Payment Methods in Foreign Trade

Last updated 11 June 2020
Payment Methods in Foreign Trade

After the processes of determining the product or the commodity and the .quantity then comes an important task for all traders

They are the mechanisms and means of payment between you and the .supplier and the owner of the product

Agreement on this point is considered one of the main issues in the success of the deal. After that, the money is delivered in any way, but after determining the payment method between them.

In this article, we will learn about the most important and best ways to pay and pay for foreign and international trade in general:

Advance Payment

Payment in advance is considered one of the basic conditions for shipping the goods, in which merchants or importers come to the supplier until the supplier ships the goods to the importer.

This method is not used much, it is only used for small and counted orders, and it has many faults, including failure to comply with the specifications required by the importer.

Payment in Cash

In this case, payment is made in cash to the supplier for certain reasons, which are lack of confidence in the importer and lack of knowledge of his condition.

  Types of Letter of Credit

The economic and political conditions in the importing country govern cash payment, and the stability factor in the country is very important

or when the goods and products are designed for this importer and the ,supplier cannot sell them to anyone other than them

because it was designed for him, and finally when the deal or the imported quantity is very little,

documentary credits and other methods are not tolerated.

Letter of Credit

This method is considered one of the most important methods of shipping and payment in international trade. This method is done by the buyer opening Letter of Credit with the value of the message through the bank.

The supplier receives this message from the bank, makes all modifications to it that are satisfactory to both parties, and sends it to him until it is approved.

After that, the shipping process will take place and the bank will bear the value of the commercial deals and receive them based on the Letter of Credit, and this method is considered one of the strong ways because there are sufficient guarantees.

  Examples of Letter of Credit

Payment for Documents

This method is done by the supplier sending the shipping documents to his bank, and the supplier bank sends these documents to the importing bank and to receive the importer.

These documents pay the transaction value so that he can receive the shipping documents and then transfer the purchase price from the importer’s bank to the supplier’s bank.

Until the goods are supplied from the supplier country to the country of the importer and this is considered a way to ensure that the value of the purchasing transaction is paid.

Trade Credits

It is the delivery of a consignment of goods versus another consignment of goods, with the payment of goods and products.

or delivering export documents against delivery of import documents and then delivering these export documents and attaching them to the bank.

So that the bank can use it to pay for imports, especially in America, Japan, and some Western European countries.

اقراء المقالة باللغة اخرى : العربية

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