Tiểu luận risks in international payment operations in vietnam and the restrictions

INTERNATIONAL FINANCE
Group :

Risks in international payment operations in
Vietnam and the restrictions

CONTENTS


A,OVERVIEW……………………………………..……………………………………..…………….…………………………………1
B, RISK IN INTERNATIONAL PAYMENT .…………………………………………….………………………………………..3
I, Based on main cause……………………………………..……………………..……………….……………………………….3
1.Commercial Risk……………………..……………………………………..……………………..………..………………………3
2.Risks in exporting credit loan ..……………………………………..……………………..………… ……….…………….4
3.Risks in exchange rate ..……………………………………..……………………..…………………………….. …………..4
4.National risks..……………………………………..……………………..……………………………..………………… ……….5
5.Moral hazard ……………………………………..……………………..……………………………..…………………………..5
6.Legal risk ……………………………………..……………………..……………………………..………………………………….5
7.Operational risk……………………………………..……………………..……………………………..……………….……….5

II, Based on payment methods ………..……………………..……………………………..…………………………6
1,Risk of Remittance………..……………………..……………………………..……………………………………….……….6
2,Risk of Open-account method………..……………………………..……………………………………………….…….6
3,Risk of Collection ………..……………………………..……………………………………………………………….………..6
4,Risk of Document credit method ………..……………………………..…………………………………………………7
C. ACTUAL SITUATION OF INTERNATIONAL PAYMENT OPERATIONS OF JOINT STOCK
COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM ………..……………………………………….…..…8
I. OVERVIEW OF BUSINESS ACTIVITIES OF JOINT STOCK COMMERCIAL BANK FOR FOREIGN
TRADE OF VIETNAM ………..……………………………..……………………………………………………………………..8
1. Overview on the process of formation and development……..………………………………………….…8
2 Some basic indicators…..……………………………..……………………………………………………………………...8

II. ACTIVITIES OF INTERNATIONAL PAYMENT OF VIETCOMBANK IN 2008-2010……………….…….8
1. Activities of payment for import and export………………………………………………………………………..8


2. Payment cart operations ……………………………………………………………………. 9
3. Exchange rate risk prevention ……………………………………………………………..... 9
4.Exchange rate risk governance in payment of import and export operations…………… ….9
III. FACTORS IMPACT ON ACTIVITIES OF INTERNATIONAL PAYMENT ……………………….. ..10
1.Factors from outside of bank……………………………………………………………...….10
2.Factors from inside of bank…………………………………………………………… ……..11
IV. SOLUTIONS TO STRENGTHEN RISK IN INTERNAIONAL PAYMENT OPERATIONS OF JOINT STOCK
COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM………………………………..11
1. Diversification of international payment services ……………………………………………11
2. Development of the Bank agent system………………………………………………………12
3. Strengthen to attract customers in the various economic sectors ….………………………...12
4. The capacity of payment officer…………….…………………….………………………………………………………12
5. Improving technological innovation of payment………….………………………………………………………12
IV. SOME RECOMMENDATIONS………………………………….……………………………………………………………12
1 Recommendations for the Government ……………………….………………………………………………………12
2 Recommendation for the State Bank……………………….……………………………………………………………13
D. Limits on international payment ……………………….………………………………………………………………..14
E, RESTRICTIVE MEASURES AND PREVENTING RISKS IN INTERNATIONAL PAYMENT
……………………….……………………………………………………………….………………………………………………………16
I, For commercial banks ………………………………………………….………………………………………………………16
II, For the state bank ………………………………………………….……………………………………………………………16
III, For the Goverment……………………………………………….…………………………………………………………….17
IV. For importers and exporters ……………………………….……………………………………………………………. 17
1, General solution……………………………….……………………………………………………………………………….. 17
2, Solutions to limit the risk to the importer…………………………………………………………………………… 18
3, Solutions to limit the risk to the exporter ………………..………………………………………………………… 18

A.

