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
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
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.
Documentary Collection Low
Low
Open Account
Nil
Relatively High
Table 7-1: Advantages and Disadvantages of Several 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 Terms of Payment as a Marketing Tool
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
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.
《国际物流与经营管理》课件--国际贸易支付文稿演示
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 Terms of Payment as a Marketing Tool
Probability of Losing the Business because of the Choice of Method of Pห้องสมุดไป่ตู้yment
Probability of loss due to Non-Payment
High
Nil
Letter of Credit
Fairly High
Almost Nil
Characteristics of International Payment Issues
• Reduced Credit Information • Lack of Personal Contact • Difficult and Expensive Collections • No Easy Legal Recourse • Higher Litigation Costs • Mistrust
Alternative Terms of Payment
• Cash in Advance • Open Account • Letter of Credit • Documentary Collection
Alternative Terms of Payment
Term of payment Cash in Advance
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
creditor’s country has:
▪ Insufficient foreign exchange reserves.
• Political risk can also mean the probability of nationalization of a firm’s subsidiary by the host country.