What are international trade payment methods?

There are several ways of paying for exports:

1 - Pre-Payment.

2- Cash Payment.

3- Documentary Credit.

4- Cash Against Document " CAD".

5- Trade Credit.

Firstly : Pre-Payment:

It means paying for the goods in advance in order to be shipped. This method is not widely used except for small orders. It has a lot of disadvantages as the exporter may not load the shipment or may not abide the required standards.

Secondly : Cash Payment

The importer pays for the goods in cash and in advance when:

- The value of enterprise is small

- The exporter does not know the importer or due to lack of confidence.

- The economic or political conditions in the importer's country are unstable.

- The commodity is produced especially for the importer and the exporter can not sell it to others.

Thirdly : Documentary credit

It means shipping the commodity after the importer open a documentary credit equal to the value of goods provided that the exporter receives the value of goods as soon as he delivers the shipping documents to the local bank.

Fourthly : Cash Against documents (CAD):

Under this method, the two parties agree on all terms such as prices and so on. When the exporter finishes the exporting procedures, he sends the documents through the bank he deals with. The latter communicate with the bank concerned in the importing country together with the directions regarding delivering those documents to the importer in return for paying in cash. Through these documents, the importer can take the goods from the shipper to the port.

Fifthly : Trade credits:

It is considered some kind of bartering. It means delivering exporting documents in return for importing documents provided that exports revenues are deposited in the bank to be used for paying the imports value.