Advance Payment

Cash with order, direct payment to the exporter before the ordered goods are shipped.

Interesting for the exporter because it receives the payment in advance.

• Risk of failure or delay in the shipment of goods.
• Risk of inappropriate quality and quantity.

Open Account

Goods are sent in advance by the exporter and the payment is made by the importer after receiving the goods

The risk of late payment or unpaid payment

Interesting for the importer because it receives the goods in advance.

Consignment

Delivery of goods to intermediaries (importers) that will sell goods to the final buyer, the ownership of the goods is still on the exporters until the goods are sold.

The possibility of failure of payment or late payment, because the goods are not always sold

Beneficial for the Importer because it can sell the goods without paying them first.

Collection

Document against payment(D/P)

The exporter ships the goods to the destination port while the shipping documents are sent to the bank as the intermediary. Importer can take the documents if they have processed the payment via the Bank; this document is needed by the importer to take the goods from the port

No payment guarantee from the Bank to the Exporter because the Bank only acts as the service provider.

There is a risk of delivered goods being not in accordance with the request.

Document against acceptance (D/A)

Nearly the same as the Document against payment, but the difference is that the method requires acceptance of payment in advance by the importer so that importer could receive the payment documents from the Bank. The acceptance of payment is the promise of payment on certain date, usually 30, 60 or 90 days after the acceptance.

No payment guarantee from the Bank to the Exporter because the Bank only acts as the service provider.

There is a risk of delivered goods being not in accordance with the request.

Letter of Credit (L/C)

The guarantee issued by the issuing Bank upon the order from the applicant (Buyer) to the exporter that the importer to pay certain amount of money.

The guarantee of payment from the Bank as long as the delivered documents is conform with the L/C.

Guarantee to obtain the goods as agreed.