RISK MANGEMENT

IN EXPORT BUSINESS

GROUP 4
TEAM MEMBERS
R 01
IN

I
NEGOTIATION

IN CONTRACT
02
S
SIGNING

IN CONTRACT
03
K PERFORMANCE
 01
RISK IN
NEGOTIATION
 RISK
● Being destitute of doing research about customers and
the market.
● Combining people with problems, these two elements
must separate.
● Caring too much about positions and forgetting about
interests.
● Lacking controlling emotions.
● Do not look for mutual gains.
● Lacking preparation such as a series of tradable, set
limits, and what-if scenarios, objectives.
● Making concession.
SOLUTION
● To reduce those risks and successfully negotiate,
we have to prepare for this.
02
RISK IN
CONTRACT
SIGNING
 2.1 INTRODUCTION
First of all, the information of the two parties is stated clearly here.
 2.2
CONTENT OF TERMS
AND CONDITIONS:
 Commodity
Risk: This is very easy to confuse in the
preparation of the object for this contract with
another object with which the company does
business.
=> Solution: The commodity should be specified
clearly, exactly and briefly
Example: Semi-IQF Raw Head-On Shell-On Black
Tiger shrimps (Pennnues Monodon)

ARTICLE 1: Commodity - Quantity –

Unit price and Amount
 Quantity
+ The quantity of the shipment is not specified
+ Gross Weight is not clearly shown
+ No tolerance in quantity
Risk: The exporter may mistake or deliver the
wrong quantity of goods.
The delivery is short or a little more than the
required quantity.
=> Solution: The quantity must be stated and also
should be estimated by approximate figure with the
tolerance of more or less 5%
Unit price and Amount

Risk: It may cause modification

in the price of commodity.
=> Solution: Written in words
“Sixty-nine thousand four
hundred and eleven only eighty-
four cents US Dollars”’
 ARTICLE 2: Quality and packing

In this clause of the contract expressed too general

and vague.
+ Product quality is not specifically mentioned => Solution:
+ Packing specifications are also not specified. - There should be many packing
+ Lack of Marking specifications for different types of
Risk: shrimp.
- It can lead to a dispute when the wishes of the - Adding to additional conditions
quality, packaging and markings of the two parties such as SIGNS to help classify the
are not the same. goods, as well as storage conditions
- Difficulty in thinking about the packaging for the shipment.
method by the seller
 ARTICLE 2: Quality and packing
In this clause of the contract expressed too general and vague.
+ Product quality is not specifically mentioned
+ Packing specifications are also not specified.
+ Lack of Marking

Risk: => Solution:

- It can lead to a dispute when the - There should be many packing
wishes of the quality, packaging specifications for different types of
and markings of the two parties shrimp.
are not the same. - Adding to additional conditions
- Difficulty in thinking about the such as SIGNS to help classify the
packaging method by the seller goods, as well as storage conditions
for the shipment.
 ARTICLE 3: Delivery
No explicit mention of terms of delivery,
just CNF-Taiwan with no Incoterms version

Risk:
- It is not fully and precisely determined which Party is responsible for the risks of
goods during transportation and freight rates.
- This is also information that directly affects other stages in the company's export
process such as customs declaration, ..

=> Solution:
- The company should clearly show the international trade conditions to avoid
confusion for customs procedures when declaring the software.
Ex: CNF Taiwan Port, Incoterms 2010
Shipment time
Risk:
- The shipment can also be considered as a rather large order, so the exporter
side also needs more time to prepare the right and quality goods.
- With transportation, there can be many different cases of production, weather,
policies and procedures, etc., so if you set a specific time for delivery, it will be
very difficult for the exporter to guarantee.

ARTICLE 3: Delivery
Shipment time

=> Solution:
+ Agreement to extend delivery time
+ Shipment time should be recorded according to the time period.

- Port of shipment: Please specify the port of departure

- Port of destination: Taiwan Port
 ARTICLE 4: Payment
Risk:
- STP may lose control of the goods once the
goods are on board. When the importer receives
the set of documents and they have received the
goods, but they still do not intend to pay for the
goods, the risk is very large for the export.
- The maximum period that the importer has to
pay to the importer is too long

=> The greater the risk for the exporter on

whether or not to receive the money back.
 ARTICLE 4: Payment

Solutions:
- STP LOGISTICS can negotiate with LONG CHEN SEAFOOD HANG
on the implementation of both payment methods LC payment to reduce
risks for exporters or By T/T 30% advance, 70% after.
ARTICLE 5: Claim
It also has not been
specifically mentioned about
Arbitration as well as who
will bear this Arbitration fee.

