1-2.
Overview
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Learning Points
- Considerations
- Why Understanding Regulations Matters
- Trade Regulations
-
Risks Associated with Trade
Considerations
Trade is the buying and selling of goods with people from overseas. It’s different from buying apples at the local grocery stores because you have to deal with people with other languages, cultures, and business practices.
Therefore, it requires:
- The proper knowledge of trade transactions
- The knowledge of laws and regulations
Why Understanding Regulations Matters
Without the proper knowledge, the following accidents can happen:
- To be Scammed
- Leads to Incur Losses
- Leads to Breaking Laws
Trade Regulations
Trade has various laws and regulations, such as import restrictions, export controls, etc. Be cautious, as the following items may be subject to regulations.
- Goods which may infringe on intellectual property
- Goods which has environmental issues
- Hazardous materials
- Endangered species
- Ailen Spices
There are also regulations for the following purposes:
- Protection of domestic industries
- Compliance with safety standards
While it may appear risky, in actual transactions, there are often cases that exporters may overlook at first.
It will lead to significant financial losses!
Risks Associated with Trade
In trade, you have to consider the following risks:
- Credit Risk
- Exchange Rate Risk
Credit Risk
When you engage in trade, you have to deal with companies physically located in other countries. Due to the lack of familiarity and uncertainty with the trading partner, credit risk arises.
You have to consider:
- Will the payment be made properly?
- Will the products be delivered as expected?
If you don’t consider these risks, you’re more likely to lose money
Common Credit Risks
In international transactions, the following scenarios are often likely to occur:
- Deliberately delaying payments
- Shipping substandard products
- Inadequate packaging and wrapping of goods
- Delivery delays of more than one month
- Invoicing for unclear items
This is because various countries follow different business practices. Things may be common for one country, but they could be considered unbelievable for another.
Exchange Rate Risk
In trade, you also need to consider exchange rate risk.
Exchange rates fluctuate daily. Pay close attention to exchange rate fluctuations in trade transactions is crucial.
Summary
In this article, we’ve covered the following points:
- What you need to know when engaging in trade
- Risks associated with trade transactions
- Important considerations when conducting trade deals
To avoid getting into trouble, it is crucial to grasp regulations.
Enhanced Learning with Videos
Trade Overview
International Rules for Environmental Protection
Test Yourself
Reinforce your understanding of this topic by working through the exercises. Attempting the exercises without referring to the material as much as possible is advisable.
