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IB.ppt
- 1. METHODS OF PAYMENT IN INTERNATIONAL TRADE BY- SKTAIRUDDIN
- 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