Risk:
Difficulty in resolving disputes and dividing the costs incurred by the offending party
=> Solution:
- It is recommended to add article of Arbitration to this clause to clearly define the
responsibilities of each party in dispute resolution (if any)
- The indication of where the contract was signed, the number of copies of the request
or the length of the contract should be in the General Condition.
Missing articles: Penalty, Force majeure
Risk: The two parties pushing each other's
responsibilities after a dispute or force majeure
causes damage to the shipment, which may be
detrimental to the exporter.
=> Solution: Add and clearly state each specific and
complete content of these terms in the contract.
Ending part
Risk: If this clause is not mentioned,
the contract will lack a stricter part

=> Solution: Add a General condition

and specify the validity period of the
contract, each original contract held
by each party and the accompanying
conditions (if any).
03
RISK IN
CONTRACT
PERFORMANCE
 1. Obtaining export license
2. Requesting initial steps of payment
3. Sourcing goods
4. Packing and Marking
12 5. Making pre-shipment inspection
6. Receiving shipping space
STEP 7. Getting goods insured
8. Making documents
9. Dispatching goods
10. Obtaining customs clearance
11. Receiving payment
12. Claiming or solving claiming
 STEP 1: OBTAINING EXPORT LICENSE

It is likely that the time to apply for an

export license is too long and the Prepare and apply for an export
procedures are stuck or interrupted due to license early before starting to
wrong procedures, which will delay the perform the export contract.
delivery of goods to the buyer and lose the
integrity of the goods. Seasonality of goods
or loss of business opportunities.
STEP 2: REQUESTING INITIAL STEPS
OF PAYMENT
In this case, the contract applies the TT method of deferred
payment, so the Exporter only performs payment- related
tasks after the goods have been delivered.
 STEP 3: SOURCING GOODS

The supplier does not The exporting company needs to do more

deliver the agreed goods, research at home and abroad to find many
causing Long Chen reputable seafood suppliers and expand
Company to delay the livestock production.
production schedule In addition, finding and knowing the
information of many different suppliers.
STEP 4: PACKING AND MARKING
- Problems related to disproportionate dimensions will occur.
- Careless packaging regulations will cause unnecessary quantity loss or
affect the quality of the product.
- Many different types of goods, so the packaging also needs to be
suitable for each type to avoid confusion and damage between products.

- Problems related to disproportionate dimensions will occur

- Careless packaging regulations will cause unnecessary quantity loss
or affect the quality of the product.
- Many different types of goods, so the packaging also needs to be
suitable for each type to avoid confusion and damage between
products..
STEP 5: MAKING PRE-SHIPMENT INSPECTION
- The quantity of goods does not conform to the contract or
the quality of goods does not meet the buyer's standard.
- Company may be refused to issue a Veterinary Certificate
due to inconsistent quality.

- Read the contract carefully.

- Always carefully check and strictly supervise during the preparation of goods
- Research carefully the process to apply for a Veterinary Certificate,
- Hire an independent third party to inspect the goods before they are shipped
at the warehouse or the port of shipment in Vietnam.
STEP 6: RECEIVING SHIPPING SPACE
- Chooses a less reputable shipping line, not thoroughly understand
the vessel schedule, which leads to:
+ The vessel is booked too late.
+ Booked a vessel that has ETD too close to the booking date.
- Not considering what kind of container the goods should be
packed in, leads to choosing inappropriate containers
- Not pay attention to the shipping company about the temperature
or ventilation suitable for the goods,
- Changing freight: The company may have to pay more than
expected.
 STEP 6: RECEIVING SHIPPING SPACE
STP company should base on the contract to determine the following information:

Commodity, the quantity of the goods. Port of Shipment: Hochiminh Port

Incoterms term: CNF (Incoterm 2010) Port of Destination : Taiwan Port
Shipment date: Lastest January 2022 Partial shipment: Allowed
 STEP 6: RECEIVING SHIPPING SPACE

