In light of the wide global trade, attractive terms of sale must be provided, supported by appropriate methods of payment.
The method of payment must be carefully chosen to reduce the risk of payment, as well as when meeting the needs of the buyer.
In this article, we will learn about the most important and prominent four main ways to pay in international transactions (import and export)
Open Account
This method is accomplished by transferring ownership of the goods from the seller to the buyer before the money is paid.
This method is usually used only between the buyer and seller who have a long-term relationship.
It means long term more than five years and is characterized by a high level of mutual trust between the two parties and a very good relationship.
Bills of Exchange for Collection Fee
This method is done through the use of a bill that obliges the importer to pay the nominal amount in the urgent case once the goods have been viewed.
Or on a specific date to be agreed upon between the supplier and the importer
The agreed draft clarifies detailed instructions that specify the documents required for the transfer of ownership of the goods.
Letter of Credit
These are the documents required to be presented by the exporter, such as the marine bill of lading and invoice, bill of exchange, insurance policy, and other similar procedures.
The letter of credit also contains an expiration date, and the bank, before the payment process, is responsible for making the payments, making sure that all documents comply with the documentary credit requirements.
It is one of the safest payment tools and methods for international merchants and international companies.
It is also a useful way to obtain reliable credit information about a foreign buyer.
Feeling satisfied with the creditworthiness (credit position) of the foreign buyer’s bank.
Prepaid
It is one of the safest ways, especially in major trades and deals, and it is considered as an attractive way for the buyer.
Therefore, the exporter must receive all the agreed amounts before shipping the goods.
Therefore, conditions and goods are usually agreed upon, and the amount is paid based on preconditions, and this is the most common method of import and export.
Also read: Conditions for Delivery of Goods in Domestic or Local Trade