|
Method of Payment |
When Seller is Paid |
When Goods are Available to Buyer |
Risks to Seller |
| Cash in Advance |
Prior to shipment of goods. |
Upon arrival of shipment. |
No payment risks. |
Confirmed Sight
Letter of Credit |
By confirming bank upon
presentation of correct documents after shipment. |
Upon arrival and payment of
documents under L/C by the issuing bank and arrival of shipment. |
Inability to produce correct
documents. Inability of confirming and issuing bank to pay. |
| Confirmed Term
Letter of Credit |
By confirming bank upon maturity
or discounting of accepted draft. |
Upon arrival of documents,
acceptance of draft and arrival of shipment. |
Inability to produce correct
documents. Inability of confirming bank or issuing bank to
accept or pay draft at maturity. |
| Unconfirmed Sight
Letter of Credit |
By issuing bank upon
presentation of correct documents after shipment. |
Upon payment of drawing under
L/C and arrival of shipment. |
Inability to produce correct
documents. Inability of issuing bank to honor L/C. |
| Unconfirmed Term
Letter of Credit |
By issuing bank upon maturity or
discounting of accepted draft. |
Upon acceptance of draft and
arrival of shipment. |
Inability to produce correct
documents. Inability of issuing bank to accept or pay draft at
maturity. |
| Documentary Sight
Collection |
By collecting bank upon payment
of draft by buyer after shipment. |
Upon payment of draft and
arrival of shipment. |
Failure of buyer to pay, leading
to warehousing and insurance expenses. |
| Documentary Term
Collection |
By collecting bank upon payment
by buyer upon maturity of accepted draft. |
Upon acceptance of draft and
arrival of shipment. |
Failure of buyer to pay at
maturity. Loss of title to merchandise leading to legal
expenses. |
| Open Account |
By buyer upon receipt of goods
or at an arranged future date. |
Upon arrival of shipment. |
Full reliance on buyer to pay.
Loss of title to goods leading to legal expenses. |
