You may negotiate excellent terms and perform an outstanding deal, but if you haven't been paid ? you've lost. That's why setting up the right terms of trade is a crucial part of your exports.

When negotiating the terms of payment you always face a dilemma:

- if you insist on more secured payment terms, you may very well reduce your sales opportunities (lower and less frequent orders, allowing your competitors with better terms to take the advantage),

- if you agree on more flexible payment terms, you run a high risk of the payment being delayed or refused.

If you appropriately select and arrange the payment terms, you can significantly minimise risks involved with payments.

There are several terms of payments that are commonly used in International Trade.

Cash In Advance
You get your money before you ship the goods. Sometimes, even before you start fulfilling the order or after notification that the order is ready for shipment.

If your buyer is prepared to pay you in advance ? you are lucky ? you have the money and you still have total control of your goods - you risk nothing at all. However, unless you are a well-known company with established brands, buyers will not accept these terms, at least not for a new transaction. They would have the same doubts as you do ? will I get my goods after I have paid?

Don't press your buyer for cash in advance, unless you know that you might experience difficulties in selling the goods to another customer if the deal is cancelled. If you have to manufacture non-standard equipment, or goods you are selling need to be specifically
customized, the best way to secure the payment is to have money in your bank account prior to commencing customisation.

Letter Of Credit (L/C)
L/C is the most used payment term in International Trade and I'll be fairly specific on this topic. L/C is a perfect procedure to equally protect your interests and your buyer's interests. Using L/C as a term of payment, you risk almost nothing and at the same time it
ensures the buyer that goods are shipped before the payment has occurred. However, you only will be paid if all terms stipulated in the L/C are met and all documents specified in the L/C strictly comply with agreed conditions and are presented in time.

Before choosing L/C as a term of trade, you must understand what it is, how it works and what you can do to minimise risks involved in the L/C payment process.

L/C, its Forms and Types
Letters of Credit are regulated by International Chamber of Commerce under the Uniform Customs and Practice for Documentary Credits (UCP 500). I strongly recommend you obtain this document from the International Trade Department of your financial institution or from ICC Australia* and read it very carefully. Sometimes it's difficult to understand what it means, as the document is drafted for the banking professionals and its language is very technical. Do not hesitate to call your bank and ask questions. Any mistakes, unclear or incorrectly stipulated terms, even typos in a L/C may cost you dearly.

In "plain English", L/C is a conditional bank guarantee of payment for supplied goods. "Conditional" means that to get paid you have to present the bank-guarantor with documents, which strictly comply with the terms and conditions specified in the L/C.

There are different forms and types of L/C, which you may (or should not) use in your operations, viz

Revocable and Irrevocable L/C
"A revocable L/C may be amended or cancelled by the Issuing Bank at any moment and without prior notice to the Beneficiary." (UCP 500, Article 8,a). This is as simple, as that. Never accept this form of L/C in your export arrangements.

Agree that the L/C is irrevocable before you go any further in your L/C negotiations. Although UCP 500 requires that L/C should indicate whether it is revocable or irrevocable (Article 6, b), it also says "in the absence of such indication the Credit shall be deemed to be irrevocable." (Article 6, c)

Confirmed L/C
When you export to a country with economical or political instability or if you are unfamiliar with the Issuing Bank, you should require that the L/C be confirmed by a first-class bank. If L/C is confirmed, the confirming bank is liable for the payment.

Transferable L/C
Transferable L/C is a perfect financial tool for middlemen to secure their margin without involving any funds. It allows dealing with more than one beneficiary. When a transferable L/C is issued in your favour, you can transfer it to your seller and use it as a payment.

L/C "can be transferred only if it is expressly designated as "transferable" (UCP 500, Article 48, b). Transferable L/C must correspond with the original L/C, "with the exception of:
- the amount of the L/C,
- any unit price,
- the expiry date,
- the last date for presentation of documents,
- the period for shipment,
any or all of which may be reduced or curtailed." (UCP 500, Article 48, h)

L/C payable at sight
"Payable at sight" means that you'll be paid "immediately" (in fact, it may take up to 7 days) after presentation of the documents stipulated in the L/C to the Issuing Bank or to the Confirming Bank if it was confirmed.

