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Risk warning: Be careful of Algerian partners

Wednesday 27, 11 2019
Vietnamese exporters have encountered some problems with Algerian customers.
Risk warning: Be careful of Algerian partners

According to the Vietnam Trade Office in Algeria, recently, Vietnamese exporters have encountered some problems with Algerian customers. Accordingly, when goods arrive in the port of Algeria, some customers do not receive goods or force the seller to reduce prices, causing damage to Vietnamese exporters. Therefore, to minimize risks, special attention needs to be paid when making payment

For example, S.A.R.L Zima Food Company ordered a container of black pepper from Vietnam. The payment method is 100% D / P via bank and a 24% deposit of the shipment value was made. When the goods arrived at the port, due to the decline in pepper price in Algerian market, S.A.R.L Zima Food Company refused to take the goods. The Vietnamese company have proposed solutions, including accepting lower prices but the Algerian partner did not agree to take nor return the goods to Vietnam nor sell to other customers. They just wanted the deposit back, which is absolutely unreasonable. After the goods had been in the port for more than 81 days, Algerian Customs auctioned them. The Vietnamese exporter decided to hire a lawyer in Algeria to take their partner to court, but more than 2 years have passed, the Algerian court has not finished the case.

Another case is that S.A.R.L Conimex International Company signed a contract to buy Vietnamese rice in bulk. The mode of payment is CAD at sight (document against payment). When the goods arrived at the port, this company arbitrarily changed the payment method to 59 days deferred payment from the date of taking the set of documents. With the intervention of the Vietnamese Trade Office, this customer had to cooperate with Vietnamese exporter to carry out procedures for re-export of the goods to Vietnam, avoiding payment risks as well as the risk of goods being auctioned by Algerian Customs. However, Vietnamese export enterprise had to pay costly warehousing and transport expenses.

According to the Asia and Africa Market Department (Ministry of Industry and Trade), when doing business with partners in Africa and in the Middle East, businesses often face payment risks because many of such importers are not familiar with opening L / C. In fact, the transactions with these enterprises often take place online. Many Vietnamese businesses are willing to transfer thousands of dollars as deposits without checking and verifying as well as searching for partner information. In 2018, the Ministry of Industry and Trade handled a number of cases related to this issue.

Recommended payment methods

Mr. Nguyen Tuan Viet - Director of VIETGO Co., Ltd. (an enterprise specializing in export consultancy) said that in fact, this is not a new problem and has been repeatedly warned by the authorities. Free trade is opening the door for many companies to do business with international partners. However, in international trade transactions, manufacturing and exporting enterprises must have appropriate payment methods to minimize risks.

Accordingly, exporters should apply 2 forms of payment: L / C at the bank or money transfer via bank (TT). Most of the other methods including document against payment, are not beneficial to the seller.

Risk warning: Be careful of Algerian partners

Specifically, with the method of D / P, export companies are not allowed to receive deposits from customers. At the same time, the customer always requires production first, then send the goods to their port. Only when the goods arrive at the port will they exchange documents for money. This leads to the case when the goods have arrived at the port, the customer refuses to pay as they want to lower price. Export enterprises either have to keep the goods stored at the port for a long time, bearing high storage fees, or must accept a discount to receive money. In both cases, exporters will suffer from losses.

For the 2 suggested payment methods, Mr. Nguyen Tuan Viet noted that L / C payment at the bank is the safest form. With TT method, exporters should also require a deposit before conducting production. When the goods are delivered to the port, 100% of the money must be collected before returning the documents to the customer. If they do not pay, businesses can re-export the goods, minimizing risks.

Sharing the same opinion, the Vietnam Trade Office in Algeria recommends that, exporting enterprises should ask customers to deposit at least 40-50% of the value of the shipment or use L / C payment. However, it is also necessary for exporters to understand their partners thoroughly by using company reports by such business information provider as VietnamCredit. In case of need, contact the Vietnamese Trade Office in Algeria for assistance.

>>> Vietnam logistics industry: risks and challenges

Source: Ministry of Industry & Trade

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