General

In the process of international trade quotation, the most important thing is to select international trade terms and payment methods with customers. The most commonly used trade terms are FOB, CIF and CPT (which often appear in detailed customs documents in customs data). The payment methods are: telegraphic transfer (TT), letter of credit (L/C), document against payment (D/P) and document against acceptance (D/A). Next, we will analyze the payment method.

(1) L/C

This method is used by many international trading companies when they are just starting to do business or doing business with foreign customers for the first time. It is the safest of all payment methods. It refers to the written document that the bank (issuing bank) pays the beneficiary against the specified documents in accordance with the requirements and instructions of (the applicant) or on its own initiative under the conditions that the documents are consistent and the documents are consistent. A letter of credit is a written document issued by a bank with a conditional commitment to payment. In international trade, the buyer and the seller may distrust each other, and the buyer is worried that the seller will not deliver goods according to the contract requirements after the advance payment; The seller is also worried that the buyer will not make payment after shipment or presentation of shipping documents. Therefore, the two banks are required to act as guarantors for both parties to collect and deliver documents.

(2) T/T

<1> The first 100% T/T: It is the best for the seller. It is that the buyer pays the seller first, and the seller delivers goods after receiving the money, and does not deliver goods without receiving the money.

<2> 70% after the first 30% or (-% after the first -%): The buyer shall pay a part of the deposit first, and then pay the balance with the original bill of lading before shipment. The specific percentage shall be discussed by both parties.

<3> The latter 100% T/T: the buyer shall pay the full amount in a lump sum after the delivery of the goods. This method is risky. If the goods are shipped, but the buyer does not pay or does not pay, it will bring huge losses to the seller

(3) D/P

<1> D/P Sight means that the seller issues a sight draft, the collecting bank presents it to the buyer, and the buyer must pay after seeing the bill. When the payment is paid, the buyer obtains the shipping documents.

<2> D/P after sight or after date refers to the time draft issued by the seller, presented to the buyer by the collecting bank, accepted by the buyer, and redeemed by the buyer on or before the maturity date of the draft.

(4) Document against acceptance (D/A): The seller issues a usance bill after the shipment of the goods, together with the commercial documents, and prompts the buyer through the bank. After the buyer accepts the bill, the collecting bank will deliver the commercial documents to the buyer, and the buyer will perform the payment obligation when the bill expires.

in my opinion. D/A and D/P are the most risky payment methods, because they belong to commercial credit. Whether money can be received depends entirely on the buyer's credit. When a buyer with poor credit is encountered, there will be refusal to pay or default on payment. For the buyer, whether the goods can be shipped on time and whether the quality is good or not also depends on the seller's credit. Therefore, these two payment methods are international trade importers and exporters with good credit.