-

Overview

Risks are sudden occurrences that cause damage to people and property.
+ The risk is unpredictable. The risk has unpredictable consequences
+ Risk raise damage to humans and asset
+ Risk is an unexpected event

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A international payment system is a system used to settle financial transactions in bond
markets, currency markets, and futures, derivatives or options markets, or to transfer
funds between financial institutions.
Risk of international payment operations :
+ Are the economic risks arising in the process of making international payments. It is
due to issues arising from parties involved in international ypayment operations
(exporters, importers, banks, intermediaries, etc.) or objective factors such as natural
disasters, war , ....
+ Risk of international payment operations It is related to trading nations. It is like the
risk of domestic commercial transactions, but more complicated due to geographic
distance, cultural and laws .

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B, RISK IN INTERNATIONAL PAYMENT
I.

Based on main cause:

1. Commercial Risk:
- This risk appears in almost every transactions between traders, so it has to be

considered in different ways from exporters and importers
1.1. To the exporters, risks came from these reasons:
• The weakening in buyers’ financial (importers). In this situation, the
buyers unexpectedly become inability to pay in the maturity time,
they will propound to extend the payment. Sellers have to accept if
the buyer cannot reform their financial situation.
• Legal regulations: if the buyers pronounce that they are not able to
afford the debt, that corporation will be dissoluted based on law. The
debt from importing transaction will only be paid after priority debt
such as wage, tax, debt from social organization,… so there will be less
chance to retrive the amount of money from the buyer.
1.2. To the importers, risks came from these reasons:
• Delivery time: Based on the contract, the importers must receive the

•

•

•

goods during the time to maturity. Every delay in the transporting
process from the exporters will make it difficult for the importers to
receive, therefore, will have a damage.
The change in rules and time: Sometime the signed commercial
contract clearly stated time and conditions, however, the exporters
unilateral change, forcing the importers to pay all the amount one
time to receive the goods. This makes buyers not afford to solve and
have to borrow money from the bank to make a payment. If the
amount is too large, buyers may not be able to borrow, this will affect
to the transporting process.
Price element: During the implementing process, with specific reasons
such as politic , calamity, the exporters will offer the importers to pay
a higher price the in the contract. In this situation, the buyers can
refuse and find new exporters, however, this will be slower. Most of
the time, buyers have no choice and obliges the high price which
deprives the profit.
Insurance risks: In the signed commercial contract, if there are’t any
strict managerment in both parties, the transporting process will have
strong consequence. Even the goods will have the compensation from
the insurance companies, however, it will be lower than the real price
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Quality and source of the goods: Goods which cannot reach the
standard in the contract or in the name will be problems for importers
in relationship with customs, taxes,… For example, the contract
pronounces that the goods are taken in A countries, exporters cannot
take from the B countries. If customs find out, importers have to pay
the fees.
2. Risks in exporting credit loan:

- Risks happen when commercial bank accepted to make a credit for customer
to
make international payment.
- Cause:
• Subjective:
 Ability to aplicable regulation and the staff capacity in the
appraisal process the loans, services before making money
transfer, collections, L/C, advance payment, BE discount,…
 The affair of payment conditions, change in L/C, endorsment
and BL guarantee.
• Objective
 Banks depends on the commitment to pay for the beneficiary
if they can show the documents. Banks, in that situation, both
provide credit for the opener and make the payment.
 The bank negotiation, after discount, if there is a mistake or
preserve the recourse from the exporters, can take the risks of
not being paid by the issuing banks or refunding banks
•

3. Risks in exchange rate
- Exchange rate risk is the risks happen when the payments are fixed by foreign

-

currency. When the rate fluctuated comparing with the price in the exporting
contract will effect on both importer and exporter
Effect:
• To the exporter, the change in price will break the plan, such as the
domestic currency is higher than foreign, the amount of money they
get will be less which make the enterprise to be lost. Furthermore, it

will affect the funding in domestic from banks to manufaturing
business.
• To the importer, the currency to make payment and in counting are
not the same will make risks for the importers when there is a change
in exchange rate. If the domestic currency are lower than foreign
currency, the amount of money they have to pay is higher than the
real price
• To the commercial bank, the management of foreign currency and
foreign currency trading is very important. If the rate is higher, there

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will not be enough money to provide and on the contrary, if the rate is
lower, there will be a loss in price
4. National risks
- National risk is the risk involve in the change in politic, economics, foreign

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exchange and trade management of a countries will affect both exporter
(cannot take the money) and importer (cannot take the goods).
These risks are from objective causes such as war, politic crisis, embargo and
low foreign exchange reserve.

