Concetti Chiave
- The account setup involves the bank automatically making payments to a firm at fixed intervals, providing the payer with a statement of account.
- A bill of exchange (B/E) is a document that orders a bank to pay a specified amount on behalf of a buyer (drawee) to a seller (drawer), commonly used in foreign trade.
- Payment via a letter of credit (L/C) ensures security for the seller, as the bank guarantees payment even if the buyer cannot pay, detailing trade terms and documentation.
- A confirmed irrevocable letter of credit offers maximum protection to the exporter since it cannot be canceled without consent.
- The commercial invoice is crucial in trade, detailing buyer and seller information, goods description, pricing, payment terms, and total payment amount.
Account setup and payment process
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.
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.
The buyer receives the shipping documents when he pays.
The buyer receives the shipping documents when he accepts to pay the bill of exchange (B/E) and signs it.
Letter of credit details
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.
Commercial invoice essentials
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.
Domande da interrogazione
- What is the role of a bank in the payment process for foreign trade?
- How does a letter of credit protect the seller in international transactions?
In foreign trade, a bank facilitates payments by automatically paying the firm at a fixed period and providing a statement of account to the payer. It also issues documents like letters of credit, which guarantee payment on behalf of the buyer if they cannot pay, ensuring security for the seller.
A letter of credit guarantees that payment will be made on time and for the correct amount. If the buyer fails to pay, the bank is obligated to cover the payment. A confirmed irrevocable letter of credit offers the best protection as it cannot be canceled without the exporter’s consent.
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