SALES & PAYMENT TERMS IN FOREIGN TRADE
What are the different terms of payment in foreign trade?
Ans. 1). Payments within a period of six months from the date of shipment are deemed as short term payment.
2). Payment within a period of more than six months but within five years are medium term payment.
3). If goods are sold on credit terms extending more than five years are long term by payment terms.
Write down different short term payment terms may be offered by Exporter?
Ans. These are as follows: i). Cash with order: In this case, payment is made in advance for the goods along with the order. This type of payment term is insisted by the supplier & upon agreed by the buyer. When the goods are manufactured according to the specification of the buyer or buyer is unknown to the seller or buyers creditworthiness is not justified.
- ii). Documentary Letter of Credit: A documentary letter of credit means an undertaking by the bank to pay on behalf of the importer, provided the exporter fulfills certain terms & conditions.
- iii). Document against payment (D/P) or Cash against Document (CAD): D/P or CAD is another payment terms under which seller agrees to deliver the title of the goods to the buyer against payment. In this case, no undertaking of bank required. Seller shipped the goods, collects the relative documents along with bill of exchange to his bank & in turn the bank forward to its overseas branch or correspondent bank.
- iv). Document against acceptance (D/A): The contract of sale may be on D/A terms, which means that the documents of title of the goods will be delivered to the buyer (Drawee) on his acceptance of the relative bill of exchange, which the payment is to be made by the drawee on maturity.
- v). Consignment sale: Under the consignment/delivery sale, exporters consign/deliver the goods to the agent or representative in foreign country & the said consignee arrange to sale. In this case of consignment, the actual sale of goods takes long after the export of the goods.
- vi). VP/COD: VP stands for value payable & COD for Cash on Delivery. These abbreviation are usually used in international trade when goods are dispatched by post parcel. COD term used when shipment made by air. They imply that the post parcel would be delivered to the buyer by the postal authorities only against payment of value.
What do you mean by ‘Suppliers Credit” & “Buyers credit”?
Ans. Suppliers/Sellers Credit: This type of credit facility granted in cases where goods are sold under deferred payment basis. If the exporter is providing the deferred payment credit facilities to the buyer, giving him facilities to spread over his payment schedule in more than one installment and over a longer period of time, such credit are known as suppliers/sellers credit.
Buyers credit: In foreign trade, buyers credit refers to a long term credit granted by the exporter bank to the overseas buyer in the latter’s undertaking to pay the value of the exports by installments at regular intervals over a specific number of years and furnishing a Bank Guarantee in favor of exporters bank against any 05.07.09. reviewed