Risks And Prevention Mechanism Faced By Exporters In International Settlement

In 2014, China’s foreign trade maintained stable growth, with import and export growth speed faster than the world’s major economics and emerging developing countries,thus, China continued to keep its status as the world’s first great power in goods trade. However, with the growth of import and export, international settlement security has been becoming increasingly prominent. Besides, it has also become common that export enterprises’ loans fail to be collected timely. Therefore, how to prevent and control the risk in international trade settlement has become an urgent issue for China’s export enterprises.In this paper, T company was taken as example,combined with its actual settlement of export business, the common risks for exporters and how to prevent them under Telegraphic Transfer and Letter of Credit were analyzed, particularly the risks and relevant preventions of Transferable Letter of Credit, as well as the characteristics of Transferable Letter of Credit, thus the party concerned would have to handle with special risk of Transferable Letter of Credit in addition to the risks like any other credit.As one of the main ways of international settlement, Telegraphic Transfer has the advantages of simple formalities, fast account and low handle charge, so it is widely used in T Company’s export business. But as a kind of commercial credit, adopting telegraphic transfer for settlement also has importers’ reputation risk, bank transferring risk and other risks. Letter of Credit is based on bank credit, higher safety,so it can avoid risks in foreign exchange collection to a certain extent, while as a way of settlement, it is not infallible. In fact, risks still exist in actual operation.In this paper, through the analysis of international settlement problems in T Company, settlement methods like telegraphic transfer, letter of credit, transferable letters of credit were compared, along with their common risks,thus a best way of settlement was found for T Company,which would be suitable for the company’s different business and would minimize settlement risk.