L/C payable on the maturity date
If deferred payment was agreed, you'll be paid on the maturity date indicated in the L/C after presentation of the documents stipulated in the L/C to the Issuing Bank. Don't forget to specify the date from which the deferring period starts (e.g. 90 days after date of transport document).

The payments under L/C are usually made by the bank upon receipt of the documents stipulated in the L/C and a bill of exchange issued by you.

The bill of exchange (the draft) is an unconditional order in writing, signed and addressed by the drawer (you) to the drawee (the paying bank), requiring the drawee to pay the drawer a certain sum of money according to the terms of the L/C.

Under L/C, always draw the draft on the bank, not on the buyer.

How L/C works
There are at least four participants, when dealing with L/C:
- The buyer ? the Applicant
- You - the Beneficiary
- Bank, the payment will come from ? the Issuing Bank
- Bank, the payment will go to ? the Advising Bank.

The diagram below shows how participants are involved in the process of payment under L/C.

1. The Applicant and the Beneficiary negotiate terms and conditions of the L/C
2. The Applicant applies to the Issuing Bank to issue the L/C
3. The Issuing Bank issues the L/C and forwards it to the Advising Bank
4. The Advising Bank checks the apparent authenticity of the L/C and advises the L/C to the Beneficiary
5. The Beneficiary checks if the L/C complies with the commercial agreements and if all terms and conditions specified in the L/C can be satisfied and ships the goods
6. The Beneficiary assembles the documents specified in the L/C, checks the documents for discrepancies with the L/C, draws the draft and presents the draft and the documents to the Advising Bank
7. The Advising Bank bears the draft and the documents against terms and conditions of the L/C and forwards them to the Issuing Bank
8. The Issuing Bank checks if the documents comply with the L/C and makes a payment immediately (if the L/C is available by sight) or on a certain date (if L/C is available by deferred payment)

Another party, which may be involved in the L/C procedure, is the Nominated Bank.

The Advising Bank
The Advising Bank advises you that a L/C is received and available to you and informs you about the terms and conditions of the L/C. The advising bank is not responsible for the payment of the L/C.

The Advising Bank is not necessarily a bank where you usually banking. Shop around. Try to find a bank, which has a corresponding bank in your buyer's country and can offer you a better deal in terms of charges involved in the payment under L/C.

The Issuing Bank
The Issuing Bank is the key player in the procedure, the one who makes the payment. Try to negotiate with the buyer which bank will issue the L/C. Ask the Advising Bank if it has a corresponding bank in the buyer's country and suggest this bank to the buyer as the issuing bank.

If the Advising Bank does not have a corresponding bank in the buyer's country, ask the bank to recommend you a well-known bank with high credit rating and insist your buyer has the L/C issued by this bank. The Advising Bank will be able to provide you with the information on financial status and credibility of the Issuing Bank.

If the Issuing Bank is not internationally recognised and your banker or you have any doubts that the Issuing Bank, for any political or economical reason, may fail to make a payment under the L/C, I would strongly recommend that the L/C be confirmed by another bank.

The Nominated Bank
The Nominated Bank is the bank, which is authorized by the Issuing Bank "to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate." (UCP 500, Article 10, b)

The Issuing Bank may authorise the Nominated Bank to negotiate the drafts and/or documents. Negotiation means that the nominated Bank ? in this case the Negotiating Bank - gives value to such draft(s) and/or documents, not just examination of the documents. (UCP 500, Article 10, b)

Confirmation of L/C
The confirmation of the L/C by another bank - the Confirming Bank - means that if the Issuing Bank refuses to make the payment, the Confirming Bank is responsible for this payment.

The best-case scenario is when the Advising Bank confirms the L/C. If the Advising Bank does not agree to confirm the L/C, ask the bank to recommend you another bank to be the Confirming Bank.

