of goods for goods between two parties. An example would be British exports of machinery to Zambia paid for by a simultaneous shipment of wood or bitumen. Straightforward barter is popular with some African and Latin American countries, especially those with a shortage of hard currency, but pure barter deals are rare.
Two types of barter can be distinguished. In the true barter, there is a simple exchange and no value is placed on the goods exchanged. In the valued barter, some value is put on the exchanged goods. It is obvious that in commercial transactions only the valued barter is used.
A valued barter is not the same as a reciprocal sales contract. The essential difference is that a valued barter, like an unvalued one, is a one-contract transaction in which obligations of the parties are made dependent on each other, whereas the reciprocal sales agreement is always a two-contract arrangement, even if the contracts are linked together in the manner indicated earlier.
In the valued barter two problems arise. The first is the disposal of the goods received by the exporter from the overseas customer. Secondly, arrangements have to be made for the payment of the settlement balance which at the end will arise in favour of one of the parties to the barter. A settlement account or evidence account will have to be constituted, preferably in a hard currency country which does not operate an exchange control system. The value of the bartered goods is set off in the settlement account and on termination of the transaction the credit balance is paid in cash to the party entitled thereto.
A typical example of barter by means of trust accounts would be the sale of trucks by a UK manufacturer to an African country, such as Kenya, with payment to come from the sale proceeds of local produce, say, coffee. The sequence of events is as follows:
a)The coffee is shipped to the UK and the payment is retained in a UK bank in a trust account, also called an escrow account.
b)The Kenyans arrange a documentary credit in favour of the UK truck manufacturer. The credit will be confirmed by the UK bank which maintains the escrow account, once there are sufficient funds from the sale of the coffee to cover the credit. The credit is then advised to the UK manufacturer who ships his goods and then presents the required documents to obtain payment.
Normal dealings in international trade are carried out by contracts of sale where the sale of goods means an exchange of goods for money. But if the contract provides for an exchange of goods for goods or services, it is not a contract of sale in the legal sense, but it is a barter. In American law, however, a contract of barter is also a contract of sale. The rules governing a contract of barter are not well defined in the English law. The contract of barter is assimilated to the contract of sale, as far as the terms implied by the law in the contract are concerned. The property in the goods, supplied in a barter by each party to the other, passes when the parties intend it to pass.
3) Buyback Deals
Buyback deals are another form of countertrade. Suppliers of capital goods agree to be paid by the future output of the factory which they are supplying. 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 (see the scheme below). For example, one country can sell a chemical processing plant to another country and take part of the plant’s future output of chemicals as payment.
Buyback refers to long-term contracts and is connected with the development projects supported with huge credits. Buyback involves two phases, one for the delivery of equipment to the buyer and a second for the delivery of the end product to the seller. In other words, buyback is a payment for products and services by the subsequent counter delivery of the ready goods made with the use of the earlier received products and services.
|
Equipment (C1) |
|
Exporter |
|
Importer |
(Seller) |
End product (C2) |
(Buyer) |
|
|
|
C1 = C2, where C – cost
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This kind of arrangement is made in mining, oil exploration or other major export transactions. The contractors who carry out the work agree that the purchase price will be paid in full or partly by their purchase of the produce of the installation.
The buy-back terms will often contain a most favored customer (m.f.c.) clause according to which sellers of the products will grant the contractors (the buyers) the most favorable price which they charge another customer purchasing goods on comparable conditions. The duration of the buy-back agreement may be lengthy.
4) Offset
It is an agreement by one nation to buy a product from another subject to the purchase of some or all of the components and raw materials from the buyer of the finished product, or the assembly of such product in the buyer nation. Offset is widely used in high technology products. Export orders are given for items such as aircraft on condition that the exporter incorporates components or sub-assemblies manufactured in the importing country.
5) Switch Trading
Switch trading is a practice in which one company sells to another its obligation to make a purchase in a given country. This is best described by way of example. Columbia sells coffee to Germany and instead of being paid builds up a credit balance. If Columbia then wishes to import coal from Poland, arrangements can be made to use the credit balance from the coffee sales to pay for the coal. Germany would thus settle with Poland.
Text 3.3. Read the text and explain how cash can be received for countertraded goods.
