According to the provisions of the letter of credit: the latest shipment date is about to expire, but the customer has been unable to confirm the shipping date. Faced with such problems, many export companies often feel helpless. A few days ago, Lin Zengjian, manager of the foreign trade department of Yihong Electronic Technology Co., Ltd., combined with personal experience cases to elaborate solutions to such problems.
Practical case: “conspiracy” game with customers
In international trade, international ocean freight rates fluctuate greatly, and there is a large difference between off-season and peak-season freight. Therefore, domestic manufacturers are often more willing to quote FOB prices and are unwilling to bear the risks of rising and falling freight rates under CFR or CIF terms.
Under normal circumstances, shipping under FOB payment terms will generally be arranged like this: the customer informs the designated
freight forwarder or the designated shipowner in advance, and the manufacturer orders the freight forwarder or shipowner in advance according to this requirement, and the domestic forwarder receives the S/O (toward order) Later, the foreign agent will be contacted and the customer will be informed of the estimated shipping date, freight and sailing date of this ticket. After the customer's consent and confirmation, the domestic freight forwarder will arrange the space and put the container.
The author once encountered such a case in 2009: an American TV buyer purchased 4,000 garden lighting from our company. The lighting was printed with the customer's logo, and the packaging was printed according to the customer's design. After the contract was reached, the American buyer also issued an irrevocable
letter of credit at sight on time, and the letter of credit also indicated the customer's designated freight forwarder and contact information. The latest shipment date for this shipment is: January 18, 2010. At the beginning of January 2010, the author requested the customer to designate the freight forwarder to book the space in accordance with the requirements of the letter of credit, but the domestic freight forwarder did not receive the notice from the foreign agent and was unable to confirm the space for a long time. Later, according to customer requirements, our company must provide a set of shipment samples before confirming the shipping schedule. On January 5, the author sent a set of shipment samples to the United States via UPS. Due to the impact of the financial crisis, the customer refused to confirm the shipping schedule on the pretext that the quality of the shipment samples did not meet the requirements.
In fact, this product is a handmade product, and flaws are inevitable. According to our years of factory production experience, this flaw does not affect customer sales at all. Therefore, the customer's move is deliberately making things difficult. Since then, our company proposed to issue a quality guarantee letter, which is solely responsible for the claims caused by quality, but the customer still cannot accept it. At this time, it is already January 10, if the customer does not confirm the shipping space, the latest shipment date will be missed. This will cause delayed delivery and lead to difficulties in delivery. After the author negotiated with the client, the client gave the following plan:
Option 1: We would cancel this order due to its bad quality. I am unable to proceed forward with the risk involved with having this product arrive in an unknown condition & the overall financial impact this would cause to our company with ABC company.
Option 2: We would continue forward shipping this product to ABC company while holding onto payment to XXX(我公司) until the product's arrival & overall sale to customers with a successful outcome. Provided all quality issues are addressed during production, this solution would best suit XXX's situation while simultaneously addressing the reservations that I harbor regarding this product.
First, the customer proposed to cancel the order on the grounds of worrying about the quality of the item number. This is clearly the worst result, because this batch of goods is printed with the customer's LOGO, and the packaging is also printed according to the customer's design, and then reselling to other customers is almost impossible.
The second point is that the customer agrees to ship first under the pretext of worrying about quality problems, but must ensure that there are no quality problems in the sale before arranging payment to our company.
In desperation, the author had to pretend to agree, and promised that after the customer finished the goods, the bill of lading would be mailed directly to the United States. After the customer sold out, the remittance would be sent to our company. All original documents would no longer be delivered to the bank.
On January 14th, after receiving the confirmation from the customer, the domestic freight forwarder immediately arranged the container loading on the ship, which happened to be in time for the latest shipment. After getting the bill of lading, the author quickly prepared a complete document and delivered it directly to the bank, ignoring the customer's urging to mail the original bill of lading.
After 20 days, the author successfully received the full payment.
Looking back on this operation, it can be described as dangerous. In the process of operation, there is indeed 'deception' behavior: first pretend to agree to the customer's request, and then let the customer pick up the goods for sale, and then collect the payment.
However, if we do not do this, then we may be 'deceived': if after the sale is completed, the customer still uses quality as an excuse to delay payment, so we will lose the goods in vain; in addition, the arrow is on the line and we have to send it. At this time, if you do not agree to the customer's terms, this batch of goods will also have the customer's logo, and it may be difficult to find another buyer.
