International trade and methods of payment

Air way-bills of lading, on the other hand, do not need to be presented in order for the buyer to claim the goods. Thus, cash in advance lacks competitiveness; the buyer may refuse to pay until the merchandise is received.

This point is especially true when a simple misunderstanding or technical problem is to blame and there is no question of bad faith. With patience, understanding, and flexibility, an exporter can often resolve conflicts to the satisfaction of both sides.

International trade - payment methods

Open account sales do pose risks, however. The local bank prepares a letter of confirmation to forward to the exporter along with the irrevocable letter of credit.

By signing and writing "accepted" on the draft, the buyer is formally obligated to pay within the stated time. For example, "net 30 days" should be specified as "net 30 days from acceptance" or "net 30 days from date of bill of lading" to avoid confusion and delay of payment.

If meeting the terms of the letter of credit is impossible or any of the information is incorrect or misspelled, the exporter should get in touch with the customer immediately and ask for an amendment to the letter of credit to correct the problem.

Foreign currency A buyer and a seller in different countries rarely use the same currency. One of the most important factors in reducing risks is to know what risks exist.

If the buyer cannot or will not pay for and claim the goods, then returning or disposing of them becomes the problem of the exporter. Once the goods are sold, payment is sent to the exporter. The exporter usually expects the buyer to pay the charges for the letter of credit, but some buyers may not accept terms that require this added cost.

The exporter may have to pursue collection abroad, which can be difficult and costly. Exporters should always request that the letter of credit specify that partial shipments and transshipment will be allowed.

One of the uncertainties of foreign trade is the uncertainty of the future exchange rates between currencies. Thus, the full compliance of documents with those specified in the letter of credit is mandatory.

The buyer or agent gets the documents that may be needed to claim the goods. The bank notifies the buyer when it has received these documents; as soon as the amount of the draft is paid, the bank releases the bill of lading, enabling the buyer to obtain the shipment.

Methods of Payment & Letters of Credit

A letter of credit may be either irrevocable that is, it cannot be changed unless both the buyer and the seller agree to make the change or revocable that is, either party may unilaterally make changes.Methods of Payment & Letters of Credit.

1 day. This one-day workshop covers the 5 main types of payment for exports, from advance payment to open account, including Sight Documentary Collection, Term Documentary Collection and Documentary Letters of.

If you're an international trader, how and when you make payments is crucial to your business. See payment methods. Import and Export Payment Methods. There are several basic Export Payment Methods - Import Payment Methods for products sold abroad.

As with domestic sales, a major factor that determines the method of payment is the amount of trust in the buyer's ability and willingness to pay. The Handbook of International Trade and Finance: The Complete Guide for International Sales, Finance, Shipping and Administration [Anders Grath] on *FREE* shipping on qualifying offers.

Intended for use by the exporter involved in international sales, finance, shipping, and administration.

International trade and methods of payment
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