Disposal of Countertraded Goods
Turning Countertraded Goods into Cash
Countertrade in oil usually takes the form of reciprocal sales contracts or barter transactions. Here, the disposal of the countertraded goods is relatively easy as oil has a commodity market. But generally, countertrade arrangements involve considerable additional risks. The disposal of the countertraded goods may cause difficulty, in particular if they cannot be sold at a readily available commodity market. The exporters may require for their disposal the services of a third party and the commission or ‘disagio’ which they charge will cause additional costs which they have to calculate into the price fixed for the export goods. Sometimes the exporter may find it difficult to turn the countertraded goods into money in consequence of exchange control restrictions or other trade barriers which exist between various countries, and it may be necessary for them to engage in a complicated swap transaction involving a third country in order to obtain the consideration due to them for the export sale. The importer’s country may have a bilateral clearing arrangement with a third country, which has a credit surplus with the importer’s country. Here this credit surplus can be utilised by way of a swap transaction for the payment of the price due to the exporter. This would involve a triangular swap. Other forms of swap transactions are also in use. They need not always be triangular and some of them are simply currency swaps. It is obvious that swap deals in any form require the assistance of an experienced countertrade expert.
Many risks in turning countertraded goods into money can be reduced or avoided if the exporter enters into a factoring agreement with a confirming house, broker, bank or other finance institution.
Factoring
If export turnover is sufficiently large, an exporter may find it easier to shift the problems of collecting the payment for completed orders over to organisations that specialise in the task of debt collection and trade finance.
The exporters can assign their obligations and sell trade debts to the factor (a factoring company), usually a subsidiary of a major clearing bank, and be no longer involved in the countertrade transaction. In return, the factor provides the exporters at once with cash up to 80 % of the face value of the debts charging, of course, a fee for the services and sometimes demanding a bank guarantee from the exporter. The factoring company handles the sales accounting and carries out the task of collecting the debts from overseas buyers. The factoring company regularly monitors sales ledgers for the exporter. If the overseas buyer defaults on a debt, there is no recourse to the exporter. This is called
45
a non-recourse factoring. Because of this a factoring company makes an agreement with an exporting company only after examining closely the financial standing of the company and the reliability of an overseas buyer, and indeed of the buyer’s country.
A factoring company may be prepared to buy the goods destined for an overseas buyer for cash. The exporter then acts as the factor’s agent, delivering the goods and collecting the proceeds. If the buyer does not know that the exporter has raised finance through a factoring house to export the goods, it is called undisclosed factoring. The exporter still deals directly with the buyer for payment of debts.
Framework Agreement
Normally, it is advisable to conclude a framework agreement, within which the individual countertrade transactions shall operate. But sometimes in a long-term or major construction contract it is usual to build the countertrade provisions, e.g. the buy-back clauses, into the main contract without concluding a framework agreement.
The framework agreement should contain a clear definition of the mutual obligations of the parties. The countertraded goods should be specified and it should be provided whether their value should be ascertained on a FOB or CIF basis. Further, the restrictions as to the markets in which they may be sold should be specified. Arrangements should be made for a settlement account or evidence account and for the payment of the credit balance on termination of the agreement in cash. If the exporter intends to realize the countertrade proceeds at once by an open factoring arrangement, the factor should be a party to the framework agreement. The framework agreement often contains penalty provisions for nonperformance of the countertrade obligations bу the exporter. A choice of law clause and an arbitration clause should be provided. It simplifies matters if all contracts, viz. the framework agreement, the export sale and the countersale, are submitted to the same legal system.
Sometimes the framework agreement takes the form of a letter of intent, but this is unsatisfactory because a letter of intent is not enforceable in law.
Text 3.4. Read the text and explain why the forms of commercial activities described in it are considered to be basic ones.
Other Forms of Basic Activities
Apart from the mentioned above, basic activities include leasing, tolling, consignation and futures. Leasing is one of the forms of credit of durable export, e.g. cars, equipment or machinery. It is based on the lease of equipment with future buyout at a price, which includes leasing payments, and the cost of equipment. The seller is interested in selling the equipment, but the buyer does not have enough capital to buy, and this is the reason to enter into the lease contract. Under a lease contract, the lessor undertakes to provide to the leaseholder (the hirer or the lessee) property in temporary possession or use. A lease is a contract giving the right to use land, buildings or equipment for a set period, in return for payment of rent, i.e. it is an agreement between the lessor (the owner of the property) and the leaseholder (the person who wants to use it), which gives the leaseholder permission to use the object for a fixed period, usually several years. In return, the leaseholder pays rent to the lessor and is responsible for the object leased. The rent payable may be fixed, or subject to periodic reviews. When the lease expires, leaseholders may be able to extend it or even to buy the object leased at a reduced price. In the case of items such as technical equipment, they may be able to return the object and take out a lease on a newer model.
With leasing, the title of the goods does not change hands. It is generally used for larger objects such as building, land and machinery and enables firms to manage with less capital than they would need if all their equipment had to be bought. It also shifts to the owners the risk of obsolescence; this will be reflected in the rentals demanded. Leasing may give tax benefits where a new firm has no profits against which it can set tax allowances on any equipment it buys. As a rule, there are special leasing companies that are engaged in financial leasing transactions.
Tolling is a kind of joint production when one company works on the raw materials of the partner. One part of the produced goods compensates the value of the raw materials to their supplier and the other part is sold to third countries. It is beneficial to the raw material exporter.
