Music Trade Review

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THE
MUSIC TRADE
REVIEW
Credit Requirements of Foreign Countries.
While the Granting of Accommodation is an Imperative Essential in Developing Foreign Trade, Yet
There Are a Number of Things Which the Credit Manager Must Know Before He
Can Intelligently Pass Upon Credit Applications From Abroad.
I
T is the constant cry of agents and buyers in foreign countries
that American manufacturers will not accommodate them-
selves in the question of credit terms to the requirements of foreign
customers, and thus through their alleged supineness lose a great
deal of business which goes to their shrewder and more reasonable
rivals in Germany and Great Britain. On the other hand, there
are numerous credit men in the United States who are confronted
with bad foreign accounts ranging from small lots trustfully
shipped to some importer in Amsterdam, Constantinople or Bogota
to large items in which the transaction is represented by at least
four figures on the wrong side of the ledger.
Some manufacturers who are beginners in the export trade
appear to be so elated over the receipt of a foreign order that they
fill it unquestionably, look for settlement hopefully and frequently
have occasion to regard their complaisance mournfully.
They
overook the fact that they would have scrutinized an order from
a domestic customer very closely before filling it. A few expe-
riences of this description are apt to prejudice the budding ex-
porter. "No more foreign business on credit for us. Henceforth
we get cash in New York before we let the goods out of our
hands." Now cash in New York is certainly very desirable, but
you can get it only when you sell something that the foreigner
must get and can get from no one else but you. Otherwise he
will buy elsewhere. If you have a patented article of universal
use you can make your own terms, of course.
In dealing with foreign customers direct, the granting of some
form of accommodation is an absolute necessity, an imperative
essential for developing large and permanent business connections.
There are a number of things which the foreign credit manager
must know before he can intelligently act upon credit applications
from abroad. And there are many things to consider, many pit-
falls to avoid and fine discriminations to make. The granting of
credits abroad is more or less of an exact science with principles
easily understood. There is no reason why a credit man should
not familiarize himself with them.
Probably the basic principle in foreign credits which is a verit-
able truism is this: "Give no credit to a firm or concern unknown
to you without investigating the credit standing of the intending
customer." This is perhaps an application of another important
principle which should never be departed from: "Do not grant
credit favors to any foreign firm when you would not readily grant
a similar accommodation to a similarly situated concern at home."
There are now several well-equipped agencies for the obtain-
ing of credit information on firms abroad. These are probably
known to the reader and need not be specially mentioned. No
foreign customer should be kept on the books without investigat-
ing his credit standing. In this connection it may be said that
it pays to obtain credit reports from several sources. A well-
known domestic rating agency has its own offices in Cuba, Mexico
and Argentina, but depends upon allied agencies elsewhere for
reports. While these reports are, of course, conscientiously com-
piled, the credit man must analyze them before he can make proper
use of them. These reports are furnished on a blank, typewritten,
single-spaced, and contain largely the statement by the risk pro-
posed, the reporter's views and perhaps a bank's estimate of the
risk. Such a report must be stripped of unverified and unsup-
ported statements and carefully boiled down.
A much better system in reporting on foreign credit risks is
employed by certain organizations which supplement their own
correspondent's reports and the risk's own statement by the opin-
ions of bank and trade correspondents. While the reports are
sometimes criticised on. the score of brevity, they furnish views of
several trustworthy parties, and they are not obscured by cumber-
some verbiage through which a busy credit man is sometimes ex-
pected to wade.
Now a credit report by itself is not always an absolutely re-
liable guide to the credit man. There are certain sections of the
world where an importer buys but little locally and is in a position
to maintain an excellent local standing, yet his rating with foreign
manufacturers may denote slowness, fault-finding, intriguing, or
he may religiously meet his drafts and neglect his open accounts.
A bank located in the city where such a customer resides is, of
course, apt to know how he treats foreign drafts, whereas his
fellow tradesmen may be unaware of any irregularities.
Perhaps it is most convenient for a credit man to file specific
rules regarding credit favors abroad by countries, an excellent
summary made by A-. J. Wolfe is worth mentioning as combining
those important principles which underlie all foreign credit giving:
1. Obtain reliable credit information on your customer.
2. Carefully analyze your information.
3. Consult American houses from whom your customer may
buy, and be always ready to give your experience. The time has
passed when a- business house was afraid to disclose a customer's
standing. To exchange credit information on foreign customers
is always helpful, and frequently very instructive.
4. Grant no favors to small, insignificant concerns. These
should buy from wholesalers or commission houses.
5. Be very clear and definite regarding agreements, prom-
ises, conditions. A large portion of foreign credit disputes is due
to lack of definiteness in original agreements.
6. Beware of the expression "sample order." It is very fre-
quently unscrupulously used.
7. Be very cautious with firms supposed to be doing business
abroad if they have high-sounding English titles—such as U. S.
Manufacturers Agency or American Importing & Exporting Syn-
dicate. Such names in nine cases out of ten are adopted to mis-
lead American manufacturers. As a name to do business with in
Russia or Guatemala the title is surely an incumbrance, for it is
not understood by the natives.
A few years ago a number of piano manufacturers in New-
York and elesewhere had quite an unpleasant experience when
they shipped a large number of pianos to Russia on an order re-
ceived from one of these exporting and importing houses with a
very imposing title. To all appearances the order seemed good,
and being received at a time when business was rather quiet it was
looked upon as a godsend and was filled promptly. The fraud
was discovered many months later and a number of pianos were
recovered in Europe. The experience, however, is one that the
manufacturers involved will not easily forget. It emphasized
afresh that too much care cannot be exercised in looking up the
legitimacy and standing of the houses placing orders.
As a matter of fact, the safest plan of selling foreign coun-
tries to-day is through an export house of recognized standing.
This plan has been adopted by many of our large manufacturers
with decided success. In this way the local export house is re-
sponsible to the manufacturer shipping the instruments, and the
only thing necessary is that shipments should be made according
to the rules and requirements of the export house. Of course,
there are a number of piano manufacturers selling direct to deal-
ers in South America. They are retail concerns of standing, how-
ever, and are increasing their trade in American instruments. Too
much care cannot be exercised, meanwhile, in accepting and filling
orders without getting the best of information of the correct stand-
ing of those who place orders. It is a wise business safeguard,