International Trade Risks and GIA Trading Group Solutions

Local Competition: In today’s competitive marketplace with an ever-increasing number of international retail conglomerates going global, local businesses are forced to import goods from overseas suppliers from countries with lower manufacturing costs.
Manufacturing Process: Globalization is forcing manufacturers to compete on price and quality worldwide and in order to lower their costs. A number of manufacturers prefer not to keep large inventory in stock, but instead move to the just in-time manufacturing model.
Risks to Suppliers: The ever-increasing number of overseas buyers multiplied the numbers of defaulted or delayed payments from buyers. Manufacturers are not prepared to take these risks anymore and they demand 100% prepayment of the orders or at the very least partly payment in advance with the balance guaranteed by a bank (bank payment guarantee or standby letter of credit).
Bank Risks: Payment guaranteed by a bank does not mean the manufacturer will collect his money in time. Banks work with documents issued by the shipping agents, port authorities and the captain of the vessel; these documents are presented to the bank by the seller in order to collect the funds. However, if there is a discrepancy (occurring in over 90% of the transactions) in the paper work (signature in the wrong place, misspelled words, wrong description of the product, error in the quantity, wrong dates and so many other human errors), banks will not pay till everything is in a strict compliance with the bank-issued instrument. Correcting documents takes time and money, especially since the buyer is from another country with a deferent legal jurisdiction. In some cases, legal procedures cost more than the disputed amount.

Transaction Costs (usually bore by buyers):

Legal costs for international trade contracts

Banking charges for a letter of credit could cost up to 2% of the value of the letter of credit especially if the letter of credit has to be confirmed by an unrelated second or a third bank

Currency conversion

Cost in banking disputes (legal, time, travel)

Suppliers will increase the price of the product to cover themselves in a case of a bank dispute because of a discrepancy in the documents (sellers offer a discount when pre-paying for the order)

RISKS to BUYERS:

Seller is an Agent, unless buyer has a presence in the suppliers’ country or visits the manufacturers’ premises, there is a great risk of the seller being an agent and not the manufacturer. Agents in many cases cannot and will not perform in accordance with the agreement.

Sellers collecting upfront payment or partial payment and not delivering the products.

Incorrect quantities of products shipped.

Wrong products shipped.

Products not complying with the international or country standards.

Delayed shipments.

Costly disputes in foreign countries.

RISKS to SELLERS

Expiring letters of credit.

Buyer’s insolvency.

Exchange rate risks.

Bank’s inability to honor its undertaking.

There are additional risks generally associated with the international trade such as country economic and political risks:

Risk of insolvency of the buyer/seller.

Influence of political parties in importer's/exporter's company.

Changes in government policies.

Surrendering economic sovereignty.

Surrendering political sovereignty.

War risks.

Industrial disputes.

Trade embargoes.

Exchange control regulations.

Risk of Exchange rate.

Imposition of exchange controls by the importer's/exporter's country.

Foreign currency shortages.

Risk of cancellation or non-renewal of export or import licenses.

Supplier inability to supply the products.

A bank's inability to honor its undertakings.

Difficulty in resolving potential disputes.

Lost confidence in management when assume the blame for delayed payments and lost revenue. LC problems can hinder team morale, leadership abilities, and even the direction of a manager’s career.

Given the current financial and economic situation when well-known old banks (Merrill Lynch, Washington Mutual, Lehman Brothers, Bear Stearns, etc.) have collapsed and become bankrupt or others (like Citi Group) being SOLD to the US government – not many producers/exporters would accept letters of credit drawn on these or any other banks. Additionally, it has become now fashionable to argue that banks are safer if they are part of larger institutions. This is NOT true. Bigger banks are just even more awful – implicit safety can become dangerous when institutions become too big to save. Citi’s tailspin was not required to show that pure investment banks weren’t the only one that got into trouble. Care to remember UBS, Wachovia, Royal Bank of Scotland, HBOS and Fortis? None of them was a pure investment bank, but all suffered huge losses from playing around with risky assets. Their other businesses (like retail banking, trade finance, insurance, etc.) did little to soften the blow. Indeed, the mix of businesses may have made these banks less competent or even more reckless in managing trading operations, i.e. nobody likes the “jack of all trades” or ”all can-do” types – everybody wants to deal with a SPECIALIST.

“GIA Trading Group” (“GIA Group”, GIA) is a ten-years old Australian company operating on a global scale and SPECIALIZING in the international trade and wholesale and distribution business at a national lever worldwide. GIA Trading Group has currently invented a NEW WAY of doing international trade business, the way that will either eliminate or greatly reduce risks associated with international trade. Under the NEW WAY of doing international trade and import-export business, both suppliers and buyers will be dealing with ONE LOCAL (to them) entity – GIA TRADING GROUP BIFRANCHISEE.

BENEFITS OF DOING BUSINESS WITH GIA TRADING GROUP (NEW WAY):
NO more international travel – sale and purchase done locally, it saves you money and given recent financial events, it keeps you safe.

NO more language and cultural barriers – negotiating sales and purchase done locally in your mother tongue under your local customs, traditions and legal jurisdiction.

NO more Letters of Credit, NO bank fees, NO delays – transactions are done in an expedient way with the most possible protection of both buyers and sellers.

NO more FOREX rate fluctuations – transactions are done in your LOCAL currency