5. Moral hazard:
- Happens when one party deliberately not to fulfill the obligations which leads
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to others’ benefit.
The importer can delay, refuse to pay or catch the bug in documentations,
make price pressure to get profit, while the exporter can deliberately deliver
unsuitable goods, but showing all the reasonable documentations to take the
trust or fake documents.
Moreover, the carrier can take the money from the seller and disappear or
sell it to another buyer, and the bank can delay, or take too much time or
refuse to make payment for the exporter

6. Legal risk:
- Legal risk happens when there is dispute or complaint between parties. The

problems is about which country’s court will receive and under which
country’s law.
7. Operational risk
- Operatonal risk is The risk of loss resulting from inadequate or failed internal
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processes, people and systems or from external events
Causes:
• Internal Factors
Inadequate processes, failure of existing systems, inefficient hardware
and server maintenance contribute to banking operations being
adversely affected. The onset of manual errors and erroneous
communication also occurs as a result of a huge workforce.
• External Factors
External factors such as natural disasters, political upheavals, weak

financial policies of the state, and criminal fraud have only
compounded operational risks.
Most organizations accept that their people and processes will inherently
incur errors and contribute to ineffective operations. In evaluating

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operational risk, practical remedial steps should be emphasized in order to
eliminate exposures and ensure successful responses.
Poor operational risk management can hurt an organization's reputation and
cause financial damage.

I.

Based on payment methods

Risk of Remittance
In a remittance transaction, as the role of intermediary bank between
drawer and drawee, banks can not intervent in the goodwill of drawee
towards beneficiary.
- To the Importer: after payment, buyer goes to bankrupt or makes wrong
quantity, low quatlity or delay as agreement.
- To the exporter: if importer makes the payment after transaction, the capital
tie-up easily spreads.
- To the impoter’s bank: risk happens when banks lease buyers to receipt
goods but their quality is not well, making the insovent of the buyers then
leads to the loss.

- To the exporter’s bank:
o Risk happens when the bank lease to export goods but the buyer can
not retire the money.
o Also, out-dated technology in transfering money leads to the wrong
place and the amount of money.
2. Risk of Open-account method
Only buyers get risk in this method: although goods are sold, sometimes
Exporter did make the transfer of ownership but the payment is not
guaranteed.
1.

3.

Risk of Collection
Essentially, exporters get risk.
o
o
o

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•
•

Non-acceptance of documents risk
Non-payment risk
Risk of delivery of goods to the importer withour origial shipment
documents.
To the importer: in collection rules, the buyer takes responsibility to pay
immediately or accept bill of exchange beforce receive goods, thus they could

not check them, leading the fact that the goods are not packed rat the right
quality as agreement before.
To the immediary banks
Selling bank: risk happens when the bbank discount the documents but the
importer refuse to make the payment or accept bill of exchange.
Collecting bank: risk happens when supply credit for customer but importer’s
goods are difficult to sell.
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4.

Risk of Document credit method
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-

-

-

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To the issuing bank: in this type of payment, banks are not only the
intermediary but also attenders, who make the deal to pay on the
behalf of buyer, which means the issuing bank would pay for
beneficiary even though the applicant do not pay or do the L/C
transaction.
Also, if L/C could not cancel after issued, issuing bank has no right to
declne or fix the content, but only notice the mistake within 7 days

after receive relatng documents. And if out of that date, the issuing
bank lose the right to refuse and the bank must bear all risks.
To the notifying bank: the notifying banks must define the encoding of
issuing bank, if not, notifying bank must note in L/C notice to the
exporter. If the bank do not notice carefull, rosk would happens for
bith notifying bank and exporter.
To the negotiating bank: If banks attending the transaction could not
notuce the mistakes or pass small ones, after the transacion,
negotiating bank would bear all risks of issuing bank refuse the
payment.
To the exporter: Banks only do the transaction according to the
documents, thus exporters must pay even the goods at bad situation.
Also, if the buyer intiatively create fake documents, importers would
bear all risk and loss.

