AVOIDING EXPORT TRADE BARRIERS
(by D.G.D. Mauritzen, Marketing Manager, The Chartered Bank)
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The finance of export trade is a continually developing science, yet the sophisticated methods which are used today are in many ways the same as the practices used by the earliest British traders in Hongkong.
At the end of the last century, for instance, almost fifty years after the Chartered Bank itself was incoprorated, local fur exporters to Britain used to take cash advances against Documentary Letters of Credit to provide themselves with funds to purchase furs from China. These cash advances were noted in red ink on the reverse of the Letters of Credit and were the origin of today's Red Clause Letters of Credit.
The problems facing today's exporters have been complicated by many factors such as growing prtectionism, fluctuating exchange rates and the development of new markets. But basically an exporter still needs the same things —— stability, a guaranteed supply of materials, new products and markets, and information on the financial situation in the rest of the world.
Modern banks, particularly the larger international ones, can help the exporter not only by financing his trade but by advising him about economic trends, currency problems and ways of avoiding the many legal obstacles and trade barriers that stand in his way.
The Hongkong businessman has earned an enviable reputation for being adaptable and innovative, and possessed of the necessary courage and determination to develop new products and to work hard to make them a commercial success. But even once he has produced his goods and Identified his markets and price, there still exist certain risks which call for the knowledge and resources of an experienced bank. These risks that an exporter may be aware of many categorised as follows:-
CREDIT This refers to the possible insolvency or default or unwillingness to pay for to accept the goods)on the part of the Importer. This is a perpetual risk and in some trades it is considered that it has recently grown, Although this risk can to a large. extent be covered by obtaining a Documentary Letter of Credit this can only be considered as being satisfactory if the exporter can be sure that all terms of the Documentary Letters of Credit can be met.
There have been wide movements in exchange rates in recent years and Hongkong exporters frequently have to
EXCHANGE quote in foreign currencies.
TRANSFER →→ The Importer's country may strike a period of weakness during the period of the contract, and official barriers may be erected against the import of the goods or, even worse, against payment for the goods after they have arrived. This risk can best be judged only by expert research through the internationally-linked banking system or official information bodies.
TRANSPORT -- There is always a risk of damage, theft and other form of loss of the goods in transit. This risk can of course be covered by marine insurance, which is the oldest form of insurance in the world and in which a vast body of experience and precedent has been built up over the centuries. Modern variants are land-surface policies and air cargo insurance.
PERFORMANCE
Hongkong businessmen may not necessarily be exporting goods but may be exporting services or expertise. The performance risk especially applies to large contracts for goods or services on international projects. With the accelerating volume of international bidding on contracts to build large infrastructure items, usually financed by the International lending institutions and by syndicated bank loans, government and private clients are demanding performance bonds and similar guarantees.
JOINT RISKS -- In recent years, the governments of developing countries have considerably increased their volume of funding for large projects, supplies for which are to be bought from abroad in large measure. This is especially common in the East and Southeast: Aslan region. When the overall foreign exchange loans are made, from the World Bank and its sister organisations, from the Asian Development Bank, or from the private sector banks (or any combination of all of those), the process of tendering for supplies and services can be set in motion.
For many of the contracts, there are opportunities for subcontracting and joint contracting. The successful bidders on these contracts may experience joint risks, and the negotiation of the financing, the delivery and the reimbursement have to be accomplished through a "hierarchy" of institutions, which can only be done through the international banking system and its allied professions.
· To meet the needs of the exporters in covering many of the risks described above, the Export Credit Insurance Corporation was established. This organisation provides insurance protection for the exporter against financial losses which might otherwise be suffered through non-payment for the goods or services supplied to overseas buyers, against payment of a premium.
The banks in their turn now provide a host of services to assist in this business. As well as obtaining and providing reports on the credit worthiness of potential buyers, they usually now grant loans and finance exporters using the following means:
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Loans for specific amounts repayable in an agreed schedule for the purpose of plant and industrial development. Overdraft for working capital,
c)
七十八年來忠誠待客
Preshipment finance in the form of an overdraft taken against the security of an acceptable documentary letter of credit, repayable either from the proceeds of a negotiation made under that letter of credit or from a packing credit.
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(Continued P. 33
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