Keep in mind that "Branches of a bank in different countries are considered another bank." (UCP 500, Article 2). That means that Citibank in Poland, for instance, is an independent financial institution and has its own financial status and credit rating, which is very different compared with the rating of Citibank in Australia.

If you are dealing with a buyer from a country with an unstable political or economical situation, always ask for the confirmation of the L/C.

There are additional charges for the confirmation of the L/C, which depend on the risk involved in dealing with the particular country. The responsibility to pay for the confirmation is negotiable and usually is paid by the buyer. However, if it wasn't agreed prior to the issuance of the L/C, you are the one who will pay for this service.

When L/C is to be confirmed the payment process is different and is shown in the following diagram.

1. The Applicant and the Beneficiary negotiate terms and conditions of the L/C
2. The Applicant applies to the Issuing Bank to issue the L/C
3. The Issuing Bank issues the L/C and forwards it to the Advising Bank
4. The Confirming Bank confirms the L/C to the Advising Bank
5. The Advising Bank checks the apparent authenticity of the L/C and advises the L/C to the Beneficiary
6. The Beneficiary checks if the L/C complies with the commercial agreements and if all terms and conditions specified in the L/C can be satisfied and ships the goods
7. The Beneficiary assembles the documents specified the Issuing Bank in the L/C checks the documents for discrepancies with the L/C and presents them to the Advising Bank
8. The Advising Bank bears the documents against terms and conditions of the L/C and forwards them to the Confirming Bank
9. The Confirming Bank checks if the documents comply with the L/C and makes payment immediately (if the L/C is available by sight) or on a certain date (if L/C is available by deferred payment)
10. The Issuing Bank reimburses the funds to the Confirming Bank immediately after the payment

There is another advantage in using confirmed L/C. Assume that after long negotiations your potential buyer is ready to strike a deal, which is very profitable for you. The only condition you are not comfortable with is the deferred payment of 90 days after the shipping date. You feel that you may have some problems with cash flow, because you have to pay for the freight, packaging and so on. Well, with the confirmed L/C you won't.

A confirmed L/C may be used not only for securing the payment under the L/C but also as a security to obtain additional funds from the Advising Bank. Generally, the Advising Bank can discount the L/C in your favour as soon as the documents stipulated in the L/C are presented to the bank and checked. The funds will be considered as a loan, which will be automatically reimbursed by the Confirming Bank on the maturity date indicated in the L/C.

Information that an L/C must have
Although the buyer applies for L/C, it is essential for you to be absolutely sure that the L/C was prepared correctly and there is no legitimate ground for refusal of payment under the L/C.

L/C must enclose:

- Full Applicant's name and address
- Full Beneficiary's name and address
- Issuing Bank details
- Advising Bank details
- Form and type of credit (e.g. irrevocable, transferable)
- Issue date
- Expiry date
- The latest date of shipment (usually "no later than")
- Expiry date for presentation of documents
- Amount payable under L/C
- Currency of payment
- Port of loading
- Port of discharge
- Terms of delivery
- Indication of the payment of the freight (Freight Prepaid/Freight Collect)
- Allowances for partial shipment or transshipment if needed
- Type of payment availability (e.g. at sight, on the maturity date)
- Description of goods (must correspond with the description given in the invoice)
- List of documents required for the payment
- Accountability for bank charges

Documents that may be stipulated in an L/C
You should negotiate which documents are to be included in the L/C before the L/C is issued. Always try to keep this list as short as possible. Never agree to include a document that must be signed or authorised by the buyer's representative or a document that may never be produced (say, a certificate, which should be issued by a foreign
agency).

I would like to underline that there is a difference between the documents you have to present under the L/C and the documents you have to supply according to the contract. It is not necessary to mention all documents required by the contract in the L/C.

Most likely, you will be required to present a commercial invoice, a transport document and an insurance policy (certificate).

The list of additional documents depends on the agreement made between you and the buyer. Usually the buyer will include documents needed for the customs clearance. The list may include:

- Certificate of origin
- Certificate of quality
- Weight certificate
- Pre-shipment inspection certificate
- Packing declaration
- Packing list
- Fumigation certificate, and so on

The detailed explanation of the above documents is given in the "Export Documentation" section of these tutorials.