C. ACTUAL SITUATION OF INTERNATIONAL PAYMENT OPERATIONS OF JOINT
STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

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I. OVERVIEW OF BUSINESS ACTIVITIES OF JOINT STOCK COMMERCIAL BANK FOR FOREIGN
TRADE OF VIETNAM

1. Overview on the process of formation and development
VCB, formerly Foreign Exchange Management Department under the Vietnam National Bank
was established on January 20, 1955 under Decree 443/ TTg of the Prime Minister. In May 2008,
VCB completed equitization process in the form of retaining state capital and issuing new shares
representing 30% of charter capital, officially moved into Joint Stock Commercial Bank for
Foreign Trade of Vietnam.

2 Some basic indicators
2.1 Scale of total assets and equity
Total asset growth is quite stable over the years, but VCB’s equity has disproportionate growth
in the period of 2009-2015.

2.2 Scale of total assets and stock market capitalization
In the period of 2009-2015, the scale of assets and market capitalization of VCB have
stable growth in conditions of banking operations with many difficulties and bank business
environment with complicated changes, diversified risk, stock market fluctuation.

2.3 Some other targets and business activities
The basic indicators on outstanding loans to profit before tax and after tax increased quite
stably, at a high level over the years of 2009-2015, the target of net profit after tax is basically
stable, increasing slightly in the years of 2014-2015.
Vietcombank securities trading company- VCBS with profit before tax reached 119.68 billion dong;
in 2015 reached over 92.0 billion dong. The most recent time that is the end of 2015, the company
implement financial leasing with more than 41.0 billion dong in pretax profit, without reaching the
plan.

II. ACTIVITIES OF INTERNATIONAL PAYMENT OF VIETCOMBANK IN 2008-2010
1. Activities of payment for import and export
Payment for
export
Payment for
import

2006
32%

2007
29%

2008
27%

2009
22%

2010
20%

23%

20%

20%

19%

19%

In 2010, VCB reached sales of payment for import and export is 19% and 20%.
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2. Payment cart operations
The number of international cards developed by VCB accounts for 34%, domestic cards account
for 19% and VCB's international payment cards account for 53% of the national card market
share.

3. Exchange rate risk prevention
VCB full issued regulations on foreign business executive direction, about the purchase rates
and sale rates, on foreign currency trading with customers in international settlement
operations, open L/ C guarantee ... under the provisions of the Foreign Exchange Management
Ordinance, the provisions of the State Bank and other relevant provisions of law and monitoring
implementation and full implementation, seriously issued regulations. VCB implements flexibly
monitoring of the fact. Besides, exchange rate risk preventive activities have also many
inadequacies, in the period of 2009-2015, many of the document have been refused payment by
abroad bank. Overall, during the period of 2009-2015 by different ways VCB performed
exchange rate management, but not really completion.
4.Exchange rate risk governance in payment of import and export operations
In the period of 2009-2015, despite many difficulties, challenges from the economic context and
the increasingly fierce competition from rivals, along with measures to basic exchange rate risk
prevention to be deployed has a positive impact on the operational results of import-export
payments and foreign currency trading, the two fields are still growing through the years.
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Chart 2.1 Developments of international payment services and trade finance among
months in 2015 of VCB
In 2015, VCB reached sales of foreign currency trading increased 3.7% compared to the year of
2014, remittance increased 11.8%.
III. FACTORS IMPACT ON ACTIVITIES OF INTERNATIONAL PAYMENT

