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ONLINE CERTIFICATE IN EXPORT MANAGEMENT 2012
COURSE 6. RECEIVING PAYMENT FOR YOUR EXPORT SALES
Export transactions with limited or
no financial risk to the
IMPORTER
NOTE:
This is a copy of the actual page from the online course.
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the chapter in which it appears.
In today's competitive world of international trade - further complicated by the global recession -
foreign buyers may ask you to assume more, if not all of the financial risk involved in an export
transaction. They may only pay after they have inspected the goods or when they have sold the goods
locally (a form of consignment). The following payment methods shift the financial risk from the
importer to you as the exporter. They are discussed in detail later in this course.
You must be aware of the financial risks that you will be assuming in each type of export transaction.
Study each step involved in the fulfillment and payment process. Understand the roles of all parties
involved - and where problems and misunderstanding may arise. Secure non-payment insurance from
EXIMBANK
or other financial
institution. Why should you assume the risk when you can insure against
non-payment at a reasonable cost - and include it in your export price? Be especially cautious with
payment terms in the following payment arrangements where the financial risk is your responsibility as
the exporter:
Documents against payment by sight draft
After the shipment has arrived at the port of import at your expense, the buyer
may refuse to sign the sight draft, make payment and pick up the goods at the pier.
If this occurs, you will be forced at your
expense to (1) attempt to sell the goods locally, (2) return the shipment to the United States, or (3)
ship goods to another country to try and sell them.
Documents against payment by time draft
You allow the importer to pick up the goods at the port of import and try to sell them within the
period of the time draft. If the importer accepts the time draft and
and payment is not guaranteed by your bank, you will have no alternative but to try obtain payment
through the courts - usually in the country of the importer (a difficult thing to do!).
Open Account
You agree to relinquish control of the shipment to the importer - and you authorize the importer picks
up the shipment at the port of import without paying for the goods. Payment is to be made to you at a
specific date in the future. If payment is not made on the due date,
the importer could refuse to
return the goods to you.
Since there is no international bank involved in the transaction to enforce compliance, if you do not
have non-payment insurance, your money could be lost. Your only alternative would be to attempt to
recover payment through the local courts (again, could be a difficult to do!)
Also calculate the alternate use of funds
cost. You will be paying interest or losing interest income
on the money you will not have in your possession during the extended non-payment period.
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Copyright 1987 - 2012, Export Institute of the United States
Telephone: (952) 943-1505, http://www.exportinstitute.com
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