In relation to L/C, there are several issues about the documents you should keep in mind:

- Specify how many original documents and how many copies are to be presented.
- The description of goods stipulated in the L/C must correspond with the description given in the invoice. "Must", in this case, means "must". If the invoice states "100% Fruit Juice" and the L/C ? "Australian Fruit Juice", it is enough for the bank to refuse the payment and this decision most likely be supported by the court.
- L/C may require a "clean" transport document. That means the document "which bears no clause or notation which expressly declares a defective condition of the goods and/or the packaging". (UCP 500, Article 32, a)

Delays cause troubles
L/C indicates three dates, which must be met to be paid:

- the latest date for shipment,
- the expiry date for presentation of documents and
- the expiry date of the L/C

When negotiating the date of shipment, be sure that you are able to ship the goods before this date. Always allow extra time for the amendments of the L/C. If the L/C contains any errors or you cannot fulfill all terms and conditions stipulated in the L/C do not ship the goods until all necessary amendments are made. Do not forget to include the amendment allowing "later shipment".

Try to obtain all possible documents before the shipment. If the document can be issued only after the goods are shipped (e.g. transport documents), be sure that you'll get it before the date stated in the L/C. If L/C does not indicate the date of presentation of the documents, "banks will not accept documents presented to them later than 21 days after the date of shipment". (UCP 500, Article 43, a)

The expiry date of the L/C should allow you not only to assemble and check all documents but also to correct errors, which might be identified by the bank. The bank has up to 7 days to examine the documents and inform you if there are any discrepancies. These discrepancies must be corrected and the documents must be resubmitted to the bank prior to the expiry date. "In any event, documents must be presented not later than the expiry date of the Credit." (UCP 500, Article 43, a)

Freight Payment
"Freight" is the term, which refers to the transportation charges (UCP 500, Article 33, a). L/C usually requires indicating whether you or the buyer is liable for the freight payment. The responsibility to pay freight depends on the agreed terms of delivery.

If the agreed delivery terms include freight (e.g. CFR, CIF, CIP), then the L/C will require that the transport document clearly indicate that freight has been paid or prepaid and the words "Freight Prepared" appear on the transport document.

"The words "freight prepayable" or "freight to be prepaid" or words of similar effect, if appearing on transport documents, will not be accepted as constituting evidence of the payment of freight" (UCP 500, Article 33, c)

If the agreed delivery terms do not include freight (e.g. EXW, FCA, FAS, FOB), then the L/C will require that the transport document indicate that freight is to be paid by the buyer and the words "Freight Collect" appear on the transport document.

Minimising the risks
When dealing with L/C pay careful attention to the following:

- Prior to the issuance of the L/C, negotiate exactly what documents must be presented to the bank.
- Try to agree to present as few documents as possible and to have descriptions as simple as possible.
- Always include your requirements for the L/C in the pro-forma invoice.
- Once issued, the L/C can only be altered or cancelled by consent of all parties.
- Remember that L/C is a bank-to-bank agreement and is not a substitute for the contract between you and the buyer.
- Be sure that you are in a position to provide the bank with all documents stipulated in the L/C in time.
- Always indicate L/C as "irrevocable".
- Check the Additional Conditions and be sure that you are able to meet them.
- If you have any doubts that the Issuing Bank, for any political or economical reason, can fail to make a payment, the L/C must be confirmed by the Advising Bank or by any other bank, whose confirmation will be accepted by the Advising Bank.
- If there are any discrepancies and the L/C has to be amended, do not ship goods before these amendments are made.