1. Factors from outside of bank
1.1
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Macroscopic policy from State

Foreign exchange management policy
Tax policy
External economics policy

1.2 The change of political regime economy of others country

The economic slowdown will adversely affect the
commercial liberalization, woolenbusiness activities of
enterprises from which affect international payment operations. Changes in a country's policy
as changing the storage regulations, taxation, foreign exchange, import and export charges ... or
simply legal environment, the economy of a country is not yet stable and frequently change
makes the partners do not foresee the situation affecting the ability to pay. Thus causing
damage to the parties involved in that Bank.
1.3 Factors from customers

If the Bank can collect large amounts of shouted regular customers have active importexport business will develop international development payments. In addition the situation
in production
and
business activities, financial capabilities, professional level of
foreign
trade, the
moral behavior of
customers also affected the
operation of
the
Bank's international payment

2. Factors from inside of bank
2.1 Organization of the operating management of activities of

international bank payment

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A management system operate from central
to local
to the
branch
to follow a specific process compact delivered right to the initiative for the branch going to
cum arecost, time payment is secure and attract customers to the Bank to be more because
their rights are guaranteed.
2.2 Professional level of Banking Officer

- Requires Bank officials must have high qualification
- Requires Bank officials must have a certain foreign language proficiency
2.3 Bank technology

The
criteria of international payment operations is timely and
accurate quickly so Bank's advanced
technologies are used in order
to better implement the criteriaon.
2.4 bank network agent

Bank network agent all over the world making make payments fast, correct address, reduce
costd and minomize risk

IV. SOLUTIONS TO STRENGTHEN RISK IN INTERNAIONAL PAYMENT OPERATIONS OF
JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM

1. Diversification of international payment services
Currently, the
value of
international payment by document
credit
method them from still occupy a fairly high rate of international payment turnover in cages at
Bank VCB, mainly
focused on
two L/C
: L/C irrevocable, L/C irrevocable and confirmed. Therefore,VCB may
be made to
diversify the types of L/C lays his TTQT market expansion:
- For
commodities are trading through intermediaries can apply the appropriate payment type such
as letter of credit-backed armour, letter of credit transfer
- For outsourcing delivery cycles should apply the credit method as the periodic credit
- For goods and products are food products, agricultural products and quickly deteriorate should
apply the letter of credit balance to ensure the implementation of the contract the two
parties of import and export
- VCB need to develop services for payment cards, traveler's cheque more to meet the needs
of the customer's payment in domestic and abroad
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2. Development of the Bank agent system
Continue
to maintain and strengthen the
relationship with the Bank to maintain its credibility in the market
- Expand the relationship with agent banks in many different countries to meet the needs of the
customer's payment

3. Strengthen to attract customers in the various economic sectors
- For the big client is the regular business payments through VCB with high turnover should
have the priority in the payment as regarded them as the first object to provide the new
payment service (electronic bank account management via the network...) prioritizing
inspection certificate from the free trade, consultant
- For customers who do not regularly to bank transaction VCB can apply various incentives, best
served their requirements, given the benefits that they will get when making payment VCB
versus made in others bank
4. The capacity of payment officer
- Bank officers are required to have high qualification
- Bank officers are required to have a certain foreign language proficiency
5. Improving technological innovation of payment
– Should make the capacity of existing machinery systems, proceed to reduce the work sheets
with the use of computer systems and networks
- Diversification of distribution channels such as additional payment service on the web, ...
- Constantly upgrading and purchasing equipment to perform international payments

IV. SOME RECOMMENDATIONS
1 Recommendations for the Government
- Have a favorable economic environment for international payment operations
- improve and complement the legal documents regulating activity of international payment
- Improving the quality of the macro on the operating of money, credit
- Develop exchanges set up relationships with the countries in the region and the world in order
to create favourable conditions for active support of imported woolen.
- Reform of the administrative procedures in order to create favorable
conditions forbusiness activities related to export and import
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2 Recommendation for the State Bank

- Improve the legal corridor.
- Flexibly controlling the tools of monetary policy.
- Strengthen inspection, supervision of credit institutions and the construction of early warning
system.
- Enhance the role of the national credit information center.

