The political situation in the Middle East is a little chaotic recently and politically risky. Even if collecting money through L/C, you cannot ensure the security of funds in the event of political turmoil. Reducing and controlling the risk of the project is very important for exporters.
You must learn about the credit of the buyer or the owner. If the other party is a Western oil company, the credit may be better. But if it is some companies in Africa, you must be cautious. Some African governments are unstable. Other things may be harder to say.
For exporting companies, if the risk is high, you must insure the project, including the insurance of the goods themselves. More importantly, you must consider the risk of export collection caused by the buyer and political reasons. When negotiating the contract, you can consult with China Export Credit Insurance Corporation for relevant regulations and specific insurance rates.
Strive to collect foreign exchange early through advance payment, bank guarantees, standby L/C, Confirmed L/C, etc. And try to reduce capital risk by asking some well-known banks, like Citibank, to act as issuing bank or confirmed bank of guarantees, L/C, standby L/C.
When trading, choose the right trading method, such as CIF instead of FOB. In this way, even if there is a problem, you can have more control over the goods to avoid losing both money and goods. Choose a reliable logistics company.
The large-scale project is large in amount, long in time, wide in scope and high in risk. It is necessary to handle the export credit insurance. Although there are additional costs, in the event of commercial or political risks, it can protect the interests of exporters. China Export Credit Insurance Corporation represents the state. And it is the only financial institution in China that undertakes policy export credit insurance business. When a dispute arises between an enterprise and a customer, it will coordinate. Its special identity can give customers some pressure and shock.
This year Libya has a crisis. Some Chinese-funded institutions that have dealt with insurance business through it have soon been compensated. After all, it is a policy insurance institution, which is much more reliable than commercial organizations. However, many Chinese companies that are not insured have suffered heavy losses.
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