The company plans to develop agency export business and doesn't know where to start, asking about specific practices, required materials, complexity of the process, and risks. The best answer states that the main steps of agency export business include negotiation of mandate, preparation of documents, customs declaration and inspection, foreign exchange collection and settlement, and tax refund application. During the process, attention should be paid to contract terms, foreign exchange collection risks, and cargo quality.
What are the unavoidable risks in agency import and export trade?
Resolved
I plan to find an agency company for import and export trade, but I've heard there are quite a few risks involved. I'd like to ask, what risks actually exist in agency import and export trade? I hope everyone can tell me, so I can prepare in advance and avoid pitfalls.
Trade Expert Insights Answers
In agency import and export trade, the first is credit risk. The principal may provide false information or fail to pay on time during transactions; the agent may also be negligent, harming the principal's interests. Secondly, there is market risk. The international market's supply and demand, and prices fluctuate frequently. For example, a sudden drop in commodity prices may cause losses to the principal. There is also policy risk. Trade policies of various countries are constantly adjusted, and changes in tariffs, quotas, etc., may affect the trade process and costs. Furthermore, there is transportation risk. Goods may be damaged or lost during transportation due to natural disasters or accidents. In addition, there is exchange rate risk. Exchange rate fluctuations will affect the settlement amount. Finally, documentation risk should not be overlooked. For example, incorrect or missing documentation may lead to goods being unable to clear customs smoothly.
These risks all require cautious handling in agency import and export trade.
Intellectual property risk cannot be ignored either. Import and export goods may involve intellectual property disputes, such as infringement of trademarks or patents. Once this occurs, the goods may be seized, and the company may face legal action and huge compensation.
Operational process risks are also quite common. The process of agency import and export trade is cumbersome, from booking, customs declaration, to inspection. Errors in any step, such as incorrect customs declaration data, can lead to goods being stranded at the port and incurring extra costs.
Tax risks should not be underestimated. Tax policies vary greatly between countries. If the agency company does not grasp the tax policies accurately, it may lead to overpayment or underpayment of taxes, causing economic losses to the principal.
Settlement risks are also worth paying attention to. In international trade settlement, if collection or letter of credit is used, difficulties in receiving payments may arise if the counterparty's credit is poor or there are operational errors by the bank.
Force majeure risks may also occur. Events of force majeure, such as earthquakes or wars, may disrupt production and transportation, leading to trade not proceeding as planned and causing losses to both parties.
Trade barrier risks also exist. Some countries set up various trade barriers, such as technical barriers and green barriers, which increase the difficulty of product entry and affect trade development.
Agency qualification risks should be noted. If the chosen agency company lacks full qualifications, it may encounter various obstacles during operation, affecting the normal progress of import and export trade.
Information transmission risks may also occur. Inaccurate or untimely information transmission between the principal and the agent may lead to incorrect decisions and affect the trade process.