Payment Problems
In international trade, it is easier to avoid problemsāÆinvolving bad debts than to rectify them after they have occurred. NormalāÆbusiness prudence is crucial to the exporter in limiting risks. Credit checks and services such as the U.S. Commercial Serviceās International Company Profile, which conducts background checks on potential foreign partners, can be of great help in mitigating any risks in advance.
Just as in a companyās domestic business, exporters occasionallyāÆencounter problems with buyers who default on their payment. When theseāÆproblems occur in international trade, obtaining payment can be both difficult andāÆexpensive. Even when the exporter has insurance to cover commercial credit risks, aāÆdefault by a buyer still requires the expenditure of both time and money to collectāÆpayment. This is because the exporter must exhaust all reasonable means of obtaining paymentāÆbefore an insurance claim will be honored. Even after all the insurerās requirements have beenāÆmet, there is often a significant delay before the exporter receives reimbursement.
Whenever possible, try toāÆprevent payment-relatedāÆIssues before they happen. The simplest and least costly solution to a payment problem is to contact and negotiate with theāÆcustomer. With patience, understanding, and flexibility, you may often resolve conflicts to theāÆsatisfaction of both sides. This is especially true when a simple misunderstanding or technicalāÆproblem is to blame and there is no question of bad faith.āÆEven though you may be required to compromise on certaināÆpointsāperhaps even on the price of the committed goodsāāÆyour company may save a valuable customer and profit in theāÆlong run.
Many issues can be solved withāÆa phone call, either directly orāÆthrough a hired consulting agencyāāÆespecially if the heart of the disputeāÆis a simple misunderstanding.
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Tips for Addressing Payment Problems
When payment problems do occur, answer the following questions before seeking outside help or filing an insurance claim:
1. Have you contacted the buyer to determine the problem?
2. Have you attempted to negotiate a mutually agreed solution to the problem?
3. Have you supplied the goods/services as per the contract, invoice, orāÆletter of credit?
4. Is there an issue of quality or price?
5. Are all your shipping and customs documents in order?
6. Was there damage or theft?
7. Have you tried to work out delayed payment terms with the buyer?
8. Have you discussed your problem with your bank or your lawyer?
9. Have you exhausted all efforts to obtain payment from the foreign buyer?
10. Do you have copies of all correspondence and records related to the dispute?
If negotiations fail and the sum involved isāÆconsidered significant enough, your company should getāÆthe assistance and advice of your bank, legal counsel, andāÆthe U.S. Commercial Service. When all else fails, arbitration isāÆoften faster and cheaper than legal action. The InternationalāÆChamber of Commerce (ICC) handles most international arbitration; ICC arbitration is usuallyāÆacceptable to foreign companies because it is not affiliated with any single country. For moreāÆdetails, contact http://iccwbo.org.