D. Limits on international payment
In the international trading, the payment of goods is the basic rights and obligations of both
buyers (importers) and sellers (exporters). Therefore, when negotiating about the payment
methods, parties attempt to agree on the terms of payment that have the most benefits for
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their own. Risks, limitations are things that each payment method could not avoid.
* In international payment, importers require their banks to transfer a certain amount of money
to exporters in a certain location by means of remittance provided by the importer.
- In many cases, importers will not transfer money to the exporter until they receive full goods.
This is an advantage for importers but it is risky for exporters when the goods have been
delivered but the cargo is not paid, delayed payment or inadequate payment.
- However, the importer may also bear the risk, especially in the case of money transfer before
delivery as: receiving all the goods before delivery, deposit, advance payment... and if money
has been delivered but goods are not delivered on time, in the right quantity or quantity.
* Open account applies to the international payment: Exporters after complete their obligations
(usually delivery obligations) specified in the contract of international payment will open a debit
note. The importers after a period of time (agreed by the two parties) have to pay for exporters.
- This method is completely beneficial to the importer. The exporter will bear the risk when the
importer fails to pay or delays payment or inadequate payment.
- The seller is actually lend the buyer the loan for the deferred payment, but the seller is also
counts interest on the deferred payment. Thus, the goods after the delivery to the buyer, the
seller receives only part of the amount of money, so even though there is interest on the

deferred payment, the risk to the seller is still high. Buyers can solve the problem of shortage of
capital instant, but they have to pay a higher price because they have to pay interest.
* A/P( account payable) is a method of payment applied in the international payment, where
the importer's bank, as the request of the importer, provide a document request to the
exporter’s correspondent bank issuing an A / P- pledged to buy a bill of exchange with the
condition that the document presented suitable to the conditions that set in the A / P and must
be verified by the representative of the importer.
- A/P is applied mainly in contracts for the purchase of machines, equipment, technical and high
technology products. Basically, this method means that the importer through their bank in the
importing country transfers money to bank in the exporting country to authorize the bank to
pay the bill of exchange issued by the exporter.
- This method of payment is quite safe for exporters, but there will be many disadvantages for
importers when the money has been exported but it is unlikely to receive goods or receive poor
quality goods or delayed delivery. . In order to limit the risk to themselves, the importer should
specify the specific conditions, details and detailed payment procedures if applying the A / P
method to avoid their disadvantages later.

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* If the partner is not trusted or the fraudulent partner, it is most likely the business will be
fooled by fake papers. Besides, conflicts between goods and documents are also important, as
goods imported likely will be confiscated by customs because there is no match with
documents.

E, RESTRICTIVE MEASURES AND PREVENTING RISKS IN INTERNATIONAL
PAYMENT:
I, For commercial banks:

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Modernize the international payment technology of banks on the basis of international level.
Banking technology is one of the key determinants of the success of banking. Therefore,
commercial banks need to invest in strengthening the technology base, increasing the
exploitation of utilities and creating value added products for customers. Modernizing the
technical basis to meet the requirements of increasing the volume of international payment,
integrating with the region and the world.
- To pay special attention to the training of the contingent of staff members in terms of
professional skills, foreign language qualifications, legal knowledge, professional ethics, risk
prevention awareness, international practices and customs. The customs of the country have
foreign trade relations. The experience of many countries in the world and the region shows
that training is one of the success factors for the development of the country in general as well
as of each commercial bank in particular. Therefore, in order to minimize risks in international
payment operations in particular, it is necessary to train a contingent of managers and
professional staff who are qualified, capable and qualifiedm are really mportant and necessary.
- Enhance the risk management capacity for the management team, at all levels and strengthen
the inspection and supervision of risks in international payment activities.
- Strengthening risk prevention information. Banks need to keep up to date on economic
information, especially risk prevention information, in order to minimize the risk to the
international payment process of commercial banks. To select and apply appropriate methods
and tools to prevent and limit risks according to international practices and standards.
Strengthening external relations with foreign banks. Commercial banks need to establish and
strengthen networks of correspondent banks and representative offices abroad. By providing
information, support for hearted business customers and carrying out international payment
activities efficiently, safely and quickly.
II, FOR THE STATE BANK
- Strengthening the inspection, monitoring and evaluation of safety of the commercial banking
system. Coordinate with ministries and sectors to complete procedures and regulations for
international payment operations for the whole. Building a technology system that ensures the

collection of necessary administrative information for the bank in a timely manner as a basis for
the bank's business decisions.

