Payment Methods in Import Transactions

Advance payment:
Advance payment is a method where the importer prepays the price of the goods and the exporter loads the goods after it has received the payment. It is the highest risk payment method for importers, but it allows importers to import at discount prices thanks to advance payment.

Cash against documents:

This is a method where the goods are loaded and the shipment documents representing the goods are sent by the exporter’s bank to the importer’s bank for delivery against the payment of the price of the goods. The importer’s bank will not deliver the shipment documents to the importer until the importer pays the price of the goods.

Cash against goods:

This is a method where the importer clears the goods through the customs without paying the price of them and pays the price on a future date agreed upon by and between importer and the exporter. It is the lowest risk payment method for importers, because they pay after taking delivery the goods.

Acceptance Credit:

This is a method where the importer pays the price of the goods on the date of the relevant bill of exchange or promissory note. It can be applied for cash against documents, letter of credit or cash against goods. It allows importers to make deferred payment for the goods they import.

Letter of Credit:

• Payable at sight: The price is paid when the documents described in the relevant letter of credit are presented within the term thereof to the confirming bank if the letter of credit is confirmed or to the issuing bank if the letter of credit is not confirmed.
• Deferred: The price is paid when the documents described in the relevant letter of credit are presented on the due date agreed upon by the parties.
• Letter of acceptance: the documents described in the relevant letter of credit are presented to the issuing or confirming bank, the bill of exchange issued is accepted, and the accepted bill of exchange is paid on its due date.
• Mixed payment: A certain amount of the value of the letter of credit is paid against presentation of the documents or on a certain due date.Types of letter of credit:
• Confirmed L/C: Upon demand of the issuing bank, the confirming bank undertakes to pay the letter of credit in addition to the issuing bank’s undertaking. The confirming bank undertakes to pay the letter of credit to the beneficiary against presentation of the documents described in the letter of credit.
• Unconfirmed L/C: The correspondent bank undertakes only to notify the letter of credit to the beneficiary, not to pay it. Only the issuing bank is obliged to pay the letter of credit against presentation of the documents described therein.volving L/C:  This type of L/C is renewed under the same conditions and for a pre-determined amount without having to amend it after the whole or some of its amount is paid. It can be renewed on a due date or for a certain amount.
• Transferrable L/C:  A letter of credit issued in favor of an exporter can be transferred to one or more different beneficiaries. Only the letter of credits containing the term “transferable” can be transferred as such.
• Standby L/C: This type of L/C functions as a letter of guarantee. It guarantees to pay the price even if the importer fails to fulfill its obligations or to pay the price.
• Back to Back L/C:  A new letter of credit is issued in favor of a manufacturer or supplier to supply the goods described in the letter of credit issued in favor of the exporter.
• Red Clause L/C: Some or whole of the amount of a letter of credit is paid in advance to its beneficiary. It is a means of pre-financing granted by the importer to the exporter.Special letters of credit:
• Revolving L/C:  This type of L/C is renewed under the same conditions and for a pre-determined amount without having to amend it after the whole or some of its amount is paid. It can be renewed on a due date or for a certain amount.
• Transferrable L/C:  A letter of credit issued in favor of an exporter can be transferred to one or more different beneficiaries. Only the letter of credits containing the term “transferable” can be transferred as such.
• Standby L/C: This type of L/C functions as a letter of guarantee. It guarantees to pay the price even if the importer fails to fulfill its obligations or to pay the price.
• Back to Back L/C:  A new letter of credit is issued in favor of a manufacturer or supplier to supply the goods described in the letter of credit issued in favor of the exporter.
• Red Clause L/C: Some or whole of the amount of a letter of credit is paid in advance to its beneficiary. It is a means of pre-financing granted by the importer to the exporter.

Types of letter of credit:

• Confirmed L/C: Upon demand of the issuing bank, the confirming bank undertakes to pay the letter of credit in addition to the issuing bank’s undertaking. The confirming bank undertakes to pay the letter of credit to the beneficiary against presentation of the documents described in the letter of credit.
• Unconfirmed L/C: The correspondent bank undertakes only to notify the letter of credit to the beneficiary, not to pay it. Only the issuing bank is obliged to pay the letter of credit against presentation of the documents described therein.

Special letters of credit:

• Revolving L/C:  This type of L/C is renewed under the same conditions and for a pre-determined amount without having to amend it after the whole or some of its amount is paid. It can be renewed on a due date or for a certain amount.
• Transferrable L/C:  A letter of credit issued in favor of an exporter can be transferred to one or more different beneficiaries. Only the letter of credits containing the term “transferable” can be transferred as such.
• Standby L/C: This type of L/C functions as a letter of guarantee. It guarantees to pay the price even if the importer fails to fulfill its obligations or to pay the price.
• Back to Back L/C:  A new letter of credit is issued in favor of a manufacturer or supplier to supply the goods described in the letter of credit issued in favor of the exporter.
• Red Clause L/C: Some or whole of the amount of a letter of credit is paid in advance to its beneficiary. It is a means of pre-financing granted by the importer to the exporter.