1. TERMS OF PAYMENT

2. Advance Payment
Open Account
Letter Of Credit
Documents Against Payment
Documents Against Acceptance

3. CASH IN ADVANCE OR ADVANCE PAYMENT
It Occurs when:
Seller’s market
Seller wants advance for procuring raw material
Buyer’s creditworthiness is unknown
Buyer’s country has unstable political and economical condition
Exporter avoids risk

4. Features: Exporter enjoys most advantages:
Immediate use of money.
Maximum protection.
Importer has to relay on exporters integrity.
On more insist exporter may loose the deal.

5. Open Account
The Exporter sends the Goods directly to the overseas buyer along with invoice.
Factors For Open A/C
Buyer’s Market
Long And Favorable Relationship Between The Parties.
Such Practice Has Been Established Previously.
Good Financial Strength Of Exporter.

6. FEATURES: Monthly Or Quarterly Installment.
Importer Enjoy Advantage Of Simplified Procedure.
Exporter Has To Relay On Importer’s Integrity.

7. LETTER OF CREDIT (L/C)
L/C is a document issued by the importer’s bank in favour of the exporter giving him the authority to draw bills up to a particular amount covering a specified shipment of goods and assuring him of payment against the delivery of shipping documents.

8. Export Letter of Credit Cycle
5. Product is Shipped 1. 1.
2. Application
Beneficiary
Exporter/Seller
Buyer & Seller Agree
Applicant Importer/Buyer 4.
Letter of Credit 6.
Documents 2. 8.
Documents
10.
3. Letter of Credit
7. Documents
Exporter’s Bank/ Advising Bank
Importer’s Bank/ Issuing Bank 9.

9. TYPES OF L/C REVOCABLE L/C IRREVOCABLE L/C CONFIRMED L/C
WITH AND WITHOUT RECOURCE L/C
TRANSFERABLE L/C
BACK TO BACK L/C
RED CLAUSE OR GREEN CLAUSE L/C
DEFFERED PAYMENT L/C

10. BILLS FOR COLLECTION:
The exporter makes the shipment and submits the document to his bank for collection.
The bank sends these documents to the importers banking the foreign country which is authorized to deliver against d/a and d/p.
The importers bank collects the payment and remit it to the exporter’s bank which is then credit to the exporter’s a/c.

11. D/A [Document Against Acceptance] D/P [Document Against Payment]
BILLS FOR COLLECTION IS OF TWO TYPES:
D/A [Document Against Acceptance]
D/P [Document Against Payment]

12. Documents Against Acceptance (D/A)
Under the D/A, the buyer can get the shipping documents from the collecting bank after he has duly accepted the draft. This is only applicable to time draft. This is greatly convenience to the buyer, but it means much more risk for the seller, for once he has delivered the shipping documents, he will have lost his title over the goods.
D/A means more risks for the seller, for the buyer might refuse to pay after he has accepted the draft and taken the delivery of the goods. Certainly the seller might sue the buyer, but as is often the case, the buyer claims bankruptcy and then the seller can do nothing to remedy the situation.

13. Documents Against Payment (D/P)
Under D/P, the buyer can receive the shipping documents only after he has duly made the payment of the goods. It can be further be of 2 types: D/P at sight and D/P at __ days after sight (date).
D/P at sight: Under D/P at sight, the seller might draw a draft on the buyer. He hands over the shipping documents together with draft, and the shipping documents and the draft will be transferred to the collecting bank which present them to the buyer and ask him to make the payment at sight. The buyer, upon sight, should then make the payment and obtain the shipping documents. When the collecting bank has finished the collection, it should immediately notify the remitting bank, which will then make the payment to the seller.
D/P at ___days after sight (date): Under D/P at __ days after sight (date), the buyer shall duly accept the documentary draft drawn by seller at __ days’ sight upon first presentation and make payment on its maturity. The shipping documents are to be delivered against payment only.

14. Importer’s Bank/ Collecting Bank
Documentary
Collection 2.
Product is Shipped 1. 1.
Exporter/Seller
Buyer & Seller Agree
Importer/Buyer 5. 3.
Documents & Draft 6.
Documents 5.
4. Documents & Draft
Exporter’s Bank/
Remitting Bank
Importer’s Bank/ Collecting Bank 5.