Therefore, the author grasped the following two points to ensure payment recovery:
1. The payment characteristics of the letter of credit: This letter of credit is an irrevocable letter of credit at sight. The bank is the guarantee of payment. It bears the primary payment responsibility. After receiving the complete and clean documents, it needs to perform the payment responsibility, namely The letter of credit replaced commercial credit with bank credit. This feature greatly reduces the uncertainty of payment caused by the uncertainty of transactions between merchants, and provides a great guarantee for both importers and exporters;
2. The author has enough confidence in the quality of the goods provided: it is indeed the goods provided in accordance with the customer's requirements with quality and quantity, and can allow customers to sell, rather than fraud;
Of course, this move is completely helpless, but it is not the most perfect way. The author hopes to use 'showing up to speak', so as to attract others.
Solution: Prevention is the key
For L/C payments under FOB terms, the author believes that the following points can be taken to prevent:
1. The payment terms of the letter of credit must be at sight and irrevocable. For orders with lower credibility or higher risks, you can take a 30% deposit before delivery and 70% of the balance payment at sight and irrevocable letter of credit, or purchase insurance on the letter of credit to ensure the safety of collection;
Second, do a good job in reviewing documents. Before the issuance of the letter of credit, carefully review the soft terms. When preparing documents, we must strictly abide by the principle of 'document conformity and document conformity' to avoid difficulties in presentation and acceptance. As a beneficiary, it is necessary to strengthen the work of reminder, review, and change of the certificate, carefully review the letter of credit, carefully study the acceptability of the terms of the letter of credit, and request the customer to change the letter. In the process of making bills, it is necessary to prevent discrepancies caused by soft terms that affect the safe collection of foreign exchange. Common soft clauses are as follows: ① Shipping company, ship name, port of destination, port of departure or consignee, date of shipment, etc., must be notified by the issuer or approved by the issuer, and the issuing bank will revise the letter The form will be notified separately. ② When the goods are ready for shipment, they must be inspected by the issuer. The signature on the cargo inspection certificate issued by the issuer should be verified by the issuing bank or consistent with the signature on file by the issuing bank. ③After the goods arrive at the port of destination, they must be inspected by the issuer before fulfilling the payment responsibility. ④The letter of credit is temporarily not effective: This license is temporarily not effective, and will take effect after the issuance of the import license or the confirmation of the goods samples by the issuer.
Some of these soft clauses are measures taken by importers to protect their own interests, and some are a prelude to malicious fraud. However, regardless of their original intentions, these restrictive clauses may constitute a great influence on the safe foreign exchange collection of beneficiaries. Threatened. The payment of the letter of credit with soft terms is completely controlled by the importer, which may cause the exporter to suffer losses.
3. Strengthen credit risk management and attach importance to credit investigation. Foreign trade companies should establish customer information files and objectively analyze customer credit status regularly or irregularly. Before the transaction, through some independent investigative agencies, carefully review the basic situation of customers, their registered capital, profit and loss, business scope, company equipment, bank address, telephone number and account number, business style and past history, etc. Carry out necessary investigations and comments, and choose customers with good credit as their trading partners. In the transaction, it is necessary to communicate with the foreign trade salesperson frequently, and give guidance and help to the doubts and difficult issues arising from the foreign trade salesperson during the transaction. After the transaction, the accounts receivable and uncollected are used as a monitoring method to prevent the occurrence of bad debts. In this way, risks can be avoided to the greatest possible extent and contribute to the smooth progress of the business.
Fourth, strive to improve the quality of business personnel and maintain a high degree of vigilance. Foreign trade business personnel should earnestly learn professional knowledge and continuously improve their business level, which is the key to preventing risks. With the increasingly fierce competition, the ever-changing market places more and higher requirements on business personnel, and trade practices are becoming more and more flexible. Therefore, if you are unfamiliar with the business, you will look at the surface rather than the substance when you encounter a problem. Lack of sufficient estimates and blind optimism can easily cause huge losses. Foreign trade professionals should pay attention to contact with customers. Once they find any signs of abnormality, they should report to their boss or inform the boss in time, and then deal with it after consultation. From the analysis of previous cases of accounts receivable but not collected, most of them are caused by the sloppy work of foreign trade salespersons and ignoring risks.
Fifth, follow a principle: before the customer does not pay, we must have absolute control over the goods. On the bill of lading, SHIPPER must display the name of the company, and the consignee (CONSIGNEE) must try to display: TO THE ORDER. Under the condition that the customer cannot pay on schedule, the owner has complete control over the goods. Special reminder: For goods exported to Turkey, if the bill of lading needs to change the consignee, the original consignee’s consent is required before the change can be made. Therefore, when exporting to Turkey, the name displayed by the consignee must be more cautious.
In short, as the main method of international settlement, letter of credit is by no means an impeccable payment method. Bank credit cannot completely replace commercial credit, and it is impossible to completely avoid commercial risks. In the specific operation of letter of credit business, we must be soberly aware For the possible risks in the letter of credit, strengthen the awareness of risk prevention and take precautions first to facilitate the smooth progress of the business and avoid unnecessary losses.
