Cargo Agents
METHODS OF PAYMENT IN INTERNATIONAL TRADE
Method : CASH IN ADVANCE
| time of payment | Before Shipment |
| Goods available to Buyer | After payment |
| Risk to Seller | None if funds are "good", or collected & available in the seller's bank account |
| Risk to Buyer |
Relies completely on seller to ship the proper goods; Assumes the political and economic risks. |
Method : LETTER OF CREDIT - Sight Draft
| time of payment | Upon presentation of conforming documents to the negotiating bank. |
| Goods available to Buyer | After payment unless directly consigned to the buyer (seller surrenders possession). |
| Risk to Seller | Very little or none, depending on terms of the letter of credit. |
| Risk to Buyer |
Relatively low in terms of whether shipment has been made. Relies completely on the seller to ship goods described in documents. |
Method : LETTER OF CREDIT - Time Draft
| time of payment | After shipment, presentation of required documents, and bank's acceptance of draft due on specified date. Draft may or may not be discountable. |
| Goods available to Buyer | Usually after the bank's promise to pay is established, but before payment. |
| Risk to Seller | Very little or none, depending on terms of the letter of credit. |
| Risk to Buyer |
Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described in documents. |
Method : COLLECTION - Sight Draft - Document Against Payment, D/P
| time of payment | Usually soon after the local bank notifies the buyer of receipt of documents. |
| Goods available to Buyer | After payment, unless directly consigned to the buyer (seller surrenders possession). |
| Risk to Seller | Many risks such as buyers integrity and standing and political and economic instability. |
| Risk to Buyer |
Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described unless the buyer is allowed to inspect goods before payment (rare). |
| time of payment | Expected on the maturity date of the draft. |
| Goods available to Buyer | Before payment, but after the buyer accepts the draft. |
| Risk to Seller | Reliance on the buyer to pay the draft when due. Other risks are the same as for a sight draft, except the goods have already been released. |
| Risk to Buyer |
Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described unless the buyer is allowed to inspect goods before payment (rare). |
|
time of payment |
As agreed. |
|
Goods available to Buyer |
Before Payment |
|
Risk to Seller |
Seller relies completely in the buyer to pay the account as agreed. Political and economic risks |
|
Risk to Buyer |
None. |