Credit Risk

Customer credit risk (Credit Risk) refers to the possibility that in foreign trade transactions, the buyer fails to pay for goods or fulfill other payment obligations as agreed in the contract due to deteriorating financial condition, bankruptcy, or malicious default, causing economic losses to the seller. This term is commonly used in export business, letters of credit, documentary collections, open account (O/A) sales, and other scenarios. It is the core basis for foreign trade enterprises to conduct customer credit investigations, set credit limits, choose settlement methods (such as T/T, D/P, L/C), and insure export credit insurance. Precautions include: customer credit must be assessed dynamically, and macro risks such as political and exchange rate risks should be monitored; unlike commercial risk (such as market fluctuations), credit risk specifically refers to the default risk of the counterparty; it is also different from operational risk (such as documentation errors), which originates from internal processes. In practice, it should be combined with credit reports, bank creditworthiness, historical transaction records, and tools such as China Export & Credit Insurance Corporation to transfer risk.