General

What are the payment methods for foreign trade? There are five commonly used payment methods for foreign trade, mainly including T/T wire transfer, agency payment, L/C letter of credit, D/A D/A and D/P payment D/P. Foreign trade, also known as "foreign trade" or "import and export trade", also known as "foreign trade", refers to the exchange of goods, services, and technology between a country (region) and another country (region). This trade consists of two parts: import and export. For countries (regions) transporting goods or services, it means importing; For countries (regions) that transport goods or services, it means exports. This began to emerge and develop in slave and feudal societies, and developed even more rapidly in capitalist societies.

Common payment methods for foreign trade in international trade

At present, there are three most common payment methods for foreign trade: letter of credit, remittance, and collection payment.

1、 Letter of Credit

Letter of credit is the most important and commonly used foreign trade payment method in international trade. The issuer generally applies to the bank to open a letter of credit based on the contract, or pays a proportional deposit and payment redemption order to the bank.

A letter of credit is a conditional payment commitment made by a bank. It is a written guarantee issued by the issuing bank to the beneficiary at the request and instruction of the applicant. Within a certain period and specified amount, as long as the documents submitted by the beneficiary comply with the terms of the letter of credit, the issuing bank will definitely make payment.

2、 Collection and payment

The commercial documents and ownership certificates issued by the export enterprise after shipping the goods, and then entrusted their corresponding banks to collect payment from the import enterprise through the collecting bank in the location of the import enterprise, are called collection and payment. There are mainly two types, one is document against payment (D/P), which has relatively lower risks. The second one is document against acceptance (D/A). The risk is slightly greater than D/P, because D/A requires the import enterprise to accept it before the bank releases the documents. If the import enterprise has good commercial credit and is willing to accept, it will be easier to receive payment. If the credit is not good, the risk will increase.

3、 Remittance

There are three methods of remittance:

1. Wire transfer refers to the payment method in which the remitter applies to the remitting bank and then pays a certain amount to the payee through the remitting bank with instructions for wire transfer. The remitting bank must verify the confidentiality.

2. Bill of exchange is a payment method in which the payee receives payment with a bill of exchange. It refers to the application made by the remitter to the remitter, and then the remitter issues a bank draft on behalf of the remitter, which is issued by the remitter's branch or agent. The remitter who receives the draft from the bank shall deliver it to the payee by themselves or carry it for export.

3. Mail transfer refers to a payment method in which the remitting bank receives an application from the payer, sends the remittance authorization letter to the remitting bank through international express delivery or registered air mail, and then instructs the remitting bank to pay a certain amount to the payee.