International Trade Finance 

Not All Is Sweet for a Maple Syrup Producer

Background

Henry is the owner of the small maple syrup production company So Maple, based in
Quebec, Canada. Henry and his family own a large property with hundreds of maple
trees. Henry runs the business with his sister Judy, who is co-owner and sales
manager. So Maple has been exporting internationally for over two years. Judy has
grown the business by reaching out to customers online, at trade shows and even
meeting them in person in countries throughout Europe, North America and Asia. 

Henry has observed that slow product demand and currency fluctuations have resulted
in severe losses for the business. There have also been issues collecting payments
from overseas customers, which have not helped the business’ balance sheet. He
realized that he had to find different means to hedge against losses in the next financial
year. 

Jackson Foods—An Exciting Opportunity 

A few months ago, three truckloads of maple syrup worth CAD 40,000 were sent to food
importer Jackson Foods in Jacksonville, Florida. Jackson Foods supplies products to
several major health food stores in northern Florida. Both Henry and Judy were excited
they had secured the American food importer as a new customer. If things went well,
there would be potential for even greater sales in the future. 

Usually, So Maple would only conduct business with international customers who
agreed to cash- in-advance payment terms. So Maple had previously lost business to a
competitor who agreed at the start of sales negotiations to open accounts with its
customers. Jackson Foods requested an open account with So Maple, but this was
dismissed by both Henry and Judy. However, Judy did not want to appear aggressive in
her sales negotiations with Jackson Foods. So Maple agreed to receive an upfront
down payment instead of full prepayment prior to sending the products to Florida.
Before the title of goods could be transferred to Jackson Foods, the outstanding amount
was required. 

Henry determined the selling price of the products sold to Jackson Foods based on
what he would have charged a similar customer in Canada. He then charged Jackson
Foods for freight costs. Before title could be transferred to Jackson Foods, the
outstanding amount had to be paid.

So Maple shipped the products from Canada, Jackson Foods paid the down payment of
USD 25,000 by wire transfer. The outstanding amount of USD 15,000 was not insured
as Henry believed that, as a subsidiary of a large company, Jackson Foods was
creditworthy. At the time of the sales negotiations, the Canadian dollar was at par
(equal) with the American dollar. Jackson Foods was invoiced in U.S. dollars for its
product order. The exchange rate entered on the invoice record was CAD 1.00 = USD
1.00. 

Waiting for the Balance 

When the shipment of products arrived in Jacksonville, the freight forwarder released
the cargo to Jackson Foods without receiving confirmation from So Maple that Jackson
Foods’ final payment had been received. The freight forwarder assumed that the title of
the goods could be passed on to Jackson Foods based on the CIP Incoterm® rule that
was negotiated. No reference was made to the sales contract, which stated that final
payment was required before transferring the title of goods. A month later, Jackson
Foods had still not paid the remaining balance on its account. After several attempts to
contact Jackson Foods, Henry was told that the finance manager would contact him
soon to make the payment. Another few weeks went by, and Henry still had not
received the final payment. This contributed to a significant reduction in So Maple’s
overall profit margin, as the outstanding balance represented a substantial percentage
of its annual revenue. 

As time passed, there were changes in the value of the Canadian dollar. The cost of
packaging the maple syrup, along with other company expenses, started to rise. The
Canadian dollar increased in value to a weekly average exchange rate of CAD 1.00 =
USD 1.09. As sales receipts from U.S. customers were applied to invoices, So Maple
calculated foreign currency losses. Henry realized the sales receipts were less than
expected. 

The Follow Up 

Henry contacted his lawyer to see whether he could bring legal charges against the
freight forwarder for releasing the goods before payment was received. He also
considered researching alternatives to calling the finance manager at Jackson Foods
weekly to request an update on the outstanding CAD 15,000. 

Henry contacted the Canadian Trade Commissioner Service and a few other exporters’
associations to get some advice. They suggested he consider purchasing export credit
insurance for his next international transaction involving credit as a payment term, or
obtaining a standby letter of credit which operates as a guarantee to protect exporters in
such trade transactions. He approached several private credit insurance banks and
institutions. The premiums on the coverage would not be substantial even though So
Maple was not yet an established or experienced exporter. 
Henry had considered taking out a business loan in the future to invest in some
equipment to replace old machinery. Having a long-standing bad debt would not be
advantageous for So Maple’s business loan application. He had to make a plan for
future international orders. 

Learning Outcomes 

This case study relates to the following learning outcomes in the course International
Trade Finance: 

• Describe types of commercial, currency and other financial risks involved in

international trade transactions and describe methods available to minimize them. 

• Assess the competitiveness and profitability of potential export ventures through

consideration of all associated costs and possible risks of both environmental and
market factors in order to negotiate trade terms and establish final pricing. 

• Describe bonds and types of guarantees and how banks and international financial
institutions support international trade finance. 

• Describe export credit insurance and how it can cover commercial and political
risks. 

• Employ the most prudent course of collection procedures for non-payment by an

international importer. 

1. a) What is an alternative to calling the finance manager about collecting the bad
debts from Jackson Foods? 