Suggested request for L/C to be included in your pro-forma invoice

Irrevocable Documentary Credit

Expiry: expiry date in Australia

Issuing Bank
Name and address of the Issuing Bank

Advising Bank
Name and address of the Advising Bank

Applicant
You Buyer's name and address

Beneficiary
Your Company name and address

To be confirmed by name and address of the Confirming Bank

Currency

Amount

Available with name of the Issuing or Nominated Bank by specify negotiation/acceptance against the documents detailed herein specify the agreed terms (ie. "at sight", "XY days after sight", "AZ days after Bill of Lading date")

Partial Shipments:
Transshipments:
Loading on board at:
For shipment to:
No later than:

specify ALLOWED/NOT ALLOWED
specify ALLOWED/NOT ALLOWED
port of loading
port of destination
latest shipment date

Purporting to evidence shipment of:
Description of goods

Shipping Terms: specify terms of delivery (ie. FAS, FOB, CIF, CIP, etc.) and name of the port of destination as per Incoterms 2000

Documents required:

- Signed commercial invoice(s)
- Transport document (ie. clean on-board marine bill of lading, sea waybill, air waybill)
- Insurance policy or certificate for not less than the specify terms of delivery (ie. FAS, FOB, CIF, CIP, etc.) value plus 10% covering all risks
- Packing list
- Other agreed documents

Additional Conditions:
Specify agreed conditions (ie. special labeling or packing requirements)

Discount or interest charges are for the account of the specify Applicant/Beneficiary
Acceptance commission is for the account of the specify Applicant/Beneficiary.
All other charges are for the account of the specify Applicant/Beneficiary.

Documents must be presented within 21 days of issuance of the transport document(s) but within the validity of the Credit.

The Credit will be subject to The Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication 500 insofar as these are applicable.

Suggested work sheet for checking L/C

		Yes	No
1.	Is the L/C irrevocable?	( )	( )
2.	Do your company's name and address appear correctly on the L/C?	( )	( )
3.	Does the name of the buyer appear correctly on the L/C?	( )	( )
4.	Does the amount of the L/C correspond with the amount shown in the commercial invoice and is it adequate?	( )	( )
5.	Do the payment terms comply with the terms agreed upon?	( )	( )
6.	Do the drafts to be drawn under the L/C correspond to the terms offered?	( )	( )
7.	Is the L/C available with the Bank you agreed?	( )	( )
8.	Can you supply all required documents and do they conform to the arrangements made with the buyer?	( )	( )
9.	Are the goods properly described, at the right price and with the correct trade definition?	( )	( )
10.	Are the points of shipment and destination designated as agreed?	( )	( )
11.	Does the L/C contain any special instructions and if so can you comply with them?	( )	( )
12.	Do the expiration date and/or latest date for shipment allow you adequate time?	( )	( )
13.	Is the transport document endorsed correctly?	( )	( )
14.	Is the transport document endorsed correctly?	( )	( )
15.	Do the terms of delivery stipulated in the L/C correspond with the invoice and refer to the Incoterms?	( )	( )
16.	Do the terms of delivery stipulated in the L/C correspond with the invoice and refer to the Incoterms?	( )	( )
17.	If you asked for a confirmed credit, is the L/C confirmed by a bank independent of the Issuing Bank?	( )	( )

If any question is answered "No", you should contact your buyer immediately and arrange for the terms to be amended, keeping in mind that a delay experienced in obtaining an arrangement may also require an extension of the validity of the L/C.

Documentary Collection (Draft)
Documentary collections are regulated by the Uniform Rules for Collections issued by the International Chamber of Commerce (URC 522). This document can also be obtained from the International Trade Department of your financial institution or from ICC Australia*.

Documentary Collection or Draft is the term when you ship the goods before the payment is made and then draw a draft on the buyer, not on the bank, like under L/C. Under documentary collections banks have no responsibility for the payment.

There are two types of documentary collections - sight draft, also know as "Documents Against Payment", and time draft, also known as "Documents Against Acceptance".

Sight Draft
"Sight draft" is payable by the buyer immediately after notification by the buyer's bank of the receipt of the draft and transport documents.

Under this method of payment you (the Drawer) negotiate the terms with the buyer (the Drawee), specify the documents required for the payment, ship the goods and draw the draft on the buyer. The draft and the documents required for the payment are presented to your bank (Remitting Bank) and after examination are forwarded to the buyer's bank (Presenting Bank). The Presenting Bank holds the title documents (usually the transport documents) and will release them to the buyer only after the payment was made.

