Recently, many Vietnamese cashew processing enterprises have been facing difficulties as their African partners have been reneging on contracts, refusing to deliver raw cashews, or unilaterally raising prices. This situation has caused significant losses for Vietnamese businesses, impacting their production, operations, and exports.

Vietnamese Businesses Grapple with African Partners’ Contract Cancellations on Hundreds of Thousands of Tons of Raw Cashews

Causes:

According to the Vietnam Cashew Association (Vinacas), the contract cancellations by African partners stem from various factors, including:

  • Market Price Fluctuations: Global raw cashew prices have surged due to increased demand and reduced supply caused by weather and disease. Vietnamese businesses had previously contracted raw cashews at lower prices. However, with the price increase, African partners canceled contracts or demanded higher prices.
  • Payment Risks: Some Vietnamese businesses lack experience in international payments, leading to delays or incomplete payments. This has eroded the trust of African partners, prompting them to cancel contracts.
  • Product Quality Issues: Some Vietnamese businesses have imported raw cashews that do not meet the quality standards specified in contracts. Consequently, African partners have either unilaterally canceled contracts or lowered purchase prices.
  • Imperfect Legal Systems: Contracts for raw cashew sales between Vietnamese businesses and African partners are often based on standard templates, lacking detailed clauses to protect the interests of both parties. The legal systems in some African countries also have shortcomings, making it challenging to file lawsuits and seek compensation when disputes arise.
  • COVID-19 Pandemic Impact: The COVID-19 pandemic has severely disrupted international cargo transportation, causing delays in deliveries and increasing logistics costs. This has also hindered Vietnamese businesses’ negotiations and contract fulfillment with African partners.

Impacts:

The contract cancellations by African partners have inflicted substantial losses on Vietnamese businesses, including:

  • Loss of Raw Material Supply: This has led to production disruptions and revenue declines.
  • Higher Raw Cashew Costs: Businesses are forced to purchase raw cashews at higher prices, affecting their profitability.
  • Tarnished Reputation in the International Market: Vietnamese businesses risk losing credibility and trust among international partners.

Solutions:

To minimize the risks associated with partner contract cancellations, Vietnamese businesses should:

  • Exercise Caution in Partner Selection: Conduct thorough due diligence on potential partners, assessing their reputation and capabilities before entering into contracts.
  • Establish Clear and Detailed Contracts: Ensure contracts clearly and comprehensively outline pricing, product quality, delivery schedules, payment terms, and the responsibilities of each party.
  • Utilize Secure International Payment Methods: Employ secure and reputable international payment methods to foster trust and prevent payment-related disputes.
  • Actively Participate in International Trade Events: Attend trade fairs and exhibitions to promote products and seek new partners.
  • Strengthen Cooperation with Government Agencies: Collaborate with relevant government bodies to receive support in contract negotiations, dispute resolution, and international market access.

The contract cancellations by African partners pose a significant challenge to Vietnamese cashew businesses. By adopting proactive measures, enhancing risk management strategies, and seeking government support, Vietnamese businesses can effectively navigate these challenges and safeguard their long-term success in the global cashew market.

Contact Information:

HCM office Address: 191/6B Le Van Viet Street, Tang Nhon Phu A Ward, Thu Duc City, Ho Chi Minh City, Viet Nam

Factory Address: Nguyen Thai Hoc Street, Phuoc Tan Hamlet, Binh Tan Commune, Phu Rieng District, Binh Phuoc Province, Vietnam

Email: sales@cptcorp.vn

Website: cptcorp.vn

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