The export-import industry faces several challenges, but the potential for profit in the global marketplace makes it well worth it for the business owner who makes wise decisions. Any trade deal is going to have risks, but buying and selling items overseas carries several different risks that must be weighed and accounted for in any trade agreement. We’ve outlined some significant challenges that exporters and importers face and what can be done about them.
In some situations, buyers may refuse to make payment for goods they’ve purchased, or they may be unable to pay due to circumstances that are beyond their control. In any deal, the buyer wants to delay payment as much as possible, while the seller wants payment as quickly as possible. It’s not uncommon for the payment agreement to be what makes or breaks an international trade deal. Some safeguards exist, such as trade credit insurance and export financing, which help mitigate the risks surrounding business with foreign entities.
Natural Disasters and Accidents
There is always the risk of natural disasters when sending goods overseas by ship or by air. Any vessel on the sea is susceptible to storms, tsunamis, and other weather events that can hamper a journey or sink a vessel. The plane or ship carrying the cargo may also succumb to mechanical failure or the fatal error of a crewmember.
These situations can delay or destroy international trade deals, and there is no way to predict when something along these lines will happen. While technology has taken an enormous amount of the uncertainty out of gauging weather patterns and determining the safest shipping routes, ensuring the goods is the only way importers or exporters to recoup their losses from a destroyed shipment.
Economic and Political Complications
The economic and political climate of one country can influence trade. An economic downturn may cause currency exchange rates to shift, leaving a buyer unable to pay for a shipment. Other political events such as regime changes, wars, revolutions, uprisings, riots, and acts of terrorism may complicate international trade deals.
Some of these things cannot be predicted and adequately defending against them can be a guessing game. International trade finance helps lessen most of the worries felt by both sides of a negotiating table in international deals. While trade insurance and trade finance may help keep the global economy’s wheels turning, any organization conducting business globally needs to consider and prepare for these potentially business-killing situations.