Posts Tagged ‘foreign markets’
With China as Leading Clothing Exporter, U.S. Trade Associations Demand Fair Practice
Monday, November 10th, 2008
As world trade growth slipped to 6 percent last year, U.S. trade associations and experts still debate about how its nation can possibly fare in a global clothing market with China as its reigning exporter.
Despite symptoms of an overall weakening economy, China has taken over an industry largely dominated by Mexico, the Dominican Republic, and some Central American countries. As the world’s second largest exporter of merchandise in 2007, China also supplied more than a third of the world’s clothing exports – amounting to $115.2 billion, according to a World Trade Organization report.
Meanwhile, the global economy is slowing down because partially developed nations have decreased their demand for imports, according to the World Trade Organization. U.S. clothing imports from export processing zones – where materials and intermediate goods are processed – have declined an average annual rate of 13.4 percent over the past ten years.
China joined the World Trade Organization as a developing nation in 2001, four years before organization trade safeguards expired. U.S textile and clothing associations have since accused China of hurting its already vulnerable domestic industry, with rising tariffs and a greatly undervalued yuan.
“Textile manufacturers in the United States are the most competitive in the world, but they cannot compete indefinitely against producers from countries like China that both engage in predatory practices and benefit from illegal subsidies,” said Ruth Stephens, executive director of the United States Industrial Fabrics Institute , in a statement. The institute has been working toward the implementation of a monitor program toward imports from China, with other associations like the National Council of Textile Organizations.
But U.S. economist C. Fred Bergsten argues that China is not being deliberately manipulative or vindictive toward the United States.
“What these policies demonstrate is that China’s international mindset has not kept pace with its breathtaking economic ascent,” he wrote for Foreign Affairs . “China continues to act as a small country with little impact on the global system at large and therefore little responsibility for it.”
As of July, Chinese economists and its National Bureau of Statistics found its economy to be “in a dilemma, struggling for a delicate balance between maintaining a healthy growth and taming inflation” during an overall global downturn. In June, China exported US$9.87 billion worth of clothing and accessories, a 15 percent month-to-month decline from 2007, according to a Ministry of Foreign Affairs report.
Tags: christina lee, clothing, exporting, foreign markets, World Trade Organization
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Extending Credit to Foreign Buyers
Thursday, February 14th, 2008
With exporting, negotiations on financing terms can be just as arduous as those on pricing. With competitive products pouring in from companies all around the globe, the financing terms you offer can often times be the deciding factor on whether or not a buyer will make their purchase from you.
Of course, as an exporter you’ll want to get paid as quickly as possible; however, when dealing with foreign markets you’ll most likely have to extend your credit terms if you want to make a sale. If your products are shipping via container ship, there will be a 20-30 day shipping time that needs to be considered. Most overseas importers are unwilling to pay an invoice before they even receive the goods. If you are used to getting net 30 terms for domestic sales, you will need to seriously rethink your export financing terms.
Risk verses reward
Of course, with extending such generous finance terms comes risk. Risk that you will need that cash before the buyer pays you. However, if you decline to offer favorable payment terms, you very well may lose out on the sale completely. Here are some important factors to consider when deciding what payment terms to extend to a foreign buyer:
Uniqueness of your company’s products. If you are the sole manufacturer of a unique and specialized product that is in demand, then you may hold the upper hand in the negotiations and will be able to shy away from longer financing terms. However, if you are selling a product that is similar to others and has a lot of competition, then chances are you will need to offer longer payment terms in order to secure any overseas sales. With so much competition, if you’re not willing to budge on terms you can bet another company will.
Ability to obtain financing, if needed. Part of the risk that comes with extending payment terms is not knowing whether or not your company will need that cash before the buyer pays. If your company is small then your invoices for parts, labor and shipping will surely arrive before you get paid. In that case, will you be able to obtain temporary financing to keep your company afloat until you receive payment?
What you can offer instead of longer financing. If you are not able to offer payment terms as long as your competitors, then what else can you offer? Perhaps a lower cost, custom printing at no charge, or an added accessory? If you can’t compete on financing, then think of a way you can compete so that your company is not out of consideration.
Flexibility of the buyer. It’s possible that a foreign buyer will agree to payment by escrow, letter of credit (LC) or a partial payment upfront. If you are not able to give extended payment terms, then see if you are able to negotiate the terms with the buyer, so that they are less one-sided.
Whether or not extending financing to a foreign buyer is the right course of action, depends on a variety of factors. If there is a high demand and little competition for your products, then it’s safe to say you will not be forced into a corner over finance terms. However, if you are merely a fish in a sea of similar products, then you’ll have to compete with the best of them - and most times it’s the company with the best pricing and financing terms that "wins" the purchase order.
Tags: arranging credit, Carrie Hinkel, Doing Business Internationally, Finance, Finance and Accounting, foreign markets, international payment
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