15
EXPORT
| Issue #20
EDA Office of Foreign Trade • Riverside County, California • USA
To no one’s surprise, when exporting – or considering exporting - small
businesses are concerned about getting paid! This issue was highlighted
recently in a study by the US International Trade Commission where US
exporters stated that they worry about getting paid in a timely manner.
1.
This is consistent with the results from a survey by the National
Small Business Association in which 41% of their members who
export stated that getting paid was their most significant concern.
2.
In an article titled,
,” Professor David Wyld (Southeastern Louisiana
University) predicts that with the use of escrow services, “We will see a growth in exporting (and
importing) activities around the globe.” The questions are: (1) What is an escrow service?
And, perhaps more importantly, (2) How is it used in international trade transactions?
So let’s find some answers. What is an escrow service, and how does it relate to exporting? The
International Trade Administration’s
(TFG) says that an escrow service is:
A cash-in-advance option available to exporters and importers that reduces the potential risk of fraud.
A trusted third party that collects, holds, and disburses funds according to exporter and importer
instructions. A method of payment used by importers who demand assurance that the goods will be sent
in exchange for advance payment, and by exporters who demand payment up-front prior to shipping.
Here’s how it works:
The TFG points out that, as an exporter, any sale is a gift until payment is received. And, because getting
paid in full and on time is the ultimate goal for the exporter in each sale, an appropriate payment
method must be chosen carefully to minimize the payment risk, while also accommodating the needs
of the importer. As illustrated below, different payment types present
different risks to exporters than to importers. So in order to close
a sale and be protected, exporters must be aware of all payment
options and chose what works best for a given client or situation.
In closing, escrow services offer a mutually beneficial, cash-in-
advance method for both parties. Plus, offering escrow services as a method of payment can actually add
potential importers to U.S. exporters. In many cases, deals just don’t happen due to a payment-related
“
issue” – and one example might be that you, as the exporter, require payment-in-full and up-front, but
the importer is reluctant to send
the money until they receive the
goods. In this case, by offering
escrow services, both parties can
be satisfied, the payment issue is
resolved, and the deal closes.
Escrow Services – how to get
paid when exporting!
Andrew K. Sokol is
General Manager
of Emerging Markets
at Escrow.com, an
International Trade
Administration
.
Sources: 1.
2.
