INTERNATIONAL

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INTERNATIONAL

• PAYMENT

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the basic methods of payment

• cash in advance
• letter of credit
• documentary collection or draft
• open account
• consignment sales
• Barter
• Counter-trade

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Cash in Advance

• the safest method of collecting payment for the
  seller
• Methods
• An international wire transfer, e.g.the bank's
  SWIFT
• international check

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Letter of Credit

• A letter of credit (L/C) is a commitment or
  promise from the buyer's bank to pay the seller
  once the seller has met the terms and conditions
  of the letter of credit.
• L/C's are irrevocable which means that once
  established a L/C cannot be changed without the
  consent of all parties.
• It is a commonly used method of payment,
  especially when the seller/buyer relationship is
  a new one.

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discrepancies

• If a shipment is rejected the seller must quickly
  locate a new buyer, renegotiate with the current
  buyer, or pay for the shipment to be returned.
• adds to the cost of the product and can tie up
  the buyer's working capital or credit line prior
  to final payment.

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A word of advice

• when using an L/C, the seller should always have
  its international bank and freight forwarder
  carefully scrutinize the L/C. They can help you
  determine if the L/C is legitimate, if all the
  terms can be met, and all the necessary bases are
  covered.

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Standby Letter of Credit

• the standby letter of credit is a guarantee of
  payment from the bank only if the buyer defaults
  on the payment.
• The buyer pays on open account or credit terms.
  Should the buyer default, the seller presents to
  the bank a sight draft and a written statement
  certifying that the buyer has failed to make
  payment on the shipment secured by the standby
  letter of credit, and collects payment from them.

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Documentary Collection

• the seller sends a draft or other demand for
  payment with the related shipping documents
  through bank channels to the buyer's bank. The
  bank releases the documents to the buyer upon
  receipt of payment or promise of payment.
• Documentary collection carries the risk that the
  buyer will not or cannot pay for the goods upon
  receipt of the draft and documents. If this
  occurs it is the burden of the seller to locate a
  new buyer or pay for return shipment.

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Dc and sea transportation

• Documentary collections are best considered when
  shipping by ocean freight. This is because the
  ocean bill of lading (b/1) is a negotiable
  document and acts as title to the goods. The
  steamship company will not release the shipment
  from the port unless the buyer has the original
  b/l, and the buyer cannot get the original b/I
  unless they pay the bank. In the case of air
  shipments, the b/l is not a negotiable document,
  does not act as title to the goods, and the
  benefit of using a documentary collection is lost.

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classification

• D/A
• Document against acceptance
• D/P
• Document against payment

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BILL OF EXCHANGE

• A bill of exchange is an unconditional order in
  writing, addressed by one person to another,
  signed by the person giving it, requiring the
  person to whom it is addressed to pay, on demand
  or at a fixed or determinable future time, a sum
  certain in money to or to the order of a
  specified person or to bearer.

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DRAWER, DRAWEE, PAYEE

• DRAWER
• DRAWEE
• PAYER
• PAYEE

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CLASSIFICATION

• Payable to bearer
• payable to order
• Payable to a nominated person
• Payable on demand (sight draft)
• Payable at a determinable time (time draft)

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NEGOTIATION

• When a bill contains words prohibiting transfer,
  or indicating an intention that it should not be
  transferable, it is valid as between the parties
  thereto, but it is not negotiable.
• A bill is negotiated when it is transferred from
  one person to another in such a manner as to
  constitute the transferee the holder of the bill.
• A bill payable to bearer is negotiated by
  delivery
• A bill payable to order is negotiated by the
  endorsement of the holder.

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Presentment for Acceptance

• Where a bill is payable at sight or after sight,
  presentment for acceptance is necessary in order
  to fix the maturity of the instrument.
• a bill must be duly presented for payment
• DISHOUR
• Drawee refuse to accept or pay.

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Consignment

• Under consignment, the foreign distributor sells
  goods on behalf of the exporter. The exporter
  does not receive payment until the distributor
  sells the goods and transfers title of the goods.
  If the foreign distributor is unable to sell the
  goods, the exporter must pay for the return
  shipment. This method of payment is risky for the
  exporter.

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Counter-trade and barter

• - Counter-trade and barter may be necessary when
  selling to companies that cannot obtain
  convertible currency. In counter-trade, the
  "buyer" agrees to undertake specified initiatives
  that compensate and benefit the "seller." Barter
  is the exchange of goods or services between two
  parties.

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