It is an account opened for a particular firm . At a fixed period the firm is automatically paid by the bank. The payer will receive a statement of account.
Bill of exchange (B/E)
It is a document that orders to a bank to pay a certain sum of money on behalf of a person or a company to another person or company. It is a very common means of payment in foreign trade because it is sure and doesn’t need any shipping documents. The importer that it to say the person who buys and so pays, is called the DRAWEE. The exporter, that is to say the person who sells and so receives the money, is called the DRAWER.
Documents against payment (D/P)
Documents against acceptance (D/A)
The buyer receives the shipping documents when he accepts to pay the bill of exchange (B/E) and signs it.
The letter of credit (L/C)
It is a letter from a bank which guarantees that payment will be done on time and for the correct amount. If the buyer cannot pay, the bank has to pay, that’s why L/C (letter of credit) is considered the most secure means of payment for the seller. In the letter of credit there are all the terms of trade: description of the goods, time and place of delivery, the documentation required. The L/C (letter of credit) involves four parties:
1. The importer;
2. The importer’s bank (issuing bank);
3. The exporter;
4. The exporter’s bank (advising bank).
A confirmed irrevocable letter of credit gives the best protection because the buyer cannot cancel it without the exporter’s permission.
The commercial invoice is the most important document relating to sale of goods and services in both home and international trade. It is sent by the seller or exporter to the buyer or importer. The commercial invoice includes:
- A name and address of the seller/exporter and buyer/importer;
- A detailed description of goods together which unit price, quantities, terms of payment, transport details, VAT taxation and total amount to be paid.
The invoice can be accompanied by backing list.