Methods of Payment in International Trade

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International trade may be said to be the exchange of goods and services between the residents of a country to others around the world. This type of trade today defers from the economic exchange conducted long time ago ago in its level of speed, geographic reach, complexity, and diversity. However, it has been going on for many years and its fundamental character- the exchange of goods and services for other goods and services or for money- remains unchanged. International trade gives rise to a world economy in which prices, supply and demand are affected by worldwide events. Obviously sellers would wish to have assurance to get their sale proceeds as safely as possible while buyers would not wish to take any risk at all In the case here being in the market of crude oil it is important for both the importer as well as the exporter to work out which method of payment to use so as it does not pose a problem for both parties and also reduces the risk and fear of the volatility of crude oil market. Methods of Payments There’s always a debate between exporter and the importer; which method of payment to adopt. There are six primary methods of payment for international transactions and those are known as: 1. Consignment Purchase 2. Cash in Advance 3. Down Payment 4. Open Account 5. Documentary Collection 6. Letters of Credits 1.Consignment Purchase The term Consignment purchase can be the most beneficial method of payment for the importer as the importer makes the payment only once the goods are sold to him. In case of no selling, the same item is returned to the exporter. The Consignment purchase however is considered the most risky and time taking method of payment for the seller. 2.Cash-in-Advance Cash in Advance is a pre-payment method in which, an importer makes the payment for the items to be imported in advance before the shipment of

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