Question

Shoot Answer Questions. List out the terms and conditions of foreign trade. ​

Answer 1

Answer:

1. Consignment

Consignment is a variation of open account in which payment is sent to the exporter after the goods have been sold by the foreign distributor to the end customer. It is the riskiest of the most common methods of payment.

2. Open Account (O/A)

An open account transaction in international trade is a sale where the goods are shipped and delivered before payment is due, which is typically in 30, 60 or 90 days. Open accounts are risky for exporters; however, from your client's perspective, this is the preferred method of payment in terms of costs and risks.

3. Collections

Also called a documentary collection, this method of payment involves using banking channels for more than handling the movement of funds for your payment.

With a documentary collection, you’re relying on the bank to control your product until payment is made. Your bank (the remitting bank) sends documents to the importer’s bank (the collecting bank) along with instructions for payment. The funds are received from the importer and remitted to you in exchange for the documents. The most significant risk is your buyer saying they changed their mind and no longer want the product that was shipped.

4. Letter of Credit (L/C)

International letters of credit are a commitment by a bank on behalf of the foreign buyer that payment will be made to the beneficiary (exporter) provided the terms and conditions stated in the L/C have been met, as evidenced by the presentation of specified documents. It is one of the most secure methods of payment for an exporter.

There’s a lot to say about letters of credit. We’ve built up quite an archive of interesting posts that can help answer some of your questions about using letters of credit. Here are a few of our most noteworthy articles