- Carefully research, evaluate, and compare vessel schedules, freight,

and customer service policies of many different shipping lines
- Regarding the train's running time, the company must calculate so
that the time when the ship arrives in Taiwan does not exceed March
31, 2022.
- The company should cooperate with reputable, experienced
shipping lines and have a long-term cooperation relationship with the
company.
STEP 6: RECEIVING SHIPPING SPACE

- Carefully calculate what type of container

the goods should be, what size, and what
specifications are required.
- The company must rely on the weight,
volume, and size of the goods.
- In case the company is not able to book a
ship, hire a forwarder to do this for it.
This contract applies CNF terms (Incoterms 2010), so the
exporter is not responsible for buying insurance for the goods

STEP 7: GETTING GOODS INSURED

 STEP 8: MAKING DOCUMENTS
- The contract does not clearly show the required documents, the issuer, and the
number of documents => Misunderstandings => Payment refusal.

- Just a small error in the document can affect the performance of the contract of the
exporter
+ Wrong address on the Bill of lading => Your goods could be delivered to the incorrect
location.
+ Wrong information on the Bank account => Company may not receive the payment
+ Wrong packing information that affects the quality/quantity of goods, the importer
may refuse to receive the goods.

- Failure to determine the correct time to issue documents, late presentation

of documents.
 STEP 8: MAKING DOCUMENTS
- Request the parties to specifically mention both the content and form of the
document in the contract to avoid confusion.
- For documents that the exporter is not the issuer, the exporter needs to
submit the information he needs on the document to the issuer like SI for the
Bill of Lading, => Request to send the draft first for STP company to check
before releasing the official version
- Assign the staff who are experienced, careful, and have a good
understanding of documents to perform the issuance of documents.
- Closely monitor the contract performance so that it can issue documents on
time.

S O L U T I O N
 STEP 8: MAKING DOCUMENTS
- Must check all details of the documents and ensure that the
information on the documents must be:
+ Accurate and consistent with the content in the documents
+ Consistent with other documents in the set of documents.
- Before sending the original set of documents to the importer, send a
draft to the importer by mail and ask the importer to confirm agreement
with the information on the document.
- Must promptly correct and re-confirm with the importing party.

S O L U T I O N
STEP 9: DISPATCHING GOOD
- Using CNF incoterm,
- Lack of cont./bad quality cont
- Late/Traffic jam => Closing time
- Broken down => Port of loading)
- Wrong port of container drop off
- Vessel delay
- Risk during transit, loading, discharging
=> Quantity, quality
- Importer refuses to receive goods due to
quality, quantity
 - Use CPT if you don't have your own transport to the port
- Use CNF to transport over the ship's rail to limit risks
- Confirmation (documents, delivery obligation, delivery
location,...)
- Delivery notice when the goods are ready to be delivered
- After delivery inform the details of the means of transport
- Get the shipping company’s confirmation that the container
is new, clean and undamaged (mention it in booking note)
- If late/traffic jam, contact the person in charge at the
shipping line

STEP 9: DISPATCHING GOOD

STEP 10: OBTAINING CUSTOMS CLEARANCE

- Inexperienced staff - Provide devices that support internet

- Wrong HS code connection.
- Waste of time and money - Send notice to the parties for an
- Customs clearance network is down extension for unintended delay
and error - Use experienced staff for final review
 - Delay payment, non-payment and financial inability.
- The disadvantage for the exporter that the exchange rate
will no longer be the value of that time.

STEP 11: RECEIVING PAYMENT

In case two parties have many transactions and trust each other:
- Use a bank guarantee for payment
- Establish penalty clauses
- Check the financial ability of the buyer
STEP 11: CLAIMING OR SOLVING CLAIMING

- As mentioned in the above steps, for this export contract of

the company, there are many terms that are not clearly
specified.

- The agreement of such terms is based on the trust and

goodwill of the two partners for each other. However, this
may cause great disadvantages and losses for the company if
there are any disputes.
STEP 12: CLAIMING OR SOLVING CLAIMING

In order to limit complaints and the contract to go

smoothly, the two parties should clarify and agree
on the content of the contract and provide detailed
terms such as force majeure, penalty (payment,
late,...)
 CONCLUSION
● It is very hard to avoid 100% risks in the process of exporting but
with a clear analysis above based on an actual contract, we hope that
the company will have more experience in this field and use this as a
useful material to better the systems in the future.
T K S F O R YO U R AT T E N T I O N