Consignation is providing the goods by the exporter to be sold by the importer. The exporter still remains the owner of the goods. The importer does not own the goods but is responsible for their safety.
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Futures are trade in futures contracts to buy and sell standardised class of commodities at a stated price at some fixed time in the future. A futures contract entails for both parties the right and the obligation to trade. Futures contracts can be used to reduce risk by traders who have to hold a good and want protection against a low price, or who know they are going to have to buy and want protection against a high price. The contract can also be used to speculate by a trader who has a different opinion about expected price movements.
Concept check
1.What are the four main activities in foreign trade?
2.Choose the correct statement.
Re-importing is
1)buying goods from foreign sellers.
2)selling goods to foreign buyers, then buying them back.
3)buying and then selling goods in the same form.
4)selling goods to foreign buyers.
3.What basic and auxiliary commercial activities do you know? Complete the following chart and describe it.
|
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Types of activities |
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|
|
|
|
|
|
|
|
|
… |
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|
|
Auxiliary: |
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|
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1) carriage of goods |
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|
|
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2) … |
|
|
|
|
|
Selling for |
Countertrade: |
… |
… |
… |
Futures |
money |
1) barter |
|
|
|
|
2)…
3)…
4)…
5)…
4.What are the two ways to conclude a contract?
5.What are the requirements to the conclusion of deals in Russia?
6.Countertrade is considered to be a second-best policy. Do you agree with this statement? Justify your viewpoint.
7.Explain the sequence of events under the reciprocal sales.
8.Choose the correct statement.
1)Barter is the best way of trading nowadays.
2)Money as a means of exchange cannot help to avoid barter.
3)Barter as a method of direct sales is still in existence in some countries under certain circumstances.
4)Barter transactions are supported by the WTO.
9.What are the two types of barter? Explain the difference between them.
10.What problems may arise with valued barter?
11.What is a buyback transaction?
12.Explain the difference between reciprocal sales and buyback. Illustrate it by schemes.
13.Spell out the essence of offset transactions and switch trading.
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14.Do you understand the essence of factoring? Can you answer the questions on the heart of the matter?
1)What is the job of a factoring company?
2)Does the factoring company have recourse to the exporter if the buyer defaults?
3)How does the factoring company secure its interests?
4)When does the exporter act as the factor’s agent?
5)What is undisclosed factoring?
15.What are the essential features of the framework agreement?
16.When is it advisable to conclude a lease contract? Why?
17.Give explanation of such forms of basic activities as leasing, tolling, consignation and
futures.
18.Read each statement and decide if it is true or false. Correct the false statements. Explain your point of view.
1)At least three countries are involved in re-exporting.
2)The Russian legislation allows conclusion of oral contracts in foreign trade.
3)Usually one auxiliary operation corresponds to one basic.
4)Selling goods for cash is similar to countertrade transactions.
5)Highly industrialised countries with a strong monetary system often exercise countertrade transactions.
6)Countertrade transactions are still popular in commercial activities of countries.
7)Link purchase refers to long-term transactions.
8)Factoring is a service used by the exporter who passes the task of collecting debts to a specialised organisation.
9)Before the start of the factoring operation, the factor will take into consideration a number of factors that make this operation feasible.
10)If foreign buyers become insolvent under the factoring transactions, they compensate for the losses to the exporter.
11)Countertrade transactions are normally reflected in framework agreements.
12)The lessee is the owner of the property to be hired.
13)Selling a product to a leasing company is best suited when the exporter needs immediate payment.
