What are the main trading methods of foreign trade now, and what are the most used?

There are three main payment methods for foreign trade export: letter of credit, telegraphic transfer and D/P. Among them, letter of credit is the most widely used, followed by telegraphic transfer, and D/P is less.

1. Let's introduce L/C first.

Letter of credit is the most commonly used payment method in international trade at present, and everyone who does foreign trade will come into contact with it sooner or later. For many people, when letter of credit is mentioned, it will be associated with a daunting red tape full of terms. In fact, a letter of credit can be said to be a sales contract guaranteed by a bank. As long as you provide the corresponding documents to the bank according to the terms of this contract, you must pay the money to you. Therefore, it should be said that letter of credit is a very safe payment method in theory. Once the letter of credit is opened, he is real money. Because of this, a reliable letter of credit can even be used as collateral to obtain loans from banks, which is convenient for the seller's capital turnover, that is, "letter of credit packaged loans." But in practice, letters of credit are sometimes not so safe. The reason is that there may be soft clauses in the letter of credit that are difficult for you to do, resulting in artificial inconsistency.

2. The second common delivery method is telegraphic transfer (T/T).

This method is very simple to operate and can be divided into pre-t/t and post-t/t.

Pre-telegraphic transfer means that after the contract is signed, a part of the deposit, usually 30%, is paid first, and after the production is completed, the payment is notified, the balance is paid off, and then the goods are delivered and a full set of documents are delivered. But the former T/T is relatively rare, and it appears more in Europe and America. Because customers in Europe and America have a good reputation environment, he trusts others.

The most common ones are post-telegraphic transfer, receiving deposit, arranging production and shipment, and paying the balance after the customer receives the copy of the document; After receiving the balance, the seller sends a full set of documents.

The proportion of wire transfer deposit is an important content in negotiation and contract signing. The minimum margin ratio should be enough for you to send the goods out and then drag them back. In case the customer refuses to pay, the loss will not be great.

Compared with L/C, T/T is very simple and flexible, such as tight delivery, changing packaging and so on. It doesn't matter as long as the customer agrees. If it is a letter of credit, it will be very troublesome. The letter of credit must be amended, otherwise it will cause discrepancies and the customer can refuse to pay. Another feature of telegraphic transfer is that the cost is lower than that of letter of credit, and the bank deduction is less, generally tens of dollars. Letters of credit sometimes cost hundreds of dollars. So some factories set the telegraphic transfer quotation lower than the letter of credit. However, generally speaking, if the documents are fully prepared and the collection is guaranteed by the bank, the letter of credit is more reliable than the telegraphic transfer. With a letter of credit, you can go to the bank to package loans, and the financial pressure is not great. But in countries with poor bank credit or strict foreign exchange control, letters of credit are very risky, such as India.

T/T and L/C have their own advantages and disadvantages. If telegraphic transfer is combined with letter of credit, it is very safe, 30% telegraphic transfer and the rest letter of credit.

3. In addition, there are several less used payment methods:

1) D/P Documents with payment is a way to deliver documents under documentary collection, which means that the exporter's documents are based on the importer's payment, that is, the importer can only collect documents from the collecting bank after paying.

(1) D/P at sight means that the exporter draws a draft at sight, and the collecting bank reminds the importer that the importer must pay at sight. After payment, the importer gets the shipping documents.

(2) D/P after sight or after date refers to the time draft drawn by the exporter, presented by the collecting bank to the importer, and paid by the importer before or after the maturity date of the draft.

2) D/A is a way for exporters (or collecting banks) to deliver documents to importers on the condition of acceptance under documentary collection.

The so-called "acceptance" refers to the acceptance of the draft by the payer (importer) when the collecting bank presents the draft. The procedure of acceptance is that the payer signs the bill, indicating the word "acceptance" and the date, and returns the bill to the holder. No matter how many times the bill is transferred, the drawee should pay by the bill on the maturity date.

All the above are acceptable except D/P at sight. Others are risky (relative to L/C), but some customers don't pay the redemption order because of market price and other problems. If they want to do it, they can only be old customers with good reputation and long-term contact.

D/P payment and D/A payment are rarely used. Mainly because these two payment methods belong to commercial credit, that is, whether the export company can receive the payment depends entirely on the importer's credit. Whether the importer can receive the goods on time, in good quality and in good quantity depends on the credit of the exporter. For importers with good credit, there is generally no phenomenon of non-payment for goods, while importers with poor credit often default or refuse to pay for goods. Therefore, these two payment methods are mostly used by reputable importers and exporters.

D/P is risky, but it is a very good delivery method if it is combined with telegraphic transfer. Because in some countries, some companies like to pay by D/P. Then, for example, 30% T/T in advance, 40% after shipment, and D/P for the balance. This is safer than wire transfer afterwards.