Which Payment Methods Can Be Used in Foreign Trade?

Foreign trade payment methods are important in terms of foreign exchange and customs legislation. Payment agreements between the importer and the exporter take place around the banking practices used. There are basic points to consider when choosing foreign trade payment methods. These can be listed as follows;Foreign trade payment methods may have different risk values for the importer and the exporter.
Shipments whose payment has not been received by the exporters are considered as gifts given to the importers.
For these reasons, exporters want the payment to be made as soon as possible. (As soon as the order is placed or before loading)
From the point of view of the importers, the payment made before the product arrives is a donation made to the other party.
Therefore, the most suitable payment method for the interests of the importers is to buy the products and make the payment after the products are sold.When making an agreement for payment methods , bargaining is made according to the benefits for the buyer and the seller. The result of the agreement to be reached will be determined as a result of this bargaining. Foreign trade payment methods differ for import and export.

Advance Payment

The importer pays the cost of the goods from the exporter without the shipment of goods in the form of a cash foreign trade payment. In this payment method, the exporter does not undertake the risks such as delay in the shipment or the goods not conforming to the order. In this case, the entire risk is on the importer and the advance payment method eliminates the importer's non-payment status.

Payment Against Goods

Payment against goods occurs when the importer pays the exporter after receiving the goods. It dispatches the export goods on behalf of the buyer and then sends the documents representing the goods to the other party. These documents are sent either directly or through the bank on the condition of free delivery. The exporter bears the risk mostly in this form of foreign trade payment.

Payment Against Documentation

In this form of foreign trade payment, an agreement is made between the importer and the exporter. After the goods are shipped in accordance with the sales contract, the exporter sends the shipping documents to the importer representing the shipment of goods. The payment method that allows the importer to be represented through the bank in return for the collection of the cost of the shipping documents is called the payment against documents.

Acceptance Credit Payment

Allowing the payment of the goods to be paid after the shipment of the goods is called acceptance credit payment. The payment method with acceptance credit is determined by the agreement to be made between the importer and the exporter. In this form of payment, there is a policy and this policy undertakes and guarantees that the cost of the goods will be paid in a certain time.

Letter of Credit with Acceptance Credit

After the importer and exporter agree on the purchase and sale, the exporter sends a proforma invoice to the importer. The importer opens a letter of credit based on the invoice sent. The terms of the letter of credit are sent between the banks used by the importer and the exporter. The foreign trade payment method, which allows the payment of the cost of goods at the maturity of the policy created according to the agreement signed between them, is called a letter of credit with acceptance credit.