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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: 15-02-2018
Notification No. 13/2018-Customs (N.T.)
Exchange Rates Notification No.11/2018-Custom(NT) dated 1.2.2018

Date: 15-02-2018
Notification No. 12/2018-Customs (N.T.)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver.

Date: 12-02-2018
Notification No. 26/2018-Customs
seeks to further amend the notification No. 50/2017- Customs, dated the 30th June 2017 so as to reduce the Basic Customs Duty on motorcycles falling under tariff heading 8711.

Date: 06-02-2018
Notification No. 25/2018-Customs
Seeks to increase BCD tariff rate on Chana (Chickpeas), [Tariff item 0713 20 0] from 30% to 40% by invoking section 8A (1) of the Customs Tariff Act, 1975 and accordingly, the effective rate of BCD on Chana (Chickpeas), will also be 40%.

Date: 06-02-2018
Notification No. 24/2018-Customs
Seeks to increase import duty on all types of sugar under tariff head 1701, [Raw sugar, Refined or White sugar, Raw sugar if imported by bulk consumer] from the present 50% to 100% (Tariff rate) with immediate effect and without an end date.

Date: 05-02-2018
DGFT Notification No. 50/2015-2020
Amendment in import policy condition of pepper classified under Chapter 09 of ITC (HS), 2017—Schedule-1(Import Policy)

Date: 05-02-2018
DGFT Notification No. 49/2015-2020
Updation in Para 4 (A) of General Notes Regarding Import Policy of ITC (HS), 2017, Schedule – I (Import Policy)

Date: 05-02-2018
Public Notice No. 58/2015-2020
Amendment in chapter 2 of the Handbook of Procedure (2015-2020)

Date: 02-02-2018
DGFT Notification No. 48/2015-2020
Export Policy of Onions- Removal of Minimum Export Price (MEP)

Date: 02-02-2018
Notification No. 23/2018-Customs
Seeks to further amend notification No. 27/2011- Customs dated the 1st March, 2011 so as to prescribe ‘Nil’ rate of export duty on Electrodes of a kind used for furnaces



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