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Shenzhen LED Industry Mitigates Potential Shipment Risks from New EU Standard

As EU begins implementations of its new LED standards on Sept. 1, 2013, LED manufacturers based in Shenzhen, China are facing higher entry level and risks. Shenzhen’s LED industry launched a risk management platform on Aug. 30, 2013 that will issue advanced risk alerts, regulate contracts, aid in negotiations, and offer risk consulting to Shenzhen LED manufacturers.

The Shenzhen LED Industrial Association recently announced the establishment of a joint LED industry risk management platform with China Export & Credit Insurance Corporation’s (CECIC) Shenzhen Branch, according to a recent report by Shenzhen Economic Daily. The risk management platform will be offering services including advanced risk alerts, contract regulations, negotiations, and risk consultation to the LED industry. According to sources, this is the first risk management platform the association has set up. In addition, the platform can protect Shenzhen manufacturers’ business interests by offering a international buyer negotiation platform. Usually, negotiation terms between single Chinese manufacturers and large European or U.S. buyers tend to be unequal, with limited room for negotiations. The platform can help gather more suppliers to negotiate better terms with international buyers.

Statistics gathered from CECIC show 227 LED manufacturers in Shenzhen are insured, and the total insurance amounted to US$570 million. Most of the insured companies are leading manufacturers in the industry. Since 2012, the Shenzhen LED industry has filed 45 cases of export damages amounting to US$ 8.68 million, and actual compensation totaled to US$ 4.46 million. From Jan. to Aug. 2013, the LED industry has reported 39 cases of export damages valuing to US$ 7.84 million and compensations worth US$ 4.19 have been issued. The U.S. and EU are regions with the highest shipment risks. The data above indicates the LED industry’s export damage cases and loss value has been soaring in 2013, and is quickly catching up with the total annual losses filed in 2012.

From country export statistics, LED products are being exported to 103 countries and regions. Out of these, exports to 13 countries valued over US$ 10 million, with the top three regions being U.S., Germany and Hong Kong. Many manufacturers tend to lose their guard when exporting to these regions, due to their comprehensive credit system. However, not all developed countries are safe shipment areas. From a statistical perspective the U.S. and EU countries have the highest export risks.