Professional Documents
Culture Documents
International
payment
terms
After a detailed evaluation of the
difference between export costing
and pricing, Vasant Kothari gives an
insight into the export price calculation
methods. These nuances are likely
to benefit apparel manufacturers/ n exporter may negotiate excellent
exporters in the long run. terms and perform an outstanding
deal, but if he is not paid, the deal
is lost. To succeed in today’s global
marketplace and win sales against
foreign competitors, exporters must
offer their customers attractive sales
terms supported by appropriate
payment methods. Getting paid in
full and on time is the ultimate goal of
every export sale.
Before choosing LC as a term of trade, Transferable LC, LC payable at sight, LC along with instructions for payment.
he must understand what it is, how payable on the maturity date, Funds are received from the importer
it works and what exporter can do and remitted to the exporter through
to minimise risks involved in the LC the banks involved in the collection in
payment process. Letters of Credit are
Documentary exchange for those documents. DCs
regulated by International Chamber of Collections involve using a draft that requires
Commerce under the Uniform Customs A documentary collection (DC) is the importer to pay the face amount
and Practice for Documentary Credits a transaction whereby the exporter either at sight (document against
(UCP 600). There are different forms entrusts the collection of a payment payment) or on a specified date
and types of LC, which the exporter to the remitting bank (exporter’s (document against acceptance). The
may (or should not) use in operations, bank), which sends documents to a draft gives instructions that specify the
viz Revocable and Irrevocable LC, collecting bank (importer’s bank), documents required for the transfer
of title to the goods. Although banks
© Kheng Ho Toh | Dreamstime.com
Open Account
An open account transaction is a sale
where the goods are shipped and delivered
before payment is due, which is usually in
Overview of DP Collection 30 to 90 days. Obviously, this option is the
Time of Payment After shipment, but before documents are most advantageous option to the importer
released in terms of cash flow and cost, but it is
consequently the highest risk option for an
Transfer of Goods After payment is made at sight
exporter. Because of intense competition in
Exporter’s Risk If draft is unpaid, goods may need to be disposed export markets, foreign buyers often press
of or may be delivered without payment if exporters for open account terms since the
documents do not control title extension of credit by the seller to the buyer is
more common abroad. Therefore, exporters
who are reluctant to extend credit may lose
Overview of DA Collection a sale to their competitors. However, the
Time of Payment On maturity of draft at a specified future date exporter can offer competitive open account
Transfer of Goods Before payment, but upon acceptance of draft terms while substantially mitigating the risk
of non-payment by using of one or more of
Exporter’s Risk Has no control of goods and may not get paid at the appropriate trade finance techniques,
due date such as export credit insurance.