15. International payments

15. International payments

Four methods of payment for imports/exports

Advance payment bill of exchange documentary credit (letter of credit) open account


Open account

The exporter sends the good and documents/papers to the foreign buyer. The buyer pays the invoice when the goods arrive, or within a certain period from the invoice date. This can be risky, as the exporter trusts the buyer to respect/honor the original sales contract.


Documentary credit (letter of credit)

A foreign bank issues a promise/an undertaking to the exporter (through a bank in the exporters country) to pay for the goods as long as the exporter matches/complies with the conditions of the contract. This is a much safer form of payment for the exporter. To be even safer, the exporter can arrange for the bank in his/her country to act as/be “confirming bank”, which means that the bank in the exporters country is responsible for the transaction.


Bill of exchange

A legally-binding /legally-holding agreement that the importer will, on acceptance of the bill, pay the exporter for the goods. The risks are that the importer does not accept the bill even though the goods are arrived, or does not pay /dishonors an accepted bill when it matures/ is time to pay.


Advance payment

The exporter does not send / dispatch the goods until payment has been received from the importer. There is no risk for the exporter – all the risk is taken by / with the importer.


1.      We are expecting two consignments of computer printers from China.

2.      Another word for a consignment is a shipment, even if it does not travel on ship.

3.      The consignment shipped ten days ago. I am surprised you have not received it yet.

4.      A detailed list of a ships cargo is called a bill of lading.

5.      Another word for ship is vessel.

6.      In many cases, when good are imported, an import duty has to be paid.

7.      Another word for import duties is tariff.

8.      A document proving that you own a consignment of good is called a title to the goods.

9.      After payment, the bank will release the title to the goods.

10.  The bank took a long time to remit payment to my account.

11.  If we do not deliver on time, we will have to pay a late-delivery penalty.

12.  We would like to defer payment until delivery of the shipment.

13.  We usually ask our customers for payment-on delivery.

14.  If there is no problem with the letter of credit, I suggest you contact the issuing bank.

15.  The quickest way to send money to another country is to wire it, for example, by Western Union.

16.  Thank you foe sending remittance the by Western Union. I collected it this morning.

17.  An effective way to ship consignment is to use a courier such as UPS, DHL, or FedEx.

18.  The exporters bank has forwarded the bill of exchange to the importer bank.

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