VITA's Global Networking Breakfast on September 27th at the  Van Nuys Airport was featured in the  San Fernando Valley Business Journal's  Community of  Business Section!

Photo 6 Caption: The Valley International Trade Association hosted its bi-monthly Global Networking Breakfast on September 27 at the Van Nuys Airport. Guests stand in front of Magic Johnson's private jet during a special tour of  Clay Lacy Aviation and U.S. Customs and Border Protection.

In the world of global trade, even the best-laid plans can go awry.

I talk with clients every day about the inherent risks of international trade, ranging from preventable errors to unforeseen geopolitical events. For companies looking to expand internationally, being aware of these risks can help minimize the risk of loss and damages.

Here are several key risk factors to keep top of mind:

Commercial risk

What is commercial risk?

A sale isn't a sale until you get paid. If the buyer cannot pay for your products or services, that affects your supply chain and your bottom line. Whenever you, as the exporter, offer credit without collateral, you risk potential losses if the buyer does not pay.

This is especially important for international trade transactions where other risk factors such as political or foreign exchange risks, can weigh heavily on foreign buyers. Without assurances in place, you could be stuck without payment.

How can you address commercial risk?

If possible, collect payment before services are rendered or goods are delivered. If cash-in-advance is not workable, supplement with bank-mediated letters of credit, trade receivables insurance, or credit card payments.

In any case, the strength of your customer relationship will be pivotal to your success. Try to meet in person if possible - even a brief face to face meeting can set the tone for more productive contract and payment terms discussions.

Product risk

What is product risk?

The quality and quantity of your company's goods and/or services helps drive sales and build goodwill with your trading partners. If your product suffers from frequent errors, delays in shipment, or customs concerns, it can hurt your overall brand reputation with buyers.

Here's an example: An international vendor developed coffee mugs for a client's Valentine's Day campaign. The customer asked for red mugs aligning with the holiday theme, but the vendor sent blue - perhaps ideal for Memorial Day, but hardly designed for Valentine's Day.

If this had been a domestic sale, it would likely have been resolved quickly. However, if you are or buying or selling products halfway across the world, any mistake could take weeks or even months to resolve.

How can you address product risk?

Beyond recurring internal quality assurance, you can shield yourself from product risk by conducting pre-shipment inspections. Not only do these inspections reduce the risk of shipping or receiving defective product, they also diminish risk linked to internet commerce, such as phishing and fraud.

Bank risk

What is bank risk?

This risk lies directly with the foreign banks, who are often a party to your international transactions. It is an inverse factor from commercial risk - if you are working with a letter of credit, the commercial risk is replaced by bank risk as the burden is shifted to the importer's bank. If the bank goes out of business, becomes insolvent, or fails to properly execute a payment, it could impact your ability to collect from your customers.

How can you address bank risk?

Research the buyer's bank before entering into a trade agreement. Consider their reputation, financial condition and overall ratings. If selling on letter of credit terms, ask a bank, like U.S. Bank, to confirm the credit and take on the obligations of the issuing bank to pay.

Documentary risk

What is documentary risk?

In the same vein as product risk, documentary risk arises when partners provide improper, incomplete or fraudulent documents associated with an international trade transaction. Just one missing document could grind an entire transaction to a halt, costing both the importer and exporter time and money to resolve.

How can you address documentary risk?

If you don't have trade documentation expertise, invest in training. If you don't have staff available to train, consider a partnership with a firm who specializes preparing trade documentation. Additionally, if you are transacting on letter of credit terms, many banks, like U.S. Bank, offer expertise in documentary compliance and can work with you to ensure that a clean presentation is made to the issuing bank.

Country risk

What is country risk?

The largest and most complex risk factor, country risk covers the overall economic, political and legal stability of a country. There are several sub-factors within this category.

These factors may change over the course of a trade relationship, impacting trade partners at several points of the supply chain.

How can you address country risk?

Try to protect yourself as much as possible from country-specific risk factors. Conduct an analysis of the importing country's economic and political trends, FX reserves and sector performances before considering ways to mitigate those risk that are of concern. Private insurers and the Export-Import Bank of the United States offer trade receivables credit insurance to help shield companies from country risk factors outside of their control.

Additionally, when selling on letter of credit payment terms, banks like U.S. Bank also offer letter of credit confirmations to mitigate country risks.

