Credit risk of Indian customers

The Indian market attracts many due to its potential.Enterprises,but credit issues among some Indian clients occur frequently.Taking a case as an example,a long-term client paid 45% of the payment (approximately over 30,000 USD) under FOB terms,but refused to pay the remaining 55% balance (around 40,000 USD) after the goods arrived at the port on May 26,and did not take delivery.This situation is not an isolated case; delayed payments or cargo abandonment occur from time to time among Indian clients,posing significant financial risks to exporters.

Division of Responsibilities under FOB Terms

Under the FOB (Free on Board) terms,the seller is responsible for loading the goods onto the vessel,with the risk transferring to the buyer at the ship’s rail.The buyer is required to payPay and complete the cargo pickup procedures.However,if the buyer fails to pay the balance,the seller,despite having fulfilled the shipment obligation,struggles to control the subsequent disposal of the goods.In this case,the freight forwarder indicated that the ocean freight remains unpaid and the goods are still under their control,highlighting the seller’s passive position under FOB terms when the buyer defaults.

The consequences of cargo detention at the port

Goods stranded at the port bring multiple issues:

• Latefeesaccumulate.:Inthiscase,the14-dayfreecontainerusageperiodhasexpired,andlatefeescontinuetoaccumulate.
• Disposalrestricted:AccordingtoIndiancustomsregulations,thesellercannotreturnorresellthegoodswithoutawrittenabandonmentdeclarationfromthebuyer.
• Potentialloss:Iftheportdemurrageperiodisexcessivelylong(forexample,demurragefeesreaching$40,000overtwomonths),thesellermayfaceclaimsforpaymentfromfreightforwardersorshippingcompanies,orevenlegalaction.

Response Strategies

For the risks faced by Indian customers under FOB terms,the following recommendations are suggested:

1.Optimize payment terms

Output:

• Fullpaymentinadvance:Fullpaymentisrequiredbeforeshipmenttoavoidtheriskofoutstandingpayments.
• Purchasecreditinsurance:Ensurefundsafetythroughbankguarantees.

2.Risk Prevention and Insurance

Output:

• ApplyforSinosureinsurance:AfterconsultingwithSinosure,itisadvisabletoreportthelossassoonaspossibletominimizethedamage.
• Customersurvey:Conductcredithistoryandmarketreputationchecksonclientsbeforecooperation.

3.Cargo Control and Disposal

Output:

• Retentionoftitle:Negotiatewiththefreightforwardertonotreleasethegoodsbeforethefinalpaymentismade.
• Quickresale:Ifthereisanewbuyer,youmayattempttoresell,butpleasenotethatIndiancustomsrequireabuyer’sabandonmentdeclaration.

4.Legal and Contractual Safeguards

Output:

• Improvethecontract:Clarifydemurragechargesandliabilityforbreachofcontract.
• Warningletterfromalawyer:Iftheclientdelays,pressurecanbeappliedthroughalawyer.

Conclusion

Indian clients failing to make final payments and refusing to take delivery under FOB terms highlight the credit risks in foreign trade.Exporters can immediately initiate claims with Sinosure,negotiate with freight forwarders to control the goods,and seek legal support if necessary.In the future,transaction security should be ensured through strict payment terms and risk assessments.