LANGUAGE STUDY
1. Match the words on the left with their Russian equivalents on the right.
1) insurance policy or certificate |
a) страховой полис или сертификат |
|
2) charter party |
|
b) cчет взаимного урегулирования платежей, |
|
|
расчетный счет |
3) framework agreement |
c) торговля встречными поставками |
|
4) countertrade |
|
d) плата за услуги, вид комиссионных |
5) reciprocal sales (counterpurchase) |
e) обратная закупка, обратный выкуп |
|
6) settlement account |
f) чартер-партия, договор o фрахтовании судна |
|
7) evidence account |
g) счетa эвиденс, счет наличности (по сто- |
|
|
|
имости взаимных поставок) |
8) disagio |
|
h) в качестве оплаты натурой |
9) as consideration in kind |
i) общее (рамочное) соглашение |
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10) buyback |
|
j) встречная закупка |
2. Match the words on the left with their definitions on the right. |
||
1) commodity |
a) possessions collectively or the fact of owning possessions of value |
|
2) ledger |
b) in a proper or fitting manner |
|
3) process |
c) the right to demand payment |
|
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4) title |
d) causing a good result; advantageous |
5) rent |
e) recognition of or compliance with a law, custom, practice, etc. |
6) property |
f) the principal book in which the commercial transactions of a company |
|
are recorded |
7) beneficial |
g) having sufficient legal strength or force |
8) observance |
h) an article of trade or commerce |
9) validity |
i) compensation paid at intervals to the owner of a property by the user; the |
|
amount paid |
10) duly |
j) convert by some special treatment |
11) recourse |
k) the legal right to possession of property |
3. Match the words on the left with their synonyms on the right.
1) temporary |
a) be relevant (to); pertain or relate (to) |
2) associate |
b) obtain (goods, etc.) by payment |
3) durable |
c) finish or run out; cease; come to an end |
4) expire |
d) preference, privilege, benefit |
5) ensure |
e) connect or link with, couple |
6) purchase |
f) not permanent; provisional |
7) refer to |
g) long-lasting; enduring |
8) advantage |
h) make certain or sure; guarantee |
4.Fill in the gaps with the correct form of the words in 2 and 3.
1)We … barter, reciprocal sales and buyback with countertrade.
2)Hopefully, this contract will be … to the corporation.
3)The contract must be made in the form of a … signed document.
4)We cannot … this deal being a success.
5)His term of office as the president of the company will … next year.
6)The … of laws and rules while signing a contract is important for the successful fulfilment of the agreement.
7)Re-exporting means buying goods and selling them without further … .
8)The owner of the … to be hired is called a lessor.
9)We … switch trading and offset transactions to countertrade.
10)The lessor must collect the … in due time.
11)This contract gives the buyer the … to land.
12)In its most elaborate form the factor maintains the company’s sales … and other accounting functions, and does not seek … to its client if unable to obtain payment from that client’s customers.
13)Leasing of business equipment may have tax … and prevent local authorities from additional expenditure.
5.Fill in the gaps in the text using the words given below.
overseas |
equipment |
negotiations |
advantageous |
assistance |
leasing |
product |
lease |
exporters |
payment |
rental terms |
recourse |
costs |
contract |
lessee |
investment |
benefits |
assets |
Leasing
Where there is a large item of capital (1) … involved, an exporter may find it more (2) … to sell the product to a (3) … company which then provides it to the overseas buyer on a (4) … agreement. The exporter receives immediate (5) … from the leasing company without further (6) … .
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This form of a (7) … has grown considerably in the last decades and offers the use of equipment without the (8) … of capital or other liquid (9) … .
The (10) … of leasing locally in the country of exporters are:
•The (11) … is not exposed to currency fluctuations.
•The lessee obtains payment for 100 % of the delivered (12) … .
•The lessee may negotiate (13) … … over a period which matches the useful life of the equipment.
A leasing company can assist (14) … of goods in introducing them and their (15) … to major leasing markets in most parts of the world. In certain countries where a leasing company establishes leasing operations, first hand (16) … can be given to the exporters in their (17) … with the (18) … buyer in the provision of needed facilities.
READING
LICENSING
Key concepts and terms
Match up the words on the left with their definitions on the right.
1) licensing |
a) the owner of a licence |
2) installment |
b) commercial and saleable knowledge of how to do a particular |
|
thing; experience |
3) licensor |
c) payment of a total sum in regular amounts at intervals over a period |
|
instead of making a single payment |
4) licensee |
d) allowing another firm, for payment, to make use of a patent or |
|
trade-mark |
5) patent |
e) a percentage of the revenue from the sale of a book, performance |
|
of a theoretical work, use of a patented invention paid to the author, |
|
inventor, or proprietor |
6) know-how |
f) a person who holds a licence |
7) industrial application |
g) a government grant to an inventor assuring him the sole right to |
|
make, use, and sell his invention for a limited period |
8) royalty |
h) a relatively large sum of money, paid at one time, esp. in cash |
9) lump sum |
i) utilization in industry |
Text 3.5. Read the text and say whether licence agreements belong to basic or auxiliary transactions.
Licence Agreements
Historical Background
Licence agreements stand apart from all the above contracts because they do not deal with selling and buying physical goods but with the sale and purchase of ideas, scientific-technical knowledge in the form of licences, patents and know-how. As a rule, there are practically no standard licence agreements. Each licence agreement is more or less unique in itself, i.e. has its own specific individual characteristics.
Licence trade emerged much later than trade in goods at the time when industrialised economies reached a high level of development, which was accompanied by growing division of labour not only in the field of industrial production, but also in scientific research, project and design work and the industrial application.
Trade in scientific-technical achievements on the basis of licence agreements appeared as far back as in the XVIII century. During the second half of the XIX century licence trade was mainly practiced within countries with large local markets. And it was not until the end of the XIX century and the beginning of the XX century that it started to quickly develop internationally. The fast development of international trade in licences testifies that their import saves a lot of time, money and labor on one's own research and design work.
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