What are the common payment methods in international trade?

With the economic globalization, more and more enterprises have started international trade. Usually, the payment methods of trade are mainly cash and bank remittance, so what are the differences between the payment methods of international trade? Let's take a look at it with the Deep Space Network.

Common payment methods in international trade

At present, there are three most common payment methods in international trade: letter of credit, remittance and collection payment.

I. Letters of credit

Letter of credit is the most important and commonly used payment method in international trade. Generally, the issuer applies to the bank to open a letter of credit according to the contract, or pays a proportional deposit and redemption instructions to the bank.

A letter of credit is a conditional payment promise of a bank and a written guarantee document issued by the issuing bank to the beneficiary at the request and instruction of the applicant. Within a certain period and specified amount, as long as the documents submitted by the beneficiary meet the terms of the letter of credit, the issuing bank will certainly pay.

Second, collection payment.

The commercial documents and property rights certificates issued by the export enterprise after the goods are shipped, and then the agent bank is entrusted to collect the payment from the import enterprise through the collecting bank where the import enterprise is located. This is collection payment. There are two main types, one is D/P, and the risk is relatively small. The second type is D/A. The risk is greater than D/P, because the importing enterprise must accept D/A before the bank will release the documents. If the import enterprise has good commercial credit and is willing to accept it, it will be easier to collect money. If the credit is bad, the risk will increase.

Three. remittance

There are three ways to remit money:

1. T/T means that the remitter applies to the remitting bank and then pays a certain amount to the payee through the remitting bank by telex instruction. The remittance bank must check the password.

2. Bill remittance is a way for the payee to pay the bill. It means that the remitter applies to the remitting bank and then opens a bank draft with its branch or agent as the paying bank on behalf of the remitter. The remitter who gets the draft from the bank sends it to the payee himself or carries it with him for export.

3. Remittance means that the remittance bank receives the payer's application, sends the remittance power of attorney to the remittance bank by international express or registered airmail, and then instructs the remittance bank to remit a certain amount to the payee.