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'Deal with regular buyers to avoid defaults' – Mr Saran, SRTEPC

31
Dec '08
Recently the Chairman of the biggest bank in India, the State Bank of India had sounded a note of warning to Indian exporters when he asked them to be extra careful in their dealings with US based companies. This has presumably come at a time when defaults in the US markets are on the rise and can be expected in dealings with other countries too.

fibre2fashion.com spoke to Mr Sanjeev Saran, Chairman of The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC), which is a government organization dedicated to the promotion of exports of Indian synthetic & rayon textile items, to give his opinion and advice to exporters on this very tricky situation.

We started off by asking him for his suggestions to Indian exporters, to which Mr Saran replied by saying, “In view of the financial crisis in the US, it is suggested that while negotiating business with the US buyers, the Indian exporters should consider the following:

-Insist upon the payment in advance or an Irrevocable Letter of Credit.
-Negotiate business through the agent preferably in India.
-If possible, accept advance payments in foreign currency from the buyer in India.
-Minimize the credit period extended to the buyer. As far as possible negotiate business on CAD basis.
-Explore the possibilities of getting payments through the mechanism of “Factoring without recourse”.

To another question as to what precautions exporters should take to avoid inking such trade deals, Mr Saran suggested that Indian exporters should take the following precautions:

-As far as possible negotiate business with regular buyers. In case of new buyers it is advisable to negotiate business only with reputed and well known buyers with good credit worthiness.
-Do not send the shipment documents directly to the buyer.
-Do not give consent to the shipping lines for clearance of goods against guarantees.
-Take suitable ECGC cover and get the “Buyer's limit” fixed for all the buyers. Avoid doing business with those buyers to whom ECGC refuses to fix a limit.
-Shipments may be effected in smaller quantities till the situation improves.

To end the interview, we asked him for his suggestions to accelerate exports in present conditions; he advised Indian exporters to explore new markets particularly the upcoming markets in Africa and Latin American countries, in view of the prevailing situation in the US which as a matter of fact is the main market for Indian MMF Textiles.

We thank Mr Saran for his advice and suggestions which if implemented by the exporters, will help them avoid the pitfalls of defaults in payments.

Fibre2fashion News Desk - India


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