Sight draft procedure is shown in the diagram below.

1. The Drawer and the Drawee negotiate terms and conditions of the transaction
2. The Drawer ships the goods
3. The Drawer draws a draft and presents it to the Remitting Bank along with other documents
4. The Remitting Bank examines the documents and the draft and forwards them to the Presenting Bank
5. The Presenting Bank notifies the Drawee of receipt of the documents
6. The Presenting Bank holds the documents until the payment is made by the Drawee
7. The Drawee examines the documents and makes the payment for the supplied goods
8. The Presenting Bank releases the documents to the Drawee

Sight drafts have some similarity with L/C. You deal with documents and through banks, and the buyer cannot take the possession of the goods before the payment is occurred.

However, the payment is not guaranteed. If the buyer for any reason refuses to pay, you have to deal with goods "on the water" or stacked in the customs zone in a foreign country. It can be very costly to ship your goods back or to sell them urgently. In both cases, there are substantial additional expenses (warehousing, cost of transportation to a new destination, significant discount, etc.). In some cases, the buyer who failed to pay was one of the bidders at the resulting auction and had bought the goods for a fraction of the initial price.

It is also possible, that the buyer will delay the payment. Although legally the payment has to be made immediately upon receipt of the draft by the buyer's bank, the buyer may hold the payment until the goods are delivered.

Time Draft
Unlike the sight draft, when dealing with time drafts, the buyer may take possession of the goods before the payment. Under the time draft, you agree on a deferring period, ship the goods and draw a draft. For the title documents to be released, the buyer has to accept the draft by issuing written evidence of his willingness to pay on the agreed maturity date (usually by signing and dating the draft).

Dealing with the 'time draft', always draw a draft against the certain date specified in the other document. (For example, "Payable at 60 days after invoice date/bill of lading date/the draft date")

The time draft, in fact, is very similar to "open account" terms ? you have no control over the goods, nor over the payment. The only difference is that, in addition to the contract of sale, you have the buyer's written guarantee to make a payment on a certain date. You have to rely on the buyer. The consequences of the refusal to pay are the same as the
consequences of the refusal to pay under "open account" (see below).

Drafts are normally issued in a set of two (First of Exchange and Second of Exchange) or singly (Sola Bill of Exchange). ) Two drafts are usually drawn to ensure that at least one draft reaches the Drawee when they are dispatched separately. When two drafts are issued they may be numbered "1" and "2" and marked "First of Exchange (Second
Unpaid)" and "Second of Exchange (First Unpaid)".

Documentary collection is cheaper then L/C but the risk involved is much greater, especially with the time draft. I wouldn't recommend these terms, unless you are dealing with a well-known trusted buyer or the transaction is insured.

Open Account and Consignment
Open Account and Consignment are the most risky payment terms ? you ship the goods before the payment is made and don't have any control over the goods or over the payment. You totally rely on the buyer and if the payment has been refused, legal action is the most likely scenario. This usually involves not only significant legal fees but also
your time and energy and there is no guarantee that you will recover your money.

The difference between Open Account and Consignment is that sending goods on open account you usually agree on a deferred period of time after which the buyer will pay you in total.

When dealing with the consignment, the goods are shipped but not sold. Legally, you have the title over the goods until you have been paid. Depending on the agreed terms, the buyer can pay upon the sale of all goods or make periodic payments for goods that have been sold by the end of the set period.

I wouldn't generally recommend these terms, however, under certain circumstances they might be very beneficial. When you are entering a market with high interest rates through your own local subsidiary and you have total control over the buyer, you can send goods on open account or consignment. Doing that, you provide your foreign subsidiary
company with cheap finance, making the goods more competitive and giving the buyer more flexibility and better conditions for market development and positioning of the products.

Saying "total control over the buyer", I mean not only control over the company but also control over the people representing the buyer, who are in charge of finance and responsible for making payments.

