Commercial Risk In International Trade - Adam Wong
This type of risk deals with the creditworthiness of the buyer and risks that the shipment will not be
accepted. This risk is divided into the following categories:
This is the risk that the buyer will not accept the shipment. Non acceptance may be due to:
- documents indicating that the seller did not comply with the sales contract;
- the buyer refusing the shipment capriciously if he does not want to complete the transaction;
- a means to compel the seller to lower the price.
When the shipment is not accepted, the seller is left with the goods in a foreign port which may
accumulate large demurrage charges. The seller may try to settle the dispute with the buyer either
through direct negotiation or legal channels, which may be a difficult process due to long distance and
the problems associated with bringing suit in a foreign country with a different legal system.
This is risk of slow payment or financial insolvency. The buyer will not be able to make payment on
receipt of the goods or at a later date according to the sales agreement. The degree of financial risk
increases with :
- the length of credit terms offered to the buyer;
- the nature of the buyer's business;
- the buyers financial capacity.