Payment Terms Generally Adopted In Foreign Trade Essay

1884 Words8 Pages
Payment Terms Generally Adopted in Foreign Trade As “delivery” is the essence of the contract for the importer (overseas buyer), timely and sure receipt of payment is the matter that is of prime interest to the exporter. In a contract for export of goods, it is natural that there are a number of clauses defining in exact terms how the payment is to be made to the exporter. There are different modes of making payment to the exporter. Some of the payment terms generally adapted in foreign trade are: 1. Clean payments: This is the direct form of settlement between the Exporter and Overseas buyer, without the intermediation of a Commercial Bank. The merchandise is shipped by the exporter and the shipping documents and invoice are directly forwarded to the overseas buyer. The buyer then remits the payment. This mode of transacting carries an element of risk for the exporter, if the foreign buyer defaults to make payment. If the payment is remitted in advance, there is An element of risk for the buyer. Hence this form of settlement can be resorted to only in exceptional cases, where the transaction is for a small value, or that the exporter and overseas buyer belong to a same group of concerns. Or the two parties have long-standing satisfactory dealings. 2. Documentary Bills on D/A terms: Under this system, the goods are consigned by ship, the shipping documents and commercial invoice are attached to a Demand Draft and send to the overseas banker of the Buyer for collection. The documents are delivered to the buyer against payment at the overseas centre. These are called D/P Bills. When a L/C cannot be established this is the ideal mode of payment. The exporter can also attach the after sight bill for a specified No. of days and advise the Banker to deliver the Bill of Loading and other documents against acceptance of the after sight draft. The banker will deliver

More about Payment Terms Generally Adopted In Foreign Trade Essay

Open Document