TermsofPayment国际贸易付款条件
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• It is the ultimate “risk-free” alternative for the exporter. • In a Cash in Advance transaction, the risk is completely
transferred to the importer.
Cash in Advance
• The exporter ships the goods, accompanied by an invoice, and expects the importer to pay within a defined time period (30-60 days).
Open Account
Applicability
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Nil
Letter of Credit
Fairly High
Almost Nil
Documentary Collection Low
Low
Open Account
Nil
TradeCard
Low
Relatively High Almost Nil
Table 7-1: Advantages and Disadvantages of Several Terms of Payment
• The firm can ask a factoring company to advance funds on a receivable account:
▪ With recourse where the owner of the account receivable is still responsible for collecting it.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
▪ Without recourse where the collection responsibility entirely shifts to the factoring house.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Credit Insurance
• An insurance policy under which commercial risk is covered. • The insurance company bears the risk of non-payment by the
importer, deducting a slight percentage of the receivable. • Credit insurance does not cover political risk, unless the exporter
has explicitly asked for additional political coverage that is obtained through the Ex-Im Bank.
Open Account
International Factoring
• A means of financing international receivable accounts.
• The exporter is confident that the importer will pay (e.g. longstanding business relationship).
• The exporter is competing with companies that offer Open Account terms.
Alternative Terms of Payment
• Cash in Advance • Open Account • Letter of Credit • Documentary Collection • Procurement Cards • TradeCard
Alternative Terms of Payment
Risks in International Trade
Country Risk
• Country risk is also known as political risk. • The probability of not getting paid by a creditor, because the
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Cash in Advance
Definition
• In a Cash in Advance transaction, the exporter requests that the customer provide payment in advance, before shipment of the goods can take place.
Exposure
• The relative consequences of a bad-debt risk for an exporter; the risk of a $50,000 loss would represent a greater exposure for a small exporter than for a large exporter.
• The exporter wants to create goodwill. • In cases where the exporter is unsure of the importer’s credit, the
exporter can use credit insurance.
Open Account
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Applicability
• This method is only justified in rare cases. • It could be used when the importer is perceived as being very
high risk (commercial or country risk). • It should be avoided.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
creditor’s country has:
▪ Insufficient foreign exchange reserves. ▪ Not allowed the creditor to pay the debt (political embargo).
• Political risk can also mean the probability of nationalization of a firm’s subsidiary by the host country.
Open Account
Definition
• In an Open Account transaction, the exporter conducts international business in a manner similar to the way it conducts business domestically.
Term of payment Cash in Advance
Probability of Losing the Business because of the Choice of Method of Payment
Probability of loss due to Non-Payment
High
Risks in International Trade
Commercial Risk
• The probability of not getting paid by a creditor, because this creditor does not have the funds to pay the debt or because the creditor refuses to pay the debt.
Characteristics of International Payment Issues
• Reduced Credit Information • Lack of Personal Contact • Difficult and Expensive Collections • No Easy Legal Recourse • Higher Litigation Costs • Mistrust
Terms of Payment
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
transferred to the importer.
Cash in Advance
• The exporter ships the goods, accompanied by an invoice, and expects the importer to pay within a defined time period (30-60 days).
Open Account
Applicability
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Nil
Letter of Credit
Fairly High
Almost Nil
Documentary Collection Low
Low
Open Account
Nil
TradeCard
Low
Relatively High Almost Nil
Table 7-1: Advantages and Disadvantages of Several Terms of Payment
• The firm can ask a factoring company to advance funds on a receivable account:
▪ With recourse where the owner of the account receivable is still responsible for collecting it.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
▪ Without recourse where the collection responsibility entirely shifts to the factoring house.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Credit Insurance
• An insurance policy under which commercial risk is covered. • The insurance company bears the risk of non-payment by the
importer, deducting a slight percentage of the receivable. • Credit insurance does not cover political risk, unless the exporter
has explicitly asked for additional political coverage that is obtained through the Ex-Im Bank.
Open Account
International Factoring
• A means of financing international receivable accounts.
• The exporter is confident that the importer will pay (e.g. longstanding business relationship).
• The exporter is competing with companies that offer Open Account terms.
Alternative Terms of Payment
• Cash in Advance • Open Account • Letter of Credit • Documentary Collection • Procurement Cards • TradeCard
Alternative Terms of Payment
Risks in International Trade
Country Risk
• Country risk is also known as political risk. • The probability of not getting paid by a creditor, because the
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Cash in Advance
Definition
• In a Cash in Advance transaction, the exporter requests that the customer provide payment in advance, before shipment of the goods can take place.
Exposure
• The relative consequences of a bad-debt risk for an exporter; the risk of a $50,000 loss would represent a greater exposure for a small exporter than for a large exporter.
• The exporter wants to create goodwill. • In cases where the exporter is unsure of the importer’s credit, the
exporter can use credit insurance.
Open Account
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
Applicability
• This method is only justified in rare cases. • It could be used when the importer is perceived as being very
high risk (commercial or country risk). • It should be avoided.
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool
creditor’s country has:
▪ Insufficient foreign exchange reserves. ▪ Not allowed the creditor to pay the debt (political embargo).
• Political risk can also mean the probability of nationalization of a firm’s subsidiary by the host country.
Open Account
Definition
• In an Open Account transaction, the exporter conducts international business in a manner similar to the way it conducts business domestically.
Term of payment Cash in Advance
Probability of Losing the Business because of the Choice of Method of Payment
Probability of loss due to Non-Payment
High
Risks in International Trade
Commercial Risk
• The probability of not getting paid by a creditor, because this creditor does not have the funds to pay the debt or because the creditor refuses to pay the debt.
Characteristics of International Payment Issues
• Reduced Credit Information • Lack of Personal Contact • Difficult and Expensive Collections • No Easy Legal Recourse • Higher Litigation Costs • Mistrust
Terms of Payment
Terms of Payment
Characteristics of International Payment Issues Risks in International Trade Alternative Terms of Payment Cash in Advance Open Account Letter of Credit Documentary Collection Procurement Cards TradeCard Terms of Payment as a Marketing Tool