《商贸英语》 Mention some of the risks the exporter and the import

《商贸英语》 Mention some of the risks the exporter and the importer may face in trade.

1. Mention some of the risks the exporter and the importer may face in trade.

To exporters, they are those who provide goods, the main risk whether they can get full payment or not after they ship their goods overseas to the buyers. They may be affected by the flutuating cost of raw materials for products and
exchange rate. And there is also risks in transportation from exporters' side to the importers' side. What's more, the political status of an importers' country and districts will have an effect on the receipt of payment.
To importers, they are those who pay the money and want to get the goods that they require. They face the risk of getting no goods or goods that are not as per required quality, quantity and timely delivery time after paying the exporter's money. For instance, if they receive the goods late, they may not be able to sell out the goods in that season. It is also risky that the exporters tell their program and designs to other people so that there are too many competitors in the markets, and then once they receive the goods, they cannot sell the goods well, either.

2. Explain briefly the following methods of payment: cash in advance, open account, consignment transactions.
Cash in advance : For this form of payment, the risk for the buyer is very great, and for the seller very little. And partical cash in advance is often used in combination with other forms of payment.
Open account: It is actually credit provided by the seller to the buyer. High risks are involved for the seller who generally does not use this form of payment unless he has adequate trust in the credit worthiness of the buyer.
Consignment transation: i.e. The exporter entrusts his goods to his agent abroad for sale. The exporter retains title to the goods with all the relevant responsibility and risks before they are sold, and the agent gets commission after the goods are sold.
3. What is the unique feature of the letter of credit? How does it offer security to the buyer and the seller?
L/C involves in a thirty party that will protect the benefit of both the export and the the importer. The third party is often banks.
4. What are the main contents of a letter of credit? Mention at least 10 items.
Letters of credit include the following contents: (1) The number of the credit and the place and time of its establishment. (2) The type of the credit. (3) The contract on which it is based. (4) The major parties relevant to the credit, such as the applicant, opening bank, beneficiary, advising bank. etc.. (5) The amount or value of the credit. (6) The place and date on which the credit expires. (7) The description of the goods including name of commodity, quantity, specifications, packing,unit price, price terms, etc.. (8) Transportation clause including the port of shipment, the port of destination, the time of shipment, whether allowing partial shipments or transshipment. (9) Stipulations relating to the draft. (10) Stipulations concerning the shipping cocuments required. (11)Others.
5. What are the advantages and limitations of the letter of credit?
The letter of credit has greatly facilitated and promoted internationnal trade.However,like any other methods of payment,it is not perfect.It cannot provide absolute security for the contracting parties.The seller may sustain losses because of the buyer's delay even failure in the establishment of credit.The buyer may suffer losses as a result of the documents presented by the seller which do not truly represent the goods shipped.And it is not absoluted by the voidable that the bank may become insolvent or bankrupt.Besides,it is more expensive to use the letter of credit than remittance or collection as the bank will charge its client for all the services it provides.So the letter of credit may not be the most ideal method of payment for a particular transaction,and the contracting parties should make their best choice according to the specific conditions.
6. Explain the difference between revocable letter of credit and irrevocable letter of credit?
The credit is a revocable one if such commitments a can be altered or even canceled without consulting with the beneficiary.It is quite obvious that the exporter has little assurance to get payment,and therefore this type of credits are rarely used.Irrevocable credits are those that cannot be amended or revoked without the consent of all the parties concerned.Safe and reliable,this type is extensively used in world trade.
7. What are the major contents of the bill of lading?
The major contents of the bill of lading include: (1) the carrier, i.e. the shipping company. (2) the shipper or consignor, it is normally the exporter. (3) the consignee. It is generally either the importer or made out "to order". (4) the notify party, i.e. the party to be advised after arrival of the goods at the port of destination. It is often the agent of the consignee or the consignee himself. (5) a general descrption of the goods including the name, number of packages, weight, measurement etc.. (6)shipping marks. (7) the port of shipment and the port of destination.(8) the freight, for CIF and CFR it should be "freight to prepaid", or "freight paid ",for FOB it shuld be "freight to collcet", or "freight to be paid", or "fredight payable at destination". (9) the place where the bill of lading is issued. (10) the date when the bill of lading is issued which is regarded as the time of shipment and can by no means be later than that stipulated im the credit.

8. Explain insurable interest briefly and give an example to illustrate it.

Insurance is a risk transfer mechanism,whereby the individual or the business enterprise can shift some of the uncertainty of life onto the shoulders of others.Inretrun for a knowmn premium, usually a very small amount compared with the potential loss, the cost of that loss can be transferred to an insurer. Without insurance, there would be a great deal of uncertainty experienced by an individual or an enterprise ,not only as to whether a loss would occur, but also as to what size it ould be if it did occur.
For example, a house_owner will realize that each year several hundred houses are damaged by fire. His uncertainty is whether in the coming yerar his house will be one of those damaged, and he is also uncertain whether, given that he will be one of the unlucky ones, his loss will amount to a hundred dollars or so for the redecoration of his ditchen or whether the house will be gutted and cost him thousands of dollars to repair. Even though the probability of his house becoming one of the loss statistics is extremely low, the average house_owner iwll nevertheless select to spend, say $50 to $60 on house insurance, rather than face the extremely remote possibility of losing a house worth $200 000.
9. What are the major factors that may influence the exchange rate?

Factors influencing the exchange rate include the following:
1. International balance of payment. It has a direct bearing on the supply and demand of foreign exchange. The value of one's own currency will go up with favorable balance of payment and drop with BOP deficit.
2. Inflation.It is closely related to the real value of the currency and the competitiveness of the commodity. When inflation intensifies, the value of the currency will drop relative to foreign currencies and vice versa.
3.Interest rate. Under specific conditions,high interest rate will attract short term international fund, increasing the exchange rate of one's own currency and vice versa.
10. Illustrate the respective advantages and disadvantages of the flexible exchange rate system and the fixed exchange rate system.
The two different exchange rate systems each has its own advantages. The fixed exchange rate system reduces the riskiness of international business and is also an iimportant measure to curb inflation. However, the system is vulnerable to disorderly changes in currency value. The most recent example is the Asian Finaacial Crisis of 1997-1998 when the fixed exchange rate adopted by some Southeast Asian coutries like Thailand and Indonesia collapsed and dealt a heavy blow to the economy. Under the flexible exchange rate system fluctuations of the exchange rate within a definite period of time will not immediately affect domestic money circulation and is helpful to the stability of the economy. Flexible exchange rate can also protect domestic currecncy from the impact of foreign idle funds and helps to prevent the drain of foreign exchange reserve. But frequent wild swings of the value of currencies will increase the riskiness of trade and affect international investment.