Held & Associates, Inc.

Use of Buyer's Forwarder

In the current international business climate, it is not unusual for overseas buyers to want to control the routing of the goods and the U.S. freight forwarder. This is most predominant in Central America, South America, Japan and South Africa.

An exporter's level of risk depends on the credit terms and how the buyer's forwarder sets up the export documents. Following are some of the potential things that could happen in approximate order of no risk and up:

Buyer pays for goods in advance, buys Ex Factory basis and forwarder does not show you as the exporter of record. Level of risk: Almost none. Only risk is claim for improper packing.
Buyer pays for goods in advance, buys Ex Factory basis and shows you as exporter. Level of risk: Low. You are then liable for:

Payment of ocean freight costs if buyer fails to pay.
General Average if claimed by carrier.
Improper packing claim.

Open account sale, buys Ex Factory basis and forwarder does not show you as exporter of record. Level of risk: Moderate.

Buyer may not pay for goods if shortage, damage or non-delivery.
No control over how goods are insured or if they are insured at all.
Improper packing claim.

Open Account Sale - Ex Factory basis and forwarder shows you as the exporter of record. Level of risk: Moderate.

Buyer may not pay for goods if shortage, damage or non-delivery.
No control over how goods are insured or if they are insured at all.
Improper packing claim.
Liable for ocean freight if buyer fails to pay.
General average claim.

Letter of Credit Sale: Regardless of freight terms you will likely be shown as the exporter of record. Level of risk: High.

You need precise documents in order to collect from bank cleanly. You will be dependent on buyer's forwarder to create part or all of the documents that you need to collect for the goods, buyer's forwarder may not act in your best interest as he is working for the buyer.
You are liable for ocea freight if buyer fails to pay.
Liable for imporper packing claim.
General average claims.

An exporter could go for years and not have any of the potential problems shown. On the other hand, any or several of these problems could occur at any time. Scenario No. 5 is the most concern. The loss of funds for one shipment can quickly change an exporter's policy on this issue.

There are certainly some operational and sales advantages to an exporter to use the buyer's forwarder, we do not deny that. Each exporter must decide for themselves the level of risk they are willing to take in order to let the buyer control the routing and forwarding. We can not make that decision. Our job is to explain the topic as clearly as possible. Such an explanation is simply part of the service we off our clients.

If you have any question on this or any topic, please feel free to call.

1120 ERIE STREET * P.O. BOX 34470 * NORTH KANSAS CITY, MISSOURI USA 64116-0870
Tel# (816) 842-6701 *** Fax# (816) 842-6724 *** E-MAIL: INTL@HELD-ASSOC.COM