Knowing the risks is half the battle.

All of these risk factors can adversely impact your business, so it is vital to understand them and seek out ways to protect yourself. If you want to learn more about how U.S. Bank helps exporters navigate these risks, contact me at [email protected] for more information.

Consulegis hosted their 2017 Autumn Conference in Osaka, Japan from October 10-14. The conference included a welcome reception at the Osaka Bar Association hosted by member, Honmachi International Law and a panel discussion. 

Jeffery Daar, VITA board member attended and took part in the panel discussion on the rise of populism and its impact on international law, Brexit and debt collection issues for Japanese businesses. 

Consulegis is an international network of independent law firms, in-house lawyers and related professional advisors. The network started with approximately a dozen local members and now includes members in more than 45 countries and 150 cities globally. The principle objective of Consulegis is to provide its members with legal resources for their clients throughout the world, with a particular emphasis on professionalism, mutual trust and friendship, i.e., to arm its members, whose clients have commercial and litigation requirements extending beyond their own borders, with the ability to refer clients to known and trusted colleagues in all corners of the commercial world. 

Doing Business in Trinidad and Tobago
October 31, 2017 at 10 am PT

Cost: $35

Registration Link - https://emenuapps.ita.doc.gov/ePublic/event/editWebReg.do?SmartCode=8Q97  

 

The United States is Trinidad and Tobago's largest trading partner, accounting for 40% of Trinidad and Tobago's total imports and purchasing 38% of its exports.  A small country of 1.3 million, Trinidad and Tobago's economy is dominated by the energy sector. Trinidad and Tobago's geographic proximity and strong links with the United States have contributed to a strong presence by U.S. firms in the country. Trinidad and Tobago imported $2.4 billion of U.S. goods in 2016. Best prospects sectors for U.S. exports include: Energy equipment and services, equipment and supplies required for manufacturing, automotive sector, and maritime services, safety and security products, information and communication technology, entertainment and tourism related equipment and services.

 

The foregoing analysis of export opportunities in the Caribbean Region is not intended to be exhaustive, but illustrates the many opportunities available to U.S. businesses. Applications from U.S. companies will be considered and evaluated by the U.S. Department of Commerce on their market potential in the Caribbean region.

 

Doing Business in Barbados 

Date: November 8, 2017 at 10 am PT

Cost: $35

Registration Link - https://emenuapps.ita.doc.gov/ePublic/event/editWebReg.do?SmartCode=8Q96

 

Barbados is the largest market in the Eastern Caribbean and enjoys a robust trading relationship with the United States, with Barbados importing $483 million of U.S. goods in 2016. Barbados enjoys one of the highest per capita incomes in the region and an investment climate which benefits from its political stability and stable institutions. Tourism and financial services are important foreign exchange earners for Barbados, and opportunities are primarily in these sectors. The tourism sector is expected to be upgraded through several announced construction projects, with growth projected for the medium term. The government is also actively encouraging the development of new sectors such as renewable energy, pharmaceuticals, digital technologies, holdings companies and global asset management.  Best Prospects include Construction and Building Products; Consumer Goods; Agricultural Products and Equipment; Renewable Energy Technologies and Equipment; Hotel and Restaurant Equipment and Financial Services.

VITA Co-Chairperson Brett Tarnet will be presenting at the Agriculture Export Financing Seminars on November 6th in Fresno and November 7th in Bakersfield,  hosted by the District Export Council of Southern California and sponsored by Rabobank.  The event is an opportunity to get expert advice for agricultural products and equipment producers in the San Joaquin Valley.  

Exports play an important role in California's economy and they could play an important role in the future of your company. Find out how to use these tools to improve your global competitiveness and protect your foreign receivables. 

Speakers include the Foreign Agricultural Service, SBA, Export Import Bank, and several subject matter experts and will be providing information based on actual successes in the field.

Attendees will learn about

• Loans to Exporters: Sources of Funding and How-To's on qualification
• Buyer Financing Options
• Contract / Payment Structures in Export Transactions
• Payment Risk Mitigation Techniques
• U.S. Government Assistance Available
• How I Obtained the Export Financing Needed to Become Successful
• Special Bonus: Ask the Experts in One-On-One counseling!

Brett Tarnet will provide information during both sessions on transactional structure options, and risk mitigation best practices for exporters of agricultural products and equipment.

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