03 January 2012 Hits: 2932
Payment Terms Of Foreing Trade. International Terms Of Payment.
Cash Against Documents (CAD)
A payment arrangement in which an exporter instructs a bank to hand over shipping and title documents (see document of title) to the importer when the importer fully pays the accompanying bill of exchange or draft. Also called documents against payment.
1. Shipment in trust by seller and no guaranty for payment from buyer side.
2. Documents in trust in buyer’s bank.
3. Buyer will pay when buyer need documents for customs clearance (based on previous experience)
PB - Performance Bond
This is a type of bank guarantee which is issued from the Seller to the Buyer. It guarantees that the Seller will meet the terms of the contract. Normally issued in the amount of 2 % of the total amount of the contract, a performance bond can be drawn upon by the Buyer in the event that the Seller breaks the contract and fails to provide the product which was stipulated in the contract.
POP - Proof of Product
A Proof of Product (POP) is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver the product. In practice many POPs are false. POP offers no proof at all, because once a POP has been drafted it is automatically out of date - the product could have been sold to another buyer and therefore no longer exists. Nevertheless, a POP is still occasionally requested as apparent proof that a seller has the product, A POP is realistically provided only when the Buyer's bank issues a Bank Confirmation Letter (BCL) to the Seller and or seller's bank via SWIFT. Then the Seller's bank can check the availability of funds in the Buyer's bank and issue a POP to the Buyer's bank within an agreed time period (e.g. 5 days). A seller will not issue a POP to buyer without a non- operative letter of credit opened.
RWA - Ready, Willing and Able
This is a document which is issued by the Buyer's bank. The bank confirms that their client has the sufficient funds in their possession and is ready, willing and able to engage in the contract.
SOFT PROBE. This is an authorization from the buyer to the seller to contact the buyer's bank to verify the buyer has the financial capability to purchase the amount of goods and the method of payment agreed in the (LOI) Letter of Intent.
Society for Worldwide Interbank Financial Telecommunication - a global service which is responsible for facilitating communication between banks. Most payments are made via SWIFT.
Table 1. Terms Ranked from LEAST RISK to MOST RISK for the Seller
New Trade Lots
- Yellow Peas, by FCLs, Ask
- Wheat Flour, Super Grade, Ask
- Wheat Flour, 1st Grade, Ask
- Barley, by FCLs, Bid
- Milling Wheat, 11.5, by Vessel, Ask
- Yellow Millet, by FCLs, Ask
- Black Mustard seeds, by FCLs, Ask
- Green Peas, fcls, Ask
- Yellow Split Peas, by FCLs, Ask
- Split Corianders, by FCLs, Ask
- Coriander Seeds, by FCLs, Ask
- Flax-Oil Seeds, by FCls, Bid
- White Sorghum, by FCLs, Bid
- White Sorghum, by FCLs, Ask
- Yellow Millet, by FCLs, Bid
- Ask, 3000 mt MIlling Wheat Pr 11,5 by vessel
- Wheat Flour in 50 kg PP bags Ask by FCLs
- Coriander, Oats, Sorghum Sell
- Buying Canary, Flax, White safflower, Vech, Hemp seeds
- 5000 mt Soft Milling Wheat by vessel Sell
- White Sorghum in 25 kg PP bags Buy
- 44 mt White Mustard Seeds in bulk or 50 kg PP bags Sell