3 Common Payment Methods in International Trade You Have to Know
In order to further cooperate with the current development of settlement practices in international trade cooperation, various forms of international trade payment methods have risen in response to the proper time and conditions.
At present, six payment methods are the most popular in many international trades which are remittance, letter of credit, money order, promissory note, check, and collection.
HK One Plus has many years of international trade experience. Below we briefly introduce 3 international trade payment methods commonly used by One Plus, namely T/T, D/P, L/C.
Telegraphic Transfer (T/T)
1. Telegraphic Transfer, often abbreviated to T/T, is a term used to refer to an electronic means of transferring funds. A transfer charge is often charged by the sending bank and in some cases by the receiving bank.
2. T/T in advance: after the sales contract is signed, the importer pays a part of the deposit, which is generally 30%. After the production is completed, the exporter notifies the importer to pay, and after the importer pays the balance, the exporter arranges delivery and delivers all International Trade Documents.
3. T/T at sight: the exporter receives the deposit, arranges production and shipment, and the importer pays the balance after receiving a copy of the document (copy bill of lading); after receiving the balance, the exporter sends a full bill certificate.
4. Mainly used to pay deposits, payment mantissa or commissions. The risk is high but suitable for both parties with mutual trust.
Documents or Collection (D/P)
1. Documents or Collection (D/P): the collecting bank must deliver the commercial (shipping) documents to the importer after the importer has paid for the goods.
2. The bank only provides services such as transfer of documents, presentation of documents on behalf, and collection and transfer of funds, and does not provide credit (which means the bank does not review the contents of the documents and does not assume payment obligations).
3. In this method, the creditworthiness (payment capacity and business reputation) of the importer is an important prerequisite for the exporter to receive the payment.
Letter of Credit (L/C)
1. Letter of credit refers to a bank (Issuing Bank) under the requirements and instructions (of the applicant) or on its initiative, subject to the terms of the letter of credit, to a third party (beneficiary) or its designation with the required documents Party to make written documents for payment.
2. The letter of credit is a certificate that the bank guarantees payment conditionally. It has high security and has become a common settlement method in international trade activities.
3. The letter of credit is a self-sufficient document: it is not attached to the sales contract, and the bank emphasizes on the written form of authentication that the letter of credit is separated from the basic trade.
4. Letter of credit is pure document business: payment by voucher is not based on the goods. As long as the documents match, the issuing bank should pay unconditionally;
5. Issuing bank bears primary payment responsibility: A letter of credit is a form of bank credit, which is a guarantee document of the bank. The issuing bank has the primary responsibility for the payment.
6. Business operations are more complicated and costly than remittances and collections (the cost of modifying a letter of credit at one time ranges from tens to hundreds of dollars).
Comparison of Three Payments
One Plus Management Limited, as one of the leading POSM manufacturers in China and globally, has more than 25 years of experience in the POSM industry. Product types include shelf of supermarket/ convenience store, Counter, Premium, Paper print, Backwall, etc.
We always keep "creating value for clients" philosophy and strive to deliver comprehensive retail solutions including consulting, design, prototyping production, manufacturing, logistic, warehousing, installation and after-sales maintenance service to each client.
HK One Plus has more than 10 years of international trade experience and has cooperated with more than 50 countries. In order to achieve the friendly cooperation, the payment terms will be determined based on the actual transaction situation.
If you are looking for a partner for custom POSM, please feel free to email us at email@example.com and we will do our best to meet your needs.