Beruflich Dokumente
Kultur Dokumente
Methods of Payment
Methods of Payment
Cash in Advance
Letters of Credit
Documentary Collection
Sight/Time Drafts aka D/P, D/A
L /C
Open Account
Risk mitigation:
Export Credit Insurance Standby L/Cs
Cash in Advance
Importer pays Exporter prior to shipment
Goods
Exporter
Importer
Exporter has no risk of non-payment or non-acceptance Importer has risk that exporter will not ship the goods as ordered Used occasionally for small amounts, new customers, one-time sales
Letters of Credit
Protects the interests of both the Importer and the Exporter
L/C
Exporter is assured payment provided terms of L/C are met Importer is assured terms of L/C have been met before she is required to pay Used for larger amounts, higher credit risks, sometimes mandated
Documentary Collections
Exporter routes documents through banking channels, where they are held for payment or acceptance
Exporter Exporters Bank Importers Bank Importer
Goods
Less costly than a L/C and avoids tying up Importers line of credit Average of 2 - 4 weeks for exporter to collect on a sight draft Consignment Issues
Open Account
Exporter ships goods and bills the importer for payment at sight or at a future date
Invoice Goods
net 30
Importer has use of funds, no product risk Exporter has risk of non-payment Risk can be shifted through credit insurance, standby L/Cs Used for well-established customers with good credit
Letters of Credit
Import Export
Standby
1.
Exporter
Importer
2.
Application
Issuing Bank
3.
Issuing Bank advises the letter of credit to U.S. Bank, usually via SWIFT
L/C
SWIFT
Letter of Credit
U.S. Bank
Issuing Bank
Beneficiary
U.S. Bank
5.
Exporter
Importer
Goods
6.
Exporter
Documents
U.S. Bank
FBM
7.
Assuming clean documents, U.S. Bank pays exporter by debiting Issuing Banks account or upon receipt of funds from a separate reimbursing bank. Documents sent to Issuing Bank.
Exporter
U.S. Bank
Documents
Issuing Bank
8.
Issuing Bank examines documents and delivers to importer against payment. Importer takes possession of goods by presenting documents.
Importer
Documents
Goods
Issuing Bank
9.
The exporter has been paid, the importer has their goods, the banks have been reimbursed, and the cycle is complete!
Goods
Exporter Agreement
Importer
Documents
Letter of Credit
Application
Documents
U.S. Bank
Issuing Bank
Bankers Acceptances
On a time draft, the bank on whom the draft is drawn commits to pay the face amount at maturity by stamping Accepted across the draft . If the exporter wishes early payment, the accepting bank may discount the draft and pay the exporter at sight. U.S. Bank can offer you very competitive rates for BAs if the draft is drawn on us!
Transferable
Letters of Credit
Often used by an export intermediary to pay a vendor or producer The L/C may be transferred only once, but there may be several partial transferees Vendor controls presentation of documents to bank Intermediary may substitute his own invoice and draft, but it still may be difficult for the vendor and buyer to remain unknown to each other
Assignment
of Proceeds
Similar to Transferable L/C in that it is commonly used by an export intermediary to pay a producer or vendor Intermediary (beneficiary) controls document presentation, not the vendor, allowing him/her to keep information on the vendor out of the paperwork Vendor relies on intermediary for proper presentation / performance under the terms of the L/C before funds will be remitted to them
Confirmed - A second bank, usually in the exporters country, guarantees the obligation of the issuing bank, providing an extra layer of protection - especially important if the country or the issuing bank is considered risky.
Exporter must instruct the importer to have the L/C issued with a request for confirmation. The confirming bank makes a credit decision based on the credit of the issuing bank and the country risk. Approval will depend also on availability under an established line of credit.
Application
Documents
Letter of Credit
Issuing Bank
Documents
Payment protection Reliance on issuing banks credit rather than buyers Rapid, local source of repayment, if payable at a U.S. bank
Documentary evidence that the ordered goods have been shipped on time Assurance that necessary clearance documents will be provided Payment deferred until goods are shipped and documents presented (use of funds)