Importer, exporter credit analysis

The American importer finds credit analysis less difficult than does the exporter. The importer of raw materials will deal usually with relatively few foreign shippers, whose financial and moral responsibility is well known or can be ascertained fairly accurately. The importer of manufactured goods may find the problem somewhat more complex if he is handling a variety of specialty goods made by a large number of foreign firms.

The exporter is in a rather different position. He may be selling to 30 or 40 countries, each with its own commercial laws, its own customs, and its own exchange regulations. To be sure, the exporter of cotton, copper, and similar raw or semiprocessed products usually ships to relatively few mills or dealers, with changes so seldom that the analysis of the status of newcomers is not very burdensome. But the American manufacturer--or his export agent--ships to scores and even. to hundreds of foreign establishments and consequently must make fairly frequent analyses of the credit standing of new customers. How these analyses will be made depends on the nature of the product and the nature of the export organization.

Let us suppose that a manufacturer of radio receiving sets is exporting to Latin America either through commission agents, who arrange the sales to various foreign buyers, or through distributors, who buy for their own account. In the latter case it would merely be necessary for the exporter to check the standing of the distributor, whereas in the case of sales through a commission agent it would be necessary for the exporter to check the standing of the various buyers unless the commission agent assumes the credit risks for an additional compensation.

The American exporter may, if he has found that his commission agent in, say, Colombia is experienced and reliable, depend upon him to supply credit information on prospective customers. Very frequently the American exporter will and should supplement such information through the facilities of his bank and one or more of the several foreign credit services available in the United States. These services are operated on two principles, the interchange of ledger data obtained from the files of American exporters, and the use of general antecedent information from abroad.

There is a rather widespread impression in the United States that exporting is a peculiarly risky business punctuated with a depressing procession of defaults due clearly to bad faith on the part of foreigners. If the testimony of hundreds of exporters may be accepted, this impression is ill-founded. Export losses may be due to failure of the customer to pay (a credit loss), or to a failure in the mechanism of foreign exchange, preventing the American exporter from receiving dollars or obliging him to accept a sizable discount or delay in the exchange conversion (an exchange loss).