basic-guide-to-exporting_Latest_eg_main_086196

the counterparties’ local currencies. This approach could also result in nonpayment bya foreign buyer who finds it impossible to meet agreed-upon obligations owing to asignificant devaluation of his local currency against the U.S. dollar. While losses due tononpayment could be covered by export credit insurance, such “what-if” protection ismeaningless if export opportunities are lost in the first place because of a “paymentin U.S. dollars only” policy. Selling in foreign currencies, if foreign exchange risk issuccessfully managed or hedged, can be a viable option for U.S. exporters who wishto enter the global marketplace and remain competitive there.You should also be aware of any problems with currency convertibility. Not allcurrencies are freely or quickly converted into U.S. dollars. Fortunately, the U.S. dollaris widely accepted as an international trading currency, and U.S. companies can oftensecure payment in dollars.If the buyer asks to make payment in a foreigncurrency, you should consult an internationalbanker before negotiating the sales contract.Banks can offer advice on any foreign exchangerisks associated with a particular currency.The most direct method of hedging foreignexchange risk is a forward contract, whichenables the exporter to sell a set amount offoreign currency at a pre-agreed exchange ratewith a delivery date from 3 days to 1 year intothe future.If you’re able to do businessentirely in U.S. dollars, you maybe able to avoid many of thedifficulties and issues relatedto currency conversion.U.S. Department of Commerce Trade Finance GuideTo learn more about methods of payment in international trade, foreign exchangerisk, and related topics, you can refer to the U.S. Department of Commerce’s TradeFinance Guide: A Quick Reference for U.S. Exporters (export.gov/tradefinanceguide).This concise, simple, and easy-to-understand guide was designed to help U.S. smalland medium-sized U.S. companies that are new to exporting learn how to get paidfrom export sales in the most effective manner.Payment ProblemsIn international trade, it is easier to avoid problemsinvolving bad debts than to rectify them after theyhave occurred. Credit checks and the other methodsdiscussed in this chapter can limit the risks; normalbusiness prudence is crucial to the exporter.Whenever possible, try toprevent payment-relatedissues before they happen.Nonetheless, just as in a company’s domestic business, exporters occasionallyencounter problems with buyers who default on their payment. When theseproblems occur in international trade, obtaining payment can be both difficult andexpensive. Even when the exporter has insurance to cover commercial credit risks, adefault by a buyer still requires the expenditure of both time and money to collect164U.S. Commercial Service • A Basic Guide to Exporting