Analysis on the advantages of traditional trade settlement methods

First of all, the so-called risk is for the seller (then for the buyer, the opposite is true).

Secondly, generally speaking, the risk of letter of credit is the lowest, the risk of remittance is the highest and the risk of collection is in the middle. But after careful analysis, there is a time sequence of remittance, and the risk situation should be treated specifically. Details are as follows:

Remittance before shipment and remittance after shipment

1- remittance before delivery: at this time, the risk is naturally much smaller; If it is pre-production remittance (equivalent to advance payment), the risk is the lowest, almost zero.

2- Remittance after delivery: There are two types:

A. remittance first, then bill of lading.

B. Issue the bill of lading first, and then remit the money.

The former has low risk, which is about equal to D/P collection, while the latter has high risk, which is the highest among all payment methods.

In addition, there are two kinds of collection: D/A and D/P.

D/A is an acceptance collection, that is, the buyer can only get the bill of lading after accepting (accepting the draft). As for whether to pay for it in the future, it is a matter of commercial reputation. For the seller, the risk is great, almost equal to the above-mentioned bill of lading before payment.

D/P means D/P, that is, the buyer pays in the bank and gets the bill of lading at the same time, which is relatively fair to both parties.

In a word, the situation is very complicated. But you are only a short answer in the exam. You can only answer the first few sentences. In other words, generally speaking, for the seller, the risk of letter of credit is the lowest, the risk of remittance is the highest, and the risk of collection is in the middle.