The Prevalent Risks Faced by Importer/Exporters

Those in the import/export industry need to be cautious of the inherent risks on both sides. There are risk exposures to pay close attention to through the whole process. Luckily, there are ways to limit these risks.

Export Risks

Certain scenarios will bring about an inability to pay on the part of the debtor and the loss, seizure or deterioration of goods. The main risks incurred by exporting companies include:

Political risks

• Extraordinary state measures
• Political events occurring overseas (i.e. war, revolution, the annexation of territory, civil riot, embargo, and nationalization)

Risk of transfer

A government or a central bank on the foreign exchange market can cause the debtor to be unable to purchase currencies and proceed with payment for goods (i.e., debt reduction programs or debt rescheduling measures).

Del credere risk

A del credere risk, also known as a commercial risk, involves insolvency or refusal to pay the debtor or its guarantor. This may lead to a cash flow issue for the exporting company. Not having the necessary manufacturing resources means that new orders can not be made.

Cases of force majeure

Cases of force majeure are unforeseen events such as natural disasters and wars that will stop the delivery of goods.

Foreign exchange risk

There is a wide variety of foreign exchange risks associated with the currency invoicing the export operation. Margins fluctuate on export in foreign currencies and vice versa.

Other risks

There are many risks that could arise within the process of exporting goods, such as risks of fire, transport-related risks, etc. Keep in mind that certain risk exposures require specific coverage. Be sure to speak to your insurance agent about how to stay protected.

Import Risks

Import risks typically involve the customs procedures the goods must go through. There are several key factors that importing companies must pay attention to.

Customs duties

Companies should be well aware of the duties payable when importing goods before starting the process. You can do so by inquiring with the seller about custom tariff numbers applicable to the products, then consult the online customs tariff to determine the total amount of customs duties and any other taxes levied by authorities. This will also help clarify if the goods are subject to an import license. Additionally, it is advised to find out the refund and deduction policies of foreign goods.

Legislation

Importers must be up-to-date with the imported goods laws, which vary from one product to another (e.g., food safety will be much different from veterinary laws).

Counterfeit goods

Be cautious of counterfeit goods when importing. There is particular trading that is prohibited in specific destinations. This is a common risk exposure when trading products via the internet.

Type of importing

Thorough and clear communication with the forwarding agent about the importing (permanent or temporary importing, transit or other) can save everyone so much trouble in the long run. It is better to over-communicate than under-communicate.

Checking invoices

Carefully check invoices after importing operations, as appeals are generally allowed to be lodged against customs receipts for 60 days. To avoid problems when importing goods, reach out to the forwarding agents. They usually are aware of all the formalities that should be completed. Importers and exporters insurance will be your safeguard when discrepancies or mishaps occur.

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors. Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!