How far away are foreign trade risks from export enterprises?

In recent years, affected by the financial crisis, the international environment for my country’s textile and apparel exports has become more and more complex. Trade frictions and trade risks have become more widespread and diverse. Under the influence of many factors such as rising labor costs and increasing fluctuations in the RMB exchange rate, customers are increasingly non-performing and breaking contracts on export orders, which has increased export risks and increased pressure on enterprises. In the process of industrial transformation and development, textile enterprises urgently need to establish risk prevention mechanisms and dispute resolution mechanisms to safeguard their legitimate rights and interests. Recently, the special training “Coping with International Trade Frictions and Preventing Legal Risks” has aroused strong concern in the industry about the occurrence and response to trade risks.
Liang Jie, Director of the Second Export Region Division of the Import and Export Fair Trade Bureau of the Ministry of Commerce, said that my country is currently facing a high incidence of trade friction cases, and trade barriers represented by technical standards, intellectual property rights, and tariffs are emerging one after another and are getting stronger and stronger. . From the perspective of market structure, the countries that have trade frictions with my country are still mainly European and American, but they have gradually begun to shift to developing countries. From an industry perspective, trade frictions have begun to spread from traditional industries to high-tech industries. At present, compared with the light industry and steel industry, my country’s textile industry has relatively small trade volume and amount. The resulting trade frictions and disputes are relatively few, but the losses caused to enterprises cannot be ignored.
According to statistics, from 2012 to the present, there have been about 17 trade friction cases involving textile exports. The products involved generally export more raw materials and semi-finished products and relatively less finished products; most of them are cotton and cotton blended textiles, cotton thread products, and clothing. And accessories, nylon filament, polyester filament, chemical fiber cloth, linen fabric, elastic yarn, etc.
​How to identify and avoid risks
Based on the global economic depression, my country’s foreign trade exports have an obvious downward trend, and the current situation of “more monks and less meat” among foreign trade processing enterprises has become more prominent and will continue. Because companies are eager to make profits after receiving foreign trade orders, they often sign contracts in a hurry, with little consideration of various risks that may arise in the performance of the contracts, laying the groundwork for future trade frictions. He Guicai, arbitrator of the China International Economic and Trade Arbitration Commission, believes that how companies identify risks when signing foreign trade orders, how to avoid risks when signing contracts, how to control risks when disputes arise during contract performance, and how to safeguard rights when problems arise that they cannot solve themselves are all important issues. This is a question that enterprises should think about and study. According to statistics from 188 arbitration institutions across the country, 4,000 foreign-related cases were accepted in 2012, of which 2,100 were cases involving export trade, 30% of which were initiated by Chinese parties and 70% by foreign parties. Among them, the risks caused by contract defects due to factors such as missing clauses, unreasonable clauses, and yin and yang contracts account for 60%. Due to factors such as quality, delivery time, lack of evidence, unreasonable claims, and claims settlement, during the contract performance process, Strict implementation accounts for 20% of the cases, and other reasons such as non-appointment and unqualified agents account for 10%.
He Guicai said that in foreign trade contracts, risks are prone to arise mainly because companies do not understand laws and foreign trade policies and have poor risk awareness. When signing contracts and orders, they neglect to investigate the creditworthiness of merchants, and only find out that they have been deceived after disputes arise. Disputes arise during the execution of the contract, involving unreasonable claims and claims; at the same time, due to the failure to pay attention to the investigation of the sources of intellectual property rights by foreign companies, they are passively involved in litigation disputes; there are also companies that engage in unreasonable competition in signing contracts to compete for orders. However, giving up the corresponding contractual rights, swallowing one’s anger after a dispute occurs, or taking inappropriate measures will result in irreparable losses.
​Avoid omissions in contract terms
According to the actual situation encountered by export companies in foreign trade business, many trade frictions and disputes are caused by the lack of strict details and terms in the contract signing process, as well as the lack of understanding of the local regulations and cultural customs of the export market. Not enough. Take the 2012 London Olympics mascot foreign trade processing contract export dispute case as an example. The arbitrator in this case was a toy manufacturing company in Guangdong. This company signed a contract with a British buyer for 50,000 sets of Wenlock mascots in June 2012. plush toy export contract. The terms of the contract are roughly as follows: the other party’s British purchaser will provide styles and specifications. The Chinese side’s delivery period is the first batch of 20,000 sets, which will be shipped on October 15, and payment will be made 3 days after the goods arrive; the second batch of 30,000 sets, Shipped on November 11th. To catch up with the UK’s peak Christmas sales season. In terms of product quality, it is only agreed that the product meets the corresponding standards and meets the Chinese inspection standards. The applicant is responsible for the sales license, and the breaching party shall compensate the non-breaching party for the corresponding losses.
During the execution of the contract, since it is a special product, it should have a special sales license, but the company in Guangdong only applied for a general sales license for production. Second, the delivery date is too close. The first batch of goods has not been received yet, and the second batch has to be shipped. Third, because it does not have an EU sales license, it can only be transferred to non-EU countries for sales, and ultimately misses Christmas. peak sales season. Fourth, the quality agreement only meets the corresponding standards. If an accident occurs, the breaching party should compensate the observant party for the corresponding losses. Various laxities in the conclusion of the contract have led to disputes.
Another example is that when signing a contract, the written expression is not rigorous, which can easily lead to trade disputes.Easy to cause friction and disputes. The color fastness grade of textiles is one of the important indicators for measuring product quality. It involves a number of sub-categories of color fastness indicators. Common ones include color fastness to water, color fastness to washing, color fastness to rubbing, and color fastness to perspiration. Fastness, color fastness to sunlight, etc. A common mistake that companies make when receiving orders is that when signing a contract, they do not specify which specific color fastness grade they should use, but simply state that “the color fastness is greater than grade Different judgments lead to trade disputes and frictions.
In addition to the above-mentioned trade risks, when signing and performing foreign trade contracts, there are also losses for the production company due to the other party’s rejection of goods due to the lack of understanding of the other country’s consumption habits and customs details. Here I have to mention a case about China’s export of robes to Arab countries. Due to the customs and habits of Arab countries, the panda pattern is considered to be synonymous with “pig”. Because the company did not understand the relevant local cultural customs, the robes produced were not received by the ordering party, resulting in serious losses and trade disputes.
​Seek professional help to avoid risks and safeguard rights
Experts at the meeting said that if the entire export trade of an enterprise is compared to a long-distance race, then signing a standardized contract is like winning at the starting line, and the process of fulfilling the contract is like the process of hard work in the long-distance race, reaching the finish line. Even if you have successfully completed a long-distance run. In the trade process, the arbitration institution that resolves disputes when trade frictions occur is like a referee whistle.
After experiencing unfavorable factors such as the global economic crisis, the impact of trade frictions and rising costs, China’s textile industry is moving from “fighting for costs and prices” to the path of structural adjustment, transformation and upgrading. It is no longer difficult to earn meager profits through low-cost processing alone. To continue. If an enterprise wants to reduce trade friction and win a place in the international arena, it must strictly regulate its own behavior and be familiar with relevant laws at the starting line of contract signing. If a trade dispute arises, it is necessary to promptly apply for arbitration to negotiate. At the same time, the textile industry association and chamber of commerce should be used as legal aid agencies to work together to maintain normal trade based on industry standards.