Internatinal Trade Essay

1057 WordsMar 30, 20095 Pages
1.0 The principal international payment’s methods The principal international payment’s methods include Open Account, Documentary Collections, Documentary Letters of Credit, and payment in Advance. 2.0 The risk and advantages and disadvantages to both buyer and seller Open Account: For seller Risk: the risk seller will be encountered is 100%. Advantage: it can enable sales to easy and convenience. Disadvantage: there are not any security for payment, thus, the seller will not be able to protect itself in the transaction, so that the seller loses all control over the goods. For buyer Risk: buyer has not any risk for this international business deal. Therefore, the buyer gets a right to total control. Advantage: when the buyer has received the goods, he or she will make a payment to seller. Therefore, the buyer has nothing to worry about these goods. Disadvantage: it is difficult to attract sellers if use open account has international payment method. Documentary Collections: For seller Risk: if the buyer will not pay the collection that the seller has provided, the seller may have to resell the goods to other buyer or return these goods. Thus, when the seller uses the method, the seller should consider that: 1. Buyer’s guaranteed ability to pay or the buyer if have a desire to pay. 2. Whether there are stable political and economic conditions in the buyer’s country or not. 3. If the can get necessary import licenses. E.g.: currency control in the buyer’s country, etc. Advantage: the shipping documents are only released to buyer when he/she either pays or accepts the collection Disadvantage: the goods are shipped without a guarantee of payment from a bank. For buyer Risk: the risk that buyer will be encountered is less. The buyer only need make decision to pay before goods are received. Advantage: payment is made only when

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