Understand international trade risks.
Could your company benefit from a supplier with lower rates? Are there global sources that have offered your business innovative technology or a highly valued product or service? Importing might be able to give your company the competitive advantage you’ve been looking for.
Doing business overseas has its risks—longer cash-to-cash cycles, currency fluctuations, loss of goods in transit, etc. Are the benefits worth the risks? Learn more about common international sourcing risks and how to manage them.
Currency fluctuations – Currencies may change value significantly, even over the course of a single contract, so you’ll need to learn how to manage currency fluctuation risks. Whether your transaction is priced in local currency or the U.S. dollar, new exposure can radically affect sales and profits.
Foreign exchange (FX) services [link to Truist product] use market guidance, trades, swaps, and foreign currency deposit accounts to mitigate risk.
Payment risks – Since domestic transactions are usually completed on open credit terms with cash upon delivery, many companies aren’t prepared to manage international trade risks. An overseas trading partner’s track record can be hard to determine, plus international deliveries and payments add complexity along with the possibility of glitches, even if you find a trustworthy business partner.
Think about your partner’s country of origin and how that environment could affect your shipment and payment. To protect your arrangement, issue letters of credit or documentary collection transactions [link to Truist product] through your bank.
Volatile political situations – Political and economic international trade conditions can change rapidly. As an importer, you should be prepared to respond just as quickly. Civil unrest can limit movement of purchased goods out of the country and leave working capital stranded.
You need to stay ahead of challenges faced by countries you’re trading in or have plans to do business with. The International Trade Administration website is an excellent resource for up-to-date information and alerts on international trade.
Foreign business standards – Business environments in other countries can be very different from the U.S. so it’s important to be mindful of the local languages, cultures, business practices, accounting methods, and customs regulations. Any of these factors can easily derail the most prepared trade plan.
The World Bank's Ease of Doing Business rankings provide helpful insight into the time and costs associated with importing goods from 190 countries. Always be on the lookout for an experienced trading partner with knowledge about your industry and target nations.
Have you chosen a foreign exporting partner? Do you have experience with their country’s economy, business environment, or relevant financial products and services?
When it comes to importing, qualified partners are often the key to success. You’ll need a team with trade experience and local market knowledge to cut through the complexity of global business and accelerate your sourcing project.