Usually markets with high interest rates are politically or economically uncertain. It is possible that the buyer, even being your subsidiary, will fail to make a payment due to the circumstances outside its control ? force majeure. That's why, sending goods on open account or consignment, you should always try to arrange credit insurance.

Export Credit Insurance
The payments in International Trade can be insured. The credit insurance enables you to expand your exports without fear of loss. I suggest that you try to insure payments under documentary collections, consignment and open account terms. You may even consider the
insurance of the unconfirmed L/C.

The export credit insurance, issued by a financial institution in your favour, protects you against non-payments by the buyer or by the Issuing Bank (in case of insuring an unconfirmed L/C) due to commercial (insolvency, fraud) or political risk. In case of non-payment, you will usually receive 80-90% of the debt.

The credit insurance not only guarantees you the payment, but also enables you to provide better terms to your buyers. Remember the dilemma between high and low risk payment terms? Well, credit insurance is the solution for this predicament.

The insured payment also allows you to obtain additional funds from a bank. Similar to the discounting of funds under confirmed L/C, your bank will usually provide you with trade finance and use your credit insurance as a security.

Mixed Payments
Quite often you can compromise with the buyer by using different terms of payment for one transaction.

Remember that I suggested you insist the buyer pay in advance when the goods are required to be customised? I also mentioned that "cash in advance" is the least preferred term for the buyer. The solution is mixed payments. You estimate the cost involved in customisation,
which has to be prepaid and the balance may be payable under different terms, L/C, for instance.

When you experience difficulties with cash flow and do not have available funds to prepay freight and other pre-shipment expenses, you also may consider mixed payments.

Using mixed payments, you can avoid losses, which occur when the buyer refuses the payment under the sight draft.

If the mixed payments were negotiated, the proportion has to be clearly indicated in the contract of sale. For example:
"Terms of Payment:
20% cash with the order
80% by irrevocable Letter of Credit confirmed by first class bank and
payable at sight via the-advising-bank's-name and location in favour
of your-company-name"

Recommended reading

· ICC Guide to Export - Import Basics, Publication No. 543

· ICC Uniform Customs and Practice for Documentary Credits (UCP 500), Publication No. 500

· ICC Guide to Documentary Credit Operations for the UCP 500, Publication No. 515

· ICC Uniform Rules for Collections (URC 522), Publication No. 522

· ICC Guide to Collection Operations for URC 522, Publication N0. 561

· ICC Bills of Exchange (third edition), Publication No. 593

· ICC Incoterms 2000, Publication No. 560

· ICC Guide to Incoterms 2000, Publication No. 620

· ICC A to Z of International Trade, Publication No. 623

· ICC Funds Transfer in International Banking, Publication No. 497

· ICC Trade Finance Fraud, Publication No. 643

The above documents may be obtained from:

*) ICC Australia

Chief Executive Officer: Martin Cox
Assistant: Christine Schmidt

Level 50 101 Collins Street
3000 Melbourne Victoria
Telephone: 03 965 39223
Fax: 03 965 39494
E-mail: publications@iccaustralia.org

or online from ICC Publishing SA

Contacts

QBE Trade Indemnity

82 Pitt Street Sydney NSW 2000
Telephone (Sydney): 02 9375 4600
Telephone (Melbourne): 03 9612 1777
Telephone (Brisbane): 07 3221 2323
Fax: 02 9375 4030

QBE Trade Indemnity is the largest credit insurer in Australia, with over 60% of the domestic trade credit market and approximately 20% of the export credit market.

Its cover is designed for exporters who do not want to establish Documentary Letters of Credit and wish to trade on Open Account or Documentary Collection terms. Export Credit insurance offers protection against buyer default and insolvency and also covers certain political risks associated with sales to the buyer's country. The policy can be structured to suit the exporter's requirements.

Legal Notice
This tutorial has been developed for information purposes only and shall not be construed, implicitly or explicitly, as containing any commercial or financial solutions to risks associated with international payments. Under no circumstances shall the author, Newsta Pty. Ltd. or its directors, employees, shareholders or affiliates be liable for any direct, indirect, incidental, special or consequential damages.