Danesi Spedizioni
 

 

 

Payment terms

Method Usual time of payment Goods available to buyer Risk to seller Risk to buyer Comments
Cash in advance
Before shipment
After shipment
None
Complete.
Relies on seller to ship exactly the goods expected, as quoted and ordered.
Seller's goods must be special in one way or another, or special circumstances prevail over normal trade practices (e.g., goods manufactured to buyer-only specification).
Letter of credit (L/C) (See next two items)
None
None
Commercial Invoice must match the L/C exactly. Dates must be carefully headed. "Stale" documents are unacceptable for collection.
None
Letters of credit require total accuracy in conforming to terms, conditions, and documentation. Consult your TransUnion office, member for determining feasibility of terms and conditions.
Confired irrevocable credit
After shipment is made, documents presented to the bank.
After payment
Gives the seller a double assurance of payments. Depends on the terms of the letter of credit.
Assures shipment is made but relies on exporter to ship goods as described in documents. Terms may be negotiated prior to L/C agreement, alleviating buyer's degree of risk.
The inclusion of a second assurance of payment (usually a U.S. Bank) prevents surprises, and adds assurance that issuing bank has been deemed acceptable by confirming bank. Adds cost and an additional requirement to seller.
Unconfirmed irrevocable credit
Same as above
Same as above
Seller has single bank assurance of payment and seller remains dependent on foreign bank. Seller should contact his banker to determine whether the issuing bank has sufficient assets to cover the amount.
Same as above
Credit can be changed only by mutual agreement, as stipulated in a sales agree- ment. Becomes open account with buyer's bank as collection agent. Foreign bank may have problems making payment in sum or timeliness.
Drafts (See next two items)
Remittance time from buyer's bank to seller's bank may still take one week to one month.
None
Drafts, by design, shoul contain terms and conditions mutually agreed upon.
None
A draft may be written with vitually any term or condition agreeable to both parties. When determining draft tenor (terms and conditions) consult with your banker and freight forwarder to determine the most desirable means of doing business in a given country.
Sight Draft (with documents against acceptance)
On presentation of draft to buyer.
After payment to buyer's bank.
If draft not honored, goods must be returned or resold. Storage, handling, and return freight expenses may be incurred
None
A draft may be written with vitually any term or condition agreeable to both parties. When determining draft tenor (terms and conditions) consult with your banker and freight forwarder to determine the most desirable means of doing business in a given country.
Time Drafts (with documents against acceptance)
On maturity of the draft
Before payment, after acceptance
Relies on buyer to honor draft upon presentation.
None
Payable based upon the acceptance of an obligation to pay the seller at a specified time. Although a time draft has more collection leverage than an invoice, it remains only a promissory note, with conditions.
Open Account
As agreed usually by invoice
Before payment
Relies completely on buyer to pay account as agreed
None
All terms of payment, including extra charges and terms should be mutually understood and agreed upon prior to open account initiation. Companies conducting ongoing business are candidates for open account terms of payment. Seller must measure not only buyer's credit reliability but the country's as well.
 
 

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