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  • International Payment Methods Clean Payments Advance Payment Open Account Payment Collection of Bills in Internationalin Export Trade.
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    Payment Methods in Export Import Trade.




    There are 3 standard ways of payment methods in the export import trade international trade market:

    1. Clean Payment
    2. Collection of Bills
    3. Letters of Credit L/c

    1. Clean Payments


    In clean payment method, all shipping documents, including title documents are handled directly between the trading partners. The role of banks is limited to clearing amounts as required. Clean payment method offers a relatively cheap and uncomplicated method of payment for both importers and exporters.

    There are basically two type of clean payments:

    Advance Payment

    In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer.

    Open Account

    In open account method the importer is trusted to pay the exporter after receipt of goods.

    The main drawback of open account method is that exporter assumes all the risks while the importer get the advantage over the delay use of company's cash resources and is also not responsible for the risk associated with goods.


    2. Payment Collection of Bills in International Trade


    The Payment Collection of Bills also called “Uniform Rules for Collections” is published by International Chamber of Commerce (ICC) under the document number 522 (URC522) and is followed by more than 90% of the world's banks.

    In this method of payment in international trade the exporter entrusts the handling of commercial and often financial documents to banks and gives the banks necessary instructions concerning the release of these documents to the Importer. It is considered to be one of the cost effective methods of evidencing a transaction for buyers, where documents are manipulated via the banking system.

    There are two methods of collections of bill :

    Documents Against Payment  D/P

    In this case documents are released to the importer only when the payment has been done.

    Documents Against Acceptance D/A

    In this case documents are released to the importer only against acceptance of a draft.


    3. Letter of Credit L/c


    Letter of Credit also known as Documentary Credit is a written undertaking by the importers bank known as the issuing bank on behalf of its customer, the importer (applicant), promising to effect payment in favor of the exporter (beneficiary) up to a stated sum of money, within a prescribed time limit and against stipulated documents. It is published by the International Chamber of Commerce under the provision of Uniform Custom and Practices (UCP) brochure number 500.

    Various types of L/Cs are :

    Revocable & Irrevocable Letter of Credit (L/c)

    A Revocable Letter of Credit can be cancelled without the consent of the exporter. An Irrevocable Letter of Credit cannot be cancelled or amended without the consent of all parties including the exporter.

    Sight & Time Letter of Credit

    If payment is to be made at the time of presenting the document then it is referred as the Sight Letter of Credit. In this case banks are allowed to take the necessary time required to check the documents.
    If payment is to be made after the lapse of  a particular time period as stated in the draft then it is referred as  the Term Letter of Credit.

    Confirmed Letter of Credit (L/c)

    Under a Confirmed Letter of Credit, a bank, called the Confirming Bank, adds its commitment to that of the issuing bank. By adding its commitment, the Confirming Bank takes the responsibility of claim under the letter of credit, assuming all terms and conditions of the letter of credit are met.

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    What is New?

    Date: 23-09-2016
    Trade Notice No. 18/2016
    Clarification in respect of definition of service provider under Common Service Providers (CSP) in Export Promotion Capital Goods (EPCG) scheme.

    Date: 23-09-2016
    Customs Notification No. 51/2016
    Seeks to further amend notification No.12/2012-Customs dated the 17th March, 2012, so as to: 1. Reduce import duty on potatoes from 30% to 10% up to 31.10.2016. 2. Reduce import duty on wheat from 25% to 10% up to 29.02.2017. 3. Reduce import duty on palm oil from 12.5% to 7.5% for crude palm oil of edible grade, and from 20% to 15% for refined palm oil of edible grade.

    Date: 23-09-2016
    DGFT Public Notice No. 33/2015-2020
    Amendment in ANF-5A [Applicationj for issue of EPCG Authorisation ] incorporating the guideline for designating/certifying a Common Service Provider (CSP) under Para 5.02 (b) of FTP 2015-20-reg.

    Date: 22-09-2016
    Customs Notification No. 122/2016 (NT)
    Rate of exchange of conversion of the foreign currency with effect from 23rd September, 2016

    Date: 22-09-2016
    Customs Circular No. 44/2016
    Regarding setting up of 'Custom Clearance Facilitation Committee' (CCFC) for Land customs stations and Inland Container Depots-reg

    Date: 22-09-2016
    Trade Notice No. 17/2016
    Refund of Terminal Excise Duty(TED) under Deemed Exports where Duty has been paid from CENVAT Credit and ab-initio waiver is not availabe.

    Date: 22-09-2016
    Customs Notification No. 50/2016
    Seeks to further amend notification No. 12/2012-Customs dated 17.03.2012

    Date: 22-09-2016
    Service Tax Notification No. 41/2016 (ST)
    Seeks to exempt taxable service provided by State Government Industrial Development Corporations/ Undertakings by way of granting long term (thirty years, or more) lease of industrial plots to industrial units from so much of service tax which is leviable on the one time upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for such lease.

    Date: 22-09-2016
    DGFT Public Notice No. 32/2015-2020
    Merchandise Exports from India Scheme (MEIS)-Additions/amendments in Table 2[containing ITC (HS) code wise list of products with reward rates] of Appendix 3B

    Date: 21-09-2016
    Instruction
    Instruction issued by Legal Cell, CBEC regarding non compliance of sub-section 2 of section 32K of Central Excise, Act, 1944 - Immunity granted to a person from prosecution, penalty and fine



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