Barter Trade Case Presentation

(For the first barter trade transaction mode)

I.Barter trade participants:

Seller: Chinese Auto Parts Manufacturer

Buyer: FRICO Group

Barter Goods: Iran Petrochemical Co.

Chinabidders Center A: Chinabidders International Co. Ltd. - Import/Export Agent

Chinabidders Center B: Chinabidders Parsian Branch - Iran Office

Security Deposit Bank in China: Bank of China Beijing Branch

Security Deposit Bank in Iran: ………………….

II.Background

The Buyer (FRICO) and the Sellers (China Autos) have reached agreements or contracts on purchasing Auto parts from China, say for a total contract value of 100 million Dollars. Due to the problem of sanctions, the normal bank payment channel is not working properly. Therefore, there is a need for both the Buyer and Sellers to use the barter trade services provided by Chinabidders platform to overcome the issues.

III.Platform rules and Contract adjustment

Based on the agreement between the buyer and the seller, it is necessary to adjust and modify the contract slightly so as to meet the requirements of the platform trading rules:

1.The contract currency shall be changed from US dollars to RMB. The currency exchange rate shall be determined by both parties and the contract value shall be adjusted accordingly.

2.It is the choice of both parties (buyer and seller) to decide whether security deposit is required or not. If yes, then both parties shall decide how much security to be deposited. If required, both parties or any party may deposit in China and/or Iran through Chinabidders at the selected banks.

Suppose: China Auto Parts deposit for this case, and agreed (10% of contract value of each shipment).

3.Both parties shall decide and modify advance payment percentage, if needed.

Suppose: 30% advance payment, 70% against shipping documents.

4.Both the buyer and the seller agree to accept the services and rules of the Barter Trade Platform. Both parties need to sign service agreement with the platform operation centers.

5.Both parties shall note that the delivery time may be extended as a result of the fact that the actual payment through cross-border barter process does take a much longer time than bank systems.

IV.Operation procedures

1.FRICO and the China Auto shall online register to become members of Chinabidders barter trade platform, free of charge at website: www.chinabidders.com.

2.The China Auto and FRICO shall upload the signed purchasing contract onto the platform independently and separately for verification and confirmation from the platform.

3.FRICO and the China Auto shall sign Export Agent Agreements respectively with Chinabidders barter trade platform operation centers, namely:

3.1 China Auto to sign the Agency Agreement with platform operation center A: Chinabidders International Co. Ltd.

3.2 FRICO to sign the Agency Agreement with platform operation center B: Chinabidders Parsian Branch.

4.Both China Auto and FRICO pay 10% advance of the agreed service fees (C5) for each shipment as per Agency Agreements (5%).

Suppose:

a)The value of first shipment is equal to one vessel of methanol (40,000 Tons), namely VCIF.

b)The FOB price for methanol is around US$150/t and sea freight about $40/t.

c)USD/RMB exchange rate: 7.1

d)Service fee of the shipment is C5 = VCIF x 5%

Then:

e)The total import cost value of the shipment would be (C+F+I+D+V+Misc.): Vcost

C = methanol purchasing cost ($150.0/t)

F = freight from Iran to China ($40.0/t)

I = insurance (10 ‰ or 1% of 110% FOB) (note: The specific insurance amount shall be subject to actual occurrence)

D = customs duty (5.5% of VCIF)

V = value-added tax (13% of (VCIF +D))

Misc. = ￥35 (logistics, storage, insurance, etc.)+￥15 (sales promotion) per ton.

f) Total market value of the shipment would be【Vcost +Margin(￥200/t)】: Vm

g) Gross profit of the shipment would be: Vm - Vcost = Pg

h) Additional sales VAT of the shipment would be Pg x 13% = Fv

i) Income tax (withholding) of the shipment would be (Pg - Fv) x 25% = Fi

j) FRICO net profit of the shipment would be: Pg - Fv - C5 - Fi

= ￥2,498,570

Remarks: methanol purchasing price and sea freight cost can be lower and market sales prices are normally higher than calculated. In other words, quite possibly the net profit shall be more than the above figure.

5.China Auto Parts submits security deposit, if so agreed (10% of contract value).

China Auto shall open an account in the Bank of China, Beijing branch through Chinabidders. The account shall be jointly supervised by the Chinabidders and the Bank of China to guarantee the contract execution.

Deposit amount Calculation: VCIF x10% = ￥5,442,860

6.Shipment of barter goods - Methanol.

FRICO shall purchase the methanol from the local Iran market at a best possible price and arrange transportation with Irani special methanol vessel. Delivery details including vessel schedule, cargo loading, inspection, documentation and other export formalities shall be coordinated with Chinabidders Parsian Branch. FRICO shall be responsible upto CIF China port.

7.Import and sales of methanol in China

Chinabidders Operation Center A - Chinabidders International Co. Ltd. shall be responsible for all the import procedures and provide payment on behalf of FRICO for the Customs duty (5.5%) and VAT (13%), plus arrangement and payment of logistics, storages, sales and payment of taxes, etc. to ensure the encashment of the methanol within 10 days.

All the balance amount after deducting the expenses and Chinabidders service fees shall be kept as the assets of FRICO to be used for payments to China Auto parts manufacturers. In this case, the balance amount shall be: VCIF + Net Profit

= ￥(54,428,600+2,498,570)

= ￥56,927,170 ($8,017,911)

8.Payment to Seller(s)

Chinabidders Center A - Chinabidders International Co. Ltd. shall follow the instructions of FRICO to issue advance payment, progress payment and final payment as contracted with sellers.

9.Delivery and export of Auto parts

Chinabidders Center A - Chinabidders International Co. Ltd. shall be responsible for the export formalities on behalf of China Auto parts sellers. Shipping documents shall be forwarded to FRICO accordingly.

10.Release security deposit when there is no issue from all parties. The deal is closed.