1. METHODS OF PAYMENT
IN INTERNATIONAL
TRADE

2. international TRADE
International trade is the exchange of capital, goods,
and services across international borders or
territories because there is a need or want of goods or
services.
Exchange of goods and services between
different countries.

3. Methods of International Payment
CASH IN ADVANCE
LETTERS OF CREDIT (L/C)
DOCUMENTARY COLLECTIONS
OPEN ACCOUNT

4. Cash in Advance
• Buyer pays before shipment
• Used in new relationship
• Transactions are small and buyer has no
choice
• Maximum security to sellers
• No guarantee that goods are shipped

5. Letters of Credit
• What is L/C?
– A document issued by a bank stating its
commitment to pay someone (seller or
exporter) a stated amount provided the seller or
exporter meets specific terms and conditions
• also called the documentary letters of credit
• Most common payment method in
international trade

7. Documentary Collections (DC)
Documentary collection is method of trade finance
in which an exporter's bank forwards documents to
an importer's bank and collects payment for
shipped goods.
→ Exporters (Seller) Uses a Bank as Agent in collecting
Payment
→ Sellers Bank (Remitting Bank) Sends all Documents to
Buyer's (Bank (Collecting Bank)

8. Documentary Collections (DC)
Two types of DC :
1. Documents against Payment (D/P)
2.Documents against Acceptance (D/A)

9. 1.Documents against Payment (D/P)
Buyer may only receives the title and other documents
after paying for the goods
2.Documents against Acceptance (D/A)
The buyer may receive the title and other documents
after signing A time draft promising to pay at A later
date.

10. Open Account
• An open account transaction is a sale where the goods are
shipped and delivered before payment is due, which in
international sales is typically in 30, 60 or 90 days.
• It is one of the most advantageous options to the importer
in terms of cash flow and cost, but it is consequently one of
the highest risk options for an exporter.

11. THANKYOU