I. Модуль профессионального общения Учебно-профессиональное общение Purchase and Sale Agreement
Read the text and find out more about payment in international trade
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| 3.2. Read the text and find out more about payment in international trade.
Risks and Methods of Payment in International Trade Both sides face risks in an export transaction. This is because there is always the possibility that the other side may not fulfil the contract. For the exporters there is the risk of buyer default, the customers might not pay in full for the goods. There are several possible reasons for this: the importers might go bankrupt; a war might start or the importers’ government might decide to ban trade with the exporting country; or they might ban imports of certain commodities. Another possibility is that the importers might run into the difficulties getting the foreign exchange to pay for the goods. It is even possible that the importers are not reliable and simply refuse to pay the agreed amount of money. For the importers there is the risk that the goods will be delayed and they might only receive them a long time after paying for them. This may be caused by port congestion or strikes. Delays in fulfilment of orders by exporters and difficult Customs clearance in the importing country can cause loss of business. There is also a risk that the wrong goods might be sent. To succeed in today’s global marketplace and win sales against foreign competitors, exporters must offer their customers attractive sales terms supported by the appropriate payment methods. Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate payment method must be chosen carefully to minimize the payment risk while also accommodating the needs of the buyer. There are three basic methods of payment for international transactions. 1. Payment against documents. The shipping documents are exchanged with the bank representing the importers. There are two procedures: Documentary Bills and Documentary Letters of Credit. The latter is the most common method of payment, because Letters of Credit (LCs) are one of the most secure instruments available to international traders. 2. Payment into an open account. This is used when there is complete trust between seller and buyer. Also there must be no political or currency problems. The exporters simply airmail the shipping documents to the importers who settle their account monthly or quaterly. 3. Cash in advance. With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before the ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters. With the advancement of the Internet, escrow services are becoming another cash-in-advance option for small export transactions. However, requiring payment in advance is the least attractive option for the buyer, because it creates unfavorable cash flow. Foreign buyers are also concerned that the goods may not be sent if payment is made in advance. Thus, exporters who insist on this payment method as their sole manner of doing business may lose to competitors who offer more attractive payment terms. Whatever method is used, the sellers have to check the credit status of the buyers. Also in cases of very big contracts, government finance is used. Download 0.95 Mb. Share with your friends:
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