Getting paid is uppermost for foreign traders and Y2K

Rhode Island businesses that sell to and buy from foreign companies ill-prepared for the effects of the millennium on software programs have one matter above all others to be concerned about: the making and receiving of payments for goods.

The tricky part is no one can say exactly where the problems will arise, when and if they do.

“I think it’s going to depend on the countries” involved, said Maureen Mezei, international trade director for the Rhode Island Economic Development Corporation. “It’s a wide world out there.”

Bob Johnson, vice president of international banking at Fleet Bank, said “the possibilities are as wide as the horizon” and made some practical suggestions for importers and exporters.

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“Don’t just ask a company what it is doing about Y2K. Ask ‘what have you done and what has your bank done,'” Johnson said.

That’s because the old rules of money exchanges won’t necessarily apply on December 31st at midnight, he said.

For example, “emerging markets have the greatest challenges” when it comes to Y2K compliance so that a letter of credit from a bank in one of those countries may not be “the guarantee that it was before,” Johnson said.

Instead, the importer/exporter who trades on an “open account” – as if conducting business domestically – might be better off, Johnson said. Such a practice is often considered risky under normal circumstances, he noted.

Johnson also suggested quashing the instinct to accelerate payment schedules in favor of decelerating them.

“Avoid the first two to three weeks of January in terms of making payments or expecting payments from overseas,” Johnson said.

“If there are problems, it’s going to hit you in the first 30 days,” he said. By extending payment terms you “give the banking system time to work it out.”

The more businesses are pressured for early payments “the less time they’ll have to fix the Y2K structure,” Johnson said.

As for which markets could be problematic, Johnson said “Asian countries are probably the most stressed.

“Latin America is going to have some challenges, but not as much,” he said.

Still, Johnson was optimistic that even the most economically beleaguered countries will work out their Y2K kinks.

“I think some of these countries will find solutions. They may not be the prettiest solutions,” he said. “But I think in the end pragmatism will prevail.”

Raymond Fogarty, director of the Rhode Island Export Assistance Center and World Trade Center Rhode Island at Bryant College, guessed the impact of Y2K on Rhode Island importers and exporters will be “rather minimal.” That’s because the state trades about 30 percent with Canada and about 40 percent with Europe, he said.

Those countries are “pretty well set with Y2K problems,” Fogarty said. “Then you go around the world and there’s pockets of problems.”

Bill Greenberg, owner of Mercury Products Corp. of Lincoln, imports costume jewelry from several of those pockets throughout Asia. However, he said the small size of the businesses with which he deals precludes any major problems.

“I would say that most people there bought computers within the last year. Some of them are just now getting Internet service,” Greenberg said. If worse comes to worst “they go back to pencil and paper.”

Beyond the small businesses, “we’re dealing with brokers who are large and airlines who certainly have their acts together,” he said.

Textron, a $10-billion multi-national conglomerate based in Providence, certainly fits the big business profile, with about 35 percent of its revenues generated outside the United States, according to Chief Information Officer Bill Gauld. Still the company is taking nothing for granted.

“We have both a supplier and a customer on an international basis that we deal with” in the automotive, industrial and aircraft manufacturing divisions, Gauld said. As such, “we’ve addressed” Y2K “very systematically both in the U.S. and around the world.”

In conducting a review with critical suppliers and customers, Textron has encountered two main problems, he said. Countries that are further behind in resolving the problem and others who are simply slow in providing the information.

“Parts of the world that are less automated and less dependent on computers,” such as some South American and “the older Eastern European” countries, “will be the least disruptive,” Gauld said.

Asian countries have been slow in providing information but are generally “in good shape,” he said.

Gauld also predicted that the process will be ongoing, as “customers and suppliers change every day.”

“This is one of those areas where the approach is to continually be diligent,” he said.

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