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6 major risks in export business that foreign traders must know!

sofreight.com sofreight.com 2024-04-03 11:03:28

Sunny Worldwide LogisticsIt is a logistics company with more than 20 years of transportation experience, specializing in Europe, the United States, Canada, Australia, Southeast Asia and other markets. It is more of a cargo owner than a cargo owner~

In recent years, the number of risky debts and even bad debts in the import and export business has continued to increase, which not only results in interest losses, but also increases the risk coefficient over time, which has a serious impact on the sustainable development of foreign trade enterprises. Therefore, risk issues have increasingly become a topic of concern. Generally speaking, there are six main situations in which the risks of export collection are as follows:


#01The shipment specifications and dates are inconsistent with the contract provisions, resulting in foreign exchange collection risks.


The exporter failed to deliver goods as stipulated in the contract or letter of credit.


1. The production factory delayed work, resulting in late delivery;


2. Replace the products specified in the contract with products of similar specifications;


3. The transaction price is low and the goods are shoddy.


#02Poor document quality creates foreign exchange collection risks


Although it is stipulated that the foreign exchange should be settled by letter of credit and the goods should be shipped on time and in good quality, after the goods were shipped, the documents submitted to the negotiating bank did not match the documents and documents, so that the letter of credit did not play its due protective role.


At this time, even if the buyer agrees to pay, it has paid in vain for expensive international communication fees and deductions for discrepancies, and the time for collecting foreign exchange has been greatly delayed. Especially for contracts with smaller amounts, a 30% or 20% discount will result in losses.


#03Risks caused by trap clauses stipulated in letters of credit


Some letters of credit stipulate that the passenger inspection certificate is one of the main documents for negotiation.


The buyer will seize the seller's eagerness to ship and deliberately be picky, but at the same time propose various payment possibilities to induce the company to ship. Once the goods are released to the buyer, the buyer may deliberately fail to inspect the goods, delay payment, or even lose both money and goods.


The letter of credit stipulates that the transport documents will expire abroad within 7 working days after issuance, etc. Neither the negotiating bank nor the beneficiary can guarantee that such terms will be fulfilled and must be carefully reviewed. Once a trap clause appears, you should promptly notify the amendment. Don't be greedy for temporary trouble and plant hidden risks in the future.


#04There is no complete business management system


Export work involves all aspects, and both ends are outside, so problems are prone to occur.


If an enterprise does not have a complete business management method, once a lawsuit occurs, it will cause a situation where it is impossible to win, especially for those enterprises that only focus on telephone contact.


Secondly, since the company's customer base is expanding every year, in order for the company to be targeted in trade, it is necessary to establish a business file for each customer, including creditworthiness, trade volume, etc., and screen them year by year to reduce business risks.


#05Risks caused by operations contrary to the agency system


For export business, the real practice of the agency system is that the agent does not advance funds to the principal, the profits and losses are borne by the principal, and the agent only charges a certain agency fee.


But now in actual business operations, this is not the case. The first reason is that he has few customers and poor foreign exchange collection ability, and he has to strive to complete the target; the second reason is that he wants to make more profits but feels that the agency fee is too low.


#06Risks caused by using D/P, D/A forward payment method or consignment method


The deferred payment method is a forward commercial payment method. If the exporter accepts this method, it is equivalent to a financing discount for the importer.


Although the issuer voluntarily pays the deferred interest, on the surface it only requires the exporter to advance and lend money. In essence, the customer waits for the goods to arrive at the port to inspect the quantity of the goods. If the market changes and sales are not smooth, the importer can apply for bank refusal.


Some companies sell goods to classmates and friends doing business abroad. I thought it was a relationship customer, so there was no problem of not being able to collect remittances. Once there is poor sales or customer problems, not only the money will not be recovered, but the goods may not be recovered either.