What are the different ways of payments in international trade?
globalization has increased the ease and frequency of trade between countries and over long distances. The question of payment in international trade is important if one takes into account different currencies and exchange courses. There is also a matter of security and trust that the trader will receive money. There are several methods for payment in international trade, including documentary collection, cash advance and accreditation. The exact method depends on the type of trade, the scope of trade and the preferences of the business party.
The documentary collection is a method of payment in international trade, and the exporter entitles the bank to collect a payment on behalf of its name. When the exporter's bank receives permission from the exporter, it prepares and sends documents for the transaction to the importer's bank and asks for payment and determines how the payment should be made. Part of the documents sent by Bank imports include a proposal with the amount printed at the top. The importer would be asked to pay the amount of the proposal to the exporter through the importer's bank.
Another method of payment in international trade is cash advance. As the name suggests, the cash advance is the transfer of the payment for the goods before the exporter sends the goods. This type of payment is preferred because it eliminates doubt and concerns about paying that is connected to other forms of payment. The importer may cause the wire to be transferred to the exporter, which then sends the goods to the importer. This type of payment method in international trade prefers the exporter only, as the importer may be concerned about the status of the goods and whether the goods will arrive. Cash Advance usually works best when business partners traded several times and built a mutual trust.
Charnie letter is a safe form of payment in international trade, which includes the importer's bank. The importer bank takes responsibility for the payment of goods and also offers protection to the buyer who will not be obliged to pay for the goods until he enters his custody. In the open exporter's open account promises to send goodsto the importer in the specified period. The importer might not make any payments until the goods are delivered and received.