Knowing the risks associated with importing and exporting can ultimately lower those risks. Finding the right partnership produces profits and there are resources to finding legitimate overseas partners.
The #1 risk is of course, getting paid. Risks falls under three categories.
- Commercial risk. The payment arrangement must be forethought and agreed upon by the seller and buyer. Cash advance payments, letters of credit and bank intermediaries can be methods for determining risk. A letter of credit is not a bank guarantee of payment and is document intensive.
- Country risk. A specific country may have risk due to business methods, economics and political issues which can result in unexpected investment losses.
- Currency risk. The exchange rate must be determined. A bank can guarantee exchange rates on a specific day to elevate the risk and solidify final costs.
INCOTERMS determine seller and buyer delivery issues like cost, risk and responsibilities/duties. The most misunderstood issue is at what time the title passes meaning possession and ownership are two different terms.
Roy Becker Seminars give in depth use and definition of importing and exporting. To contact Roy Becker Seminars, visit; www.roybeckerseminars.com.
To learn more about INCOTERMS visit; www.iccbooksusa.net.