There are three alternatives for debt collection that So Maple could use from
Jackson Foods:
i. Debt collection agency

The collection agency might be able to assist in recovering

the money owned by Jackson Foods. In exchange, the
company needs to pay fees on the amount recovered with
the agency’s assistance.

ii. Legal Action

So Maple has the option of filing a lawsuit against Jackson

Foods in order to recoup the bad debts. The court will then
issue a notice to the importer, putting pressure on the party
 to refund the unpaid money because it will harm their market
reputation.

iii. Credit Bureau

It is an aggressive approach to which So Maple submits the

reports of outstanding debts to the credit bureaus, affecting
Jackson Foods’ credit score in future trade.

b) What effects will this alternative have on So Maple’s cash flow and amounts
received? 

i. Debt collection agency

So Maple may receive the outstanding money of USD

15,000 to the debt collecting agency. There’s no assurance,
but the collection agency will have collected some Jackson
Foods’ bad debt. At the same time, depending on the
amount recovered, So Maple will be required to pay fees to
the agency. Nevertheless, this alternative will improve So
Maple’s cash flow.

ii. Legal Action

In case of starting legal proceedings against Jackson Foods,

So Maple will likely recover the debt. This method will be
highly costly. The costs of a lawyer and court fees may be
the same as debt. If it wins, So Maple would receive the
outstanding sum, but Jackson Foods will also cover legal
fees ad pay moral damages. Legal action will positively
affect So Maple’s cash flow.

iii. Credit Bureau

The Credit bureau will not recover the debt owned by

Jackson Foods; therefore, there will not be any effect on So
Maple’s cash flow. Besides, So Maple will not have to pay
any additional fees to the bureau.

2. Henry and Judy did not agree to have an open account with Jackson Foods. 

a) What would be the disadvantages of So Maple having an open account with

Jackson Foods? 
 As the world’s economies become more connected, exporters and importers find
it easier to obtain reliable information on their overseas trading partners.

b) If Henry and Judy agreed to an open account, what steps could they take to
ensure their profit margin is still achieved? 

3. Henry and Judy agreed for Jackson Foods to make a down payment on its order
before they shipped it. What recommendations would you give to Henry and Judy
about determining the selling price and payment options for Jackson Foods as a
new international customer? 

a) Based on the new exchange rate, what would be the new Canadian equivalent
that So Maple would be receiving for the outstanding balance? 

b) What suggestions do you have to help So Maple protect its profit margin against
foreign exchange risk? 

A) What is an alternative to calling the finance

manager
a) What is an alternative to calling the finance manager about collecting the bad debts from
Jackson Foods? What effects will this alternative have on So Maple’s cash flow and amounts
received? Henry and Judy did not agree to have an open account with Jackson Foods. What
would be the disadvantages of So Maple having an open account with Jackson Foods? If Henry
and Judy agreed to an open account, what steps could they take to ensure their profit margin is
still achieved? Henry and Judy agreed for Jackson Foods to make a down payment on its order
before they shipped it. What recommendations would you give to Henry and Judy about
determining the selling price and payment options for Jackson Foods as a new international
customer? 

b) Based on the new exchange rate, what would be the new Canadian equivalent that So Maple
would be receiving for the outstanding balance? What suggestions do you have to help So
Maple protect its profit margin against foreign exchange risk?
Although based on research of actual events, organizations and/or individuals, this case
study is fictional and is intended to support learning. Cases are not intended to serve as
endorsements, sources of primary data or illustrations of effective or ineffective
management. 

© FITT 4 
International Trade Finance 

Sources 

"Chapter 1: Methods of Payment in International Trade." Export.gov. November 13,

2012, accessed March 29, 2017.
2016.export.gov/tradefinanceguide/eg_main_043221.asp. 

IsraTransfer Team. "How Exchange Rate Fluctuations Affect International Businesses

(and Ways to Protect Yourself)." IsraTransfer (blog). June 19, 2016, accessed March
29, 2017. isratransfer.com/blog/how-exchange-rate-fluctuations-affect-international-
businesses-and-ways- to-protect-yourself. 

Kelley, Michael. Foreign Currency Risk: Minimizing Transaction Exposure. Virginia

Lawyer, June/July 2001. Accessed March 29, 2017.
www.vsb.org/docs/valawyermagazine/jj01kelley.pdf. 

Smith, Susan. "Exporting Maple Syrup a Sticky Situation for Ontario Producer." The
Globe and Mail. April 15, 2015, accessed March 29, 2017.
www.theglobeandmail.com/report-on- business/small-business/sb-growth/the-
challenge/maple-syrup-maker-loses-sleep-over- exports/article23958505. 
© FITT 5 
International Trade Finance 

Photo Attributions 

Photo #1 (Maple syrup) 

Attribution: By Dvortygirl (Own work), GFDL (www.gnu.org/copyleft/fdl.html), via

Wikimedia Commons 

Licence: CC-BY-SA-3.0 or CC BY-SA 2.5-

2.0-1.0 

upload.wikimedia.org/wikipedia/commons/c/ce/Syrup_grades_lar
ge.jpg 

Photo #2 (Foreign currency) 

Attribution: No attribution required 

Licence: Public domain, free for commercial use 

pixabay.com/en/mixture-currencies-finance-business-69523 

Photo # 3 (Maple leaf) 

Attribution: No attribution required 

Licence: Public domain, free for commercial use 

www.publicdomainpictures.net/view-image.php?image=59189&picture=maple-leaves 

© FITT 6