Risk Mitigation Methods in International Trade

Non-realization of export proceeds within FEMA’s 9-month timeline risks recovery of duty drawbacks under the Customs Act, 1962.

Indian exporters face risks like buyer defaults and currency fluctuations, but mitigation strategies can protect your business.

• Strategy 1: Use ECGC insurance to cover up to 90% of losses from non-payment.

• Strategy 2: Opt for UCP 600 LCs to ensure payment upon document compliance.

• Strategy 3: Hedge forex risks via RBI-approved forward contracts, saving 3–5% on losses.

• Strategy 4: Verify buyers with D&B reports or similar, as available to avoid fraud.

• Strategy 5: Use INR vostro accounts for stable settlements. Non-realization of proceeds risks drawback recovery under FEMA.