|
|
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: Acceptance Risk 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. Credit Risk 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. |