III, For the State:
- Expanding economic, cultural and political cooperation with other countries in the world. The
expansion of relations, help information between countries is transmitted quickly, smoothly. Minimize

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unnecessary repository. Or hard work in import-export procedures. Minimize time to solve problems for
businesses of the two countries.
- To create macroeconomic stability and further perfect the policies and laws : To create an open, stable
and favorable economic environment, enabling enterprises to develop in line with the requirements of
the economic organizations, international trade regulations and regulations that we participate in.
- Improve the quality and ability of officers to participate in international payment management: It
improves the ability to analyze financial situation and develop an early warning system. Increase the
ability to resolve disputes as well as support enterprises to participate in international settlement.
- Improve the quality of CIC's operations (Credit information center)
- Consulting, supporting enterprises to access information about international market. The government
should support businesses with information, legal advice, financial resources ... to join the international
market closely, to avoid the risk of business in the state of disadvantage. , Lack of information, lack of
equality.

IV. For importers and exporters :
1, General solution:
_ Research partner information. Include: financial capacity, biography, field of operation.
_ Consult the bank on the business process of the partner.
_ Analyze and understand the process of fining penalty.
_ Reduce exchange rate risk : when it change, it can price’s good to increase or decrease. So

Exporters/importers should choose strong currencies or use derivatives to minimize risk, as
futures contract, options contract,…
_In addition, international legal business often occurs legal disputes. To overcome, limiting legal
risk should :
+ Raise the awareness of business on international trade laws.
+ Use staff who have full capacity, skills for interational payment.
+ Create the habit of using lawyers, legal experts in international trade activities.

2, Solutions to limit the risk to the importer:
_ Strict requirements, consistency between the content and forms of documents, not use
unclearly contract:
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+ Goods : Specify the characteristics of goods, product specifications, origin, quality and
quantity.
+ Delivery time: specify the delivery time. The last delivery date should be specified. Penalty
clause if the delivery is slow.
+ Payment method: regulate clearly payment method. Buyers should stipulate: how much to
pay when receive the documents , how much to pay when receive the goods. The currency of
payment should be specified.
+ Place of dispute settlement: try to reach agreement if there is a dispute to be settled in the
importing country.
+ Cargo insurance: the type of insurance must be specified.
- Bill of lading by the shipping company. When loading the goods must have the supervision of
the representative of the importer to timely compare the accuracy of the bill and schedule ship.
- The quality certificate issued by the competent authority of the exporting country or the
representative of the importer.
- Requirement of Certificate of Inspection
- Requirement to issue payment instruments of banks such as L/C

3, Solutions to limit the risk to the exporter :
For importers the biggest risk is that customers do not pay or pay late when the goods are
delivered to the importer. In addition to these measures, exporters should :
_ Choose safe payment method for exporters: Telegraphic transfer money in case of payment
before maturity, L/C in case of payment upon receipt of goods. Should ask the importer how
much advance payment before delivery, how many money when the buyer received the
documents.
_ The contract should specify the payment period and penalties for late payment. Exporters
should also specify where the dispute is resolved in the exporting country.
_ Fees other, such as: Loading/unloading fee, L/C amendment fee, .. should also added in the
contract to avoid disputes or delay payments.
_ The exporter should clearly state the inconceivable circumstances in the contract that the
exporter may be exempted from liability if encountered. In the process produce , prepare ,
transport goods for the importer, can be met the problem: Natural disasters, epidemics, war,
strike,… So delivery is slower than expected or quality does not guarantee 100% with importers
requirements.

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_ To avoid the case where the importer refuses to pay due to lack though the quantity is not few
(because of objective reasons such as loss during transportation, weighing,...). The exporter
should regulate the error what can accept in contract and original document.

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