Evidence Account Transaction

Evidence Account Transaction

Figure 7.6 shows how a complex transaction such as the F-18A sale to Canada might be structured. This type of transaction is sometimes known as an evidence account transaction because it requires adherence to certain contractual obligations. As noted, it involves the primary exporter, the importing government, and other secondary exporters and importers.
Whether firms become involved in the complexities of offset trade depends mainly on the strength of demand for their products, alternative sources of supply, and foreign exchange problems in the buying country. However, offset trade results primarily from foreign exchange shortage and is a good example of how firms and governments can compensate for the shortage through creative business transactions.


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